chapter 5

Question 1

Socialism

Answer 1

Spreading cost or value to society. asserts that the individual should act to promote the good of society, not to promote the individual’s well-being. founded by Karl Marx. Striving to reach the good of society.

Question 2

Karl Marx quote

Answer 2

“from each according to his ability, to each, according to his need.”

Question 3

authoritarian choice

Answer 3

whether the state’s decisions are made by a dictator, the people’s elected representatives, or by popular vote. Authoritarian decision makers choose for others, based on their own assessments of values and costs.

Question 4

According to socialists, something keeps individuals from auctioning off their labor to the highest bidding firm. What?

Answer 4

firms are not in competition. they are all on the same side.

Question 5

externalities

Answer 5

external costs and benefits. spillover costs. Efficient assessment of external costs and benefits must be done by those who have the knowledge of all facts of the economy and nothing to gain from the regulatory process.

Question 6

What did Marx predict about unemployment rates? What reason did he give for his prediction?

Answer 6

technological advances replace labor with capital, causing more unemployment.

Question 7

How can a state maintain socialist order if an individual disagrees with their abilities, needs, or what is good for society?

Answer 7

allow for individual choice or use force.

Question 8

communism

Answer 8

An economic system under which the state has title to all property.

Question 9

fascism

Answer 9

An economic system under which the state leaves property in private hands, but extensively regulates the use of property

Question 10

imminent domain

Answer 10

Property is taken for state public use, such as roads and parks, but the owner is compensated. may include taking property such as homes, because the state would rather sell the property to business interests. State compensates owner

Question 11

civil forfeiture

Answer 11

a person is suspected of a crime and that person’s property is seized because it is automatically suspected as having contributed to the crime. The police force that seized it receives the money or property from the forfeiture.

Question 12

The last socialist rationale popularized in the US

Answer 12

if there are any spillover benefits, state justifies dictating the use of property.

Question 13

Why is the percentage of total spending done by the state a measure of the degree of socialism?-

Answer 13

Because as the state spends more, it makes more of the economic decisions–that is, the individual, more and more, serves the state’s conception of “the good of society.”

Question 14

What do capitalist philosophers believe are the legitimate functions of the state?

Answer 14

protection of property and persons.

Question 15

“pursuit of happiness”

Answer 15

meant the right to hold and use property freely, to choose one’s profession, to make contracts and to travel.

Question 16

If property rights are protected, how can an individual in a capitalist society advance materially?

Answer 16

creating value through production/trade.

Question 17

What do capitalist philosophers say about how markets solve fairness problems?-

Answer 17

Markets may or may not solve fairness problems, but, given the limitations of the state, it might not do any better, and may make things worse

Question 18

incentive problem

Answer 18

Free markets give individuals incentives to voluntarily serve. Socialism divorces consumption from production and takes away the incentive to voluntarily serve.

Question 19

US poverty rate

Answer 19

approx 16%

Question 20

What did Piketty and Saez’s research show?-

Answer 20

Based on tax records, the average taxpayer’s income in the U. S. has been stagnant since the 1980s, while top incomes have grown.

Question 21

What did Burkhauser, Larrimore, and Simon show?-

Answer 21

We see a 37% growth in incomes when we use household data, account for taxes, transfers, and fringe benefits, and adjust for household size

Question 22

What two observations did Thomas Sowell make about inequality?-

Answer 22

As people age, gaining experience and education, they grow richer. Also, people who are poor can increase their incomes and the wealthy sometimes lose income, moving them to different categories of earned income.

Question 23

What did Milton Friedman point out about different economic systems in his interview with a talk show host?-

Answer 23

The leaders of all states are greedy. But capitalism harnesses greed to improve the general welfare, whereas socialsm does not.

Question 24

How much per person does the US spend on anti-poverty programs?

Answer 24

$20,000

Question 25

How is poverty related to anti-poverty spending? How is poverty related to economic growth?

Answer 25

Poverty does not seem to respond to anti-poverty spending, but economic growth does reduce poverty, with a lag.

Question 26

What is one area where government spending on fairness replaced private spending?-

Answer 26

Unemployment insurance and education

Question 27

What does Bastiat say about countries with machines vs. those with less mechanization?

Answer 27

He said that more mechanization allows people to have more satisfaction for less work, so mechanized societies are well off.

Question 28

When James Goodfellow replaces a worker with a machine, what could possibly employ the worker?

Answer 28

The money saved on the worker will be spent by J. G., creating a job with an equivalent paycheck.

Question 29

When James Goodfellow replaces a worker with a machine, does the total amount of production in the economy change? Why or why not?

Answer 29

Total production rises, since there is a free worker and JG also has income freed up to purchase the worker’s output.

Question 30

Who profits from James Goodfellow’s inventiveness?-

Answer 30

In the short run, JG. In the long run, others imitate JG and prices are bid down for all consumers.