(L80) The New Deal & The Industrial Revolution

1.) Evaluate this claim: “The New Deal was a wise series of government actions that healed the problems afflicting the economy.”

The New Deal was a series of atrociously planned government actions that resulted in a famished, unemployed, and economically unsound people. The National Industrial Recovery Act for example allowed each industry to draft production codes for itself; this meant minimum wages, minimum prices, hours of production, specific production methods, etc. The claim backing this decision was that what businesses really needed was stability, rather than competition. The result of acting on this claim was basically stomping out smaller businesses on a major scale. Big businesses, having multiple locations and bountiful resources were in no competition with smaller businesses in the sense of service; however, the one area small businesses could compete in was prices. With new codes preventing small businesses from competing with prices, most perished by the hand government intervention. It was stated by UCLA professors Harold Cole and Lee Ohanian that “the abandonment of these policies coincided with the strong economic recovery of the 1940s”.
Another “wise” government action attached to The New Deal was the Agricultural Adjustment Act. This time, the government decided to stimulate the economy and raise food prices by destroying crops that had already been planted and grown. Acreage limitation was also implemented, and pigs were slaughtered needlessly to raise pork prices. This caused about 2 million tenant farmers and sharecroppers to become jobless, and to top it all off it was soon discovered after the fact that the United States was not producing enough food to sustain the population, even at a minimum subsidence level diet. What a way to heal the economy, way to go government intervention!

2.) How was the standard of living affected by the Industrial Revolution?

In short, the industrial revolution created numerous opportunities for workers that hadn’t previously existed. Before the industrial revolution, workers could have either made a profitable living through agriculture, or by gaining the tools necessary to enter into an independent trade. After the industrial revolution however, there was newly made space in the economy for a work force of people who were able to do neither of these things; factory work employed many people who would have otherwise suffered because they did not have the resources to meet the needs of the economy.

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(L20) Public Goods & Poverty

1.) What are some of the problems with the concept of public goods?

There are two main issues with the concept of public goods (not including the fact that the government produces them with the public’s money). The first issue is the fact that even “public” goods such as railroads, streets, etc. can be limited to those who pay for them (in the first place). The second issue is the fine line between public and private goods, and the flimsy distinction between both. A rose garden in someones front yard for example, is privately owned. However, while it is not a public good, the passerbys on the sidewalk are not prohibited from enjoying it from the distance of the public sidewalk. Public goods are non-excludable to those who pay (but, how does one know if someone else has paid or not?). Private goods have rules set by the owners; so, in this case, how would one exclude someone who did not help pay for the rose garden? What about in the case of a public rose garden that one has not helped pay for?

2.) Describe the process by which the market economy tends toward an improvement in the standard of living.

The free market economy encourages saving and investment, which leads to an increase in capital goods, which ultimately creates a greater amount of consumer goods. A great amount of consumer goods reduces poverty by making the available consumer products cheaper. It also frees up people to move on to creating other consumer goods (because capital goods have made way for less hands to create the same amount of products in a shorter time). Increased production ultimately creates lower product prices relative to wage rates.