In taking this class we have had an opportunity to understand basic economic concepts and how they apply in our state ,national, and global economy. As I begin to understand how these economic concepts and mechanisms affect our world, many more questions seem to be generated in my mind. The Free Market system is defined as an economic system with no government regulation or intervention except in the case of taxes, private contracts, and property ownership. Property rights can be bartered and exchanged to the satisfaction of the parties involved and prices are the result of supply and demand. Goods ,services, and labor are not controlled by the state. Buyers and sellers are in control and production is the result of private parties. Market efficiency and economic equilibrium are the result of a free and competitive market and people are able to purchase the goods and services they need at prices they are willing to pay. We don't have a utopian free market however because we do have government intervention and regulation. How much regulation is needed seems to be a point  contention for many. There are market failures and failure to reach economic equilibrium. An example of this was the creation of bubbles such as the recent housing bubble that preceded our recent recession. We had an article on the housing bubble and several reasons were cited for the creation of the bubble. Bubbles seem to be created when people trade at high volumes at inflated prices and move away from the true value of the product. After the bubble burst, the economy went on a down turn that sunk us into the recent recession.  The article stated that risk was underestimated and that loans were given without the usual 30% percent down, resulting in very little equity There were many other reasons dealing with inflation, price index ,and rent ratios that I do not understand. The signs that the economy was in serious trouble were there, but were  ignored by banks, financial institutions, mortgage companies etc. So how much regulation is needed and why weren't the regulations followed? Maybe deregulation isn't the answer. Greed, probably the most seductive of human frailties, I think had a big part to play in the recent economic downturn. Will the market always right itself when people are driven by the most economic gain they can acquire? When we study the market in a class such as this one we discuss theory and ideas as well as trying generalize them in our everyday lives. I think we need to factor in our human qualities as well. Greed has a momentum of its own, not only the drive for monetary gain, but denial as well, not willing to see the signs that now seem to have been most apparent.

Greed, denial, and corruption all played a part in this latest recession. Can government regulation mitigate or neutralize greed?

 I also think economic gain will win out where Pebble Mine is concerned. The value or cost of losing or destroying one's environment is hard to determine unless you've experienced it. Can any amount of financial gain mitigate that destruction? I think greed and denial will win this one. The award that Exxon was to pay to the fisherman from the oil spill was whittled down in the courts to approximately one-tenth of the original settlement.

Another gain for a huge corporation. Japan is now experiencing the affects of radiation leakage, and now we hear commentary that the companies promised them it would be safe. How can one determine the balance that is needed? We need economic growth, but at what cost? What happens when values and costs are intangible or unknown?

 I know this is getting a bit long-winded however my next question deals with the government intervention after the recession. We hear a lot about "no more government spending"(Vernon Smith article). I am curious to know how two administrations, President Bush in 2008 and President Obama chose stimulus packages to help raise the economy. We hear much criticism for  both the federally funded stimulus packages. Presidents are advised by leading economists and this strategy wasn't selected willy nilly. It is based on Keynesian economics and was selected by two administrations. I would welcome a dialogue about this theory and how the stimulus did affect our economy. Would we have seen a longer recession or even a depression without the federal stimulus? 

 

Liz Millikan