Standards for How Can You Apply Ethics and Economics to Any Issue?

Standard: 2

Name: Decision Making

• 4-12: Students will understand that: Effective decision making requires comparing the additional costs of alternatives with the additional benefits. Many choices involve doing a little more or a little less of something: few choices "are all or nothing" decisions.
• 4-12: Students will be able to use this knowledge to: Make effective decisions as consumers, producers, savers, investors, and citizens.

Standard: 17

Name: Government Failure

Do government officials try to promote the general welfare of the nation, or are they guided by their own self-interests? Businesses that fail to satisfy consumer wants go bankrupt; but how do we know when government programs fail, and how do we change or eliminate failed government programs? Why do some farmers receive large subsidies from the government, and why are many businesses protected from competition by tariffs or quotas even when only a small percentage of the U.S. labor force is employed in those industries? Why don't taxpayers rise up and put a stop to the favoritism accorded to certain industries and special interest groups? And why do so few people participate in the political process, and so many choose not to register or vote? It is important to realize that governments, like markets, also have shortcomings and imperfections. Citizens should understand the sources of these imperfections, including the distribution of costs and benefits of some programs that lead to special-interest problems, the costs involved in gathering and using information about different candidates and government programs, and the incentives that can induce government leaders and employees to act in ways that do not promote the general national interest. Understanding this allows citizens to compare actual with ideal government performance, and to decide about the appropriate role for federal, state, and local government.

• 4-12: Students will understand that: Costs of government policies sometimes exceed benefits. This may occur because of incentives facing voters, government officials, and government employees, because of actions by special interest groups that can impose costs on the general public, or because social goals other than economic efficiency are being pursued.
• 4-12: Students will be able to use this knowledge to: Identify some public policies that may cost more than the benefits they generate, and assess who enjoys the benefits and who bears the costs. Explain why the policies exist.

Standard: 10

Name: Institutions

Institutions play a number of roles in a market economy. Property rights help insure that people bear the costs and reap the benefits of their decisions. Property rights and contract enforcement encourage investment by assuring investors that they will reap the rewards of deferring consumption and assuming risk if these investments perform well. Limiting individual liability and allowing people to pool their investment resources through joint stock corporations also increases investment and future income. Other institutions lower the costs buyers and sellers incur in their efforts to find each other in different kinds of markets. For example, banks match savers with borrowers; and investment banks match entrepreneurs who organize new firms with investors who provide the needed funds. Many institutions work to promote the goals of certain interest groups. Labor union, for example, increase the negotiating power of workers in their dealings with employers. Understanding economic institutions and the purposes they serve will help students use institutions more effectively and help them evaluate proposed new institutions or changes in the existing legal and institutional environment.

• 4-12: Students will understand that: Institutions evolve and are created to help individuals and groups accomplish their goals. Banks, labor unions, markets, corporations, legal systems, and not-for-profit organizations are examples of important institutions. A different kind of institution, clearly defined and enforced property rights, is essential to a market economy.
• 4-12: Students will be able to use this knowledge to: Describe the roles of various economic institutions and explain the importance of property rights in a market economy.

Standard: 16

Name: Role of Government and Market Failure

Why does government pay private construction firms to build roads and highways? Why do the firms that build the roads not own them themselves and charge tolls to users? All kinds of goods and services are produced and distributed through private markets, so why not roads and highways, too? In flipping through the pages of the telephone directory, we observe a vast array of businesses and government agencies. Why do markets work well to supply much of what we want, while failing to produce other things we want? Citizens should understand the limitations and shortcomings of markets and how some government policies attempt to compensate for market failures. Learning the economic as well as the political and social reasons for public sector services helps citizens make better choices about the appropriate size and scope of markets and government. It is also important that students be able to evaluate redistributive effects of government programs.

• 4-12: Students will understand that: There is an economic role for government in a market economy whenever the benefits of a government policy outweigh its costs. Governments often provide for national defense, address environmental concerns, define and protect property rights, and attempt to make markets more competitive. Most government policies also have direct or indirect effects on people's incomes.
• 4-12: Students will be able to use this knowledge to: Identify and evaluate the benefits and costs of alternative public policies, and assess who enjoys the benefits and who bears the costs.