1、Unit FourteenText:Role of Government in the Economy（政府在经济中的作用）1.Key words2.Improving economic efficiency3.Improving the distribution of income4.Stabilizing the economy through macroeconomic policies5.Conducting international economic policy6.Translate the following into Chinese7.Questionsmixed econo
2、myeconomic efficiencymacroeconomic policylaissez-fairerights of propertycontagious diseasepublic goodsspillover effectneighborhood effectside effectthird partynegative externalitypositive externalityfree riderunregulated markethealth carepharmaceutical companyhousehold appliancesincome redistributio
3、neconomic functionwelfare statemedical careprogressive taxationfinancial panicsbusiness cycleinternational stagebeneficial agreementtrade barriermanufactured goodsnational sovereignty as the price ofraising incomesintellectual property rightsforeign aideconomic interdependencedebt crisistightly inte
4、grated regionozone depletionglobal warmingspecies extinction2.1 Government assist in allocation of resources2.2 Reasons for government to override the resource allocation decisionsA central economic purpose of government is to assist in the socially desirable allocation of resources.This is the micr
5、oeconomic side of government policy;it concentrates on the what and how of economic life.Microeconomic policies differ among countries according to customs and political philosophies.2.2.1 The limits of the invisible hand2.2.2 Market failureThe invisible hand of perfect competition would lead to an
6、efficient allocation of resources.But this invisible-hand result holds only under very limited conditions.Yet,if there were to be a division of labor among people and regions,and if a price mechanism were to work,government would have an important role.2.2.2.1 Definition of market failure2.2.2.2 Sit
7、uations of market failureMarket failure is a situation in which price system brings about some problems to the society or cannot reach the social target.(1)The breakdown of perfect competition(2)Externalities and public goods(3)Imperfect informationWhen monopolies or oligopolies collude to reduce ri
8、valry or drive firms out of business,government may apply antitrust policies or regulation.An externality is a cost or benefit imposed on people other than the consumers and producers of a good or service.Externalities are also called spillover effects or neighborhood effects.Externalities may be ei
9、ther negative or positive;that is,they may be detrimental or beneficial.A public good is a good or service that,once produced,has two properties:one is that users collectively consume benefits,and the other is that there is no way to bar people who do not pay(free riders)from consuming the good or s
10、ervice.So,if public goods are available only in the marketplace,people wait for someone else to pay,and the result is an underproduction or zero production of public goods.Government may use its influence to control harmful externalities.Government can levy taxes on activities which impose external
11、public costs,or it can subsidize activities which are socially beneficial.Unregulated markets tend to provide too little information for consumers to make well-informed decisions.Because of inadequate information,the government requires companies to provide information.In addition,government may use
12、 its spending power to collect and provide needed information itself.Even when the invisible hand works and is marvelously efficient,it may at the same time produce a very unequal distribution of income.Income redistribution is usually accomplished through taxation and spending policies,though regul
13、ation sometimes plays a role as well.Today government has the responsibility of preventing such calamitous business depressions by the proper use of monetary and fiscal policy,as well as close regulation of the financial system.In addition,government tries to smooth out the ups and downs of the busi
14、ness cycle,in order to avoid either large-scale unemployment at the bottom of the cycle or raging price inflation at the top of the cycle.5.1 Reducing trade barriers5.2 Conducting assistance programs5.3 Coordinating macroeconomic policies5.4 Protecting the global environmentAn important part of econ
15、omic policy involves harmonizing laws and reducing trade barriers so as to encourage fruitful international specialization and division of labor.Rich nations have numerous programs designed to improve the lot of the poor in other countries.These involve direct foreign aid,disaster and technical assi
16、stance,the establishment of institutions like the World Bank to give low-interest-rate loans to poor countries,and concessionary terms on exports to poor nations.Nations have found that their increased economic interdependence means that macroeconomic policies must be coordinated to combat inflation
17、 and unemployment.Exchange rates do not manage themselves;establishing a smoothly functioning exchange-rate system is a prerequisite for efficient international trade.Nations have seen that fiscal and monetary policies of other nations can affect domestic economic conditions.Clearly,international en
18、vironmental problems can be resolved only through the cooperation of many nations.Even the staunchest conservatives agree that government has a major role to play in representing the national interest in the anarchy of nations.(1)If all these idealized conditions were met,the invisible hand could pr
19、ovide perfectly efficient production and distribution of national output,and there would be no need for government intervention to promote efficiency.(2)Courts and police forces would be needed to ensure fulfillment of contracts,nonfraudulent and nonviolent behavior,freedom from theft and external a
20、ggression,and the legislated rights of property.(3)Today government has the responsibility of preventing such calamitous business depressions by the proper use of monetary and fiscal policy,as well as close regulation of the financial system.(4)Government now plays a critical role representing the i
21、nterests of the nation on the international stage and negotiating beneficial agreements with other countries on a wide range of issues.(5)These involve direct foreign aid,disaster and technical assistance,the establishment of institutions like the World Bank to give low-interest-rate loans to poor c
22、ountries,and concessionary terms on exports to poor nations.(6)More recently,as scientists have raised concerns about ozone depletion,deforestation,global warming,and species extinction,nations have begun to consider ways to protect our global resources.(1)Why is it necessary for governments to intervene in their economies?(2)What is the meaning of externality?Give some examples in the real economy.(3)How does government improve the income redistribution of one society?(4)Explain why governments should coordinate their economic policies internationally.Thanks!
