Text 1. Is a free market really free?

Date: 2015-10-07; view: 516.

Taxing and spending are the major tools with which government implements policy. How policymakers use these tools depends on their beliefs about (1) how the economy functions, and (2) the proper role of government in the economy. The American economy is so complex that no policymaker knows exactly how it works. Policymakers have to rely on economic theories to explain its functioning, and there are nearly as many theories as economists. Unfortunately, different theories (and economists) often predict quite different outcomes. One source of difference is the assumptions that are part of every economic theory, for these differ from theory to theory. Another problem is the difference between an idealized theory and the real world. Still, despite the disagreement among economists, knowledge of basic economics is necessary to an understanding of how government approaches public policy.

We are concerned here with economic policy in a market economy — one in which the prices of goods and services are determined through the interaction of sellers and buyers (that is, through supply and demand). This kind of economy is typical of the consumer-dominated societies of Western Europe and the United States. A non-market economy relies on government planners to determine both the prices of goods and the amounts that are produced. The Soviet economy was a perfect example of a non-market economy until President Mikhail Gorbachev's policy of perestroika, or economic restructuring, introduced some private elements. In a non-market economy, the government owns and operates the major means of production. Market economies often exhibit a mix of government and private ownership. For example, Britain has considerably more government-owned enterprises (railroads, broadcasting, and housing) than the United States.

Market economies are loosely called capitalist economies: They allow private individuals to own property, sell goods for profit in a free, or open, market, and accumulate wealth, called capital. The competing theories of market economies differ largely on how free the market should be — in other words, on the role of government in directing the economy.

Thomas Carlyle, a nineteenth-century British social critic, called economics "the dismal science." Although Carlyle was speaking in a different context, his phrase has stuck. If being a science requires agreement on fundamental propositions among practitioners, then economics is certainly a dismal science. When twenty-seven standard propositions in economic theory were put to almost a thousand economists in five Western countries, they did not agree on a single one. Consider this example: "Reducing the role of regulatory authorities (for instance, in air traffic) would improve the efficiency of the economy." About 33 percent of the economists "generally disagreed," 30 percent "generally agreed," and 34 percent "agreed with provisions." When learned economists cannot agree on basic propositions in economic theory, politicians are free to choose theories that fit their views of the proper role of government in the economy.

Laissez-Faire Economics

The French term laissez faire describes the absence of government control. The economic doctrine of laissez faire likens the operation of a free market to the process of natural selection. Economic competition weeds out the weak and preserves the strong. In the process, the economy prospers and everyone eventually benefits.

Advocates of laissez-faire economics are fond of quoting Adam Smith's The Wealth of Nations. In this 1776 treatise, Smith argued that each individual, pursuing his own selfish interests in a competitive market, was "led by an invisible hand to promote an end, which was no part of his intention." Smith's "invisible hand" has been used for two centuries to justify the belief that the narrow pursuit of profits serves the broad interests of society. Strict advocates of laissez faire maintain that government interference with business tampers with the laws of nature, obstructing the workings of the free market.

(from “The Challenge of Democracy”)

Tasks:

do the phonetic reading and written literary translation of

a) the first passage of the text;

b) the second passage of the text;

put 8 questions to the text;

give the summary of the text;

retell the text as if you were:

1) an economist defending non-market economy;

2) an economist defending free market economy;

3) a director of an enterprise;

4) a director of a hospital;

5) a patient;

6) rector of the university;

7) a parent, whose child is trying to enter the university soon;

8) a pensioner;

9) a foreign creditor, who wants his money back.