Economic Efficiency—Economics U$A: 21st Century Edition

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In preparation for WWII, the Roosevelt administration instituted wage price and price controls to curb inflation and better focus production on war materials. When the Nixon administration set up price controls for beef, farmers attempted to stifle the supply by withholding animals from the markets. Following WWII, rent controls established to aid returning war veterans cut into landlord profits and consequently led some to abandon properties. These stories examine how the "invisible hand" behind free markets operates, the reasons for interfering with free markets, and the costs of doing so.

The Firm—Economics U$A: 21st Century Edition

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In 1980, Coca Cola replaced sugar with high fructose corn extract in order to alleviate higher production costs. In 1963, Studebaker closed its plant, unable to increase sales and take advantage of assembly line production. In the new century, printing and publishing company Printpod, Inc. avoided increasing domestic labor expenses by tapping into the workforce in India. These stories show how competitive firms minimize their costs of production by utilizing an optimal combination of inputs and scale of operation, while others fall by the wayside.

Economic Growth—Economics U$A: 21st Century Edition

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By 1916 Henry Ford's assembly line had lowered the price of the Model T to $360, making it affordable and increasing its production exponentially in two years. In 1972 a group of experts known as the Club of Rome issued a report called "The Limits to Growth," predicting that raw materials could run out and world population growth and pollution could get out of hand. The Internet is a technological innovation that paved the way for other innovations such as smart phones. These stories highlight two important factors for economic growth: capital per worker (a.k.a. productivity) and technological innovation.

Fiscal Policy—Economics U$A: 21st Century Edition

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In 1954 relying on "automatic stabilizers," President Dwight Eisenhower withheld raising taxes in order to encourage consumer spending. In the 1960s, newly elected John F. Kennedy and economic advisor Walter Heller pushed Congress to approve a $12 billion tax cut stimulus. The Employment Act of 1946 was the first time that government tried to employ fiscal policy. But, by 2010 economists disagreed about whether fiscal policy was dead, as they argued over the success or failure of President Obama’s stimulus plan. These stories are all examples of how government attempts to fine-tune tax and spending policies to reduce the severity of business-cycle fluctuations.

The Banking System—Economics U$A: 21st Century Edition

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The Knickerbocker Bank's failure led to the Bank Panic of 1907, and ultimately inspired a need for a central bank. When thousands of banks failed in the 1930s, President Roosevelt declared a National Bank Holiday closing individual banks, and created new regulatory agencies to guard the system. But in the wake of the 2008 Great Recession and the failure of regulators to act, the Dodd/Frank Wall Street Reform and Consumer Protection Act became law. These stories explain the role of banks in the U.S. economy and how government agencies act to prevent individual bank failures from becoming banking crises.

Stagflation—Economics U$A: 21st Century Edition

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1970s America saw a new kind of inflation, based on supply and not demand: "stagflation," caused by Arab oil embargoes and worldwide crop failures. In 1973 President Ford and Fed Chairman Arthur Burns tried to control inflation by choking the money supply. They failed. In the 1990s the U.S. had three ways to ease inflation: Technological innovation, market globalization, and expenditure restraint. Demand management policies fight cost-push inflation only by causing extremely high unemployment, and rising inflation and rising unemployment can parallel each other.

Monetary Policy—Economics U$A: 21st Century Edition

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Federal Reserve Chairman Paul Volker pushed us through two deep recessions using monetary policy and increased interest rates to combat inflation in the 1980s. His successor Alan Greenspan used a different tactic in the early 1990s and 2000s: flood the market with liquidity to prevent freezing. And under Chairman Benjamin Bernanke the Fed has struggled to combat the ravages of the Great Recession in the first decade of the 21st century. These stories discuss the relationship between the money supply, economic growth, and inflation, and explain why choosing correct monetary policy can be so difficult.

Reducing Poverty—Economics U$A: 21st Century Edition

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After the Great Depression President Franklin D. Roosevelt put forth a social security program, using money from employer/employee wages. In 1996 President Bill Clinton signed the Welfare Reform Act, providing childcare assistance for mothers in the work force. The Perry School for Community Services, a Washington, D.C. poverty-reduction program, offers after-school programs for kids and vocational programs for adults, including recently released convicts. These stories all deal with differences in income and how public policy and private funding is used to reduce poverty.

Federal Deficits—Economics U$A: 21st Century Edition

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During WWII, our national debt had more than quadrupled, so government encouraged citizens to buy war bonds and federal stamps to pay some of it off. In 1960, President Eisenhower achieved a surplus and reduced the debt, a feat not repeated until the 1990s. But a large tax cut in 2001, three wars, a down market and huge entitlement costs pushed the deficit and the national debt to an alarming new height that forced a fierce confrontation between Congressional Democrats and Republicans. These stories show that deficits can be helpful or harmful, but long-term debt is serious business.

Stabilization Policy—Economics U$A: 21st Century Edition

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Between 1982 and 1985, the Fed tightened the money supply to combat inflation, despite rising unemployment. Also in the 1980s, U.S. citizens began to feel the debilitating effects foreign trade would have on job loss. Paul Volker's monetary policy in the mid-1980s was designed to quell inflation once and for all. However, in the first decade of the 21st century, when unemployment skyrocketed and the banking system and major corporations needed a bailout to survive, we questioned whether we could still control the economy. These stories highlight arguments for and against active government counter-stabilization policy.

International Trade—Economics U$A: 21st Century Edition

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The U.S. auto industry lost a lot of mileage in 1973 with the rise of the more efficient Japanese imports. In the 1970s, the "trigger/price mechanism" was developed in order to differentiate between fair and unfair trade practices. Debate over the North American Free Trade Agreement (NAFTA) included accusations that American jobs would suffer and American firms would relocate south of the border. Others insisted that increased trade would create new American jobs and industries. These stories illustrate the pros and cons of free trade.

Markets—Economics U$A: 21st Century Edition

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The return of U.S. troops from overseas following World War II created a massive demand for cheap housing. Rising labor and energy costs in the United States in the '60s and '70s forced domestic steel manufacturer NUCOR to find ways to lower production costs. In 2009, rookie pitcher phenomenon Stephen Strasburg signed the largest rookie contract in baseball history. These stories show how a well-functioning free market pricing system determines how producers manufacture goods, what they will pay, what goods will be manufactured, and for whom the goods will be produced.

Perfect Competition & Inelastic Demand—Economics U$A: 21st Century Edition

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Farmers lured into producing massive food surpluses for WWI could no longer profit when the war ended and demand plummeted. After 1933, President Franklin D. Roosevelt sought to improve the conditions of farmers via policies in his New Deal plan. Government subsidies later allowed for corporate ownership of a majority of farmers. The Freedom to Farm Bill of 1996 gave farmers a little more maneuverability, but for the most part farmers are still held to the fluctuating demand statuses of large competitive firms.

Public Goods and Responsibilities—Economics U$A: 21st Century Edition

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In 1937 the Tennessee Valley Authority (TVA), a government-owned utility company, was created to electrify rural communities and control flooding. 1965 marked the first U.S. attempt at national health insurance in the passage of Medicare and Medicaid. In response to 9/11, the U.S. Transportation and Security Administration replaced private security firms with federal employees. A perfectly competitive market does not always provide the right amount of goods, so government fills the gap with public goods. The debate on just how much the government should produce is highlighted in these stories.

Resources and Scarcity—Economics U$A: 21st Century Edition

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Faced with dwindling resources, Congress fiercely debated whether to preserve 100 million acres of Alaskan land as a national park, or open the land for mineral exploration. World War II saw an unprecedented period of economic growth. The need to mobilize resources overseas quickly was palpable. In the 1970s U.S. textile industries risked competitive advantage in increasingly active Asian markets by investing more in the health of their workers. In all investments there are trade-offs and choices. These stories show how the cost of using some resources sometimes comes at the expense of others.

GDP/GNP—Economics U$A: 21st Century Edition

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In 1929 following the stock market bottoming out, Simon Kuznets led an investigative study resulting in the first national data collection of Gross National Product (GNP). Able to assess the overall production to consumption ratio of the U.S., Franklin Roosevelt entered World War II without jeopardizing the basic needs of his citizens. Although GNP was changed to GDP (Gross Domestic Product) in 1991, it still didn't account for all aspects of economic growth. Nonetheless, GDP data measurements help us understand the U.S. economy.

Boom and Bust—Economics U$A: 21st Century Edition

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The nation's cycles of economic booms and busts were considered intrinsically capitalistic by Joseph Schumpeter who called them "methodic economic growth," and by Karl Marx who lambasted capitalism as inherently flawed. John Maynard Keynes held that recessions depended on the balance of aggregate demand and aggregate supply. Economist Hyman Minsky provided a promising explanation for the Great Recession of the 21st Century with his theory that the financial system plays a determining role in economic cycles.

Inflation—Economics U$A: 21st Century Edition

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In the 1960s, President Lyndon Baines Johnson continued fueling the domestic agenda of his "Great Society," keeping a low profile on the Vietnam War. But the U.S. overspent and inflation bubbled over. Anyone living on a marginally fixed income endured harsh consequences under inflation, and workers' strikes only brought costs up more. After his election in 1972, Richard Nixon ordered a 90-day nationwide price and wage freeze after the Federal Reserve failed to curb inflation. These stories show problems posed by the development of inflation in the post-war U.S. economy.

Supply and Demand—Economics U$A: 21st Century Edition

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A two-year drought in California in the 1970s motivated areas such as Marin County to conserve by reducing their water consumption by as much as 66 percent. Following the Arab oil embargoes of 1973, the Nixon administration latched onto the world price of "new" oil, encouraging domestic oil suppliers to drill again. Jordache designer jeans used creative advertising to create a demand for blue jeans. These stories illuminate factors that determine the quantity of goods demanded by consumers and the factors that determine the quantity of goods supplied.

Monopoly—Economics U$A: 21st Century Edition

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In 1890, the Sherman Anti-Trust Act broke up the monopoly that John D. Rockefeller and his company, Standard Oil, had on the oil industry. In 1914, the federal government was sold on the concept of universal telephone service provided by Ma Bell, a monopoly that was ended by the development of a new technology. In 1998, the U.S. government filed a suit against the world's largest software company, Microsoft, for participating in anti-competitive practices. These stories explain what monopolies are, and why government sometimes chooses to intervene.