Textbook chap 7&8Seeking a collaborative partnershipGovernment cooperates with business for mutually beneficial goals.Influenced by nation’s values and customs.Working in opposition to governmentGovernment’s goals and business’s objectives are in conflict Legitimacy issues•governments whose legitimacy to be in power is questioned. (Elections riggedor using military force to acquire governmental control)•Economic sanctions= When they don’t conduct in that countryPublic policy: A plan of action undertaken by government officials to achieve some broad purpose affecting a substantial segment of a nation’s citizens.the goals, plans, and actions that each national government follows in achieving its purposes. Another source of authority is common lawElements of Public Policy 1.Public policy inputs external elements that shape government’s policy decisions and strategies to address problems. 2.Public policy goalscan be broad and high-minded or narrow and self-serving.3.Public policy toolsincentives and penalties that government uses to achieve policy goals.4.Public policy effectsthe outcomes arising from government regulation.Types of Public Policy 1.Fiscal policygovernment collecting and spending funds to stimulate or support the economy. 2.Monetary policypolicies that affect the supply, demand, and value of a nation’s currency. 3.Taxation policy Raising or lowering taxes on business or individuals4.Industrial policy Directing economic resources toward the development of specific industries5.Trade policy Encouraging or discouraging trade with other countries6.Social assistance policiesconcern social services for citizens such as health care and education.Government Regulation of BusinessGovernment establish rules of conduct for citizens and organizations to accomplish public policy.Reasons for regulationMarket failure: marketplace fails to adjust prices for the true costs of a firm’s behavior.
Negative externalities: the manufacture or distribution of a product gives rise to unplanned or unintended costs (spillover effects). Natural monopolies: without competition, firms could raise prices as much as they want.Common law= past decisions of courts, original basis for legal systemEconomic regulationsTo modify the normal operation of the free market and the forces of supply and demand; the oldest form of regulation.