Business, Government and Society MidTerm
devil07
BUS_166_slides_week_7.pdf
1. What is public policy?
2. Government regulation of business
2 / 21
What is public policy?
3 / 21
Business-government relations
Consider this question: What does business need or want from government?
• In other words, what does government provide that business could not do without?
And vice versa — What does government need or want from business?
4 / 21
How business and government relate Seeking a collaborative partnership:
• Government cooperates with business for mutually beneficial goals.
• Influenced by nation’s values and customs.
Working in opposition to government: • Government’s goals and business’s objectives are in conflict and results in an adversarial relationship.
Legitimacy issues: • Companies operating globally may find governments whose legitimacy or right to be in power is questioned.
5 / 21
Government’s public policy role
Public policy = “a plan of action undertaken by government officials to achieve some broad purpose affecting a substantial segment of a nation’s citizens” (p. 142)
Senator Patrick Moynihan: “Public policy is what a government chooses to do or not to do.”
6 / 21
Government’s public policy role
Elements of public policy:
• Inputs – external pressures that shape a government’s policy decisions and strategies to address problems
• Goals – can be broad and high-minded or narrow and self-serving
• Tools – incentives and penalties that government uses to achieve policy goals
• Effects – the outcomes arising from government regulation
7 / 21
Types of public policy Economic policy:
• Fiscal policy = “patterns of government collecting and spending funds to stimulate or support the economy” (p. 145)
• Trade policy = “rules that govern imports from and exports to foreign countries” (p. 145)
• Monetary policy = “policies that affect the supply, demand, and value of a nation’s currency (p. 146)
• Other types of economic policies: • Taxation policy (e.g., setting individual and corporate tax rates)
• Industrial policy (e.g., directing economic resources toward specific industries)
8 / 21
Types of public policy
Social assistance policies = policies that concern social services for citizens such as health care, housing, and education
Note: We will discuss some of these policies in greater detail in the coming weeks.
9 / 21
Government regulation of business
10 / 21
Government regulation of business
Regulation:
• The action of government to establish rules of conduct for citizens and organizations.
• It is a primary way of accomplishing policy goals.
11 / 21
Discussion case: Should Facebook Be Regulated?
Facebook’s Cambridge Analytica scandal:
• Cambridge Analytica, a British consulting firm hired by the Trump campaign, was accused of accessing the private data of 87 million Facebook users in an attempt to influence the 2016 presidential election.
• The firm gathered users’ data through a personality survey it offered on Facebook’s platform.
• The data was used to target political ads to Facebook users.
Does Facebook need to be regulated? If so, on what grounds?
12 / 21
Government regulation of business
Reasons for regulation: • Market failure – allocation of goods and services by a free market is not efficient
• 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 (e.g., electric utility)
• Information asymmetry – one party in a transaction has more information than another
• Ethical arguments – consequences, fairness issues
13 / 21
Types of regulation
Economic regulations – aim to modify the normal operation of the free market and the forces of supply and demand; the oldest form of regulation.
For example: • A ter the financial crisis of 2007-2008, Congress passed the Dodd-Frank Act in 2010. This legislation affected the oversight and supervision of financial institutions.
14 / 21
Types of regulation
Antitrust — a special kind of economic regulation
Antitrust laws prohibit unfair, anticompetitive practices by business.
• Setting prices too high (to maximize profit) due to lack of competition.
• Setting prices too low (to drive out rivals out of business). This is called predatory pricing.
15 / 21
Types of regulation
Social regulations – aimed at such important social goals as protecting consumers and the environment and providing workers with safe and healthy working conditions.
For example: • Equal employment opportunity • Protection of pension benefits • Health care for all citizens • Pollution control • Safety and health concerns
16 / 21
Types of regulation & regulatory agencies
17 / 21
Effects of regulation
Government hopes that the benefits arising from regulation outweigh the costs.
Cost-benefit analysis helps the public understand what is at stake when new regulation is sought.
• Who pays the costs?
• Who enjoys the benefits?
18 / 21
Spending on U.S. regulatory activities
19 / 21
Effects of regulation
Cycles of regulatory reform:
• Deregulation – the removal or scaling down regulatory activities of government
• Example: “get government off the back of the people” campaign in early 1980s.
• Reregulation – the expansion of government regulation
• Example: reregulation of the securities and financial services industries in the 2000s.
20 / 21
Regulation in a global context
Government established rules to protect the interests of the their citizens.
• International regulatory agreements and cooperation.
• Example: International Organization for Standardization https://www.iso.org/standards.html
21 / 21
- What is public policy?
- Government regulation of business
