MAKING AMERICA WORK
a great network of cities and states that would make our founding fathers and mothers proud.
Why does America work? In large part the answer is embedded in our cultural values. In particular, we value and respect work. We want to see hard workand creativity rewarded. We love Horatio Alger stories — stories in which our hero triumphs from hard work, honesty, and perseverance. Alfred P. Murrah’s life is, of course, one such story.
We truly want to have a nation in which any child can grow up to become the President of the United States or, at least, the president of a Fortune 500 company. At the same time, however, we respect everyone who works, be they doctors or garbage collectors.
While we value and respect work, we are also concerned about economic justice. In our labor markets, we like to see all Americans earn a fair day’s pay for a fair day’s work, and we like having a safety net to catch those who, despite their best efforts, cannot compete successfully in our labor markets.
In short, America works because it has achieved a balance between our desire to reward work and our concern about economic justice.
But America could work even better.
I. The Role of Government
In a complex society like ours, the economic rewards from work are determined by a combination of market forces and government policies. Markets arise automatically from the economic interactions among people and institutions. Here and there, government intervenes to influence the operations of those markets and to shape the outcomes that result from market transactions.
Needless to say, policymakers can’t do much about market forces. Adam Smith’s laws of supply and demand are every bit as immutable as Newton’s laws of thermodynamics. But policymakers can change how governments
market operations and outcomes. market outcomes through regulation,
In that regard, governments spending, and taxation.
Government regulation defines and limits the range of markets and so influences the shape of the initial distribution of economic resources. Taxes and government spending also have a significant impact on the distribution of economic resources. In particular, taxes and spending are the primary tools for redistribution.
A. Measuring the Impact of Government on the Distribution of Economic Resources
It is probably impossible to measure the full impact of government policies on the distribution of economic resources. In particular, it is hard to estimate the