As we move into macro-economics, the study of the operations of the economy as a whole, it is important to remember that scarcity extends beyond the decision-making of individuals in households and businesses. Government officials, citizens, and public workers also have limited resources to satisfy a burgeoning list of wants and needs, and the reality is that in public life, as in private life, choices have opportunity costs. Public choices, like private choices, are driven by goals. Through government, we establish economic goals and design policies to achieve them. Because we have multiple national economic goals and because individuals’ ranks and weightings of goals vary with time and circumstance, policy creation is an ongoing process of making trade-offs.
This lesson creates a framework for study of macro-economic topics by identifying national economic goals and then engaging students in a consensus-building exercise in which they must prioritize goals in a variety of policy contexts. In combination with lessons 7-12, it offers a model for organizing and tying together macroeconomic topics in the high school classroom.
|scarcity||trade off||opportunity cost|
Standard 1: Students will understand that Productive resources are limited. Therefore, people cannot have all the goods and services they want; as a result, they must choose some things and give up others.
- Like individuals, governments and societies experience scarcity . . .
- Choices involve trading off the expected value of one opportunity against the expected value of its best alternative.
- The choices people make have both present and future consequences.
- The evaluation of choices and opportunity costs is subjective; such evaluations differ across individuals and societies.
Standard 2: Students will understand that Effective decision making requires comparing the additional costs of alternatives with the additional benefits. Most choices involve doing a little more or a little less of something; few choices are all-or-nothing decisions.
- To determine the optimal level of a public policy program, voters and government officials must compare the marginal benefits and marginal costs of providing a little more or a little less of the program’s services.
Standard 16: Students will understand that There is an economic role for government to play in a market economy whenever the benefits of a government policy outweigh its costs. . . .
- Governments provide an alternative method to markets for supplying goods and services when it appears that the benefits to society of doing so outweigh the costs to society. Not all individuals will bear the same costs or share the same benefits of those policies.
- Introduce and define the generally accepted list of national economic goals.
- Discuss the compatibility/incompatibility of goals. Tie to scarcity, trade-off, marginal decision-making.
- Differentiate between ‘market-driven’ and ‘non market-driven’ goals.
- Participate in a consensus-building exercise to rank economic goals in order of importance.
- Consider how command and traditional economies rank goals differently from market economies.
- Discuss the relationship between goals and policy, and the implications of the lack of goal consensus for policy formation.
- Repeat the consensus-building exercise in specific policy contexts.
- Discuss the implications of changing goal priorities for policy formation and for consensus.
- Review: “Governments” don’t make choices; people do.
- National economic goals include: efficiency, equity, economic freedom, full employment, economic growth, security, and stability.
- Economic goals are not always mutually compatible; the cost of addressing any particular goal or set of goals is having fewer resources to commit to the remaining goals.
- Evaluation of the importance of relative importance of economic goals is subjective.
- Perceptions of the relative importance of economic goals changes with time and circumstance.
- Scarcity impacts our ability to translate national economic goals into policy.
- Trade-offs in addressing national economic goals occur at the margin. Policy decisions are rarely all-or-nothing decisions.
- “Governments” make decisions.
- Governments do not have economic goals.
- All economic systems have the same goal priorities.
- If politicians made better decisions, we could achieve all our economic goals.
- When economic goals are achieved, everyone benefits.
- The priority ranking of our nation’s economic goals is constant.
Frequently Asked Questions:
- Who determines / sets economic goals, and how?
- If economics teaches us that individuals make decisions, what do we mean when we say our “country” has economic goals?
- Why is it so difficult to reach and maintain agreement on goal priorities?
- Why are economic goals important? What role do they play in our economy?
- What’s the difference between economic goals and other goals – social goals, for example?
- Why can’t we achieve all of our economic goals?
- What is the relationship between political and economic processes in determining the policies that will be adopted to address economic goals?
- Does focusing on one goal mean giving up the others?
- What cause individuals’ goal priorities to change? What causes change in a country’s goal priorities?
- Why do countries rank goals differently?
Classroom Activity Options
- “Prioritizing Economic Goals”
- Discuss the following analogy with students:
Suppose that your family sets a goal of going to Disney World for spring break next year. You would adopt a series of “policies” to enable you to accomplish that goal. For example:
- When making commitments to other activities throughout the year, family members would remember to keep their calendars clear for that week.
- Choosing to set aside a portion of monthly income, or to forego other spending in order to save spending money for Disney World;
- Assigning family members to monitor Internet travel sites for transportation and hotel reservation deals.
The process of setting goals and adopting policies for the national economy is analogous to the process your family used. Like your family, our nation sets goals and priorities and then works toward them.
The similarities don’t end there, however. Is it likely that Disney World was everyone’s first choice in your family? What about the “policies” you adopted about spending? Did everyone agree on who should pay for what? Not likely, is it? Reaching agreement on goals and policies for the nation is often at least as difficult as getting a family consensus about spring break!
The exercise we’re going to complete in class today should help us to better understand how we prioritize our economic goals and policies.
- Distribute the “Goals of Economic Policy” handout. Identify the list of national economic goals and review the definitions with students.
- Discuss with the students the compatibility of the various goals, pointing out, for example, that emphasizing freedom may necessitate giving up some security. (Relate the necessity of these trade-offs to the ubiquitous condition of scarcity.)
- Ask students to think about their own individual priorities. Direct them to rank order the economic goals by placing the numbers 1 – 7 in the column labeled “Priority Rank (Individual).” #1 is the highest priority and #7 the lowest.
- Remind students (and provide examples) that the ranking means that they would be willing to sacrifice some of any or all of lower-ranked goals in order to have more of those ranked higher. (Arriving at a complete 1-7 ranking is not necessary. Generally, students tend to identify 3 top priorities and a 4th – and sometimes 5th – of marginal importance. The other 2 or 3 goals are either just dismissed, actively opposed, or already achieved through a prior goal. It is less important that they distinguish between priority 1 and 2 than that they identify their top 3 priorities. )
- (Optional) Ask students to imagine themselves 20 years from now. Do they think they will rank the goals. With older students, ask them to imagine themselves as 20 year-olds when completing the second ranking.
- After students have had a few minutes to complete their rankings individually, divide the class into small groups of 4-6 students and direct them to come to a group consensus on their rankings. (The appropriate analogy here is that of a governmental body – for example, a city council trying to adopt policies regarding public transit. The individual members’ goal rankings will shape their evaluations of alternative policies.)
- Debrief. Note the differing priorities. (Commonly, there is a strong split between those students who rank equity or security first and those who rank economic freedom first. The trade-offs among these goals are a constant theme running through our country’s history.)
- Ask students to generate historical examples in which we traded some of our freedom for additional security, or for additional equality.
- Provide students examples of policies currently being debated on a national level (defense spending, health care programs, for example) and have them identify the trade-offs in terms of economic goals.
- (Individual or small groups) Direct students’ to write “Minimum Wage Policies” at the head of the first of the 3 policy columns on the second grid on their handout. Direct them to mark a +, -, or ? in the boxes to indicate whether they think minimum wage legislation promotes (+) or undermines (-) each goal.
- When all have completed the task, direct students to refer back to their original goal priority rankings to see whether minimum wage policies are compatible with the goals that they’ve identified as being most important.
- Discuss who benefits and who bears the cost of various minimum wage policies. Discuss how individuals’ goal priorities affect their perceptions of the costs and benefits.
- Divide the class into 2 groups: 16 year olds entering the work force and employers of minimum wage workers. How do their differing perspectives affect their goal priorities and their perception of minimum wage policies?
- Discuss whether their analysis of the goals promoted by minimum wage policies prompts them to reconsider their goal priorities.
- Repeat the exercise, in small groups, with 2 current policy issues on which students have shown interest or strong feelings. (Examples: immigration, health care reform, defense spending, drug, alcohol, cigarette policies, etc.)
- Why can’t we accomplish all of our economic goals?
- How do personal values, and perceptions of costs and benefits affect the way people prioritize national economic goals?
- What might a lack of consensus on economic goals impact the creation of economic policy?
- Why is understanding of marginal analysis important in efforts to achieve national economic goals?
- Assign students to choose an event/era in U.S. history (Great Depression, Viet Nam War, Constitutional Convention) and to create a ranking of goals prior to, during, and after that time period.
- Assign students to research 2 or more countries (from World History studies or contemporary) and create an economic goal ranking for each nation. Compare/contrast and explain the countries’ rankings.
- Survey (email, phone, or mail) the economic goal rankings of one of the following groups:
- Local government (city council, county commissioners, homeowners association, school board, etc.)
- State senator(s)/representative(s) in your local area
- Your state’s political party officials
- Your state’s Congressional delegation
Analyze your findings. What are the implications of the rankings in terms of policy decisions these people will make that might affect your life?
Handouts and Supplemental Materials