Two Views of the Proper Role of Government in the Economy

Paul Samuelson and Milton Friedman are two of America's most distinguished economists. In recognition of their achievements, Samuelson was awarded the Nobel Prize in Economics in 1970 and Friedman in 1976. Both spent most of their professional lives on the faculty of major universities (Samuelson at the Massachusetts Institute of Technology, and Friedman at the University of Chicago). Given their similarities, one would think that the two would also hold similar views on economic issues. Nothing could be further from the truth. And, some of their sharpest differences center on the question of what ought to be the proper role of government in the economy.

Classical economists in the tradition of Adam Smith had long recognized the need for government to provide goods and services that would not or could not be provided by the private sector (like national defense). But they urged that this participation be kept to a minimum.

But Samuelson argued that too many of the problems the classical economists wanted to leave to the marketplace were not subject to its influence. These externalities, affecting things like public health, education, and environmental pollution, were not subject to the laws of supply and demand. Consequently, it was up to government to establish goals for the economy and use its powers to achieve them.

Milton Friedman sees things differently. Like the classical economists of old, he regards supply and demand as the most powerful and potentially beneficial economic forces. The best that government can do to help the economy, in Friedman's view, is to keep its hands off business and allow the market to "do its thing." The minimum wage laws are a case in point. Whereas Samuelson endorses minimum wage laws as a means of helping workers at the bottom of the income ladder, Friedman would argue that by adding to unemployment, they harm the very people they were designed to help. That is, he explains, by increasing labor costs, minimum wage laws make it too expensive for many firms to hire low-wage workers. As a result, those who might otherwise be employed are laid off.

On the one hand, Samuelson endorses the concept of government-sponsored programs such as public housing and food stamps as a means of reducing poverty. Friedman, on the other hand, would prefer to give the poor additional income and allow them to use the funds to solve their problems without government interference. To apply this concept, Friedman suggested the "negative income tax." The graduated income tax takes an increasing amount in taxes as one's income rises. The negative income tax would apply a sliding scale of payments to those whose income from work fell below a stated minimum.

Вариант 3

1. Read and translate the text:

Product, Price, Promotion and Place: The Four P’s of Marketing

The total marketing concept involves four steps, or, as they are often called, the four P’s of marketing - product, price, promotion and place.

Product. The place to begin is with the product itself. A business must determine what kind of product potential customers want. Companies employ very complex market research techniques to find out. Surveys by phone, mail, or personal interview can reveal, exactly, what’s on the consumer’s mind. The product warranty card that you return after a purchase provides marketing information too. Sophisticated research mathematics applied to a sample of consumers can typify the rest of the consumers. If we can find out what a few want, we can assume the others in the group of population will want the same things. Deciding who should be in the sample is the problem. Researchers have very detailed formulas for constructing marketing samples.

Price. Another major part of marketing is price. Companies have to decide on a product price that will cover all costs and also return a profit. Included in costs are such fixed expenses as rent and insurance. Variable expenses must be anticipated too. Those include the costs of material and commissions. These costs are used to compute a break-even point - the point at which income from sales equals fixed and variable expenses. On one side of this point, the company will have a net loss and on the other side, a net profit.

Promotion. Promotion is a key part of marketing because it is the way business get their messages to consumers.

Businesses would like to see steady growth rather than sudden surges in business. One function of promotion is to maintain a steady and growing demand. Promotions through advertising in the media, direct mailings or through personal contact are a few of the ways producers make their products known to consumers. If consumers don’t know about a product, they won’t buy it. Through advertising, businesses tell people what products are available. Advertising even gives them reasons to buy.

Place. The final part of marketing, the fourth «P», is place. For a product to be useful, it has to be in place when and where it is needed. That should seem obvious. To sell products, business must anticipate «when» and «where» consumers will buy them. A hot dog at a baseball game on a sunny afternoon is an example of excellent product placement. A lemonade stand in the winter is not. Hot dogs have less value after the game, and lemonade has more value in the summer.

2. Give English equivalents to:

Общее понятие маркетинга включает четыре момента; потенциальные покупатели; исследования по телефону, по почте; на уме покупателя; обследуемая группа покупателей; чего хотят немногие; очень подробные формулы; покрывать все издержки; такие постоянные затраты как рента и страхование; вычислить точку самоокупаемости; ключевая часть маркетинга; в средствах массовой информации; предприятия должны предвидеть.

3. Ask questions for these answers:

1. The total marketing concept involves four steps.

2. They are product, price, promotion and place.

3. Yes, it must.

4. Surveys by phone, mail, or personal interview can reveal it.

5. The product warranty card provides marketing information too.

6. It is price.

7. Variable expenses must be anticipated too.

8. A break-even point is the point at which income from sales equals fixed and variable expenses.

9. Promotion is a key part of marketing.

10. Advertising gives people reasons to buy products.

11. To sell products, businesses must anticipate «when» and «where» consumers will buy them.