This document outlines the agenda and activities for a class on sustaining markets. It includes discussions of incentives, market failures, the tragedy of the commons, and negative externalities. Students will participate in simulations and debates about fishery management, organ donation policies, and proposed legislation. The goal is for students to understand how individual and group incentives can contribute to market failures and how policy can be designed to address these issues.

1. Good Day! DRAW A LINE SEPARATING TODAY & YESTERDAY 1) Write: Date: 01/13/10 , Topic: Sustaining Markets, Part 2 2) On the next line, write “ Opener #5 ” and then: 1) Plot your mood, reflect in 1 sent . 2) Respond to the opener by writing at least 2 sentences about : Your opinions/thoughts OR/AND Questions sparked by the clip OR/AND Summary of the clip OR/AND Other things going on in the news. Announcements: None Intro Music: Untitled

3. Work #5a , Title “ Opener Shareout ” Pick 1 thing from your opener to share with your partner. 1) Each of you sign your name in your partner’s workbook under 1) to verified you’ve shared.

5. Agenda 1) Behavior Econ: Incentives 2) When do markets fail? 3) Tragedy of the Commons 4) Negative Externalities End Goal, you will be able to… 1) How do we contribute to market failure? Reminder 1) Find & complete your 4 news pods

6. Reminder 1) Find & complete your 4 news pods (new source: Marketplace, NOT Newshour) 2) Blog Update 3) First Day Forms

8. Review 4 Things for a Healthy Market: a) Private property rights (including intellectual) GOV ROLE: Police + Courts b) Freedom to spend (buy) + make (start biz) money how you want GOV ROLE: Limited gov + anti-trust protection c) Freedom to exchange goods/services GOV ROLE: Reliable roads, stable money, accurate measures, fraud protection d) Freedom to keep your profits GOV ROLE: Reasonable tax rates

9. Work #5b , Title “ Video: Greed ” 1) Copy Source Title: John Stossell 2…) Discuss questions on the board with a partner. Summarize your discussion ( include their name at the end ). Remember participation points are deducted if off task. 5 Reading/Film Qs Come From These Work Sections Time Bookmark: 00:00

10. Behavior economists have researched greed, and attempted to harness it in the form of incentives.

12. Contest Rules: 1) No stealing money 2) No touching anyone 3) No doing anything dangerous

14. Notes #5a , Title: “ Behavior Economics ” 1) Incentives : Pressures used to elicit a behavior a) 3 Incentive Types : i) Economic : Financial Pressure ii) Social : Peer Pressure iii) Moral : Self Pressure b) Perverse Incentive : Pressures that lead ppl to do the opposite of what you intended.

15. i) Economic : Financial Pressure

16. ii) Social : Peer Pressure

17. iii) Moral : Self Pressure

19. Humans are more driven by incentives then rules Lets assume that you’re a lawyer making $100/hr. Driving illegally in carpool saves you 1 hrs/day. You get ticketed $300 on average once a month. What might some people do in this scenario?

22. Is offering some type of gas tax credit to relieve some of the cost of gas a perverse incentive?

23. Is giving a car company that made bad cars money creating a perverse incentive?

24. Is giving financial firms money that made investments in housing a perverse incentive?

25. Work #5c , Title “ Incentives ” Ask your partner ( include their name ): 1) Which incentive is most powerful over society? 2) Which incentive is most powerful over yourself? Incentives: Which is more powerful? 1) Financial Incentives Can’t pay everyone for everything 2) Social Incentives People aren’t always watching 3) Moral Incentives At times the weakest, but also the strongest (ppl die for what the believe in)

26. Work #5c , Title “ Lit: Incentive Readings ” 1) Copy Source Title: Freakonomics + Nudge Read, and then respond to: 2) What problem were they were facing in Freakonomics ? 3) What was the results of their solution? 4) What is the concept of “ Nudge ”? 5) What were some nudges suggested you think are good ideas? (Note: Nudge is 1 of Obama’s fav) Bonus Q 6) Based on the ideas of Freakonomics + Nudge, is there something you see in your world or the wider world that can be done better? 5 Reading/Film Qs Come From These Work Sections

27. Economist are reluctant to ban things, they rather use incentives and design things to nudge people.

28. Choice Design (Richard Thaler’s Nudge)

31. Work #5e , “ Initial Assembly Bills ” Before the governor (Mr Chiang) signs the bills, he wants the voters input. 1) How capitalist, socialist, or communist are the current bills that are proposed? 2) Would you support or be against the real CA’s legislature, if it wrote laws with the same intents as conveyed in the bills before you? 3) What do you predict to be the long term pros/cons of this legislation? 4) What changes do you think should be made to the bills?

32. Ways to Make Chiang Money 1) Better job 2) Spend less 3) Make $ on stock market (nx week) 4) Sell “legal” things to classmates (Fri: marketplace, study notes, BUT you cannot sell homework/projects .) Roles during break: Landlords: Circle territ, write in rent, Collect Rent + 360 (2 chk) Bankers: Deposit salary, withdraw checks

33. Fish live in the common (aren’t owned), can greed+incentives save threatened animals?

34. Fisherman Simulation Instructions 1) When I say “GO” you can take as many as you want. Who has the most wins a 4 pt participation. 2) What ever is left in the bowl (ocean) at the end of the round gets doubled .

35. Work #5f , Title “ Incentives ” Answer these questions ( include their name ) : 3) Summarize what happened in the simulation AND explain if you think we should sale all the remaining threatened animals to private farms? 4) Come up with an example a financial incentive used to shape your actions 5) Come up with an example a social incentive used to shape your actions 6) Come up with an example a moral incentive used to shape your actions 7) Come up with an example a perverse incentive Be Prepared to Present

36. Work #5g , “ Organ Debate ” 1) Read the 4 sides, choose 1 side, and write which you choose and explain why . 2) Then write down what your partner thinks ( include their name at the end ). a) Voluntary organ donors (current system) b) Set default to organ donor (choice design) c) Let people sell their organs (free market) d) Require all dead to donate organs (communal)

37. Organ Donor Clip

38. Market Failures: We’ve spent 3 days praising the power of free markets, now lets see when they fail.

39. Homework: 1) Study today’s notes + work sections for a possible workbook quiz . 2) Pick and listen to your 4 news podcast by next Monday. Workbook Check: If your name is called, drop off your workbook with Mr. Chiang ( if requested, points lost if your workbook is not turned in )