How Governments Can Harm Economic Growth

In the previous tutorial we learned about six ways that governments can support economic growth. But there are ways in which governments can harm economic growth as well. What could those be? Let's take a look!

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[NoChance]

Critique on over-taxation point (all others are perfectly fine):
A) The gas example is actually a particularly bad choice of example. Some Canadian provinces have implemented a heavy tax on gas that we can show has had effectively 0 effect on consumer prices compared to provinces (and USA states) that don't have a carbon tax. We know that this kind of tax *is* felt almost, if not entirely, by the corporations.
B) When you say business "often" pass on the cost of a tax to consumers, I'd have to ask for this claim to be qualified. Because as noted above: this doesn't seem typical, especially with gas. This idea that the costs "often" get passed to consumers seems to contradict standard theory regarding supply and demand (which is to say, if we know customers are willing to pay $1 more for gas, why wouldn't the gas company be charging that price pre-tax anyways?).
C) Discouraging spending might be a good thing. By some measures, the above carbon tax is actually considered a failure because it _didn't_ raise consumer prices. It was supposed to discourage gas purchases in favour of green energy production/investment. I'm sure you're already aware this is called a "sin tax" and understand it's purpose, I know this video is supposed to be simple, but this might be important to note.
D) Your point on companies moving headquarters is definitely a correct fact, but you don't actually explain _why_ it hurts economies. When Google moved it's HQ to Bermuda, that didn't prevent people from using Google or purchasing Google products. If the only advantage of keeping the HQ of a large corporation is the corporate tax revenue: then there's no sense in trying to hold onto them when the competition is at 0%. So you need to explain specifically why this is bad.

Over-taxation can definitely be an issue but I believe you should have approached this point from a much different angle. Highly competitive goods (like foodstuffs) tend pass taxes onto consumers far more due to low margins and low price elasticity. Additionally high taxes on lower incomes/small business might put an undue strain on small businesses creation (reducing competition) and/or discourage consumer spending in general (just by having less disposable income). Explaining that a corporate HQ leaving is an issue because that's a loss of jobs, or a loss of important control over a key business, may also better strengthen this point.

Feel free to disagree with this critique, but hopefully it helps you in the future. Keep up the great work Dave!

[fmradisapratama]

Science man savagely demolished my SimCity 2k playthrough.

[yeto]

Thank you! You expressed more elenquently what I have always thought, the government must create a healthy ecosystem and safety nets.

[CashmereMercenary]

Appreciate all your content Dave. Been following since intro chem teacher posted your videos to watch, great stuff. 👍👊

[jalilsalomon]

Kinda funny to hear all this and notice every single point applies to my country

[yamiletmartinez]

This video just helped me write my economic essay. I am no longer failing economics🎉

[harleyjudy]

Hey Proffessor dave how does worker safety measures fit into government regulation

[JulianH-coqg]

5:38 why can't there be a contract between the landlord and renter ? Both the landlord, and the renter can come to an agreement and both sign a contract. Tehy can print it and, have copies for both themselves.

[linnealager]

I do think we all need to do less in general though. Feels like noone, including me has time for family, friends or hobbies. We also over consume and destroy the enviornment, and lastly depression and stress related health issues are on the risk. What do you think about lowering work time and introducing ubi?

[dario.fco.demartino]

Hey!
Regulations must be specific according to the size and stage of the companies..

[kiepier]

Love this series! Thanks for the high-quality content.

[infinitemonkey]

I would add to the list subsidies for companies that pay a non-living wage.

[Oodain]

the real issue is whether or not any given economic growth is a good thing...
between externalities and the practical reality that free market mechanisms arent absolute nor fully functional we have systemic issues in aligning economic theory with reality...

[ShionWinkler]

And on taxes, the US has it's highest rate of economic growth when taxes are high.. and that is a provable historical fact. In fact tax cuts have ALWAYS been followed by economic crashes... every single time, again a provable historical fact.

[greenflagracing]

Not all contracts should be enforced -- racially restrictive covenants, contracts in aid of fraud, contracts contrary to public interest, contracts where the bargaining power is disproportionate between the sides in certain circumstances (consumer finance, residential leases, labor law).

[selocan]

Clear and accurate explanations on the subject matter. This should be a teaching material in high schools or even some Collages and Universities Junior levels.

[lucidity]

no, governments don't pay for things through taxation! according to modern monetary theory, governments pay for things by printing money, and taxation is only necessary to remove currency from the economy to prevent/lower inflation. otherwise, the video was fine.
also, the lack of enforcement of contracts has a very simple real-world example: any criminal deal gone wrong, because that's how things get solved when you can't rely on the government to enforce a contract...

[max]

The UK has managed pretty much all of those and a few others into the bargain.

[jursamaj]

2:35 "Whenever governments regulate an economy, they are manipulating a free market."

"Free markets" seldom exist, and not for long when they do. Large entrenched interests alway reach a point where they cooperate to fleece the customers, while preventing small competition from growing.

[TheMcEwens]

Please explain this to Our government. . .