Investigative Question

What is the role of government in our economic lives? How has this changed over time throughout American history?

Students can further their studies of the American economic system by addressing this question: How is the American government involved in the economy? The U.S. economy is primarily a market economy with some government intervention. As a result, students learn that it is more accurately classified as a “mixed economy.” Students can review from previous classes the economic significance of government actions like investments in roads and other infrastructure, health, basic medical and technological research, reigning in monopolies and predatory practices, pure food and drug initiatives, and regulations against pollution and risky banking practices. Government agencies like the Federal Reserve and Consumer Financial Protection Bureau sometimes intervene in markets to promote the general welfare, provide for national defense, address environmental concerns, establish and enforce property rights, and protect consumer and labor rights. In this unit, students investigate the changing role of government in the economy, including the consequences of both government action and inaction in specific sectors of the economy. In particular, they can analyze the outcomes of incentives and investigate the distributive effects of government policy. They learn to identify the benefits and costs of government influence in the economy in different industries and for different groups of people. For example, students can consider the government’s response to hydraulic fracturing. Government regulation of “fracking” can impact the environment, the local labor market, and the growth of a variety of small and large business interests. Students can trace how government policy steers any one sector of the economy through its regulatory activity. Students can consider the legacy of governmental involvement in our mixed economy by addressing the question: How has the government been involved in the economy in the past? They might look historically to evaluate the impact of government in land purchases like the Louisiana Purchase and of Alaska; the investment in infrastructure, like canals, railroads, and the interstate highway system; investment in education, through land grant colleges and the GI Bill; and investment in science and technology, such as space exploration. Students can analyze and evaluate the extent and impact of government research into energy efficiency, space, medicine, and other investments, examining the distribution of benefits and costs of these investments among different groups. Students might also look at contemporary examples of government involvement in the economy like the 2010 Consumer Protection Act, which established the Consumer Financial Protection Bureau. Students can consider the ways in which the government aims to make markets work for ordinary Americans as they use credit cards or analyze mortgages, for example. Federal, state, and local governments have enacted a wide range of laws intended to protect the health of the environment, many implemented through fiscal policies, used to influence business decisions and practices that affect public health and the natural environment. Students learn about the externalities of modern production and consumption, and the interactions between economic policy and protection of the environment, allowing them to explore marginal costs, marginal benefits, and opportunity costs of government actions. This builds their knowledge about the considerations and processes involved in decisions related to the environment and natural resources (California Environmental Principle V). Students investigate the range of fiscal tools government uses to help protect the environment: establishing or managing markets, providing subsidies, imposing taxes, and using command and control policies (See EEI Curriculum Unit 12.3.1. - Government and the Economy: An Environmental Perspective). Students might also analyze the long history of issues related to water ownership in California, for example, offering an opportunity to develop their understanding of the American system of private property ownership through a lens of renewable and nonrenewable resources. Allowing them to explore connections between individual property rights and societal decision-making, helps students recognize the wide spectrum of social, economic, political, and environmental factors related to the use and conservation of natural resources (California Environmental Principle V). Students recognize that many of these factors are considered when governments and communities make decisions about private property rights and the balancing of individual self-interest and society as a whole (See EEI Curriculum Unit 12.1.4.- Private Property and Resource Conservation Economics).
This source set provides an overview of both key historical turning points and key theoretical questions in the ever-changing relationship between the American government and the American economy. This topic can be complex and is heavily freighted with questions of politics, morality, and "common sense." The goal of this source set is to bring students (and teachers) out of the usual one-dimensional debates about "big government" vs. "small government" and to understand how local, state, and federal governments have always played a crucial role in economic life. As a whole, these sources tell two major historical stories. First is a story of continuity, like the one mentioned above, in which the American government has always played an active role driving and investing in growth and technological innovation, opening new markets, and providing regulatory frameworks for American capitalism. The second is a story of discontinuity, emphasizing a few key moments of change (in particular, the massive change during the New Deal, in which the federal government took a much more aggressive stance on governing production and attempting to manage overall economic stability). In the end, the key question is not whether the government had a role in the economy (because it always has had one) but rather what the government saw as its scope, purpose, and role in specific moments. In what ways were governments attempting to shape historical events, and in what ways were they reacting to events already happening?
Teacher background: This letter from Theodore Roosevelt (Source 3) packs a lot of information, some of which has to be inferred, into a relatively small amount of text. This literacy activity, then, brings students' attention to each segment of this text to help them consider both what is explicitly stated and what is implied, and it helps students think about how this information relates to other sources of information they've encountered both within and beyond the unit. This process of identifying, inferring, and synthesizing will help students more deeply understand Roosevelt's stance toward government intervention in economic activity as it relates to natural resources. Directions:
    1. Provide context. a. Use the source descriptions and the directions on the student handout to give students some basic context about circumstances surrounding Theodore Roosevelt's writing of this letter, including what industrial capitalism looked like at the time. Also, make sure students understand that this letter was not legislation but was Roosevelt's opinion, or argument, about the importance of government regulation.b. Explain the purpose of the literacy activity: to closely examine lines of text to notice what is stated and implied in Roosevelt's argument about government intervention regarding natural resources and to then think about how this relates to other arguments.
    2.  Interpret and discuss text. For each of the three sections of the student handout ("Identify," "Infer," and "Synthesize"):a. Briefly explain the directions, reinforcing what each thinking process term ("identify," "infer," and "synthesize") means in relation to the last.b. Have students work to answer the questions individually, in pairs, or in small groups (but with opportunities for all students to verbally process either before or after writing). c. Debrief responses as a class, spending the most time here discussing the "synthesize" section as this will provide the most opportunity to draw out viewpoints about government economic intervention as it relates to the natural environment.
    3. Extend the learning. Later in the unit, to provide more speaking opportunities while reinforcing key unit themes, ask students to use unit sources to debate the extent to which the goals and fears Roosevelt outlines in this letter have been realized.


12E.3 Government Influence on the US Economy Student Handout

12E.3 Government Influence on the US Economy Teacher Key

  • The Library of Congress. The Library of Congress’ Primary Source Analysis Tool supports an inquiry model of instruction by asking students to first observe, then reflect, then question. Their customizable tool includes specific prompts for student interrogation of books and other printed materials, maps, oral recordings, photographs and paintings, and many other types of primary sources.
  • The National Archives and Records Administration (NARA). NARA has developed a vast collection of document analysis worksheets, ready for classroom use. Their website offers teachers a wide collection of customizable tools – appropriate for working with photographs, maps, written documents, and more. NARA has also customized their tools to meet the needs of young learners, and intermediate or secondary students.
Redlining, racial discrimination, violence against Native Americans. These racially discriminatory and/or violent aspects of the role of the American state are necessary to discuss in this history, but may be potentially sensitive.