Jun 01 2007

Can you say, “paranoia”?

Promotional Fax Mistaken for Bomb Threat – washingtonpost.com

the threatening fax!

I don’t know, but I would say the American people are a little on edge these days. What does it say about our society when a paranoid bank employee receives a fax and calls in the bomb squad? The arrival of the threatening fax coincided with the arrival of a “suspicious” package, escalating the fears of the terrified bank staff. Turns out the fax was from the corporate office, and the package contained some paper files, but by the time police figured it out 15 local businesses and a nearby day care’s 30 children had been evacuated from the area!

Okay, so this story may not appear to have much to do with our Econ course… or does it?

Discussion questions*:

  1. What impact might mass paranoia about terrorism have on the macro economy? Explain.
  2. Would the free market provide the security and protection needed to ensure a healthy and safe environment for investment? Why or why not?
  3. What is the term for a service or product that provides spillover benefits for society but which is under-provided by the free market (such as a police force)?
  4. Do you think the bank employees were right to be frightened by the threatening fax? Is their fear rational or irrational given the political and social climate in America today?

*From now on, most of the posts on this blog will include discussion questions. These are meant to help students start their own discussion about the issues raised in the posts and how they connect to our economics course. Posts like this one are tagged with a category, and next year when we get to a particular topic in our Econ course, students will be asked to find a past post from that category on the blog, read it and post their comments. This will become a part of students’ grades. To see how the blog will graded, click here.

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About the author:  Jason Welker teaches International Baccalaureate and Advanced Placement Economics at Zurich International School in Switzerland. In addition to publishing various online resources for economics students and teachers, Jason developed the online version of the Economics course for the IB and is has authored two Economics textbooks: Pearson Baccalaureate’s Economics for the IB Diploma and REA’s AP Macroeconomics Crash Course. Jason is a native of the Pacific Northwest of the United States, and is a passionate adventurer, who considers himself a skier / mountain biker who teaches Economics in his free time. He and his wife keep a ski chalet in the mountains of Northern Idaho, which now that they live in the Swiss Alps gets far too little use. Read more posts by this author

2 responses so far

2 Responses to “Can you say, “paranoia”?”

  1. jabbobbon 04 Mar 2009 at 5:52 am

    Would the free market provide the security and protection needed to ensure a healthy and safe environment for investment? Why or why not?

    As learned in class, a public good or service, such as benches in the park, street lights or protection provided by the police are non-excludable and non-rivalrous. Meaning that the government provides these goods and services and nobody would directly pay to use them. But in a society where paranoia spreads around, especially in the U.S.A., it may happen, that the people don't feel save enough with just the police and the army and start arming themselves. Nevertheless banks with employees armed to their teeth are unlikely and the police has other things to do, than waiting for more "bomb fax" to destroy the world. Banks might be willing to pay for their safety and this is were PRIVATE security companies come in. Private security = competition = free market. Of course the example with the bank is not the only type of business that might hire private security companies.

  2. Helene Gleitzon 04 Mar 2009 at 6:08 am

    The security of a society is maintained by the local police, which is usually employed by the government. This is an example of a public good, which are non-rivalrous in consumption and non-excludable in production. In other words, it is impossible to exclude other individuals from benefiting from it or to prevent someone from consuming it. Security is guaranteed by the government, however the free market also provides us with security. Private firms, such as Securitas, can be hired to protect a community. However, these firms are usually employed by private companies to protect a building or a certain firm, not the population. As Jabbo also stated, people could start arming themselves and buying weapons. But it is unlikely to see people walking around and going to work with a gun in their pockets.

    I think that, considering the US background, people are more likely to be scared by something suspicious, however should carefully consider the evidence that something is wrong and not panic.