[chanting] 1979. while americans stewed in gas lines, congress argued over what to do with 150 million acres of alaskan land. which would we choose? wilderness or mineral development? in 1939, one american in six was unemployed. by 1942, we were fighting a great war and living better than we had in years. how did we increase production of both guns and butter during world war ii? in 1978, a troubled textile industry was told to spend $2 billion combating brown-lung disease. by 1980, the supreme court was asked to choose between saving lives or jobs and profits. how much is a life worth? wilderness or minerals? guns or butter? jobs or safety?

we always face choices. resources and scarcity. what's economics all about? with the help of economic analyst richard gill, we'll examine that question on economics usa. i'm david schoumacher.

what's economics all about? there have always been theoretical answers to that question, but reality complicates the most elegant theories. economics usa is about theory and reality in 20th-century america, and how people and events have shaped economic decisions that affect our lives. those decisions usually involve tradeoffs. in 1980, congress designated over 100 million acres of alaskan land as national parks and wilderness areas. why did congress make that decision? how much did it cost the nation? in 1867, when the united states purchased the territory of alaska from russia,

the acquisition was derided as wasted money. a century later, after two gold rushes, alaska braced for another. the new gold was oil. millions of barrels lay beneath the permafrost. during the 1970s, when the skyrocketing price of foreign oil threatened to devastate the american economy, alaskan oil seemed to promise hope for american energy independence. then along came 1979. revolutionary shock waves spread through islamic nations. iran cut off petroleum exports to the united states. america felt it was held hostage by dependence on foreign oil. as the price of a gallon of gas passed a dollar, congress debated closing off 100 million alaskan acres to mineral exploitation. the bill would double our national park system. alaska congressman don young was outraged.

how selfish and ridiculous can we be when we think we can live within ourselves? we have billions of people in asia alone, south america is suffering from starvation, and we're going to set aside 175 million acres of land for a playground that has all the minerals and oil and resources-- timber and hydropower? that's asinine! other congressmen saw the issue in more personal terms. arizona congressman mo udall. the most important thing to me is that it's there. you get a real lift from getting out of the artificial world and being with nature. not only oil lay beneath the tundra. minerals vital to national defense were being imported from the third world while unknown quantities waited in alaska.

the amounts were assumed to be vast. the alaska lands act would prevent further exploration. within those borders, there's the potential of providing for this nation the 31 minerals which we're importing from the third world. why weren't they developed before this? because the need wasn't there. because it's expensive. if there was debating room on alaska's minerals, there was no debate on the wilderness. it was vast, and it was america's last wilderness, the last wild home for many plants and animals. we could import minerals but not wilderness. we couldn't have both. we'd have to choose. doug scott was the chief lobbyist for the environmentalists.

people in future generations will be outraged if we destroy everything natural about this planet in our shortsighted rush to develop everything for short-run economic gain. almost everybody in this country agrees with that. that's why we said to the american people, "write your congressman. "he's about to make a decision of extraordinary importance. "you may never be able to go to that national park. "it's a part of our culture. tell your congressman you care." and millions of people responded. that's why the congress rose to this historic conservation challenge. they sold this issue on the national interest of preserving the lands for the future. everybody will say they support wilderness and parks. if you ask them,

"do you support wilderness as a jeopardy of your job?" they'd say no. we couldn't convey that message to the public. secondly, regardless of what people say, there will be a loss of jobs in alaska. when we're faced with unemployment... don young's eloquence was in vain. the alaska lands act was passed by the house in 1979, by the senate in 1980, and signed into law by president carter. with a stroke of his pen, the president doubled the national park system, the nation's wilderness areas, and our wildlife refuges and closed the door on mineral development on these lands. the economic cost of the alaskan lands act is measured in terms of the ress5rces

we chose not to develop-- the minerals that still lie beneath the permafrost. was it worth it? we asked economic analyst richard gill what the alaskan lands issue tells us about economic questions in general. the alaskan lands issue is an issue of limits. one limit relates to economics. what is the value to society of preserving our natural wilderness? economists will have personal views. we can make no claim to special wisdom. this question is for society to decide. having been appropriately modest, we can now ask what economists can do. the first lesson of economics is that we can't have everything we want. our desires for material goods may be unlimited. our resources for fulfilling those desires

are limited and scarce. consider the following diagram-- along this horizontal axis, we measure the acres of alaska preserved as wilderness. if we preserve the maximum amount of alaskan wilderness, we might end up here with 150 million acres of unspoiled natural terrain. on this vertical axis, we measure the valuable resources, say minerals, in those 150 million acres. if all those acres were developed, we would get $13 billion worth of minerals. the notion of limits in economics says you can't be in both places at once. if you want all wilderness, you'll have zero minerals. if you want some minerals, you'll give up some wilderness and end up here. you now have $5 billion of minerals. you're left with 120 million acres of wilderness.

more minerals here. less wilderness here. still more minerals. still less wilderness. finally we have a whole curve-- it expresses the possibilities that lie before us, the fundamental limits on our range of choice. in 1943, american servicemen fought on two fronts while american civilians lived better than they had in years. how did america increase production of guns and butter during world war ii? the 1930s had been bitter years for america. the depression, which began with the stock market crash, dealt a severe blow to national self-confidence. for almost a century, the united states had boasted of the most productive farms, the most modern factories,

limitless natural resources, and the best workers in the world. but the great depression brought the country to its knees. a nation which thought itself wealthy found itself impoverished by the inability to mobilize its resources. leon keyserling remembers that time of national torment. industry was in collapse, banking was in panic, agriculture was in ruins, and labor was in despair. we had 13-15 million umemployed out of a labor force of 46 million people. you had bank failures right and left. people wondered how long life could be sacred or property safe in the face of fathers who couldn't meet their children's cries for food. after 10 years of depression, one in six remained out of work.

factories were closed. it was a vicious circle. it took a worldwide explosion to break it. in 1939, german armies marched into poland, igniting world war ii. the united states vowed to stay out, but the allies needed our economic resources. what were these resources and how would we mobilize them? robert nathan was on the war production board. as early as the fall of 1940, at the advisory commission, we began to come up with bottlenecks under a total mobilization of the economy, a fully-employed economy. it was clear we needed more aluminum and would need more steel. i remember when these results came out.

we told the steel industry that a fully-mobilized united states would need more steel. they said, "you're crazy! "we've gone through a decade with phenomenal portions of our steel capacity idle." during the depression, the american steel industry limped along at 20% of its capacity. by 1941, the mills were working overtime, pouring out steel for tanks, guns, and planes. we would need new steel mills, open new factories, create new jobs. the american economy had gone to war. the japanese attack on pearl harbor brought america into the shooting war. americans left their homes and jobs to fight overseas. still the explosive economic growth continued. everybody that could work worked. young people worked.

wives moved into the labor force. older people didn't retire early. the result was that your productive capability expanded very, very rapidly. our production was so phenomenally higher by 1944 than what it had been in 1939, that the per-capita consumption was very high. still over 40% of the total production of this country, some 42-43% at peak, went totally to the military. with full employment came demand for consumer goods which had been unaffordable during the 1930s. the country was producing and consuming more. for a while, the united states increased its production of military and consumer goods. but choices had to be made. so what we did, along with setting high mobilization efforts, beginning very soon after pearl harbor,

you began to cut back on the civilians. by the spring of-- early summer or late spring of 1942-- no more new automobiles were produced. none. and how people screamed about that. even the auto industry, which did a wonderful job in world war ii producing tanks and airplane parts and antiaircraft guns and the like in these big auto factories, they even resisted cutting off production. when the last assembly line switched to military production, most cars were off the road. gas was rationed. tires were rationed. meat, butter, and cloth were rationed. americans felt the pinch of wartime scarcity. the tweak of rationing was mild compared to the misery of the depression. americans accepted hardships as necessary for victory.

the result was that in '42, '43, it was almost a magical consequence how the factories and plants and manpower and management in this country just poured it out and really saved the free world. by 1945, the united states had confounded its enemies and amazed the world by mobilizing resources we barely understood we had back in 1939. our ability to quickly and completely mobilize these resources brought military victory and economic recovery. richard gill explains this increase in guns and butter at the same time. more guns and butter? but we just proved that limits exist in economics. more alaskan wilderness. fewer minerals. the main answer to the paradox is pretty obvious.

there's a production possibilities curve for guns and butter much like our curve for alaskan wilderness. no one said we had to be on the curve. during most of the 1930s, we were operating way inside the curve. because of massive unemployment, we weren't exploiting our production possibilities. had all our workers had jobs and all our factories been producing at capacity, we'd have had much more civilian goods. but we were back here. when the war effort got serious, when everybody was working and our factories were running to capacity, we could increase our gun production and still have more civilian goods. we did even better than that. because we developed new technologies of production and everybody was working overtime, we managed to shift the curve outward.

this enabled us to increase both military and civilian production. economics is fundamentally concerned with scarcity, limits. but we don't always produce to our limits. those limits can and do change over time. when i first went there, they fanned the frames out with a cardboard fan. we had to stay there. they'd say, "don't let that lint get in that yarn." they didn't care about it going in our lungs. when i left, the company never asked what was wrong with me. gertrude brown has byssinosis, more commonly known as brown-lung disease. 20% of her fellow textile workers, perhaps as many as 150,000 americans, suffer from the ailment. the disease is caused

by inhaling cotton dust and fiber, that are by-products of textile manufacturing. growing public awareness of brown-lung disease was a prime force behind the passage of the occupational safety and health act in 1970. as competition increased and profits shrank, businessmen, workers, and the government asked how much we should spend to protect workers. throughout the 1970s, the american textile industry was locked in a struggle against foreign competition. asian competitors were undercutting american mills. the american textile industry was spending millions to protect worker health. asian textile industries spent almost nothing. faced with this competition, the u.s. industry looked to cut costs. o.s.h.a., the occupational safety and health adminstration, told business to spend more, not less. o.s.h.a. proposed tough, new standards for cotton dust.

w.o. leonard recalls the industry's reaction. we wanted a reasonable standard established, not one that was impossible to reach. we also were very interested in the time frame for implementation. we knew that the technology was not all in place to achieve compliance. we wanted enough time for that to be developed and to become commercially available. industry claimed the new regulations would require spending $2 billion on equipment, and they could achieve almost as much with dust masks costing $1.49 each. the amalgamated clothing and textile workers union disagreed. workers still died from brown-lung disease. dust masks wouldn't eliminate the risk. the union argued fiercely, but many sided with industry.

eric frumin remembers the arguments. well, there were forces within the carter administration, particularly the economists, who thought that the money spent to protect workers' health was, in a sense, not worth it. and if workers could just be forced to wear these intolerable dust masks-- which don't look that uncomfortable, especially if you never wore one all day-- then we'd be saving everybody money. somehow that would be to society's benefit. that view, fortunately, didn't prevail. the textile industry sued o.s.h.a., arguing that the new regulations would impose a relatively high cost to protect a relatively small number of lives. they argued that eliminating the disease risk would destroy the industry's ability to survive overseas competition,

that the most effective dollars had been spent. you do get considerable more out of the first dollar you spend rather than the millionth or the last dollar you spend because usually improvement is achieved very early in making progress toward reaching a standard. you lower your dust levels quite significantly on new equipment that's put in. but then if that doesn't meet the standard, just putting in that equipment, finding the answer to reach that final stage of compliance can be very expensive. there's no real cost-benefit analysis allowed under the o.s.h.a. act. cost-benefit analysis is nice to do if you have a problem where you can put dollar signs here and there and decide it's worth it to buy a new car.

but when lives are on one side, it's not so easy. congress understood that when they passed this law. senators got up and said, "this may cost us some money, "but it's worth it. "we don't believe business should run at the cost of workers' health." late in 1980, the supreme court heard arguments from both sides. the court agreed with the union that congress had intended worker health be considered above all cost considerations. by 1985, most american textile companies had installed new equipment to meet the dust regulations. brown-lung disease had virtually disappeared, but so had 300,000 jobs in the textile mills. we feel most of that has come about

because of foreign imports. but mixed in there has been some failures due to the inability to meet these standards, principally by smaller companies. how much should we spend on a worker's health? a lot, according to the supreme court. spending more protecting health may mean ever-increasing costs in the form of higher prices and lost jobs. we asked richard gill if this is typical. the textile-industry situation is indeed typical of economic problems. the first small expenditures for worker protection were able to produce large improvements in worker health. to improve health still further required quite massive expenditures. the further we go in one economic direction, the higher the costs.

you may have wondered why i've drawn the production possibilities curve with a bowed-out shape. this shape expresses the principle i've just mentioned. the more of one economic good you produce, the more it usually costs in terms of some other economic good you must give up. our goods are cotton textiles and worker health. the more we divert our resources from producing textiles to producing protection devices, the healthier our workers. we'll move along the curve in this direction. but notice the difference between the moves from a to b and from b to c. we get the same improvement in worker health. these lines are equal. at the beginning, we get this improvement

with a small diversion of resources. to move from b to c requires a massive diversion of resources and loss of production. economics is concerned with limits, scarcity, with costly choices between this or that. society must ultimately make these choices. only with the knowledge of fundamental economic principles can the consequences of our choices be understood. jobs or safety? which would you choose? park lands or oil? which would you choose? national defense or consumer goods? which would you choose? economists recognize that in a world of scarce resources, somebody wins and somebody loses. rarely can we have it all. but how do we decide? this series will bring you face to face with the people who have shaped economic events and theories of the 20th century.

for economics usa, i'm david schoumacher. captioning performed by the national captioning institute, inc. captions copyright 1986 educational film center public performance of captions prohibited without permission of national captioning institute

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♪ annenberg media ♪ world war ii was over. the gis were home raising the roof, hoping to raise a family. how could they realize the american dream, a home of their own? when foreign steelmakers were pricing america's largest steel mills out of the market, how could a minimill hope to compete? baseball. for millions, a pastime. for a few, a paycheck. why was this man's paycheck half a million dollars a year?