We think you have liked this presentation. If you wish to download it, please recommend it to your friends in any social system. Share buttons are a little bit lower. Thank you!
Presentation is loading. Please wait.
Published byAnita Dowsett
Modified about 1 year ago
Chapter Outline ©2015 McGraw-Hill Education. All Rights Reserved. 2 Public Goods Private Provision of Public Goods Public Choice Income Distribution
Public Goods ©2015 McGraw-Hill Education. All Rights Reserved. 3 Pure public good: a good that has a high degree of nondiminishability and nonexcludability. –Each person consumes the same amount of it. Collective good: a good that is excludable and has a high degree only of nondiminishability.
Figure 18.1: The Aggregate Willingness- to-Pay Curve for a Public Good ©2015 McGraw-Hill Education. All Rights Reserved. 4
Figure 18.2: Equilibrium in a Market for Jointly Produced Products ©2015 McGraw-Hill Education. All Rights Reserved. 5
Figure 18.3: Optimal Provision of a Public Good ©2015 McGraw-Hill Education. All Rights Reserved. 6
Paying For Q* ©2015 McGraw-Hill Education. All Rights Reserved. 7 If the government is to produce Q* units of a public good, it must somehow raise sufficient tax revenue to cover the total production costs of that amount. The willingness to pay for public goods is generally an increasing function of income. –The rich, on the average, assign greater value to public goods than the poor do, not because they have different tastes but because they have more money.
Private Provision of Public Goods ©2015 McGraw-Hill Education. All Rights Reserved. 8 How can the good be paid for, if not by mandatory taxes? Funding by Donation –Free riding: choosing not to donate to a cause but still benefiting from the donations of others. Sale of By-Products Development of New Means to Exclude Nonpayers Private Contracts Clubs
Figure 18.4: The Trade-Off between Privacy and Cost ©2015 McGraw-Hill Education. All Rights Reserved. 9
Public Choice ©2015 McGraw-Hill Education. All Rights Reserved. 10 Majority voting: by this standard, projects favored by a majority—in either a direct referendum or a vote taken by elected representatives—are adopted and all others are abandoned.
The Median Voter Theorem ©2015 McGraw-Hill Education. All Rights Reserved. 11 The median voter theorem states that whenever alternatives can be ranked according to their closeness to each voter ’ s ideal outcome, majority voting will always select the alternative most preferred by the median voter. –Median voter: the voter whose ideal outcome lies above the ideal outcomes of half the voters. –Single-peaked preferences preferences that exhibit a single most-preferred outcome, with other outcomes ranked lower as their distances from their most- preferred outcome increases.
Figure 18.5: The Power of the Median Voter ©2015 McGraw-Hill Education. All Rights Reserved. 12
Cost-Benefit Analysis ©2015 McGraw-Hill Education. All Rights Reserved. 13 Cost-benefit analysis: an alternative to majority voting that attempts to take explicit account of how strongly people feel about each of the alternatives under consideration.
Local Public Goods and the Tiebout Model Even with a perfect mechanism for choosing between alternative public goods, it is difficult to escape the need for painful compromise. Professor Charles Tiebout suggested that at least some of these compromises can be avoided if people are free to form communities with others of similar tastes. – Those who favor high levels of public goods can group together in communities in which they accept the high tax rates necessary to finance these levels. – Those who favor a more limited menu of public goods and services can form groups of their own and have lower tax rates. ©2015 McGraw-Hill Education. All Rights Reserved. 14
Rent Seeking When there are large gains to be had from a project, private parties are willing to spend large sums in order to enhance their odds of being chosen as its beneficiaries. Pursuit of these gains is know as rent seeking. ©2015 McGraw-Hill Education. All Rights Reserved. 15
Income Distribution Determinate outcome: the theory of competitive factor markets tell us that each factor will be paid the value of its marginal product, and that in long-run competitive equilibrium, these payments will add up to the total product available for distribution. It rewards imitative, effort, and risk taking. The harder, longer, and more efficiently a person works, the more they will be paid. ©2015 McGraw-Hill Education. All Rights Reserved. 16
The Rawlsian Criticism Of The Marginal Productivity System ©2015 McGraw-Hill Education. All Rights Reserved. 17 The most common criticism to the marginal productivity system is that it often generates a high degree of inequality.
Rawls’ Thought Experiment ©2015 McGraw-Hill Education. All Rights Reserved. 18 “ What constitutes a just distribution of income? ” To answer using the following thought experiment: –Imagine that you and the other citizens of some country have been thrown together in a meeting to choose the rules for distributing income. This meeting takes place behind a “ veil of ignorance, ” which conceals from each person any knowledge of what talents and abilities he and others have. No individual knows whether he is smart or dull, strong or weak, fast or slow, and so on— which means that no one knows which particular rules of distribution would work to his own advantage The distribution of income chosen from behind this veil of ignorance constitutes what would be considered fair and just.
Fairness and Efficiency ©2015 McGraw-Hill Education. All Rights Reserved. 19 Inefficient solutions make the economic pie smaller for everyone, rich and poor alike. –If efficient solutions are adopted, it must be possible for everyone to receive a larger slice.
Figure 18.6: Charging for Directory Assistance ©2015 McGraw-Hill Education. All Rights Reserved. 20
Methods of Redistribution ©2015 McGraw-Hill Education. All Rights Reserved. 21 Our Current Welfare Programs The Negative Income Tax (NIT) Public Employment for the Poor (JOBS) A Combination of NIT and JOBS
Figure 18.7: Benefits versus Income for a Typical Welfare Program ©2015 McGraw-Hill Education. All Rights Reserved. 22
The Negative Income Tax ©2015 McGraw-Hill Education. All Rights Reserved. 23 Gives every man, woman, and child—rich or poor—an income tax credit that is large enough to sustain a minimally adequate standard of living. –Someone who earned no income would receive this credit in cash. People with earned income would then be taxed on their income at some rate less than 100 percent.
Figure 18.8: A Negative Income Tax Program ©2015 McGraw-Hill Education. All Rights Reserved. 24
Figure 18.9: Income Source in the NIT-JOBS Program ©2015 McGraw-Hill Education. All Rights Reserved. 25
Chapter 17 McGraw-Hill/IrwinCopyright © 2010 The McGraw-Hill Companies, Inc. All rights reserved.
CHAPTER 16 Public Goods and Tax Policy. Goods Classifications: Excludable –can prevent people from consuming without paying Rival in consumption –can.
Chapter 5: Market Failure: A Role for Government.
1 Public choice Alexander W. Cappelen Econ
CHAPTER 21 Taxes, Social Insurance, and Income Distribution PowerPoint® Slides by Can Erbil © 2004 Worth Publishers, all rights reserved.
Chapter 11 Public Goods and Common Resources. Some Questions to Consider How big, exactly, should government be? What goods and services should government.
Chapter 5 Decision Making in the Public Sector Chapter outline 1 ． Differences Between the Public and Private Sectors 2 ． Voting and Public Choice 3 ．
CHAPTER 21 Taxes, Social Insurance, and Income Distribution.
Chapter 6 Equity and Income Distribution Chapter outline 1.Government and Redistribution 2.Concepts of Equity 3.Equity, Administrative Efficiency, and.
Chapter 15 Market Interventions McGraw-Hill/Irwin Copyright © 2008 by The McGraw-Hill Companies, Inc. All Rights Reserved.
General Equilibrium and Market Efficiency. Chapter Outline ©2015 McGraw-Hill Education. All Rights Reserved. 2 A Simple Exchange Economy The Invisible.
1 Net Worth over $2.3 billion Copyright ACDC Leadership 2015.
Chapter 33: Taxes: Equity versus Efficiency Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 13e.
Chapter 4 Efficiency: Public Goods and Externalities Chapter outline The rationale for government production of goods and services. 1.Public Goods, Private.
Redistribution, Efficiency, Fairness 1. Consider a Possibility Frontier Most government action we have thought about is getting you from inside the frontier.
Chapter 2 Theoretical Tools of Public Finance © 2007 Worth Publishers Public Finance and Public Policy, 2/e, Jonathan Gruber 1 of 43 Theoretical Tools.
When you have completed your study of this chapter, you will be able to C H A P T E R C H E C K L I S T Distinguish between value and price and define.
CHAPTER 14 Government spending and revenue ©McGraw-Hill Education, 2014.
Public Choice Chapter 6 (Part 2). Market Failures and Government Intervention How do governments and state bureaucrats actually behave? How do governments.
The U. S. Economy: Private and Public Sectors Chapter 4.
Professor: Keren Mertens Horn Office: Wheatley 5-78B Office Hours: TR 2:30-4:00 pm ECONOMICS OF THE METROPOLITAN AREA 212G,
© 2007 Thomson South-Western. Income Inequality and Poverty A person’s earnings depend on the supply and demand for that person’s labor, which in turn.
Public Finance and Public Policy Jonathan Gruber Third Edition Copyright © 2010 Worth Publishers 1 of 44 Theoretical Tools of Public Finance F ERNANDO.
A.S 3.3 Describe and illustrate resource allocation via the public sector to compensate market failure.
Chapter 2 Theoretical Tools of Public Finance © 2007 Worth Publishers Public Finance and Public Policy, Jonathan Gruber, 2e 1 of 43 Social Efficiency 2.
1. Self-interest: The desire of bettering our condition comes with us from the womb and never leaves till we go into the grave (Adam Smith). No one spends.
Chapter 20 Externalities and Public Goods Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior.
Theme 4 - Public Goods Public Economics 1. MAIN THEORY – Paul Samuelson 2.
Chapter 16 Public Goods and Public Choice © 2009 South-Western/ Cengage Learning.
Chapter 18W McGraw-Hill/IrwinCopyright © 2010 The McGraw-Hill Companies, Inc. All rights reserved.
INCOME REDISTRIBUTION: CONCEPTUAL ISSUES Chapter 12.
Public Goods. Public Goods -- Definition u Public goods involve a particular kind of externality - where the same amount of the good has to be available.
CHAPTER 12 Income Redistribution: Conceptual Issues Copyright © 2010 by the McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin.
© 2008 Pearson Addison Wesley. All rights reserved Review Perfect Competition Market.
Economics by David Begg, Gianluigi Vernasca, Stanley Fischer & Rudiger Dornbusch TENTH EDITION ©McGraw-Hill Companies, 2010 Chapter 14 Government spending.
Government Policies to Redistribute Income and Wealth 3 Main Policies 1.Monetary Benefits 2.The Tax System 3.Direct Provision of Goods and Services.
Chapter 11 Optimal Portfolio Choice Chapter Outline 11.1 The Expected Return of a Portfolio 11.2 The Volatility of a Two-Stock Portfolio 11.3 The.
© 2006 McGraw-Hill Ryerson Limited. All rights reserved.1 Chapter 14: Market Failures and Government Policy Prepared by: Kevin Richter, Douglas College.
Taxes CHAPTER 8 When you have completed your study of this chapter, you will be able to C H A P T E R C H E C K L I S T Explain how taxes change prices.
Taxes CHAPTER 8 C H A P T E R C H E C K L I S T When you have completed your study of this chapter, you will be able to 1 Explain how taxes change prices.
McGraw-Hill/Irwin Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved. CHAPTER 22 PUBLIC FINANCE IN A FEDERAL SYSTEM.
1 Chapter 14 – Efficient and Equitable Taxation Public Economics.
What is Economics? Lesson 1 Essential Questions: Why and how do people make economic choices? How do economic systems influence societies? It Matters.
The role of government Today: Public goods; government failure; taxation.
The Economics of Information and Choice Under Uncertainty.
The Economics of Politics “Pork Barrel Spending” A public expenditure that is larger than the total benefit it creates, but that is favored by a legislator.
© 2010 Pearson Education CanadaChapter Chapter 11 What Are You Worth? © 2010 Pearson Education Canada.
Crime and Economics Chapter 8 (Pages ) Dan Hunter.
Market Efficiency SPHA511, John Ries. Market Economies and Perfect Competition Prices are determined by supply and demand Demand represents aggregate.
© 2017 SlidePlayer.com Inc. All rights reserved.