1 / 16

Public Choice Theory

Public Choice Theory. Microeconomics Dr. D. Foster. Political Choices . . . Economic Reasoning. Not how the system should work . . . How the system does work. Are politicians/bureaucrats/employees … -- rational ? -- self-interested ? -- like the rest of us ?.

yaron
Télécharger la présentation

Public Choice Theory

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Public Choice Theory Microeconomics Dr. D. Foster

  2. Political Choices . . . Economic Reasoning • Not how the system should work . . . • How the system does work. • Are politicians/bureaucrats/employees …-- rational ?-- self-interested ?-- like the rest of us ?

  3. Two Basic Decisions: How much to tax? How much to spend? • Vote for a new defense system? • Vote for a new social program? • What is the downside ? • Does President Haegerwant more $ for NAU? • Does Paul Gosarwant more $ for USGS? • Is there any incentive to keep costs down ?

  4. Perverted Incentives • No profit - no reward for efficiency. • Serving others doesn’t serve oneself. • No pricing mechanism to insure thatallocation is efficient. • At Q*, marginal value (P) = marginal cost • Criteria for “success” is majority. • vs. lower bar of profitability. • supersedes intensity. • Choices in the public sector are enforceable.

  5. VotingIssues • Not especially rewarding. • Should it be easy? Should it require a test? • Information is costly. • If your contribution is zero . . . • We can’t pick results only promises. • And, in a market . . . ? • What if the Academy Awards . . . ? • Benefits and costs are usually mismatched. • e.g., Flagstaff mayor’s race; CCC bond proposition. • Paradox of collective choice.

  6. Voting Systems • What’s so great about majority rule?-- It is just like football !! • The market results in proportional “rule.” • Public choices may be inconsistent. • Public choices may be inefficient. • Point voting ? Continuous elections ? • Non-geographic voting ?

  7. 50% 50% A A’ A” B’ B median voter The Median Voter Model • If preferences are peaked . . . • If we vote for the person closest to us . . . • Candidates should congregate near the middle! Candidate A wins !!

  8. Inconsistent outcome: Want a park? • City council has 3 choices for land parcel:A – Turn it into a park.B – Use it for low-income housing.C – Allow for commercial development. • Polling indicates that:40% favor A > C > B35% favor B > A > C25% favor C > B > A How do you frame a vote between just two ?

  9. Inefficient outcome: Build a road? • A road can be built that benefits 3 people. The cost is $300, and each would pay an equal share. They benefit as follows: John – $ 200 George – $ 90 Janet – $ 80 Will they vote to raise taxes to pay ? What can we do to alter the outcome ?

  10. Why is inefficiency a rational outcome? • Voters – information is costly (rational ignorance) -- Does your vote count ? -- Can you trust political ads ? • Special interests -- Spread costs; concentrate benefits. -- How about a Help-Dr.-Foster tax ? It’s a dime. • Bureaucrats -- What are their incentives ?-- Whom do they serve ?

  11. The Virtues of the Market • Trial and error achieves rational outcome. • Even imperfect markets are remarkably efficient. • Markets penalize incompetence & miscalculation. • Markets reward ability & foresight. • Markets encourage innovation. Can the government plan the “discovery” process?

  12. What Government can’t do: • Use “technical expertise” to guide economy. • Achieve “perfect market” outcomes. • Guarantee good results even with good intentions. • Ignore incentives and compatible processes. • Be benign nor efficient.

  13. What about global warming? • What are we talking about? • What is the basis for the alarm? • Do the alarmists have a good track record? • Are the alarmists scientists with appropriate expertise? • Do others, with similar expertise, disagree?

  14. Public Choice Theory Microeconomics Dr. D. Foster

More Related