Exam 1 Notes Concepts 1 8 Public policy Normative statement Empirical statement Deontological ethics Teleological ethics 01 22 2014 Public Policy What the government does or does not do about public problems When the government replaces individual choices with collective choice Constitutional Justification Tension o Individual liberty vs collective choice o Thomas Hobbes says life is solitary poor nasty brutish and o How do we decide the appropriate level of government short involvement Normative Statements Expresses a value judgment about whether something is desirable o Subjective o Uses words like should Not falsifiable o Example People should not pay high taxes Empirical statements Expresses a fact about the state of the world o Objective a statement of fact o Often posed as if then statements o Hypothesis falsifiable o Be careful some empirical statements are not true Example If the government raises taxes then companies will hire fewer workers Logical Argument Preferences about policy are usually articulated as normative statements what should shouldn t the government do in situation X A logical argument o Connects a normative statement and empirical statement o Example Therefore the government should mandate that restaurants disclose how many calories are in their food Differences in Opinion Empirically based o What does the science say o We can actually find out what we know what we don t know and try debate settle our differences Value based o The normative statements are based on values Types of Ethical systems Deontological values o Moral imperatives o Duties o Things must be done regardless of the consequence o Examples telling the truth non violence stand during national anthem Teleological values o Only do something if the consequence of the action is o Actions are seen as instruments to achieve some goal o Examples brushing your teeth driving to work paper or desirable utilitarianism plastic Value based disagreements Pro Choice vs Pro life argument Pro gun vs Anti gun control Values in Public Policy Analysis Deontological o The disagreement comes on the empirical statement o Individual liberty o Communitarianism o Respect for all life human and non human o Civic duty patriotism Teleological o Effectiveness o Efficiency o Equity o Sustainability o Feasibility technical and political Concepts 1 10 Market efficiency Equity Market failure Efficiency Scarcity implies the need to ration goods and services o There are many ways to do this o Goods are efficiency providing to the extent that they provide the maximum net benefits to society Net benefits benefits cost Benefits to consumers Costs to procedures o Put differently there is no way given the current technology that the good can be produced at less cost and still provide the same amount of benefits to society o Market economies market goods through the price free markets efficiently provide goods and Competition lowers costs of production and therefore lowers prices for consumers Markey efficiency mechanism o Assertion 1 services Caveat certain condition must be met which we ll go to next time Planned Economies o Isn t there a lot of waste in market economies Planned economy a committee decides how goods and services will be allocated What information does the committee have access to o Generally not as efficient as market economies Equity That goods are allocated according to need or some other criteria Does everyone who needs a salad have a salad Assertion 2 Markets are often inequitable o Caveat here we re talking about equity in outcomes not in terms of process Market Failure Instances when free markets produce an inefficient allocation of o i e we could produce the good or service more cheaply or resources Examples that provide more benefits o Monopolies o Externalities o Information asymmetries o Collective action problems Concepts 1 13 Monopoly Exists when a single business provides a good for which there are Monopolies Externalities Information asymmetries Collective Action Problems no close substitutes o No competition o Consequences Antitrust laws Also note oligopolies Natural monopolies o A single business can supply a good or service to the entire market at a smaller cost than could two or more businesses Examples electricity o Regulations Externalities being of a bystander Two types The uncompensated impact of one person s actions on the well o Negative externality negative cost one person s impose costs on a bystander My actions hurt someone else Not only equitable but inefficient From a social point of view I don t consider other people s costs in mu behavior Too much pollution o Positive externality external benefit impose benefits on a bystander one person s actions My actions help my neighbors Inefficient because I don t consider all the benefits I give to others when I cut my grass Too little lawn care is produced Information Asymmetry One person in a market transaction has more information than another Incomplete information for consumers to make good decisions on their own Not a problem for certain items food o Not complex items we can understand their purchase o We consume them frequently can adjust behavior o No big costs if we get it wrong We can make really bad decisions Problems o Health insurance o College loans o Home purchases o Car purchase repair Collective Action Problems Doing what is in your own self interest is not in the interest of society of the larger group society o Cooperation problems o If everyone cooperated we would all be better off but each of us has an incentive to be uncooperative Concepts 1 15 Government Failure Median Voter Theorem Common Pool Resources CPRs Government Failure When public policy causes a more inefficient allocation of goods and services than would occur without the policy o Just because the market fails does not mean that the policy solution will somehow automatically fix the problem o No need to be dogmatic sometimes the market fails and sometimes the government fails Why does the government fail we ll be looking at the unromantic side o Warning o 4 incentives o 1 Incentives for Elected Leaders Medium Voter Theorem Closer you move to the middle the higher chances you have on winning the election o Congressional Districts Members of congress move towards the center within their district liberal Some districts highly conservative some highly Increasingly more polarized in last few years Interest of the country or interest of their district Trade
View Full Document
Unlocking...