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Concepts 1/8Public policyNormative statementEmpirical statementDeontological ethicsTeleological ethicsPublic PolicyWhat the government does or does not do about public problemsWhen the government replaces individual choices with collective choiceConstitutional JustificationTensionIndividual liberty vs. collective choiceThomas Hobbes says life is “solitary, poor, nasty, brutish, and short.”How do we decide the appropriate level of government involvement?Normative StatementsExpresses a value judgment about whether something is desirableSubjectiveUses words like “should”Not falsifiableExample: People should not pay high taxes.Empirical statementsExpresses a fact about the state of the worldObjective: a statement of factOften posed as “if then” statements”Hypothesis, falsifiableBe careful, some empirical statements are not trueExample: If the government raises taxes then companies will hire fewer workers.Logical ArgumentPreferences about policy are usually articulated as normative statements: what should/shouldn’t the government do in situation X?A logical argument…Connects a normative statement and empirical statementExample: Therefore, the government should mandate that restaurants disclose how many calories are in their food.Differences in OpinionEmpirically-basedWhat does the science say?We can actually find out what we know, what we don’t know and try debate/settle our differencesValue-basedThe normative statements are based on valuesTypes of Ethical systemsDeontological valuesMoral imperativesDutiesThings must be done regardless of the consequenceExamples: telling the truth, non violence, stand during national anthemTeleological valuesOnly do something if the consequence of the action is desirableActions are seen as instruments to achieve some goal; utilitarianismExamples: brushing your teeth, driving to work, paper or plastic?Value-based disagreementsPro-Choice vs. Pro-life argumentPro-gun vs. Anti-gun controlThe disagreement comes on the empirical statementValues in Public Policy AnalysisDeontologicalIndividual libertyCommunitarianismRespect for all life; human and non-humanCivic duty/ patriotismTeleologicalEffectivenessEfficiencyEquitySustainabilityFeasibility (technical and political)Concepts 1/10Market efficiencyEquityMarket failureEfficiencyScarcity implies the need to ration goods and servicesThere are many ways to do thisGoods are efficiency providing to the extent that they provide the maximum net benefits to societyNet benefits= (benefits-cost)Benefits to consumersCosts to proceduresPut 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 societyMarkey efficiencyMarket economies market goods through the price mechanismAssertion 1: free markets efficiently provide goods and servicesCompetition lowers costs of production and therefore lowers prices for consumersCaveat: certain condition must be met, which we’ll go to next timePlanned EconomiesIsn’t there a lot of waste in market economies?Planned economy: a committee decides how goods and services will be allocatedWhat information does the committee have access to?Generally not as efficient as market economiesEquityThat goods are allocated according to need (or some other criteria)Does everyone who needs a salad have a salad?Assertion 2: Markets are often inequitableCaveat: here we’re talking about equity in outcomes not in terms of processMarket FailureInstances when free markets produce an inefficient allocation of resourcesi.e. we could produce the good or service more cheaply or that provide more benefitsExamplesMonopoliesExternalitiesInformation asymmetriesCollective action problemsConcepts 1/13MonopoliesExternalitiesInformation asymmetriesCollective Action ProblemsMonopolyExists when a single business provides a good for which there are no close substitutesNo competitionConsequences?Antitrust lawsAlso, note, oligopoliesNatural monopoliesA single business can supply a good or service to the entire market at a smaller cost than could two or more businessesExamples: electricityRegulationsExternalitiesThe uncompensated impact of one person’s actions on the well-being of a bystanderTwo typesNegative externality (negative cost): one person’s impose costs on a bystanderMy actions hurt someone elseNot only equitable, but inefficientFrom a social point of view I don’t consider other people’s costs in mu behaviorToo much pollution!Positive externality (external benefit): one person’s actions impose benefits on a bystanderMy actions help my neighborsInefficient, because I don’t consider all the benefits I give to others when I cut my grassToo little lawn care is produced!Information AsymmetryOne person in a market transaction has more information than anotherIncomplete information for consumers to make good decisions on their ownNot a problem for certain items (food)Not complex items, we can understand their purchaseWe consume them frequently, can adjust behaviorNo big costs if we get it wrongWe can make really bad decisionsProblemsHealth insuranceCollege loansHome purchasesCar purchase/repairCollective Action ProblemsDoing what is in your own self-interest is not in the interest of society of the larger group (society)Cooperation problemsIf everyone cooperated, we would all be better off, but each of us has an incentive to be uncooperativeConcepts 1/15Government FailureMedian Voter TheoremCommon Pool Resources (CPRs)Government FailureWhen public policy causes a more inefficient allocation of goods and services than would occur without the policyJust because the market fails does not mean that the policy solution will somehow automatically fix the problemNo need to be dogmatic; sometimes the market fails and sometimes the government failsWhy does the government fail?Warning: we’ll be looking at the unromantic side4 incentives1. Incentives for Elected LeadersMedium Voter Theorem: Closer you move to the middle, the higher chances you have on winning the electionCongressional DistrictsMembers of congress move towards the center within their districtSome districts highly conservative; some highly liberalIncreasingly more polarized in last few yearsInterest of the country or interest of their district?Trade favors with others—logrolling2. Incentives of VotersVotingCosts/BenefitsDoes it matter if you vote?Does it matter which politician gets elected?Limitations of votingCannot express


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FSU PUP 3002 - Exam 1

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