AED Economics 200
Principles of Food and Resource Economics
Winter, 2003
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AED Economics 200 |
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Government intervention is often recommended as solution to market failure - regulation, taxes, subsidies, persuasion. Government intervention comes at a cost |
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| administrative costs enforcement costs opportunity cost of industry's resources to comply e.g. manager's time is spent in complying with regulation price distortion and inefficiency rent seeking e.g. barriers create economic rent for those controlling barriers |
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Government failure - govt. solution to some problems does not guarantee their improvement. Public Choice and the Political "Market" |
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| Public choice - application of
economic principles to public sector decision making Assumption of public choice economists - |
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| people are the same, whether they are consumers,
employers, and employees, or politicians, bureaucrats, voters, and special interest groups Their motivation is self interest. |
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| Political Market - participants include: | |||
| politicians voters special interest groups bureaucrats |
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| Politician | |||
| -moving toward the middle (Exhibit 18-1) -successful campaigns appeal to the median voter opponents are "too liberal" or "too conservative" candidates want to be perceived as moderate candidates pay close attention to polls candidates speak toward ends, not means |
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| Voters | |||
| -benefits of voting - feelings of civic duty,
feeling of patriotism, or self interest -costs of voting - opportunity cost of time to become informed and to vote -does it matter? - importance of vote |
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| Special interest groups - common interests tie together groups, which hold strong preferences | |||
| -better informed and actively participate in
political process -B/C of rent seeking -congressional districts as special interest groups -logrolling - exchange of votes to gain support for specific legislation |
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| Bureaucracy | |||
| -funding - legislative appropriation -motive - not profit or cost efficiency -control - responsible to elected officials -competition - little, if any -life span - determined by legislation Given this, what will be behavior of bureaucrat? |
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Summary: Issues from "Public Choice" |
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| Govt. intervention comes at a cost
Multiple (often conflicting) policy goals |
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| Principles of justice laissez faire efficiency - individual society egalitarianism merit |
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| Politicians, voters, special interest groups, bureaucracy | |||
| Self interest is strong motive | |||
| Behavior is predictable, not always in "public interest" | |||
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