Lecture 6 - Lecture 6 Political Economy Political Economy...

Info iconThis preview shows pages 1–6. Sign up to view the full content.

View Full Document Right Arrow Icon
Lecture 6 Political Economy
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Political Economy Why important? Economists don’t determine public policies Decision structure differs across countries Single ruler Elected officials Direct vote of citizens Can these mechanisms deliver the optimal interventions suggested by theory?
Background image of page 2
Unanimous Consent Model of government that is able to optimally determine the level of public goods Use Lindahl pricing to form social benefit curve Individuals honestly reveal their willingness to pay Government charges them that amount to finance the public good Total SMB can be compared to the SMC for the next unit to determine whether or not next unit should be produced Efficient production of public goods through use of benefit taxation Unrealistic model
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Constructing Lindahl Pricing
Background image of page 4
Problems with Lindahl Pricing Preference revelation problem Incentive to lie about willingness to pay Free rider problem Preference knowledge problem Individuals may not know their valuation Preference aggregation problem Realistically, can’t survey and add every citizens’ willingness to pay
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 6
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 03/08/2009 for the course ECON 454 taught by Professor Staff during the Spring '08 term at Maryland.

Page1 / 15

Lecture 6 - Lecture 6 Political Economy Political Economy...

This preview shows document pages 1 - 6. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online