ChapC11 - 1 How to Study for Chapter 11 Public Choice...

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1 How to Study for Chapter 11: Public Choice Chapter 11 applies the prices of the market economy to the political aspect of society. 1. Begin by looking over the Objectives listed below. This will tell you the main points you should be looking for as you read the chapter. 2. New words or definitions are highlighted in italics in the text. Other key points are highlighted in bold type. 3. The class meeting will cover the technical points relating to Public Choice. You are responsible for all of the cases whether they are covered in class or not. Be sure to go over them carefully to see how they illustrate the principle. 4. You will be given an In Class Assignment and a Homework assignment to illustrate the two main concepts of this chapter. When you have finished the text and the assignments, go back to the Objectives. See if you can answer the questions without looking back at the text. If not, go back and re-read that part of the text. Then, try the Practice Quiz for Chapter 11. Objectives for Chapter 11: Public Choice At the end of Chapter 11, you should be able to answer the following: 1. What is meant by “public choice” ? 2. What is meant by “rational abstention” ? by “rational ignorance” ? In each case, explain why they occur. 3. What is a “special interest” ? What is the “special interest effect” ? Explain under conditions of widespread costs and concentrated benefits. Explain under conditions of widespread costs and concentrated benefits. 4. What is the “shortsightedness effect” and why does it occur? 5. What is a “bureaucracy” ? What are the main goals of bureaucrats? In what ways might bureaucracy lead to non-optimal behaviors from the point of view of society? 6. What is meant by “empire building” ? 7. Explain how the Forest Service illustrates the problems inherent in bureaucracy. 8. What criticisms can be made of Public Choice Theory? Chapter 11 Public Choice (latest revision June 2004) In Chapter 10, we discussed the functions of government in a market economy with laissez faire. We also considered some examples of each. It was argued there that government has a role to play when the market fails to perform properly. In Chapter 11, we shall consider the arguments of what is called Public Choice Theory . In this theory, the government may also fail to perform its functions properly. In many of these cases discussed in this chapter, the government failed to perform its function properly, causing certain problems for society. Public Choice economics applies the principles of private markets to the government. In fact, it commonly refers to the government as the "political market" . In this "market", the desires of people are satisfied through collective decision-making. There are two important principles of private markets that are applied to government. First , individuals are the basic decision- making units . Government agencies are composed of individuals. Second, individuals attempt to achieve their personal goals in this "political market" . Legislators act as
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