Ch 20 - Political Economy and Public Choice.pptx

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Chapter 20 Political Economy and Public Choice
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Today’s topic is Political Economy and  Public Choice But first a brief review Positive  and  normative  statements normative   statement  expresses a value judgment  about whether a situation is subjectively desirable or  undesirable. Often there is an explicit or implicit  “should”. positive statement  is a statement that is in  principle testable or that can be disproven. It does not  express a value judgment. 2
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Examples Governments should focus on producing public goods  and let markets produce private goods. Normative Governments generally focus on producing public  goods and let markets produce private goods. Positive 3
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Normative statements do not always include  “should”. Free birth control pills for all women is a good  government policy. Everyone has a right to clean drinking water. 4
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Positive economics  is describing, explaining, or  predicting economic events. Normative economics  is recommendations or  arguments about what public policy should be. REEF  Time 5
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Which of the following is a normative statement? A) Minimum wage laws lead to increased unemployment  among low-skill workers. B) Minimum wage induced unemployment is relatively  higher among teenagers than other age groups. C) Wage subsidies have the potential to increase  employment among low-skill workers. D) Wage subsidies are better public policy than minimum  wage laws.
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Our analysis of government thus far has been largely  positive (i.e., making positive statements). Economic effects of government policies Taxes, price controls, tariffs, quota Ways that governments can fix market failures (“fix” =  reduce DWL, increase gains from trade) Pigovian taxes Subsides  Regulation Production of public goods Reduction of resource overuse with common property resources This is one way to think about government policy, but  there are others. 7
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Our analysis of government thus far has been largely positive  (i.e., making positive statements). Economic effects of government policies Ways that governments can fix market failures (“fix” =  reduce DWL, increase gains from trade) This is one way to think about government policy, but there  are others.   What is the proper role of government? (Normative – Ch. 21) Governments  should  fix market failures.
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  • Fall '08
  • RYAN
  • Democracy, Amartya Sen, Public Choice

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