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Unformatted text preview: CHAPTER 21 POLITICAL ECONOMICS The problems in this final chapter are of two general types. First are four problems in traditional welfare economics (Problems 21.121.3 and 21.5) that illustrate various issues that arise in comparing utility among individuals. These are rather similar to the problems in Chapter 12. The other six problems in the chapter concern public choice theory. Comments on Problems 21.1 A problem utilizing two very simple utility functions to show how none of several differing welfare criteria seems necessarily superior to all the others. This clearly illustrates the basic dilemma of traditional welfare economics. 21.2 This problem examines the Scitovsky bribe criterion for judging welfare improvements. Although the criterion as a general principle is not widely accepted, the notion of bribes in public policy discussions is still quite prevalent (for example, in connection with trade adjustment policies). 21.3 Shows how to integrate production into the utility possibility frontier construction. In the example given here, the frontiers are concentric ellipses so the Pareto criterion suggests choosing the one that is furthest from the origin. The choice is, however, ambiguous if the frontiers intersect. 21.4 Illustrates the irrelevant alternative assumption in the Arrow theorem. 21.5 A further examination of welfare criteria that focuses on Rawls uncertainty issues. Shows that the results derived from a Rawls initial position depend crucially on the strategies individuals adopt in risky situations. 21.6 Further examination of the Arrow theorem and of how contradictions can arise in fairly simple situations....
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This note was uploaded on 11/06/2009 for the course ECON ECON111 taught by Professor Smith during the Spring '09 term at Punjab Engineering College.
- Spring '09