AEM 2500 Lec 13 and 14 public goods 9-24-10 9-27-10 sv

AEM 2500 Lec 13 and 14 public goods 9-24-10 9-27-10 sv -...

Info iconThis preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon
Requirements for an Efficient Allocation of Resources Using Markets: Public Goods Contrast Market Success with Market Failure Associated with Externalities. Recall that perfectly competitive markets are characterized by: 1. complete property rights (i.e., no public goods), 2. atomistic participants (i.e., no monopolies), 3. complete information (i.e., rules out inefficiencies from inadequate information), 4. no transactions costs (i.e., rules out externalities). ankiw #7: Governments can ometimes prove on Mankiw #7: Governments can sometimes improve on market outcomes. In Doing So, It Helps to Ask Three Questions 1. To what extent does society want to rely on market processes, and to what extent do they want government intervention? 2. What is the desirable level of public good? (social optimum) 3. What is the most efficient way to get to the social optimum? (i.e., How do we get from private “market” optimum to social optimum?)
Background image of page 1

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

View Full DocumentRight Arrow Icon
A Parable Once, a long time ago in a poor village in the famous Côte ď Or wine region of rance, the village Priest announced his France, the village Priest announced his retirement after decades of service. The villagers each wanted to give him a gift to help ease his life in retirement. But alas, they were poor and had no money to spare. The village elders met and decided that while they were individually poor in monetary terms, collectively they were rich grapes and winemaking skills. in grapes and winemaking skills. Together, if each household donated a carafe of their best wine from their fields, they could amass a barrel that the priest ould sell and adequately fund a long could sell and adequately fund a long retirement. A cask was placed in the village centre, and each night, after a long day of toil, the villagers brought their ceramic carafes to the barrel and eventually filled it to the brim…
Background image of page 2
(Environmental) Public Goods Lecture In environmental economics, most externalities are public goods or bads. “ he notion of externality has risen because of its intuitive appeal I do The notion of externality has risen because of its intuitive appeal. I do something for my own benefit, ignoring the fact that my action also affects you. However…most externalities can be viewed as a nonexcludable [public] good or bad being produced by one agent and being consumed by ne or more agents The producer chooses how much to produce based on one or more agents. The producer chooses how much to produce based on his or her own calculus. The consumer has no choices since the good or bad is nonexcludable. Air pollution fits into this framework, as does noise, and even externalities such as knowledge.” (Kolstad, 2000 p. 94) Interactive Choice and the “Problem” of Public Goods – Public Goods Experiments – Economics is the study of choice: • Individual [Private] • Group [Interactive] •S o c i a l Role for Public Policy (social choice)
Background image of page 3

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

View Full DocumentRight Arrow Icon
Lab Experiment on Provision of Public Goods What does a public goods experiments look like? “ Four undergraduates from a sociology course are brought to a room and seated at a table.
Background image of page 4
Image of page 5
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 25

AEM 2500 Lec 13 and 14 public goods 9-24-10 9-27-10 sv -...

This preview shows document pages 1 - 5. Sign up to view the full document.

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