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19 download_doc-4.php - • Slide 5(Operational...

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February 2, 2009 Day 4 Slide 2 (Public Choice Analysis) o Branch of economics Individuals pursue their own self interests o Maximize Incentive – weigh constraints o Government can fail Have inefficiencies Slide 3 (Public Sector Participants) o Major part Voters, politicians, bureaucrats Voters o Rationally ignorant o Supposed to be ignorant o Costly to be informed o Little benefit to be informed Politicians o Vote maximizers o Bring you the info Bureaucrats o Budget maximizers o Hired into office Don’t care about votes
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o Care about power, prestige, money Always want bigger budget Slide 4 (The Shortsightedness Effect) o Politicians support project with: Clearly defined benefits Big, visible o Paid for how? Future costs that are difficult to identify Don’t point out future expenses
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Unformatted text preview: • Slide 5 (Operational Inefficiency) o Private sector Profit driven • If can’t change price point, lower costs o Public Sector Have budget • As long as costs are within budget, don’t care to lower costs • Possibly the opposite o Always try to spend budget • Slide 6 (Rent Seeking Behavior) o Small groups try to change public spending for personal gain Spend on lobbying • Seen as non-productive o Often exceeds “prize” • Slide 7 (The Special Interest Effect) o Easier to get support for small groups than large groups o The individual costs of taking action often exceed the potential individual benefits o The individual benefits of taking action often exceed the potential individual costs...
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19 download_doc-4.php - • Slide 5(Operational...

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