PAM 4380 february 4 2011 - Normative Economics Outline:...

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Normative Economics Outline: 2/4/2011 Positive economics: (last lecture) Normative economics Market success Defining “optimal” and “efficient” Market failures Homework #1: Due Wed., 2/11/2011 Next time: motorcycle helmet laws
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Example: Banning a “Bad” “Let’s consider some hypothetical product I’ll call X. Product X has been around for a long time. Many people use it. Over the years, a tremendous amount of incontrovertible evidence has been gathered to demonstrate that using X can increase your chance of being harmed or dying. Furthermore, if you use X with your loved ones close by, they too face an increased chance of being harmed or dying. And to make matters even worse, if you use X around complete strangers, you increase their chance of being harmed or dying.” “Is this enough information to lead you to the conclusion that banning product X may be sound social policy?” Harold Winter, Trade-offs: An Introduction to Economic Reasoning and Social Issues , 2005
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Market Success Market forces tend to allocate resources to their most highly valued use
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PAM 4380 february 4 2011 - Normative Economics Outline:...

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