PAD4223Notes

PAD4223Notes - PAD 4223-002 Budget and Fiscal Management...

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PAD 4223-002 Budget and Fiscal Management Dr. Victor Eno MWF 12:15 -1:05 Monday 01.11.10 1) Two-Way relationship between government and market 2) Market Failure occurs when the market mechanism (demand/supply and pricing among others) do not function equitably. Government intervenes to correct defects in the market 3) Note: concept of economic efficiency: price paid by buyer should not exceed the additional cost (i.e. marginal cost) of producing the good or service. But a private business needs to charge a price higher than zero, the efficient price, in order to stay in business 4) Concept of public, private, and intermediate goods a. Differentiate among them and consider implications for state-market relations 5) Related to concept of public goods consider these: a. Exhaustion, non-rivalry b. Exclusion vs. non-exclusion Public Goods: Ex: National defense, law enforcement, justice system, disease control (health services), ER Private Goods: Ex: food, clothing, entertainment, housing Wednesday 01.13.10 Public Good vs. Private Goods Note Concept: Exclusion vs. Non-Exclusion Exhaustion vs. Non-exhaustion Non Rivalry vs. No NonRivalry Three Categories of Goods: 1) Public: a. Characterized by non-exclusion, non rivalry, and non-exhuastion b. Defense, Law enforcement, Social services 2) Intermediate: a. Toll Goods, subject to joint use, turnpikes, toll roads & bridges, cinema, football stadiums etc b. Common-pool Goods Ex: aquifers, fisheries, petro-gas deposits c. Most are non rivalry 3) Private Goods: a. Food, Clothing, Television Set
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b. No NonRivalry; If you use it, no one can use it at the same time Friday 01.15.10 continuing discussion of market failure and function of government - Consider concept of externality: third-party effects from market transaction between buyer and seller. - Note what governments do to promote positive externality, i.e positive effects of third party externalities o Also what it does to address negative externalities - Provide examples of externalities, and positive/negative effects Cell phone = Private Service = Intermediate Good Everyone benefiting from one person in a class getting vaccinated by not getting sick from him OR Someone getting sick from another cars exhaust Economic Stabilization Redistribution 01.25.10 Privatization: Variants of Privatization 1) Gov Provision/ Gov Production 2) Gov Provision/ Private Production 3) Private Provision/ Gov Production 4) Private Provision/ private Production Building Social Decisions from Private Preferences 1) discussion is based on concepts of cost-benefit analysis and individual decision-making principles a. Individuals are best judges of their well-being b. Welfare of community (i.e., society) depends on the welfare of the individual c. Following from above, if individual welfare society’s well-being and improved, therefore pareto criterion which states: if at least one person is better off from a
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This note was uploaded on 05/27/2011 for the course PAD 4223 taught by Professor Eno during the Spring '10 term at Florida A&M.

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PAD4223Notes - PAD 4223-002 Budget and Fiscal Management...

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