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Unformatted text preview: Chapter 17 Government Chapter Summary Chapter 17 begins with a discussion of public goods: the two main characteristics are non- diminishability and nonexcludability. An aggregate willingness to pay curve is generated. The optimal quantity of public goods is derived, followed by a discussion of the private provision of public goods. The second half of the chapter is devoted to public choice. The chapter finishes with a discussion of income distribution. The chapter is a good introduction to a course in Public Finance. Chapter Outline Chapter Preview Public Goods Public Choice Income Distribution Summary Teaching Suggestions 1. Many students will never take a public finance class and therefore will miss out on the formal presentation of efficiency in the allocation of public goods. This is unfortunate because the role of government in economic life is a topic of increasing relevance. The text links together the issues of efficiency and income distribution in ways that need to be explored by all economics students, so this chapter should be included in the course if at all possible. 2. The creative ways of financing public goods are always interesting to students. The captive audience of the cable TV program for advertisers, the possibility of exclusion by club membership strategies, and the moral imperative preaching of some private charity organizations all provide ways of overcoming the free rider problem. Examine some locally relevant expressions of these techniques. 3. Entertain the question of whether income redistribution problems are primarily problems of economic incentives, social problems beyond (or within) the control of the poor, or problems inevitable to the normal distribution of a genetic lottery. Does the cause of poverty make a difference in the public policy one should propose? 4. A good illustration of the free rider problem is the periodic membership drive on PBS. In most areas 1/3 or less of the viewers are members. The rest are free riders. 5. In an era of concern about government provision of public goods, students will be interested in the possibility of voluntary organizations providing some of the quasi public goods. Spend some time illustrating how clubs, coops, churches, and simple neighborhood organizations can provide some of the goods. Make sure that the issue of exclusion is developed carefully in the examples because it is this issue that is pivotal in deciding how successful a club type organization will be in the long run. 6. Below is a graph of a three-person community that has an aggregated willingness to pay function as shown. Following the graph is a set of questions that will help bring out the key issues involved in the provision of public goods. 197 CHAPTER 17: Government ....
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This note was uploaded on 09/16/2011 for the course ECON/ACCOU 101 taught by Professor Jang,hajoon during the Spring '11 term at Korea University.
- Spring '11