IBE316-7 - IBE 316 Economic Policy Stiglitz Economics of...

This preview shows page 1 - 6 out of 14 pages.

IBE 316 Economic PolicyStiglitz: Economics of the Public SectorChapter 7: Public ChoiceKeisuke OTSUSophia University FLASpring 2008OTSU(Sophia University FLA)IBE 316Spring 20081 / 14
OverviewFocus QuestionsIn what ways does collective decision-making di/er from standarddecision-making within a household?Why may there not be a well-de°ned outcome when majority voting isused to resolve?What are alternative ways to for determining the level of public goodsexpenditures?What are some of the ways in which politics a/ects the outcomes ofpublic decision-making about resource allocationOTSU(Sophia University FLA)IBE 316Spring 20082 / 14
Public Mechanisms for Allocating ResourcesThe Problem of Preference RevelationIn a private decision-making, the decision maker knows what he wantsFor a private good, the household decides to buy it or notFor public decision-making, the decision maker has to ascertain thepreferences of those on whose behalf he is making decisions forEven when asked directly, the consumers may not truthfully tell theirpreferencesOTSU(Sophia University FLA)IBE 316Spring 20083 / 14
Public Mechanisms for Allocating ResourcesIndividual Preferences for Public GoodsCollective decision making is di¢ cult because people are di/erent intastesincomestaxes: uniform, proportional, progressive/regressiveWith the same cost paid, rich typically prefer higher levels of publicgoods, however, the cost to increase a public good may be higher forthe richOTSU(Sophia University FLA)IBE 316Spring 20084 / 14
Public Mechanisms for Allocating ResourcesThe Problem of Aggregating PreferencesIn a dictatorship, the dictator±s preference dominatesIn a democracy, voting rules are developed to make a collectivedecisionunanimity votingsimple majority votingtwo-thirds majority votingOTSU(Sophia University FLA)IBE 316Spring 20085 / 14

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture