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

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IBE 316 Economic Policy Stiglitz: Economics of the Public Sector Chapter 7: Public Choice Keisuke OTSU Sophia University FLA Spring 2008 OTSU (Sophia University FLA) IBE 316 Spring 2008 1 / 14
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Overview Focus Questions In what ways does collective decision-making di/er from standard decision-making within a household? used to resolve? What are alternative ways to for determining the level of public goods expenditures? What are some of the ways in which politics a/ects the outcomes of public decision-making about resource allocation OTSU (Sophia University FLA) IBE 316 Spring 2008 2 ± 14
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Public Mechanisms for Allocating Resources The Problem of Preference Revelation In a private decision-making, the decision maker knows what he wants For a private good, the household decides to buy it or not For public decision-making, the decision maker has to ascertain the preferences of those on whose behalf he is making decisions for Even when asked directly, the consumers may not truthfully tell their preferences OTSU (Sophia University FLA) IBE 316 Spring 2008 3 / 14
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Public Mechanisms for Allocating Resources Individual Preferences for Public Goods Collective decision making is di¢ cult because people are di/erent in tastes incomes taxes: uniform, proportional, progressive±regressive With the same cost paid, rich typically prefer higher levels of public goods, however, the cost to increase a public good may be higher for the rich OTSU (Sophia University FLA) IBE 316 Spring 2008 4 ± 14
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The Problem of Aggregating Preferences In a democracy, voting rules are developed to make a collective decision
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This note was uploaded on 10/22/2011 for the course ECON 316 taught by Professor Keisukeotsu during the Spring '08 term at Sophia University.

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

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