Topic 4 - Topic 4: Public Goods and Common Resources (Ch...

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Topic 4: Public Goods and Common Resources (Ch 16) 1. Write a paper about the topic of public goods and/or common resources using articles in a recent newspaper or magazine. Summarize key points. Use the analysis developed in class and the textbook to introduce your topic and explain the issue. 2 . Identify the type of market failure. Is the public good under-allocated or overallocated? Show how. 3. Explain how government intervention or private solutions can improve economic efficiency. INTRODUCTION The market meltdown that began in the U.S. housing sector and tore through the world economy has laid bare a number of economic principles. In particular, the deregulatory movement that swept through myriad industries was premised on the notion that market forces produce results superior to government intervention. This movement relied on the assumption that rational choice theory fairly encapsulates real-world behavior, such that companies and consumers act in their best interests. So informed, this theory suggested that markets self-correct, economic distortions are ephemeral, and rational behavior produces desirable outcomes. In light of the calamitous global recession, certain of these assumptions were obviously misplaced. Despite a common reliance on free- market forces, the principles of economics that underlie competition law are highly distinct from the norms that justified deregulation in the financial sector. Antitrust law understands the market to self-correct where monopoly conditions attract capital, thus yielding competition, lower prices, and greater social welfare.(n1) In contrast, in the financial sector, the incentive to maximize profits spurs excessive leverage, creating systemic risk, which triggers the need for regulation. Thus, the market failure in the banking industry need not reveal an intellectual frailty underlying antitrust jurisprudence. Were one to infer, however, that the market failure associated with the credit crisis has normative repercussions for the faith properly placed in capitalist forces generally, one might reasonably revisit substantive antitrust doctrine. This Article explores whether we should in fact interpret the recession in this manner. The global crisis, properly construed, does have significant repercussions for the larger political landscape within which competition law is defined and informed. Revolutionary moments in the development of this area of law have been characterized by a broader socioeconomic context that predisposes the courts, the public, and academics toward adopting an alternative view. From the
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This document was uploaded on 11/02/2011 for the course ECONOMIC ec 202 at Montgomery.

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Topic 4 - Topic 4: Public Goods and Common Resources (Ch...

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