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16c+Final+lecture - INTA 1200American Government FINAL...

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INTA 1200—American Government FINAL LECTURE
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INTA 1200—American Government I. WHAT DID WE COVER?
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Initial Question: Why government? Initial Answer: Why not? Because MARKETS do it better! 1) Efficient (lower prices, better quality) 2) Decentralized 3) Innovative When markets are working, they are generally more: INTA 1200—American Government …so why do we need government?
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Historically, what has American government done? 1607-1789: Early colonists form government to: 1) PROVIDE PUBLIC GOODS (non-rival, non-excludable) 2) SOLVE MARKET FAILURES: 1870s-1910s: Monopolies (rise of Populists & Progressives) 1890s-1920s: Negative externalities, Prisoner’s dilemmas (Progressives) 1940s-2010: Positive externalities (investment in R&D) 2000s: Imperfect information & information asymmetries (Health Care, Financial Crisis) Adverse selection 3) REDISTRIBUTION: Budgets and taxation Trade policy (protectionism vs. free trade) Monetary policy (inflation vs. unemployment) Problem?: “Moral Hazard” = Separation of risk from responsibility
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Why (not) Government?
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