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Econ 337 #6 - No Child Left Behind • Read the article...

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Unformatted text preview: No Child Left Behind • Read the article from Time, 01/23/2012 • Share with your group what you found from the articles you collected. • Specific impacts to your State? – What is the State’s next move? • Report • Fiscal federalism: If we have a choice between centralization and decentralization… The decentralization theorem • For a local public good without economies of scale in production , it will always be more efficient (or at least as efficient) for local governments to provide the Pareto- efficient levels of output for their respective jurisdictions than for the central government to provide any specified and uniform level of output across all jurisdictions. Two economic arguments I. A two-person- two-commodity world • Two individuals: A and B • Two goods: X and Y – X is a private good – Y is either a private good or a public good (example: safety protection) Private: decentralized production Public: centralized production • Case one: Y is a private good. MRSA=MRSB=MRT B1 A1 • Case two: Y is a public good (A and B consume the good jointly) è YA = YB (YA +YB =Y) è MRSA+MRSB=2MRT B1 A1 (Without cost savings) It is always preferable to provide PE levels of consumption for subsets of a group than for the group as a whole. • In other words, It is never in the interest of A and B to constrain themselves to consume Y jointly unless there are some cost-savings to be realized from collective consumption. • When such cost-savings do exist, this implies that by consuming Y jointly, A and B can realize higher levels of consumption of Y without sacrificing any consumption of X. B1 A1 II. Barzel’s arguments • It generates a cardinal measure of welfare gains from decentralization. • In order to maximize the welfare of its constituency, the government of a jurisdiction must minimize the welfare loss due to variations in demand. Q $ P Qi Q P b a Q i i i + = Let P =MC/n ∑ =- = ∆- = -- = ∆ n 1 i 2 i i 2 i i i i i i Q Q b 2 1 W Q Q b 2 1 Q Q b 1 Q Q 2 1 W ) ( ) ( ) ( ) ( Suppose the slope of the demand curve over the relevant range is the same for all individuals....
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Econ 337 #6 - No Child Left Behind • Read the article...

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