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The role of government

The invisible hand or the helping hand is replaced by

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Unformatted text preview: ories: Public pressures for state intervention due to low tolerance for market failures Special interest groups make demands for government actions unrelated to social welfare Politicians and bureaucrats are rewarded for interventions withoput reference to the costs of implementation Demand for government intervention is further enhance by the high time- discount of political actors PUBLIC CHOICE theories: Government is not a singular actor Politicians, bureaucrats may act in their own self- interest Rent- seeking or log- rolling are powerful force ! the invisible hand or the helping hand is replaced by the “grabbing hand: Therefore the government doesn’t have an incentive to correct the problem Rent seeking – where decisions are made leading to resource allocation that maximizes the benefit to the decision maker at the expense of another party or parties Log rolling – where decisions may be made on resource allocation to projects that have less importance in return for the support of the interested party in other decision making areas Corruption: What...
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