Model 1: Pure Exchange Economy
An economy with
1. 2. 3. 2 people: Adam & Eve 2 commodities: Apples & Fig leaves Fixed supply of commodities
An Edgeworth Box depicts the distribution of goods between the two people.
s ev ae g F l i
Econ 337 TA Session 2
Jorge Catepillan January 19, 2012
Young and old residents tend to have different preferences for local public services. Suppose that each old person has the utility functionU o = 2G+2xO , where G is consumption of a local p
Econ 337 TA Session 1
Jorge Catepillan January 18, 2012
Suppose we have two goods, lets say X and Y , and a consumer that values such goods according to a utility function U : R+ R+ R this means that the consumer prefers the bundle
Since the Tiebout process does not eliminate the variance in desired government service within communities, voting is required and used to find a compromise position within those remaining differences of opinion.
Public Choice without mobility: Voting
1. If capitalization occurs, fewer communities are needed to achieve an efficient equilibrium 2. Communities need be homogenous only in the desired amount of public service and can include households desiring the whole range of housing, the equity concern
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 Paretoefficient levels of output for their respective jurisdict
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 centrali
Organization of sub-national government and fiscal federalism
Ch. 6 Oates (1972), Ch1-2
Why centralized? Why decentralized?
1.Go over a few public goods and services. 2.Discuss which ones should be provided by a central government and which ones should be
Positive vs. Normative analysis
A systematic framework to assess the desirability of various government actions. Welfare economics is concerned with the social desirability of alternative economic states.
This class: Look for economic, as opposed to historical or institutional, explanations for different fiscal decisions by various states.
G8 and NATO summit in May Mayor's ordinance:
Change the opening hours of beaches and parks from 4 a.m. to
Why study state and local governments?
The state and local government sector. 1. is a substantial part of the US economy: Its spending represents 14% of GDP 2. comprising more than half of total government domestic expenditure 3. provides ser