Lecture 25 Public Choice

1
Lecture 25 - Public Choice

• Wissinks Words

2
remarks

• This lecture covers an enormous amount of
  material related to the observation from last
  time markets dont always work so well.
• Main focus is on what happens when goods in the
  market place are not purely private goods.

3
purely private goods

• Two implicit assumptions weve made about private
  goods
• there is rivalry in consumption
• there is feasible excludability
• Interesting difficult problems arise if either
  of these properties is missing.
• A pure public good misses both!

4
a taxonomyof sorts
5
two classic market failures

• Externalities positive and negative
• Public goods
• Keep in mind
• understand why the market allocation is
  inefficient
• how and if the government can be used to enhance
  efficiency

6
simple idea

• For Pareto Efficiency want MBsociety
  MCsociety
• With purely private goods PMBprivate
  MBsociety and MCprivate MCsociety
• With externalities production side MCsociety ?
  MCprivate consumption side MBsociety ?
  MBprivate
• With public goods MBsociety ?MBprivate

7
last, but not least...

• Solutions are often hard to come by. Solving the
  problem is easier said than done.
• Maybe the market will do the best that can be
  done.
• Maybe the government can improve matters. Maybe
  not.
• Social Choice Theory important.