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Lecture: Role of Government Chapter 19 Outline
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səhifə | 2/7 | tarix | 23.05.2023 | ölçüsü | 71,5 Kb. | | #112472 |
| Lec6 RoleGovernment - Public Goods: 2 qualities
- Nonrival: someone’s consumption does not reduce the amount available for others to consume.
- Non-excludable consumer cannot be excluded from consuming the good either by having to pay or through some other mechanisms.
- Classic example national defense.
Types of Goods - Merit Goods: good that are thought to be good for someone regardless of the person’s own preferences.
- Compulsory education.
- Wearing seat belts or helmets on motor cycles.
- Tobacco and drugs.
- Market failure because don’t consume enough of it.
- Government’s often try to correct market failures (market distortions).
- Remember the theory of the second best, fixing the distortion won’t necessarily make people better off (may or may not).
- Need to think about when government intervention may be appropriate.
- Can sometimes be a value judgement.
- In health care governments are not aiming for perfect competition because not achievable for much of health care. Instead use other mechanisms than a price mechanism to ration health care.
Rational for government intervention - Public Goods:
- Market failure because too little of the good is produced in private markets.
- Usually large number of individuals.
- Individuals unlikely to cooperate to fund substantial amounts of public goods through voluntary contributions.
- Free-riders: can’t exclude them from the benefits, but free-ride b/c an voluntary contribution has a negligible impact on availability.
- Government takes responsibility for providing good.
- E.g. control of disease vectors (malaria), clean air, food and water safety, information, medical research (some types), information, voluntary giving (redistribution)
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