Week 7 - Public Goods Flashcards
(78 cards)
1
Q
`What makes a good nonexcludable?
A
A good is nonexcludable if people who don’t pay cannot be easily prevented from using it.
2
Q
What makes a good nonrival?
A
A good is nonrival if one person’s use of it does not reduce the ability of another person to use the same good.
3
Q
What is an example of a public good?
A
Asteroid deflection—nonexcludable and nonrival; everyone benefits without reducing others’ benefits.
4
Q
What is an example of a private good?
A
A pair of jeans—excludable and rival; only one person can wear them, and nonpayers can be excluded.
5
Q
What are the four types of goods based on excludability and rivalry?
A
Private goods – excludable and rival
Public goods – nonexcludable and nonrival
Club goods – excludable but nonrival
Common resources – nonexcludable but rival
6
Q
Why can private goods be efficiently provided by the market?
A
Because they are excludable, people have incentive to pay, enabling market provision without inefficiency.
7
Q
Why are public goods underprovided by the market?
A
They are nonexcludable, making it hard to get people to pay voluntarily.
8
Q
What is a free rider?
A
Someone who enjoys the benefits of a public good without paying a share of the costs.
9
Q
What is a forced rider?
A
Someone who pays a share of the costs of a public good but does not enjoy the benefits.
10
Q
What’s the problem with free riders in public goods?
A
It leads to underprovision of the good, since people avoid paying, expecting others to bear the cost.
11
Q
How can government solve the free rider problem?
A
By taxing everyone and using those funds to provide the public good.
12
Q
What are club goods? Provide examples.
A
Excludable but nonrival goods, like television, music, and software.
13
Q
Why can markets be inefficient in providing club goods?
A
People willing to pay cost may be excluded due to higher market prices.
14
Q
What is a common resource?
A
A good that is nonexcludable but rival—use by one reduces availability to others.
15
Q
What is the “tragedy of the commons”?
A
The tendency of unowned, nonexcludable resources to be overused and undermaintained.
16
Q
Why are tuna not public goods?
A
Tuna are nonexcludable until caught, but rival—once consumed, others cannot use them.
17
Q
What is the result of nonexcludability and rivalry in resources?
A
Overexploitation and undermaintenance of the resource.
18
Q
How can norms help prevent the tragedy of the commons?
A
Groups enforce social norms to manage shared resources effectively—though harder with unrelated users.
19
Q
What is an example of command and control to manage commons?
A
British Columbia limited fishing boats in 1968, but “capital stuffing” led to continued decline.
20
Q
What is the takeaway about public goods and markets?
A
Public goods are valuable but underprovided by markets—nonexcludability is the key issue.
21
Q
What are some solutions to the tragedy of the commons?
A
Social norms (Elinor Ostrom)
Private property rights
Command and control regulations
Individual Transferable Quotas (ITQs)
Cultural/religious constraints
22
Q
What is the takeaway about common resources?
A
Nonexcludable but rival resources tend to be overused; solutions include property rights and social norms.
23
Q
Public choice
A
the study of political behaviour using economic tools
24
Q
What is rational ignorance?
A
whent he costs of being informed is more than the benefits of being informed
25
Consequences of rational ignorance
- Voters who don't know the facts can't make informed decisions.
- They may rely on low-quality, unreliable, or biased sources.
- This undermines the quality of democratic outcomes.
26
What is a key challenge to the idea of rational ignorance?
Not everyone is rationally ignorant — there are real incentives for people to stay informed.
Examples:
-Personal impact of policies
-Civic duty or moral responsibility
-Social status or reputation
-Professional or economic benefits
-Intrinsic curiosity or interest in issues
27
What is Caplan's point about voters?
that democracy insulates an individual’s beliefs about public policy from consequences and thus makes people more likely to hold irrational beliefs
28
29
When is there an incentive to stay informed? give example
special interests are rationally informed and use money to influence policy, especially when they stand to benefit significantly.
Example - Sugar Quotas on imports
Because the cost to each consumer is small (about $5–$6/year) and spread out, so the effort to oppose the quota isn’t worth it — a case of rational ignorance.
Because they gain millions of dollars each from quotas, and sugar production is concentrated among a few producers — giving them a rational reason to be informed and involved. (SPECIAL INTEREST)
30
How does the sugar quota example illustrate the imbalance of political influence?
Consumers are largely uninformed due to low individual stakes, while producers are well-informed and active due to high personal gains — giving special interests disproportionate influence.
31
What does “diffuse costs, concentrated benefits” mean in politics?
It means spreading the costs of a policy across many people (who may not notice or care), while giving large benefits to a small group (who then have strong incentives to support it).
a successful formula for politics
32
Why do politicians support policies with diffuse costs and concentrated benefits?
The people who are harmed are rationally ignorant and have little incentive to oppose the policy.
The people who benefit are rationally informed and have strong incentives to support the policy.
33
Give examples of policies that follow the “diffuse costs, concentrated benefits” pattern.
Trade quotas and tariffs
Agricultural subsidies
Government projects (e.g., roads, bridges)
Tax credits and deductions
34
What is a negative consequence of policies with concentrated benefits and diffuse costs?
They can lead to wasteful spending on projects with low overall benefit and high public cost, just to satisfy a small group.
35
What is voter myopia?
Back:
It’s when voters focus only on economic conditions during the election year, ignoring the rest of a president’s term.
36
How do politicians respond to voter myopia?
They try to boost the economy — especially disposable personal income — right before elections to increase their chances of re-election.
37
When is the incumbent party (one currently in office) more likely to win an election?
When disposable income is growing
When inflation is low
When their party hasn’t held power too long
38
When are special interest groups most likely to succeed in influencing policy?
When the policy is narrow, hard to understand, and affects only a small part of the economy — making public resistance unlikely.
39
When are voters most likely to be informed and active about a policy?
When the policy is highly visible, widely reported in the media, and impacts millions of people.
40
What does the median voter theorem state?
In a majority-rule election, when voters vote for policy closest to their ideal preferences, the policy closest to the preferences of the median voter will beat any other option.
41
What effect does the median voter theorem have on political strategy?
It encourages politicians to target moderate voters and adopt centrist positions to win elections.
42
What does the median voter theorem say about policy stability?
If the median voter’s preferences don’t change, then policy is unlikely to change either — the system favors stability over transformation.
43
What kind of policy does democracy seek under the median voter theorem?
A policy that cannot be beaten in a majority-rule vote, not necessarily one that maximizes total voter satisfaction.
44
When does the median voter theorem break down?
-When voters don’t vote based on their ideal preferences
-When there are multiple dimensions of political conflict
-When no stable winning policy exists
45
What is the main political implication of the median voter theorem?
It gives politicians a strong incentive to target moderate, centrist voters, especially on high-salience, single-issue topics.
46
What is the relationship between democracy and economic freedom?
Democratic countries tend to have more economic freedom, and there is a strong correlation between democracy and higher standards of living.
47
Why might greater wealth lead to more demand for democracy?
Wealthier societies may want more accountability, transparency, and personal freedoms — all supported by democratic governance.
48
What did Amartya Sen claim about democracy and famine?
That no famine has ever occurred in a functioning democracy, because democratic institutions and free press ensure government accountability and response.
49
What did Besley and Burgess find about political competition and famine prevention?
Greater political competition → More public food distribution
→ When politicians must compete for votes, they are more likely to provide essential goods to win public support.
Higher newspaper circulation → More government responsiveness to food crises
→ A free and active press increases public awareness, making it harder for governments to ignore suffering.
50
What institutions do democracies tend to support that promote economic growth?
Markets – Competitive, open markets allow for innovation, efficiency, and wealth creation.
Property Rights – Democracies are more likely to protect private ownership, giving individuals and businesses the security to invest and grow.
Rule of Law – Laws are applied consistently and fairly, creating a predictable environment for economic activity.
Fair Government – Democratic accountability reduces corruption and encourages public trust in institutions.
51
What is the Condorcet Paradox?
It’s a situation in which collective preferences are cyclical (non-transitive), even if individual preferences are not — meaning no clear winner can be determined by majority vote.
52
What is preference cycling?
Preference cycling occurs when group preferences loop back on themselves: A beats B, B beats C, but C beats A — making it impossible to determine a consistent majority winner.
53
What does the Condorcet Paradox show about majority voting?
It shows that majority rule can fail to produce a stable or rational outcome when group preferences are cyclical.
54
How does the Condorcet Paradox challenge the idea of democratic fairness?
It reveals that even in fair, majority-rule voting systems, the outcome can depend on how the choices are ordered or grouped, allowing for manipulation of the agenda.
55
What is a key implication of the Condorcet Paradox for elections and policy?
Agenda setters (e.g., politicians, committee chairs) can influence the outcome by choosing the order of votes, since preferences can cycle.
56
What is the argument for exporting pollution to poor countries and importing kidneys from poor countries?
that the trade makes people better off:
- the rich value health more than money
- the poor value money more than health
57
Which important values does economic reasoning ignore?
-The problem of exploitation
-Meddlesome preferences
-Fair and equal treatment
-Cultural goods and paternalism
-Poverty, inequality, and distribution of income
58
What is the problem of exploitation in economic reasoning?
It’s when market exchanges are technically voluntary but still unjust or coercive due to power imbalances, like in sweatshops.
Many people in rich and poor countries alike take jobs that involve significant risks.
The yearly mortality rate for commercial fishermen in Alaska is seven times the mortality rate when donating a kidney.
The issue is whether it’s wrong to offer to buy things from the poor just because they are poor, including their labor.
59
What are meddlesome preferences?
Preferences that involve infringing on others’ freedom or dignity — they raise ethical questions about whether all preferences should count equally.
60
Why might economic efficiency conflict with fair and equal treatment?
Because efficiency focuses on maximizing output, not necessarily ensuring fairness or equity among individuals or groups.
In New York City, buses can accommodate passengers in wheelchairs.
One study estimated that it would be cheaper for each wheelchair user to take a taxi than to refit all buses.
Defenders argued the value of equal treatment—not making people feel different or disadvantaged.
61
What does the cultural goods objection say about markets?
That some goods (like heritage or tradition) can’t be valued purely in economic terms, and markets might undervalue or harm them.
The French government spends 1.5% of GDP subsidizing culture and related “higher values.”
It placed a minimum quota on the number of French movies shown on TV.
62
How do critics of economics view poverty and inequality?
They argue that distribution matters, and focusing only on overall wealth or efficiency ignores the real harm caused by poverty and unequal outcomes.
63
What do markets maximize under ideal conditions (no externalities, perfect competition)? What is the problem with this?
They maximize the sum of consumer surplus and producer surplus, achieving efficiency.
but EFFICIENCY IS NOT EQUAL TO FAIRNESS
64
Why might an efficient market outcome still be considered unfair?
Because it could result in unjust outcomes — for example, the poor may be forced into harmful choices due to unequal income distribution such as trading kidneys for money.
65
What is the role of moral philosophy in economics?
It helps support normative policy judgments (what should happen), guiding decisions based on values like justice, fairness, and human dignity — not just efficiency.
66
What are the three major theories of justice discussed?
Maximin principle
Utilitarianism
Entitlement theory of justice
67
What is Rawls' Maximin Principle?
Justice means maximizing the benefits for the worst-off group in society.
68
Who developed the Maximin Principle and when?
Harvard philosopher John Rawls, in his 1971 book A Theory of Justice.
69
How does Rawls’ view differ from traditional economic thinking?
Rawls rejects trade-offs and prioritizes helping the worst-off group over increasing total or average well-being.
70
What it Utilitarianism?
the idea that the best society maximises the sum of utility - maximises total happiness, regardless of distribution
71
When do utilitarians support income redistribution?
When it increases total utility — that is, when the gains to the poor outweigh the losses to the rich.
72
Why do utilitarians limit redistribution?
Because excessive redistribution can hurt incentives to work, reducing total wealth and utility.
73
What is the entitlement theory of justice?
The distribution of income in a society is just if property is justly acquired and voluntarily exchanged.
74
What does Robert Nozick’s entitlement theory say about justice?
Justice depends on fair processes — if income is acquired justly and voluntarily, the outcome is just, regardless of inequality.
75
How does Nozick’s theory differ from utilitarianism?
Nozick cares about how wealth is acquired (process), not about maximizing happiness or equalizing outcomes.
76
Why is J.K. Rowling’s wealth considered just under entitlement theory?
Because people voluntarily bought her books, so she gained wealth through just and consensual exchanges.
77
What role should government play according to Nozick’s entitlement theory?
A minimal role — mainly to protect property rights and enforce contracts, not to redistribute income.
78
Which statement
best explains why special interest groups are able to exert disproportionate
influence over lawmakers?
Special interest groups' size and focus aid in their ability to lobby
for legislation that benefits their members. They can form close alliances with
legislators who can aid in the passage of legislation that is beneficial for a small few
at the expense of the larger population. When the benefits of potential legislation are
spread among a larger population, it is more difficult for the interested parties to
organize and lobby.
