Download - Government - CERGE-EI
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Intermediate MicroeconomicsGovernment
Agribusiness Teaching CenterEaster Term 2015
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Government
Why Do Governments Exist?
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Role of Government
Mancur Olson theory of state:
Origins of government
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Role of Government
Mancur Olson theory of state:
Origins of governmentRoving Bandits vs Stationary Bandits
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Role of Government
Market inefficienciesProperty rights and coordination failures
ownership, side of driving, production chains
Public goodnon-excludable and (non-)rivalrous, free-riding
Externalities(Pigouvian) taxes, education
Monopoly and imperfect competition Redistribution
Robin Hood?Market intervention
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Good CharacteristicsExcludability and Rivalry
Public Good(Mosquito control
Justice, Ideas)
Club Goods (Bridges
Swimming pools)No
Common Goods(Fishing ground
Public grazing land, Clean air)
Private Goods(Hot dogs,
Automobiles, Houses)Yes
Rival
NoYes
Exclusive
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Tragedy of Commons… or One More Reason for Communism to Fail
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Tragedy of Commons… or One More Reason for Communism to Fail
Ingredients: common property (graze field or fishing pond)diminishing returns to scale production many people social vs. personal optimisation
What about Nepotism?
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Externalities as source for inefficiency
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Externality
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External dis-economy (modelling)
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External dis-economy (modelling)
(overproduction, low costs)
(mis-production, missing market)
(underproduction, too high costs)
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External dis-economySocially optimal production: Internalising
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External dis-economySocially optimal production: Internalising
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External dis-economySocially optimal production: Internalising
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External dis-economySolutions
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External dis-economyArthur Cecil Pigou
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External dis-economyPigouvian taxes vs Internalisation
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External dis-economyDefining Property Rights
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Government related problems
Deadweight loss of taxation
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Government Related problems
Industrial policy
Subsidies to sectors, wage controls, import monopolies, ISI, and the like
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Government related problems
CorruptionKleptocracySelf-preservation