ECO207 Chapter 5 - Public Goods, Public Choice, and Government Failure

cost-benefit analysis

a method for deciding whether or not to provide a public good that involves the comparison of the total cost of providing that public good with its collective benefit (measured by collective willingness to pay)

deregulation

the removal of most, or even all, of the government regulation and laws designed to supervise an industry

earmarks

narrow, specially designated spending authorizations placed in broad legislation by senators and representatives for the purpose of providing benefits to firms and organizations within their constituencies

excludability

the characteristic displayed by those goods and services for which sellers are able to prevent nonbuyers from obtaining benefits

free-rider problem

the inability of potential providers of an economically desirable good or service to obtain payment from those who benefit, because of nonexcludability

government failure

inefficiencies in resource allocation caused by problems in the operation of the public sector (government)

logrolling

the trading of votes by legislators to secure favorable outcomes of decisions concerning the provision of public goods and quasi-public goods

principal-agent problem

a conflict of interest that occurs when elected officials or agents pursue their own interests rather than ones that are in the interest of the public or stockholders

regulatory capture

the situation that occurs when a governmental regulatory agency ends up being controlled by the industry that is supposed to be regulating