Comparative Politics Ch 4 Slides PT 1

Political Economy

The study of the interaction between states and markets. **Examines Balance of freedom and equality and which one is more prioritized in a state’s economic policy-making.

Market

interactions b/w forces of supply and demand that allocate resources - buyers and sellers.

Property

Goods or services that are owned by an individual or group

• privately or publicly owned

• Can be tangible or intangible - apples vs recipes

• Traded or exchanged in markets

Public Goods

Goods that no one can be kept from using.

Things that single individuals/companies are incapable of providing -things that only a state/government is seen as well suited to provide. Usually GOVT provides them so no one is excluded.

EX: Clean air, streetlights, Basic infrastructure, National security.

Private Goods

A product that IS excludable and rivalrous (set limit).

EX: Food, Electronics, Apparel, private property,

Private v Public Goods

Private

Excludable

Consumption reduces availability.

Markets are efficient at providing private goods

Public

Non excludable

Consumption does not reduce availability

Markets are bad at providing public good

Social Expenditures

ALSO called Welfare - Prioritizes equality value - mostly benefits the middle class.

Public benefits like education, subsidized child care or health care

Advantages to Social Expenditures

Provides economic building blocks

Insurance against economic downturns/personal difficulties

Disadvantages to Social Expenditures

CAN discourage ppl from seeking work (sometimes)

Costly for the gov’t to maintain****

Taxation

Used to pay for social expenditures, public goods, etc.

Variety of Sources: Income taxes, property taxes, sales taxes, corporate or payroll taxes

Advantages of Taxation

More gov’t revenue

Can decrease harmful behavior (more obey??)

Disadvantages of Taxation

May penalize work and investment

Can decrease competitiveness as companies don’t want to enter a heavily taxed area

Money

Medium of exchange. Store of value (holds value overtime), a unit of account (yk how much u have)

**The value of money is determined by states

Social institution that is printed and produced by states.

Central Bank

Institution that controls how much money is flowing through the economy as well as how much it costs to borrow money in that economy.

Main role of a central bank

To set interest rates on borrowing

Higher rates = less loans and more saving which helps to cool the economy and fight inflation

Lower rates = more loans and more SPENDING which speeds the economy and raises employment higher inflation

Inflation

Increase in the general price level of goods and services in the economy

• problem: too much money - money becomes less valuable and goods are more expensive

Deflation

A decline in the prices of goods and services

Problem: not enough money

• prices are lower, so are the business’ earnings and spending

• businesses close and unemployment rises

Stagflation

Rare BUT - High inflation occurs at the same time as stagnant economic growth and high unemployment

Regulation

Rules or orders that set the boundaries of a given procedure.

Some can limit commerce or govern an association

EX - OSHA

Tariff

A tax on an IMPORTED good

Quota

A limit on the number of certain foreign goods that can enter the country

Non-tariff regulatory barrier

Health, packaging, or other restrictions that make it more difficult for foreign goods to sell in local markets.