Public Policy midterm 1

Authoritarianism

principle of blind submission to authority, as opposed to individual freedom of thought and action

illiberal democracy

although elections take place, citizens are cut off from knowledge about the activities of those who exercise real power because of the lack of civil liberties and civil institutions

Coasian bargain

Ronald Coase noted that externalities may be caused by weak property rights. If property rights are not assigned, \n then they cannot buy or sell a right

Pigouvian tax

tax to change behavior. ex.increasing market prices of polluting goods, inducing consumers to seek out greener alternatives

Liberalism

equality before law, supports private property, market economics, and individual rights. Based on rationality, empiricism, and personal liberty.

Capitalism

individuals choose

Milton Friedman

there can’t be political freedom if government controls production and consumption because free people must be free.

Joe Stiglitz (liberalism)

argued that decreasing inequality of opportunity leads to stronger economic growth. ex. policies like healthcare for the poor, leads to improved economic performance

John Locke

father of liberalism, man has three natural rights: life, liberty, and property.

Negative externality

when the production or consumption of a product results in a cost to a third party. ex. air pollution

Positive externality

when a benefit spills over to a third-party

ex. vaccination

Lack of market competition

raises prices

Public goods

non excludable and non rivalrous, Government solutions \n needed ex.parks

Private goods

excludable and rivalrous ex. What kind of car should I buy? Where should I live?

Excludability

only people who pay can consume it

Non-rivalrous in consumption

supply is not affected by people's consumption.

Life expectancy

policies to improve life expectancy. Like not allowing people to smoke in schools

Market efficiency

no meaningful failures, sum of wealth of buyers and sellers from a transaction cannot be higher, market outcomes cannot be beat

Private cost

cost that a person or firm pays in order to buy or produce goods and services

Social cost

private costs+value of externality, the total burden imposed on the economy

Public problem

Perceived as a responsibility of society to solve. ex. air pollution, spread of disease, lack of access of healthcare

Rent-seeking

an entity seeks to gain wealth without any reciprocal contribution of productivity.

Lobbying

communicating with officials for the purpose to influence them, advocating for a public good

Free ridership

someone who wants others to pay for a public good but plans to use the good themselves

Common access good

rivalrous and non excludable ex. coal

Crony capitalism

a system characterized by close, mutually advantageous relationships between businesses. ex. political and economical tactics

Moral hazard

personal benefit in personal situations. Taking advantage of a financial deal knowing the fallout will land on another party. ex. sick days

Socialism

Government controls

Capitalism vs Socialism

C:product owned by private individuals, prices determined by free market forces, encourages innovation, limited taxes.

S: product owned by government, income equally distributed according to need, price set by government, less innovation, high taxes.

Strong central government

direct control over private and public decisions

Mostly targeted government

target policy to solve public problems

Mixed government

ignore some public problems and intervene in some private decisions

non-crony capitalism

level playing field where all economic actors receive equal treatment under the law

market failure

when the market outcome does not maximize wealth ex. lack of competition

Market failuresss

lack of competition, externalities, Too Few Public Goods, overexploitation of common access goods

Liberal democracy

freedom of speech, freedom of the press, freedom of assembly, and freedom of religion.

Inequality

Monopolistic competition

***when many companies offer competing products or services that are similar, but not perfect, substitutes***.

Victor Orban

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Equality of opportunity

Adam Smiths invisible hand

allowing people to buy what they want, sell what they want, and produce what they want