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Public choice theory
Economic analysis of government decision making, politics, and elections
Logrolling
Trading of votes to secure favorable outcomes
Paradox of voting
A situation in which society may not be able to rank its preferences consistently through paired-choice majority voting
Median-voter model
Under majority rule and consistent voting preferences, the median voter will in a sense determine the outcomes of elections
Government failure
Inefficiency due to certain characteristics of the public sector
Special-interest effect
Any outcome of the political process whereby a small number of people obtain a government program or policy that gives them large gains at the expense of a much greater number of persons who individually suffer small losses
Earmarks
Narrow, specifically designated authorizations of expenditure
Rent seeking
Appeal to government for special benefits at taxpayers’ or someone else’s expense
Benefits-received principle
Households and businesses should purchase the goods and services of government in the same way they buy other commodities
Ability-to-pay principle
Tax burden should be apportioned according to taxpayers’ income and wealth
Progressive tax
If its average rate increases as income increases. Such a tax claims not only a larger absolute (dollar) amount but also a larger percentage of income as income increases.
Regressive tax
If its average rate declines as income increases. Such a tax takes a smaller proportion of income as income increases. A regressive tax may or may not take a larger absolute amount of income as income increases.
Proportional tax
If its average rate remains the same regardless of the size of income
Tax incidence
Final resting place of a tax (who pays it?)
Efficiency loss of the tax
This loss is society’s sacrifice of net benefit, because the tax reduces production and consumption of the product below their levels of economic efficiency, where marginal benefit and marginal cost are equal
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