Economic analysis of government decision making, politics, and elections
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Logrolling
Trading of votes to secure favorable outcomes
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Paradox of voting
A situation in which society may not be able to rank its preferences consistently through paired-choice majority voting
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Median-voter model
Under majority rule and consistent voting preferences, the median voter will in a sense determine the outcomes of elections
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Government failure
Inefficiency due to certain characteristics of the public sector
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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
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Earmarks
Narrow, specifically designated authorizations of expenditure
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Rent seeking
Appeal to government for special benefits at taxpayers’ or someone else’s expense
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Benefits-received principle
Households and businesses should purchase the goods and services of government in the same way they buy other commodities
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Ability-to-pay principle
Tax burden should be apportioned according to taxpayers’ income and wealth
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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.
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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.
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Proportional tax
If its average rate remains the same regardless of the size of income
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Tax incidence
Final resting place of a tax (who pays it?)
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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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