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The Economic Functions of Government

The Economic Functions of Government. Enforce Laws and Contracts. Maintain Competition. Redistribute Income. Provide an Economic Safety Net. Provide Public Goods: Nonexclusion Shared consumption Correct Market Failures: Provide market information

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The Economic Functions of Government

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  1. The Economic Functions of Government • Enforce Laws and Contracts. • Maintain Competition. • Redistribute Income. Provide an Economic Safety Net. • Provide Public Goods: Nonexclusion Shared consumption • Correct Market Failures: Provide market information Correct negative externalities Subsidize goods with positive externalities • Stabilize the Economy: Fight unemployment Encourage price stability Promote economic growth Unit 5 : Microeconomics National Council on Economic Education

  2. Illustrating a Negative Externality Unit 5 : Microeconomics National Council on Economic Education

  3. Illustrating a Positive Externality Unit 5 : Microeconomics National Council on Economic Education

  4. Key Ideas in Public-Choice Economics • Is it rational for government leaders to favor special interests over the general public? Concentrated vs. special interests Information costs • Why are politicians mainly in the middle of the road? Median-voter model of political behavior • Are people rational or irrational when they spend little time evaluating candidates before they vote and when they don’t vote? • What is the effect of bureaucratic entrepreneurs on government? Unit 5 : Microeconomics National Council on Economic Education

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