1 / 7

Q0: Why Government in the First Place?

1 . 1. Q0: Why Government in the First Place?. A0: Creating Institutions and Defending Them. Nozick: The “Minimal State’’: “A minimal state, limited to the narrow functions of protection against force, theft, fraud, enforcement of contracts and so on.”

gpetway
Download Presentation

Q0: Why Government in the First Place?

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. 1 . 1 Q0: Why Government in the First Place? A0: Creating Institutions and Defending Them. • Nozick: The “Minimal State’’: “A minimal state, limited to the narrow functions of protection against force, theft, fraud, enforcement of contracts and so on.” • No trade without having property rights and enforcing them!

  2. 1 . 1 “According to the system of natural liberty, the sovereign has only three duties to attend to; three duties of great importance, indeed, but plain and intelligible to common understandings: first, the duty of protecting the society from the violence and invasion of other independent societies; secondly, the duty of protecting, as far as possible, every member of the society from the injustice or oppression of every other member of it, or the duty of establishing an exact administration of justice; and thirdly, the duty of erecting and maintaining certain public works and certain public institutions, which it can never be for the interest of any individual, or small number of individuals, to erect and maintain; because the profit could never repay the expense to any individual or small number of individuals, though it may frequently do much more than repay it to a great society.” Adam Smith, The Wealth of Nations, Book IV, chapter IX

  3. 1 . 1 ( ( ( ( Example 1 – A Coordination Game • Two ranchers (A raises sheep and B cattle). • Two grazing pastures (1 better than 2) • Equilibrium: 4 or 8 8 4

  4. 1 . 1 Example 2 – A Prisoner’s Dilemma Game • Equilibrium: (Nash + dominant strategy) M-C M-C A ``better’’ outcome: M M

  5. 1 . 1 Q1: When Should the Government Intervene in the Economy? Market failure 2: Monopoly Market failure 3: Asymmetric information

  6. Public Economics is about the proper role of government in the economy, and the implications of its policies. Main role: Minimal State Reasons for government intervention in the economy: 1. Efficiency due to “market failures’’: (i) Monopoly, (ii) Externality, (iii) Asymmetric information. 2. Equity. How? (i) Taxes/Subsidies, (ii) Public Provision, (iii) Mandates and regulations. Other concepts: Pareto superior, unintended consequences, a prisoner’s dilemma game. What Did We Learn?

More Related