《公共经济学.ppt》由会员分享，可在线阅读，更多相关《公共经济学.ppt（229页珍藏版）》请在taowenge.com淘文阁网|工程机械CAD图纸|机械工程制图|CAD装配图下载|SolidWorks_CaTia_CAD_UG_PROE_设计图分享下载上搜索。
1、公共经济学公共经济学 Important concepts in economic policy21.1 The public sector in a mixed economy31.1.1 Definitions:(1).Public sector:government sectorTypes of government activity:Providing a legal system Government production(nationalization)Influence on private production(taxes and subsidies,regulation)Pu
2、rchase of goods and servicesRedistribution of income 4(2)Mixed economy While many economic activities are undertaken by private firms,others are undertaken by the government.In addition,the government alter the behavior of the private sector.51.2 Economic rationale for public policy(chapter 3,4,5)61
3、.2.1 Concept of the invisible hand In 1776,Adam smith,in the first major work of modern economics,the Wealth of Nations,argued that competition would lead the individual in the pursuit of his private interests(profits)to pursue the public interest,as if by an invisible hand.(Only firms that produced
4、 what was wanted and at as low a price as possible would survive.Smith argued that the economy was led,as if by an invisible hand,to produced what was desired and in the best possible way.)7(3)Market failure:the Great DepressionLimitations in the ability of the private sector to produce efficient ou
5、tcomes and meet certain basic social needs.The attempt to correct these failures has led to the growth of governments role in the market economy.8(4)Government failureSystematic failures of the government to achieve its stated objectives.9(4).Government failure:The failure of many public programs ca
6、n be attributed to four factors.(a).Limited information(b).Limited control over private market response(c).Limited control over bureaucracy.Those who design legislation have only limited control over the implementation of the government programs.(d).Limitations imposed by political processes.Politic
7、ians may act to further special private interests.More generally,political processes are complicated and need not yield efficient outcomes.101.1.2 Relate the activities of the public sector to the four fundamental issues of choice,namely:(1)What is to be produced?(2)How should it to be produced?(3)F
8、or whom is it to be produced?(4)How are choices made?11(1)What is to be produced?How much of our resources should be devoted to the production of public goods,such as defense and highways,and how much of our resources should we devote to the production of private goods,such as cars.TV sets,and video
9、 games and so on.(please see the figure on page 15 of the textbook)12(2)How should it to be produced?Whether to produce privately or publicly?Whether to use more capital and less labor or vice versa.Whether to employ energy-efficient technologies.Government policy affects how firms produce the goods
10、 they produce.(e.g.environmental protection legislation restricts pollution by firms;payroll taxes discourage firms from production techniques that require much labor.)13(3)For whom is it to be produced?Some groups will benefit from the production of one public goods,others from another14(4)How are
11、choices made?In the public sector,choices are made collectively.Collective decision-making is far more complicated,for individuals often disagree about what is desirable.151.1.3 Explain the differences between positive and normative economics in the context of economic policy.Positive economics is c
12、oncerned with what“is”,with describing how the economy function;Normative economics deals with what“should be”,with making judgments about the desirability of various courses of action.(please see the example on page 19 of the textbook)161.1.4 Explain the main sources of disagreement among economist
13、s about the role of the public sector in a mixed economy.Disagreement arise within positive economics.Economists often disagree about the best model for describing the economy.Even after agreeing about the nature of the economy,they may disagree about quantitative magnitudes.17Disagreement lies with
14、in normative economicsAny policy,may have some desirable consequences and some undesirable consequences.Individuals may weigh these consequences in different ways.181.2.2 The two fundamental theorems of welfare economics(1)Every competitive economy is Pareto efficient (Pareto efficient:resource allo
15、cation that have the property that no one can be made better off without someone being made worse off are said to be Pareto efficient,or Pareto optimal.)19(2)Every Pareto efficient resource allocation can be attained through a competitive market mechanism,with the appropriate initial redistributions
16、.This theorem provides a major justification for reliance on the market mechanismTo attain an efficient allocation of resources,with the desired distribution of income,it is not necessary to have a central planner.Competitive enterprises,attempting to maximize their profits,can do as well as the bes
17、t of all possible central planners.20Note:The theorems follow from strict assumptions,reflecting an ideal competitive model:Many small firms and millions of households,each so small that it has no effect on prices;All firms and households have perfect information concerning the goods and prices;Ther
18、e is no air or water pollution.211.2.3 Why competitive markets are potentially Pareto efficientCompetitive markets have exchange efficiency,production efficiency,product mix efficiency.22(1)Why Parato efficiency has exchange efficiency?Exchange efficiency means that,given the set of goods available
19、in the economy,no one can be made better off without someone else being made worse off.23Exchange efficiency requires that all individuals have the same marginal rate of substitution.(marginal rate of substitution:the amount of one commodity which an individual is willing to give up in exchange for
20、a unit of another commodity.)24Example:(p64)Robinson:marginal rate of substitution =apple/orange=(+1)/(-1)Friday:marginal rate of substitution =apple/orange=(-3)/(+1)25(continued)Clearly,there is room for a deal:Robinson gave 1 orange to Friday;Friday gave 2 apples to Robinson.Both are better off:Ro
21、binson:require to get 1 apple,but get 2 apples.Friday:would have been willing to give up 3 apples,but only gave up 2 apples.26So long as Robinson and Fridays marginal rate of substitution differ,there will be room for a deal.Thus,exchange efficiency requires that all individuals have the same margin
22、al rate of substitution.27Then we will see competitive economies satisfy the condition for exchange efficiencyTwo goods:apple&orangePrices:PA&POTotal income of one consumer:I(please see the figures on the blackboard)28At the point of tangency:The slope of the indifference curve=the slope of the budg
23、et constraintSo,Marginal rate of substitution=-PO/PA Because all consumers face the same prices in a competitive economy,and each sets his or her marginal rate of substitution equal to the price ratio,they all have the same marginal rate of substitution.Thus competitive markets have exchange efficie
24、ncy.29(Please see Edgeworth Box on page 68 of the textbook)30(2)Why Parato Efficiency has production efficiency?31Production efficiency requires that,given the set of resources,the economy not be able to produce more of one commodity without reducing the output of some other commodity.Production eff
25、iciency requires the marginal rate of technical substitution between any two inputs must be the same for all firms.(marginal rate of technical substitution:the amount of one kind of input required to compensate for a decrease in another kind of input by one unit.)32Example (p69-70)Producing apple:Ma
26、rginal rate of technical substitution=land/labor =(-2)/(+1)Producing orange:Marginal rate of technical substitution=land/labor =(+1)/(-1)33So long as the marginal rate of technical substitution differ,there will be room for increasing production.Thus,production efficiency requires that all productio
27、ns have the same marginal rate of technical substitution.34Then,we will see competitive economies satisfy this condition for production efficiency.Two inputs:land&laborPrices of the inputs:rland&rlaborTotal cost of production:C 35At the point of tangency:The slope of the isoquant curve=The slope of
28、the isocost line.So,Marginal rate of technical substitution=-rlabor/rlandIn a competitive economy all firms face the same price of inputs,so all firms will set their marginal rate of technical substitution equal to the same price ratio.Hence all will have the same marginal rate of technical substitu
29、tion.Thus competitive markets have production efficiency.36 (Please see Edgeworth Box on page 71 of the textbook)37(3)Why competitive markets have product mix efficiency?38First,we should know:product mix efficiency requires that marginal rate of transformation must equal marginal rate of substituti
30、on.(marginal rate of transformation:how many extra products we can have if we reduce production of another product by one unit.)(please see figure3.9 on page 72)39Then,we will see competitive economies satisfy this condition for product mix efficiency.Under competitive economy:Marginal rate of trans
31、formation=y2/y1 =(C/y1)/(C/y2)=MC1/MC2 =-P1/P2 (please know why)Marginal rate of substitution=-P1/PSo,Marginal rate of transformation=Marginal rate of substitution=-P1/P2401.2.4 six circumstances under which the market is not Pareto efficient41(1)Imperfect competitionMonopoly(Figure 4.1 on page 79:m
32、onopoly output is lower than competitive output.)OligopolyMonopolistic competition42(2).Public goodsPure public goods have two critical properties:First,it costs nothing for an additional individual to enjoy their benefits:formally，there is zero marginal cost for the additional individual enjoying t
33、he good.Secondly,it is in general difficult or impossible to exclude individuals from the enjoyment of a pure public good.The market either will not supply,or will not supply enough of,a pure public good.(e.g.,lighthouse)43(3)Externalities44(4)Incomplete marketsWhenever private markets fail to provi
34、de a good or service even though the cost of providing it is less than what individuals are willing to pay,there is a market failure that we refer to as incomplete markets.45(4.1)Insurance and capital marketsImperfect insurance markets:The private market does not provide insurance for many important
35、 risks that individuals face.So,the governments have to step in.(e.g.,Insurance against a loss of savings arising from the insolvency of banks,)46Imperfect capital markets(e.g.student loans,providing loans to small business)47Why insurance and capital markets are imperfect?481.Innovation2.Transactio
36、n cost3.Asymmetries of information and enforcement cost The insurance company is often less informed about the nature of some risks than the person purchasing insurance.Similarly,in capital markets,lenders worry about getting repaid.49(4.2)complementary markets(p83)(p83)The producers of coffee&the p
37、roducers of sugar Each acting alone would not be able to pursue the public interest,but acting together they could.In this simple case coordination might easily be provided by the individuals themselves without government intervention.Public urban renewed programsThere are many cases where large-sca
38、le coordination is required,particularly in less developed countries,and this may require government planning to provide coordination.50(5).Information failures (p83)51A number of government activities are motivated by imperfect information on the part of consumers,and by the belief that the market,
39、by itself,will supply too little information.Government requires lenders to inform borrowers of the true rate of interest on their loans.Government requires drug&food producers to disclose the contents.Government requires used-car dealers to test various parts of the car and disclose the outcome of
40、the test.52Information is,in many respects,a public goods.The private market will often provide an inadequate supply of information,just as it supplies an inadequate amount of other public goods.53Understand how income redistribution and provision of merit goods might justify government intervention
41、 even if the market does happen to be Pareto efficient(p86-88)54Understand how income redistribution and provision of merit goods might justify government intervention even if the market does happen to be Pareto efficient.P.868855Income redistribution(p.86)The fact that the economy is Pareto efficie
42、nt says nothing about the distribution of income;competitive markets may give rise to a very unequal distribution,which may leave some individuals with insufficient resources on which to live.So,one of the most important activities of the government is to redistribute income even if the market does
43、happen to be Pareto efficient.56Provision of merit goods.(p87)Merit goods:The goods that government compel individuals to consume such as set belts&elementary education.The reasons that government should provide merit goods:(1)Individuals may not act in their own best interests(paternalism vs libert
44、arianism)(2)Children(3)Government cannt commit itself to refrain from helping the people that made the poor decision.57Why the concept of Pareto efficiency is individualistic (p59)(Reason 1)First,Pareto efficiency is concerned only with each individuals welfare,not with the relative well-being of di
45、fferent individuals.It is not concerned explicitly with inequality.Thus,a change that made the rich much better off but left the poor unaffected would still be a Pareto improvement.58Why the concept of Pareto efficiency is individualistic(Reason 2)Second,it is each individuals perception of his or h
46、er own welfare that counts.Individuals are the best judge of their own needs and wants,of what is in their own best interests.59Why there is a trade-off between equity and Pareto efficiency.(p.94)An exampleCrusoe:10 oranges Friday:2 orangesWe play the role of government and attempt to transfer 4 ora
47、nges from Crusoe to Friday,but in the process 1 orange gets lost.The trade-off:Equity (Crusoe with 6 oranges,Friday with 5 oranges)Efficiency (the total number of oranges available has been diminished)60Two questions are often debatedQ1:There is disagreement about the nature of the trade-off how muc
48、h efficiency do we have to give up to reduce inequality?Q2:Disagreement:Inequality is the central problem of society Efficiency is the central problem of society 61Outline the contrast between Utilitarianism&Rawlsianism(p100-102)62 Utilitarianism(P100)Society should maximize the sum of the utilities
49、 of its members.The social welfare function is:W=U1+U2 What the utilitarian social welfare function says is that the utility of any individual should be weighted equally to the utility of any other individual.63(2).Rawlsianism:The welfare of society only depends on the welfare of the worst-off indiv
50、idual.Society is better off if you improve his welfare but gains nothing from improving the welfare of others.Note:No amount of increase in the welfare of the better-off individual could compensate society for a decrease in the welfare of the worst-off individual.64Know the condition that must be me