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Pubplic choice and public good


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Pubplic choice and public good

  1. 1. Friday, December 12, 2014
  2. 2. Group Names Sakaria Abdiaziz Ismail Mustafe Abdiftah Mohamed Muse Ahmed Ali Khadra Suleiman Ali Friday, December 12, 2014
  3. 3. After completing this presentation you will be able to take concept about Choice and its types Public good &private good Why government exist Public Choice and the Political Marketplace Political Equilibrium A Fourfold Classification Friday, December 12, 2014
  4. 4. Choices Choices can be divided:- - Public choice -Private choice Public choice defined:- a decision that has consequences For many people and perhaps for an entire society. Friday, December 12, 2014
  5. 5. A private choice A private choice:- is a decision that has consequences for Only the person making it. Friday, December 12, 2014
  6. 6. Why Governments Exist The economic theory of government Explains both why governments exist and Why they do a less-than-perfect job. Governments exist for three major reasons. 1. First, they establish and maintain property rights. 2. Second, they provide nonmarket mechanisms for allocating scarce resources. 3. Third, they implement arrangements that redistribute income and wealth. Friday, December 12, 2014
  7. 7. Continue… The market economy also delivers and distribute income and trade that most people regard as unfair. Government failure:- is a situation in which government actions lead to inefficiency—to Under provision. Friday, December 12, 2014
  8. 8. Government failure Government failure can arise because government is made up of many individuals, each with their own economic objectives. Public choices are the outcome of the choices made by these individuals. To analyze these choices, economists have developed a public choice theory of the political marketplace. Friday, December 12, 2014
  9. 9. Public Choice and the Political Marketplace Four groups of decision makers interact in the political marketplace. They are ■ Voters ■ Firms ■ Politicians ■ Bureaucrats Friday, December 12, 2014
  10. 10. Public Choice and the Political Marketplace Voters: Voters evaluate politicians’ policy proposals, benefit from public goods and services, and pay some of the taxes. Firms: Firms also evaluate politicians’ policy proposals, Benefit from public goods and services, and pay some of the taxes. Friday, December 12, 2014
  11. 11. Welcome muse Friday, December 12, 2014
  12. 12. Continue… Politicians: Politicians are the elected persons in the federal, state, and local governments—for example the president of Somalia. Voters express their demand for policies with their votes. Bureaucrats: are the public servants who work in government departments. Friday, December 12, 2014
  13. 13. Political Equilibrium Voters, firms, politicians, and bureaucrats make their economic choices to achieve their own self-interest. Public Good To see what makes a good a public good, we distinguish two features of all goods:  the extent to which people can be excluded from consuming something.  the extent to which one person’s consumption rivals the consumption of others.
  14. 14. Continue… Rival: A good is rival if one person’s use of it decreases the quantity available for someone else. Friday, December 12, 2014
  15. 15. Welcome Mustapha Friday, December 12, 2014
  16. 16. Continue… A private good is one for which consumption is rival and From which consumers can be excluded. A public good is One for which consumption is non rival and from which it Is impossible to exclude a consumer. A common resource is one that is rival but non excludable. A good that is non rival But excludable is produced by a natural monopoly Friday, December 12, 2014
  17. 17. A Fourfold Classification Private Goods A private good is both rival and Excludable. Public Goods : is both nontrivial and Non excludable. A public good simultaneously benefits everyone, and no one can be excluded from its benefits. National defense is the best example of a public good. Common Resources is rival and non excludable. A unit of a common resource can be used only once, but no one can be prevented from using what is available. Friday, December 12, 2014
  18. 18. Continue… Natural Monopoly Goods is non rival and excludable. When buyers can be excluded if they don’t pay but the good is non rival, marginal cost is zero. Mixed Goods with External Benefits Two of the Things that have the greatest impact on your welfare, Your education and health care, are mixed goods with External benefits. Friday, December 12, 2014
  19. 19. Inefficiencies that Require Public Choices Public choices must be made to ■ Provide public goods and mixed goods ■ Conserve common resources ■ Regulate natural monopoly Objective of Bureaucrats:- Bureaucrats want to maximize Their department’s budget because a bigger Budget brings greater status and more power. So the Emergency Services Department’s objective is to Maximize the budget for firefighting airplanes. Friday, December 12, 2014
  20. 20. Continue… A marginal external benefit is the benefit from an Additional unit of a good or service that peoples other Than its consumer enjoy. Marginal social benefit (MSB) is the marginal benefit Enjoyed by society—by the consumer of a good or Service (marginal private benefit) and by others (the Marginal external benefit). Friday, December 12, 2014
  21. 21. Continue… Four devices that governments can use to achieve a More efficient allocation of resources in the presence Of external benefits are. ■ Public production ■ Private subsidies ■ Vouchers Friday, December 12, 2014
  22. 22. Continue… Health-Care Services Health care is example of a mixed good with External benefits. The external benefits from health Care include avoiding infectious diseases, living and Working with healthy neighbors, and for many people, Just living in a society in which poor, sick people Have access to affordable health care. Friday, December 12, 2014
  23. 23. The End Any Question Comment Friday, December 12, 2014