Chapter 1 Flashcards
Regulations can derive from ____ or ____
Congress or Executive
T/F: All regulations are implemented by the Executive, regardless of derivation
True
___ are the people who carry out the activities of regulation, typically as a large group
Regulators
___ are the presumed benefits that follow from the achievement of those benefits
Objectives
T/F: Benefits are always clear and intentional
False
T/F: There are always costs associated with regulations
True
T/F: Costs are always clear, intentional, overestimated, and less than benefits
False
Costs and benefits are valued (objectively or subjectively)
Subjective
We assume (market or book) prices and costs can be used
Market
All regulation entails actual or potential ____
Coercion
The main justification for regulation of private activities is because
People are too uninformed to be allowed to make decisions, and must be protected from mistakes
A secondary justification for regulation of private activities is because
There are some public goods we must have as a society, and the government must provide them
Implementation of regulatory policy is fraught with ____
Uncertainty
Scientific principles underlying regulation are often ____
Unproven
T/F: There are always errors in regulatory policy
True
The failure to achieve the prime objective of regulations is ___ error
Type I
Type II errors refer to
Implicit or invisible errors made by avoiding Type I errors
We most want to avoid ___ errors
Type I
Convicting an innocent person is an example of a ___ error
Type I
Failing to convict a guilty person is an example of a ___ error
Type II
T/F: The more Type I errors avoided, the more Type II errors committed, and vice versa
True
T/F: The main justification for regulation (people are too uninformed) is self-evident and consistently applied
False
___ is the field of understanding why people do things financially that may be irrational
Behavioral economics
___ policies encourage people to act more in line with true interests
New paternalism
T/F: Regulators are average people with their own interest, motivations, and limited knowledge
True
The __ problem refers to the problem of ensuring that regulators act in accordance with objectives in policy (public interest) rather than in accordance with their own private objectives (private interest)
Incentive
We use the ___ approach, which assumes regulators always act in their own interest rather than in public interest
Public choice
The ___ problem refers to how regulators must determine how to implement policy to achieve objectives, and how to measure achievement
Knowledge
Which problem is more difficult: Incentive or Knowledge problem?
Knowledge
Transferring a set of objectives from (public to private, or private to public) makes it more easily achievable
Private to public
T/F: Identifying the need for regulation is insufficient, as we must consider costs and benefits, errors, and knowledge and incentive problems
True
Whether or not the policy is adopted, implemented, or maintained depends crucially on ___
where we put the burden of proof
___ determines how many and what kind of regulations we have
burden of proof
T/F: Legislatures and executives are jointly responsible for regulation
True
T/F: Regulation considerations differ depending on the level of government (local vs state vs federal)
False
Regulation occurs in a ___ economy
market
T/F: Private-property ownership has always existed in human society
False
If someone intrudes on someone else’s private-property ownership, they are acting ___
coercively
Private-property rights establish the right to be free of ___
coercion
a ___ specifies the terms of consent to use an owned item
contract
we live in a ____ economy
monetary
act of ___ is separate from the act of __ in a monetary economy
sale, purchase
__ prices guide and motivate actions
market
prices act as ___ and ____ to guide and organize private actions
signals and incentives
T/F: Prices are automatic regulating devices
True
___ refers to using money to estimate value of investments in productive resources
capital-accounting
___ refer to individual or civil/human rights, and are implied by private-property rights
voluntary association
A market economy/economic freedom contains the following 5 relationships:
private-property, money, contracts, voluntary association, and freedom of expression
___ involves interfering in one of more of the economic freedom relationships
Regulation
(Disparity or prosperity) is the result of economic freedom
Prosperity
T/F: Never before have so many people lived so well throughout human history
True
T/F: Prosperity cannot be achieved without economic freedom
True
Which is more important - economic freedom or political freedom?
Economic freedom
Political freedom refers to the right to
elect government representatives
Economic freedom refers to the right to
trade for what you want with whomever you want
Which grants more individual well-being and happiness - political freedom or economic freedom?
Economic freedom
T/F: Political freedom is neither necessary nor sufficient for economic freedom
True
T/F: Political freedom without economic freedom is possible
False
T/F: Economic freedom without political freedom is possible
True
What are the two reasons economic freedom produces prosperity, according to Adam Smith?
division of labor and innovation
What shape is the graph of human progress across history?
A hockey stick - very low then shoots up after industrial revolution
The massive growth in human population indicates __
economic progress
T/F: There are always unintended consequences of any regulation
True
The public choice approach assumes the public sphere is as much driven by ___ interest as the private sphere
private
The wider the range of regulation and more removed it is from actions being regulated, the more serious the ___ problem is
Knowledge
T/F: Detailed knowledge about production and consumption is widely dispersed in the market economy
True
