Chapter 17 L Flashcards
Free rider problem?
that everyone benefits from public goods. so if it was in the private sector, some may pay whole others free rode.
What are public goods?
national defense. police protection. transportation. communication. all these were the biggest gov expenditures 50 years ago. now focus is on education, health care, and transfer payments.;
why do we need govs?
they account for externalities (pollution)
they spend money on public services like roads (that on one would do in the private sector)
We benefit from economies of scale (hydro, gas, rail)
What would happen if Canada sold off some of its crown corporations like telecommunications?
better quality and cheaper prices due to competition.
What else does gov do?
they help distribute incomes, even if the mkt is doing well.
Gov helps the poor. housing, employment, training, welfare, ei.
the problem is that some of these programs go to the middle earners as oppose to the poor.
Why do Canadians pay higher taxes?
bc we have free health care, more generous social programs, past debts. plus we don’t want to give up budgets so we spend all leftovers so that next year it’s the same.
plus, there are more “special groups” that want a piece of the taxes that they wouldn’t have got if not part of the group. called rent seekers
Sp what does the future entail for gov?
we now know more gov spending doesn’t mean more growth, bc higher taxes distort the incentives to save and invest, sending the economy into a downward spiral of higher costs and lower efficiency
why do free mkts provide all the rock n roll CDs consumers want, but not national defense or police protection?
bc ND and PP are public goods that everyone receives, even if they don’t pay. businesses want to make money, not give handouts.
What is the trend of deregulating natural monopolies?
making once gov controlled things less gov controlled. like Canada post vs ups . it’s more efficient and cheaper
What is the public choice theory?
says that govs are so generous bc they want to maximize power and influence, and to get this they need to make people happy. they want bigger, not cheaper and more savings.
