collective decision-making and political economy Flashcards
Why do governments do what they do?
*Different ways of organizing government produce
different results.
*Ideal case: Government measures preferences and acts
accordingly.
*Direct democracy: Voters directly cast ballots in favor of
or in opposition to particular public projects.
*Representative democracy: Voters elect representatives,
who decide on public projects
What is the Lindaha tax? and does it allow?
*Different ways of organizing government produce
different results.
*Ideal case: Government measures preferences and acts
accordingly.
*Direct democracy: Voters directly cast ballots in favor of
or in opposition to particular public projects.
*Representative democracy: Voters elect representatives,
who decide on public projects
Explain how Lindahal princing acheives the efficent amount of the public good?
This is because MC = Total marginal willingness to pay.
*Each person’s price is equal to their own marginal
willingness to pay, so this is an equilibrium.
*Lindahl pricing also exemplifies benefit taxation.
*Benefit taxation: Taxation in which individuals are taxed for a public good according to their valuation of the
benefit they receive from that good.
What are the problems associated with Lindahl Pricing?
- preference revelation problem:individuals have an incentive to lie about their WTP, to lower their price
- preference knowledge: individuals might not know their WTP
- preference aggregation problem: how to aggregate individual preference sinto a social welfare function
Does Lindahl pricing require majority vvoting or unanimous consent?
Lindahl pricing requires unanimous consent to
implement the public good.
Whtat’d majority voting?
The typical mechanism used to
aggregate individual votes into a social decision,
whereby individual policy options are put to a vote
and the option that receives the majority of votes
is chosen
