Government decision making

Question 1

What are some considerations governments have to make during decision making?

6 in total

Answer 1

Objective: to maximise social welfare
- benefits
- costs (explicit and implicit)
- constraints
- information
- perspectives
- uninteneded consequences

Question 2

What are the key questions asked during government decision-making

Answer 2

• whether or not to intervene in a market
• whether or not to pursue a project
• deciding between projects (due to budget constraints)

Question 3

What is government failure?

Answer 3

When governement intervention fails to improve market outcomes and actually make them worse

Question 4

What are reasons for government failure?

Answer 4

1. conflicting goals between equity and efficiency
2. over-correction of taxes due to imperfect information NOT UNDER-CORRECTION
3. unintended consequences
4. time lags
5. lack of profit motive
6. policy myopia (quick fixes)