Midterm Review Flashcards
What are the Eight Steps in the Eightfold path
1) define the problem
2) assemble some evidence
3) construct alternatives
4) select criteria
5) Project Outcomes
6) Confront Trade-offs
7) Decide
8) Share results
Describe step one in eightfold path
Define the problem -
Do’s:
- think of deficit/excess
- specify and quantify
- think of opportunities for improvement, not just problems
Don’ts:
- don’t analyze or embed solutions in def.
- do not expand or confine scope
used as the basis for your analysis
What private dealings cause public problems that need to be addressed?
Describe step 2
assemble evidence
- gather evidence from all different types of sources – make use of past and present policies in other contexts, locations, or times to analyze possible solutions and similar problems
Describe Step 3
construct alternatives
- one part of the outcomes matrix (then add criteria in step 4 and project outcomes in step 5)
- Things Gov’s do handout
(Taxes
Ex. on sales, property, income
Regulation
Ex. Securities Exchange Commission
Subsidies & Grants
Ex. housing vouchers, food stamps, research grants
Service Provision
Ex. fire-police, streets/highways
Information
Ex. food labeling
The Structure of Private Rights
Ex. labor law, family law
The Framework of Economic Activity
Ex. antitrust, utilities
Education and Consultation
Ex. neighborhood watch, CDC advisories
Financing and Contracting
Ex. military procurement
Bureaucratic and Political Reform
Ex. creation of new bureau or commission)
- do cost-benefit analysis and analyze to criteria
Describe step 4
Select Criteria
- choose most important criteria (criteria being targets you hope a policy to reach or achieve)
- incrementalism might be good and can be its own criteria
- most common criteria
(Efficacy:
the alternative will reduce the severity of the problem
Efficiency:
a1) the alternative will add more benefit than cost
a2) the alternative will add benefit at minimum added cost
b) the alternative will minimize waste of resources
c) the alternative will improve the allocation of benefits and burdens economically
Feasibility:
implementing the alternative can be achieved
Legality:
the alternative will be permissible and within policy actors’ existing authority
Political Acceptability:
the alternative will garner & sustain necessary support among elected officials, voters, etc.
Equity (Fairness, Justice):
a) the alternative will treat those affected evenhandedly
b) the alternative will take into account social disadvantage
c) the alternative will redistribute in a way which advances equality
Freedom:
the alternative will not unduly burden the free choice of producers, consumers, and citizens generally)
- use outcomes matrix
efficacy vs efficiency
Efficacy - the alternative will reduce the severity of the problem
Efficiency -
a1) the alternative will add more benefit than cost
a2) the alternative will add benefit at minimum added cost
b) the alternative will minimize waste of resources
c) the alternative will improve the allocation of benefits and burdens economically
What is the function of market
Markets Function to Allocate Scarce Resources in Society
- Safe To Assume All Resources Are “Scarce”
Microeconomics
helps frame pub pol problems and assemble evidence
8 Types of Market Failures
- pos / neg externalities
- shared resources
- public goods
- monopolies
- transaction costs (search)
- Transaction costs (private property)
- Information failure
Kirp’s 5-wheeled cart: modes of social choice
(not on study guide)
Markets
- Politics
- Voting
Representation
- Rights
- Courts
Organizations
- Bureaucracy
- Neighborhood associations
- Boards and councils
Experts
^ For all of these consider who analysis is done by and who it is done for
Comparative Pub Pol Analysis (Liu & Geva-May Reading)
Covid as a “naturally occurring experiment” to advance the field of comparative public policy analysis - helps improve responses to future crises
neg/pos externalities
neg - spillover effects of private operations with harmful consequences on the public
pos - spillover effects of private operations with beneficial consequences on the public that beneficiaries don’t/can’t be charged for
public good
goods with free riding like fireworks or military where all consumers cannot be identified and charged due to cost or infeasibility
monopoly / oligopoly
when market power is in the hands of a select few because there are to few firms which can lead to price discrimination and underproduction
Information Failure/Asymmetry
when consumers know more about their wants/demand than producers or when producers know more about the good/service than consumers causing potential harm, decline in trust, or low demand
- (ex. pharmaceuticals - failure when doctors or companies don’t make side effects very clear to consumers)
- addressed by regulation and labeling
Transaction Costs (Search)
when producers can’t find consumers or vice versa
- addressed by job fairs and info websites
- ex. labor market
Transaction Costs (Intellectual Property)
When costs to protect creative works are too high to pursue them leading to lower innovation
- addressed by patents, copyrighting, trademark, etc.
- failure - piracy and copyright infringement
Competition (MBN18 - keeping the competition out)
Def: rivalry among buyers or sellers of outputs or inputs
MBN 18:
- Regulatory capture: when businesses and industries sometimes use government regulations to limit competition
- can lead to inefficiencies and higher costs for consumers
Regulatory Capture:
when industry representatives lobby heavily, provide funding, or build close relationships with regulators, leading to rules and policies that favor the industry’s interests rather than those of the public. –> inefficiencies, higher costs reduced innovation
Regulatory Capture
when industry representatives lobby heavily, provide funding, or build close relationships with regulators, leading to rules and policies that favor the industry’s interests rather than those of the public.
–> inefficiencies, higher costs, reduced innovation
Cost (MBN 1)
the most valuable alternative that is forgone when making a decision
opportunity cost
the cost of what you miss out on. What you could have gotten if you had chosen a different alternative
Full Cost/price (MBN 7)
combined measure of everything that must be sacrificed to undertake an activity (money, time, etc.)
(producers full cost, consumers full price)
time cost (MBN7 - obesity)
time it takes for consumers to enjoy a good/service has decreased (microwave meals, online prime delivery, internet, etc.)
Menu Mandates
requiring calories to be labeled on menus (and reduced) to decrease caloric intake by addressing the information failure, however wasn’t successful in the long term
Law of Demand (MBN7)
as an item gets cheaper, people want to consume it more
Labor Force participation rate (MBN 7)
for women has doubled so less time at home to cook means more Fastfood and easy to prepare meals –> increased obesity
Inflation corrected
Economics of Obesity
cheap food + law of demand = obesity/weight gain
cheap food bc gov. subsidies on corn and other crops creates increased supply
inflation adjusted and nominal price
adjustment in price according to inflation since previous nominal price (costs expressed in terms of a nations currency, such as the dollar)
MBN 1 death by bureaucrat FDA (history, roles, lessons)
HISTORY: food and drug safety act of 1906 (drug labeling, safety) –> 1938 food, drug, and cosmetics act (required demonstration of safety before sold on market) –> 1962 Kefauver-Harris Amendment (stricter/longer drug approval process bc incident of med killing pregnancies)
- 7 months –> 8-10 years
- more costly (delayed potential revenue + $$ tests)
ROLE: decide whether or not drugs are safe enough to go on the market
LESSONS:
Type II vs Type I errors - balancing by creating incentives for safe drugs and fast approval processing
pub pol can have unintended consequences
Scarcity (MBN 1)
in a world of limited resources to get more of one thing means you must get less of another
TYPE 1 Error and TYPE II Error
type I error is the people who die from taking a risky drug, Type II errors are the people who die waiting for a safe drug to be approved - FDA manages
Economic Growth
= the annual increase in the amount goods or services produced per person each year
Innovation Vs. Invention MBN2
invention = the creation of something new; innovation - the creative thought up ways of how to use that invention and make it practical
Patent
protection the gov. Gives an inventor for the exclusive right to make, sell, or use an item for a period of time (20 years in US) without fear of their work being stolen and sold by someone else - essential for innovation
MBN 3 friendly skies
too much safety regulation can be too costly, where do consumers rank safety on their criteria, airlines have incentive to create safe planes
Incentives (MBN2/6- sex,booze,drugs)
pub pol can have pos/neg incentives (ex increasing criminal activity with prohibition - comparative advantage), markets can create natural incentives for producers but there can also be additional gov ones to encourage a desired behavior, def= perceived consequences of actions (pos or neg; monetary or nonmonetary)
MBN 8 (kidneys for sale)
safegaurds can be created to prevent neg consequences like impacting the poor and vulnerable (will criminal activity increase -no), risky procedure - consider TYPE I vs TYPE II (people might die on both sides one from risky procedure, others from kidney disease)
MBN11 (Das Kapital in 21st century)
capitalist system rich get richer as poor get poorer increasing economic inequality, higher top marginal taxes, mismeasurement when rich incomes might be lower or higher than reported, switching from corporate to individual tax returns makes inequality seem higher in past, capital gains made income seem higher when was the same
Capitalist System
economic system where there is large-scale private ownership of resources and in which market incentives play big role in the allocation of those resources
Capital Gains (& losses)
increase in capital assets (money) when assets (property) are sold; when value of assets decrease then it is capital loss
Income inequality
differences in share of income accruing across individuals or groups of individuals
Income Mobility
the tendency of individuals to move around the income distribution over time
Marginal Tax Rate
the fraction of the last dollar that is paid in taxes
MBN 12 (Why Women are Paid Less)
men paid 10% more than women, women labor force participation rate increased and men decreased, mothers put on “mommy track” and paid less after having children with less hours, compensating differential (higher risk men jobs paid more for this)
Compensating Differential
additional pay given to workers in hazardous jobs (arg. For gender pay gap)
Labor Force Participation rate
def= sum of all people working or looking for work divided by population usually restricted on numerator and denominator for those 16 and up (Has increased for women and decreased for men)
MBN13 (The Effects of Minimum Wage)
minimum wage increases costs for producers which decreases jobs ………………………………
Minimum Wage
lowest hourly wage firms legally pay their workers
MBN14 (The disincentives of higher taxes)
reduces innovation bc firms don’t think its worth pursuing due to the cost to get lower profits from taxes
Tax Credit
an offset against current or future income taxes
Dynamic Analysis
an assessment of the economic impact of a policy that takes into account the induced responses to that policy
Earned Income Tax Credit
a tax policy that offers payments from the government to people who earn relatively low wages
Elasticity / Elasticity of Demand
the measured responsiveness of one variable to a change in another variable - its the ratio of two percentage changes. (elasticity of demand - the responsiveness of the quantity of a commodity demanded to a change in its price per unit)
Elasticity of Supply
responsiveness of the quantity of a commodity supplied to a change in its price per unit
Negative Tax
a payment from the government to supplement the incomes of those who make low wages
Perfectly inelastic
characterized by a zero value for the ratio of the percentage change in quantity over the percentage change in price; a perfectly inelastic curve is vertical (there are no other alternatives or substitutes - demand stays the same no matter what prices does)
Relative Prices
the costs of goods expressed in terms of other goods or a basic bundles of goods
Static Analysis
any assessment of the economic impact of a policy that does not fully take into account the induced responses to that policy
Supply Curve
graphic representation of supply (slopes upward - pos) reflecting the positive relationship between price and quantity supplied
Excess Quantity Demanded
the difference at the current price of the quantity demanded and the quantity supplied (at equilibrium this is 0)
