public choice school exists ig

Question 1

main premise of the public choice school

Answer 1

• politicians cannot be trusted
• politics must be studied with the tools of economics

Question 2

james buchanan

Answer 2

theorizes that bureaucrats and legislators frequently frustrate good policy

Question 3

how do businesses use regulation to their benefit

Answer 3

“capture” theory of regulation –> to protect them from the risks of competition

Question 4

rational ignorance-special interest paradox

Answer 4

regulators move in and out of private and public sectors

Question 5

takes by Gordon Tullock and William A. Niskanen Jr

Answer 5

businessman look to maximize profits but bureaucrats cannot maximize their profits –> they try to maximize different things: salary, prerequisites, power and prestige

Question 6

james buchanan

Answer 6

economist that was very outspoken of public officials

Question 7

buchanhan’s take on deficits

Answer 7

deficits do hurt, but the pain is indirect –> people are willing to sacrifice their future for benefits in the future

Question 8

buchanan on deficit spending

Answer 8

deficit spending is taxation without representation → financial burden on your unborn children

Question 9

how do politicians manipulate the macroeconomy to boost reelection

Answer 9

use inflationary policies to force down unemployment → recession fixes inflation → unemployment for the next election

Question 10

what were keynes’ beliefs about the state

Answer 10

• state guides consumption ← income taxes and interest rate
• need new types of administrative agencies to carry out/influence ⅔ to ¾ of total investment

Question 11

why did keynes not worry about runaway politicians and bureaucrats

Answer 11

• believed that politicians are bound by an ethic of responsibility (consequentialism)
• believed that the government would be ruled by an intellectual aristocracy, who would rise above self-interest

Question 12

3 main leaders at the Versailles Peace conference

Answer 12

• George
• Clemenceau
• Wilson

Question 13

how did keynes describe those 3 leaders

Answer 13

• George → intellectual the subletest
• Clemenceau → aesthetically the noblest
• Wilson → morally the noblest

Question 14

how does political self-interest diverge from the public interest

Answer 14

as government expands through regulation → information costs rise
checks and balances exist for politicians

Question 15

microeconomic/macroeconomic effects of a political invisible hand

Answer 15

micro → officials can manipulate spending for political self-interest
macro → public will be prejudiced to low taxes & high government spending

Question 16

efficient market hypothesis

Answer 16

markets are efficient, leaving no room to make excess profits by investing since everything is already fairly and accurately priced

Question 17

bond vigilante

Answer 17

people who buy and sell bonds based on country’s outlook, discourages reckless governments

Question 18

critiques of public choice school

Answer 18

• people are rational so they’re able to catch politicians’ bullshit
• as you increase interest rates, burden already calculated