test 3 Flashcards
tragedy of the commons
An economic problem in which every individual tries to reap the greatest benefit from a given resource. As the demand for the resource overwhelms the supply, every individual who consumes an additional unit directly harms others who can no longer enjoy the benefits.
- large scale
- 2 problems: over extraction and overuse; lack of effort
- free riders and forced carriers
Collective Action Problems or the 1/N problem
public policies will often be biased towards narrow special interests; greater number of people=greater N = less benefit for those in the group lobbying for their benefit because its divided up so much .
lowering n = less problems and vice versa
factors that can help solve collective action problem
- political competition helps public
- ## make the public more informed voters so they will make good decisions for public goods
how big is the problem of special interests vs public good
- trillions of dollars made, but only billions spent by special interests - not that large rent seeking.
- it’s really hard to achieve collective goal of gov that provides good public goods and has good incentives
why are elections like a commons and suffer from tragedy of the commons
- people try to minimize costs by not donating or attending or keeping informed
- people want more than 1/n from gov but not everyone can have more than 1/n
special interest groups advantages
few people, lot of money = benefits of lobbying are divided up in a few people making the benefits very high,more incentive to lobby, more able to organize
- while consumers very numerous and their losses are very low when divided up so many times so they have little interest in spending much on protecting their interests
- means we should expect to see concentrated benefits and dispersed costs
benefits from lobbying
concentrated among special interest groups
- so most subsidies or tax breaks go to groups like student loans, business subsidies, pensions (flood insurance)
costs from lobbying
distributed amongst broad groups of population
- so most costs (taxes) are assigned not to the correct externalities they are spread out amongst broad segment society
tragedy of the contested
restricted access when instead of going through one person have to go through lots of steps and stages and makes more inefficient in the end and many people act as owner and active seller of a resource
- each acts as if they were the exclusive owner and instead of paying a single fee have to pay many
- when to many restrictions hard for anyone to tap resource– loss of efficiency
- instead of overextraction get under extraction, high transaction costs, inefficiency,
the metering problem
part of the collective action problem- hard to determine how much effort one person does especially in large group and harder to enforce competition can help solve this problem
encompassing interests
common grounds between special interests and broader interests or the stake that special interests have in the common good or politicians also have common interests as the broader interests
- economic progress it helps everyone: bandits benefit from steady greater income and people benefit from protection from other bandits
Coase theorem
A legal and economic theory that affirms that where there are complete competitive markets with no transactions costs, an efficient set of inputs and outputs to and from production-optimal distribution will be selected, regardless of how property rights are divided.
LOOK UP, CONFUSED pigs vs bed n’ breakfast
- in private property we have rights and responcibilities we have rights and responcibilities to using resources but there are gaps, this theory predicts that
migratory competition
people vote with their feet, if people move to a different product the prior product will try and change to stop outflow and convince some to come back
- invisible hand of politics – leads to some degree of efficiency in using resources
club goods
good that’s not inclusive in supply but is cooperative in consumption
- goods ( parks, theater seats, cable tv) sold to people without free rider problem but could be provided to more people without depriving anyone else of any benefit
network good
in some instances cooperative consumption increases the value to others for example when there is a ton of people at a sporting event it gets more fun (tv telephones, cell phones, facebook)
- however they can stunt growth or creative destruction
because once everyone is used to using one thing it’s hard to retrain for something new (iPhone )
common pool resources
resources that are inclusive in supply but not cooperative in consumption
- these goods benefit everyone in group one provided but can be depleted and are rivalries in use. but can be depleted for example fish in ocean
coase efficient democracy
- would result in greatest happiness for the greatest number of people
- if the conditions applied politicians would have to serve interests of majority electorate
- large number of candidates and voters
- low political decision costs
- optimally informed electorate
- low admin costs
- defined enforced political rights and duties
read more on pg 201 possible essay question
political and otherwise search costs
find graphs, study, get good grades, make your father proud
