Public Economy

• Rational Ignorance - refraining from acquiring knowledge when the supposed cost of educating oneself on an issue exceeds the expected potential benefit that the knowledge would provide.

  • This can be applied in the context of voting and why people tend to not be informed voters.
  • In the context of votes, this comes from the realization that one vote does not matter.

• Campaigns are aimed at incentivizing people to vote but at the cost of being prone to interested third parties

• A number of economic policies produce gains whose beneficiaries are easily identifiable, but costs that are partly or entirely shared by a large number who remain anonymous.

  • Special Interest Groups are groups that are small in number relative to the nation, but quite well organized and focused on a specific issue.
    • They can pressure legislators to enact public policies that may not be in everyone’s interests.
    • It often turns out that the regulated can exercise considerable influence over the regulators. This follows from how the regulated have strong incentive to do so
  • Politicians have incentive to spend government money in their home district. Pork barrel spending is spending that benefits a single political district.
  • Logrolling is where all members of a group of legislators agree to vote for a package of otherwise unrelated laws that they individually favor

• The median voter theory applies here to some extent.

• A voting cycle is one where choice is preferred by the majority over choice . Choice is preferred over Choice and choice is preferred over choice . Every choice is preferred to an alternative and not preferred to another alternative.

• Governments can be examined like markets, except where households invest in them with taxes.

  • In a democratic government, the government can enact programs, due to personal incentive or special interest groups, that are not socially beneficial for the majority.

• Economic Policy is apolitical because both markets and governments can produce unwanted roles..

Links §

• Shapiro, MacDonald and Greenlaw - Ch.18