Reading...
Play button
Play button
Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
27 Cards in this Set
- Front
- Back
|
Spillover
|
Monetary- captured
Nonmonetary- not captured |
|
|
Why the govt interferes
|
1. Social norms
2. Magnitude and speed of adjustment |
|
|
Externalities
|
Positive: beneficial side effect not captured
Negative: adverse side effect not captured |
|
|
External benefit
|
Underproduction
|
|
|
Solution to positive externality
|
Government Subsidize
Pay for this with taxes |
|
|
External costs
|
Over production
|
|
|
Example of positive externality
|
Neighbor's flowers example
|
|
|
Negative externality example
|
Pollution of H2O
|
|
|
Quota
|
Command and control: might not work bc some companies will just pay the fine- too cumbersome.
Govt property rights. (Forcing the production to stop wherever the efficient equilibrium is) |
|
|
How to fix market failure (externalities)
|
1. Quota
2. Implement propert rights A. Govt taxes B. Cap and trade C. Coase |
|
|
Govt tax
|
|
|
|
Cap and trade
|
Tradeable permits
Cap @ Ee Like quota but with permits |
|
|
Coase
|
Ronald Coase
Reciprocal nature of spillovers Govt defines property rights, but it doesn't matter who gets them. They bargain over who gets them. |
|
|
Coase
|
Ronald Coase
Reciprocal nature of spillovers Govt defines property rights, but it doesn't matter who gets them. They bargain over who gets them. |
|
|
Problems with Coase
|
1. Distribution of income favors the property rights holder
2. As # of players increases, transaction costs increase- Bargaining gets harder. |
|
|
Coase
|
Ronald Coase
Reciprocal nature of spillovers Govt defines property rights, but it doesn't matter who gets them. They bargain over who gets them. |
|
|
Problems with Coase
|
1. Distribution of income favors the property rights holder
2. As # of players increases, transaction costs increase- Bargaining gets harder. |
|
|
Markets and government are...
|
Complements
|
|
|
Coase
|
Ronald Coase
Reciprocal nature of spillovers Govt defines property rights, but it doesn't matter who gets them. They bargain over who gets them. |
|
|
Problems with Coase
|
1. Distribution of income favors the property rights holder
2. As # of players increases, transaction costs increase- Bargaining gets harder. |
|
|
Markets and government are...
|
Complements
|
|
|
Government failures
|
1. Failure to define/enforce property rights
2. Failure to regulate effectively- too big to fail 3. Corruption- localized and general 4. Too much centralization 5. Collusion 6. Bureaucracy |
|
|
Coase
|
Ronald Coase
Reciprocal nature of spillovers Govt defines property rights, but it doesn't matter who gets them. They bargain over who gets them. |
|
|
Problems with Coase
|
1. Distribution of income favors the property rights holder
2. As # of players increases, transaction costs increase- Bargaining gets harder. |
|
|
Markets and government are...
|
Complements
|
|
|
Government failures
|
1. Failure to define/enforce property rights
2. Failure to regulate effectively- too big to fail 3. Corruption- localized and general 4. Too much centralization 5. Collusion 6. Bureaucracy |
|
|
Government success
|
1. Complex transactions and markets
2. Industrial policy |
