Public Finance and Public Policy: Responsibilities and Limitations of Government - 2nd edition

✍ Scribed by Arye L. Hillman

• Year: 2009
• Tongue: English
• Leaves: 871
• Edition: 2
• Category: Library

✦ Synopsis

This book is the second edition of Public Finance and Public Policy (2003). The second edition retains the first edition's themes of investigation of responsibilities and limitations of government. The present edition has been rewritten and restructured. Public choice and political economy concepts and political and bureaucratic principal-agent problems are introduced at the beginning for application to later topics. Fairness, envy, hyperbolic discounting, and other concepts of behavioral economics are integrated throughout. The consequences of asymmetric information and the tradeoff between efficiency and ex-post equality are recurring themes. Key themes investigated are markets and governments, institutions and governance, public goods, public finance for public goods, market corrections (externalities and paternalist public policies), voting, social justice, entitlements and equality of opportunity, choice of taxation, and the need for government. The purpose of the book is to provide an accessible introduction to the use of public finance and public policy to improve on market outcomes.

✦ Table of Contents

Half-title......Page 3
Series-title......Page 4
Title......Page 5
Copyright......Page 6
Dedication......Page 7
Contents......Page 9
Preface to the Second Edition......Page 11
1 MARKETS AND GOVERNMENTS......Page 13
A. Self-interest with virtue......Page 16
Social benefit and efficiency......Page 17
Buyers......Page 18
The concepts of supply and demand......Page 25
The study of economics......Page 26
Multiple and unstable market equilibria......Page 27
Non-competitive markets......Page 28
Competitive markets as a responsibility of government......Page 29
Why might competitive markets fail to result in efficiency?......Page 30
The prima facie case for the competitive market......Page 31
Information......Page 32
Political decision makers......Page 34
Information and spontaneous order: Normative and Positive conclusions......Page 35
Cost-benefit analysis......Page 36
Compensation and social justice......Page 37
B. Are competitive markets socially just?......Page 39
Social justice as the natural right of possession......Page 40
Reservations about the natural right of possession......Page 41
Ex-post equality......Page 42
Efficiency and ex-ante equality......Page 43
Efficiency and the natural right of possession......Page 44
Envy......Page 45
Aversion to inequality......Page 46
Voting......Page 47
A. Benefits of the rule of law......Page 48
Private property rights and markets......Page 49
Ethical behavior......Page 50
Anarchy and the prisoners' dilemma......Page 51
Private deterrence......Page 56
B. Anarchy with strong and weak......Page 57
The equilibrium......Page 58
The burden of inefficiency......Page 61
Roving and stationary bandits......Page 62
C. Anarchy and ethics......Page 64
A mixed population of honest and dishonest people......Page 65
Response to breach of contract by the government......Page 67
Supplement S1A: Market efficiency in general equilibrium......Page 68
Efficient allocation of resources......Page 69
Choice of the combination of goods to produce......Page 70
Efficient distribution of goods among buyers......Page 71
Simultaneity......Page 72
International trade......Page 73
Supplement S1B: The competitive market-adjustment mechanism......Page 74
Supplement S1C: Monopoly profits and social justice......Page 75
Summary......Page 76
1.1 The prima facie case for the market......Page 79
1.2 Efficiency and social justice......Page 80
1.3 The rule of law......Page 81
Supplement S1C: Monopoly profits and social justice......Page 82
2 INSTITUTIONS AND GOVERNANCE......Page 83
2.1 The Political Principal–Agent Problem......Page 85
A. Asymmetric information......Page 86
A government budget......Page 87
Rational ignorance......Page 88
B. Political support and public policy......Page 89
Public finance for political expenses......Page 90
Why vote?......Page 91
The advantages of interest groups over voters......Page 92
The media and the principal–agent problem......Page 93
Regulation of campaign contributions......Page 94
Term limits and the political principal–agent problem......Page 95
C. Rent seeking......Page 96
Rent seeking as the cause of inefficiency......Page 97
Evaluating the social loss from rent seeking......Page 100
Political trade-offs as impediments to rent creation......Page 106
A rent-seeking society......Page 108
Adam Smith and rent seeking......Page 109
Lobbyists and lawyers......Page 110
Corruption......Page 111
A. Incentives and behavior in a bureaucracy......Page 113
B. Demand creation by bureaucracies......Page 114
D. Solutions to the bureaucratic principal–agent problem......Page 115
Contracts......Page 116
Political monitoring......Page 117
The Thomas-à-Becket effect......Page 118
2.3 Life without Markets and Private Property......Page 119
Hayek and the fatal conceit......Page 121
B. Information and efficiency......Page 122
Theft and social justice......Page 123
D. Personal freedom......Page 124
Supplement S2A: Rent seeking and rent dissipation......Page 126
Supplement S2B: Institutions and natural monopoly......Page 128
Financing solutions for natural monopoly......Page 129
Choice of effort......Page 130
Revenue maximization......Page 131
Waste management......Page 132
Ownership by government and privatization......Page 133
Supplement S2C: Labor self-management......Page 134
The kibbutz......Page 135
Summary......Page 136
2.1 The political principal–agent problem......Page 141
2.3 Life without markets and private property......Page 144
Supplement S2B: Institutions and natural monopoly......Page 145
Supplement S2C: Labor self-management......Page 146
3 PUBLIC GOODS......Page 147
The transition from private to collective benefit......Page 150
Characteristics of pure and congestible public goods......Page 151
Public goods and natural monopoly......Page 152
Private supply and holdup problems......Page 153
Exclusion......Page 154
The dilemma of exclusion......Page 155
B. Voluntary personal payments for public goods......Page 156
Efficient voluntary payments for public goods......Page 158
Asymmetric information and under-supply of public goods......Page 159
The ideal Lindahl consensus......Page 161
The Lindahl solution as a benchmark......Page 163
The prisoners' dilemma and voluntary payment for public goods......Page 164
The prisoners’ dilemma and the Lindahl solution......Page 165
Experimental evidence......Page 166
Trust and norms of conduct......Page 168
Cooperation as expressive behavior......Page 169
Complexity in sequential and discrete public-good games......Page 170
Weakest-link public goods......Page 171
Different standards......Page 174
Volunteer-type public goods......Page 175
The game of “chicken”......Page 176
Personal freedom as a voluntarily privately supplied public good......Page 179
D. National security......Page 180
Free riding within a country......Page 181
Democracy......Page 182
Asymmetric warfare and defense against terrorism......Page 183
Poverty and terrorism......Page 184
Incentives and rewards......Page 185
Deterring terrorism......Page 186
Profiling......Page 188
Social and political divisions......Page 189
A. Can governments solve the information problem?......Page 190
B. The Clarke tax and truthful self-reporting......Page 192
Values of the Clarke tax......Page 193
Person 3......Page 194
The Clarke tax when no one is decisive......Page 195
The Clarke tax with two projects......Page 196
C. User prices......Page 197
Lindahl prices and user prices......Page 198
Two-part user prices......Page 199
User prices and fixed costs......Page 200
Self-financing user prices......Page 201
Do self-financing user prices necessarily exist?......Page 202
Who supplies the public good?......Page 203
Are user prices desirable?......Page 204
The inefficiency of exclusion......Page 205
Diversity in application of user prices......Page 206
Preferences and differences among government jurisdictions......Page 207
The scope of choice......Page 208
Choice of different quantities or qualities of the same public good......Page 209
Incentives to reveal true benefits......Page 210
Natural monopoly and cost sharing......Page 211
Cost sharing in separate jurisdictions......Page 212
The decision whether to leave a jurisdiction......Page 213
Tiebout and Lindahl......Page 214
Locational mobility......Page 215
Prices and politics in the Tiebout locational market......Page 216
Income and locational rents......Page 217
Cost sharing for public goods as a cooperation game......Page 218
A. Costs and benefits without market valuations......Page 221
The value of human life......Page 223
B. Valuation over time......Page 224
A project with benefits for multiple years......Page 225
What should the discount rate be?......Page 226
C. The discount rate and choice between public projects......Page 227
Social welfare functions......Page 228
Utility-maximizing choice of own contribution......Page 229
The reaction function......Page 231
Nash equilibrium for voluntary contributions......Page 234
Efficient contributions......Page 235
Changes in the efficient quantity as group size increases......Page 236
The change in the Nash-equilibrium quantity as group size increases......Page 237
Changes in income distribution......Page 239
Supplement S3B: Property taxes and incentives for zoning......Page 240
Joint supply of private and public goods......Page 242
Supplement S3D: An efficient economy with public and private goods......Page 243
Summary......Page 245
3.1 Types of public goods......Page 250
3.2 Information and public goods......Page 252
Supplement S3A: Group size and voluntary public-good contributions......Page 253
Supplement S3D: An efficient economy with public and private goods......Page 254
4 PUBLIC FINANCE FOR PUBLIC GOODS......Page 255
A. Efficient tax-financed public spending......Page 258
The excess burden of an income tax......Page 259
The excess burden and intrusion into other markets......Page 263
Indirect taxes......Page 264
A value-added tax......Page 265
Indirect taxes and fiscal federalism......Page 266
Rent seeking and costs of taxation......Page 267
Cost-benefit analysis and the excess burden of taxation......Page 268
Tiebout locational choice and taxes......Page 271
A personal head tax......Page 272
Taxes with no tax revenue......Page 273
The excess burden in labor markets......Page 274
The diversity in empirical estimates of the excess burden......Page 275
B. Tax revenue and the Laffer curve......Page 276
Tax revenue......Page 277
Individual behavior and the aggregate Laffer curve......Page 278
The political sensitivity of the Laffer curve......Page 279
C. Who pays a tax?......Page 280
A tax that sellers are obliged to deliver to the government......Page 281
Sharing of the excess burden......Page 282
Political pronouncements and taxation......Page 283
Fiscal illusion and the effective incidence of taxes......Page 284
Economy-wide effects on who pays taxes......Page 285
D. Taxes on international trade......Page 286
The excess burden of an import tariff......Page 287
Protectionist rents......Page 288
Why use an import tariff?......Page 289
Import quotas......Page 290
4.2 Tax Evasion and the Shadow Economy......Page 291
Public policies......Page 292
Why do people evade taxes?......Page 293
Opportunities for tax evasion......Page 294
B. The behavior of the tax authorities......Page 295
Welfare fraud......Page 296
Corruption and the shadow economy......Page 297
The incentive to claim exaggeration......Page 298
Conspicuous consumption and visible spending......Page 299
4.3 Government Borrowing......Page 300
A two-period example......Page 301
B. Intergenerational tax sharing......Page 303
Ricardian equivalence......Page 304
The preferences of future taxpayers......Page 305
D. Constitutional restraint on government borrowing......Page 306
Supplement S4A: The excess burden with substitution and income effects......Page 307
The excess burden as payment to avoid the tax......Page 308
Summary......Page 310
4.1 Taxation......Page 314
4.2 Tax evasion and the shadow economy......Page 316
Supplement S4A: The excess burden with substitution and income effects......Page 317
5 MARKET CORRECTIONS......Page 319
A. Attributes of externalities......Page 321
Efficiency gains from resolution of an externality......Page 322
Externalities involving consumers......Page 323
Externalities for which corrections are not required......Page 324
Missing markets and asymmetric information......Page 326
The tragedy of the commons......Page 327
Private ownership......Page 328
Rent seeking and resolution of the tragedy of the commons......Page 329
The commons and the old and new worlds......Page 330
Reciprocal beneficial externalities: The case of bees and apples......Page 331
A contractual alternative to common private ownership......Page 333
C. The Coase theorem......Page 334
Legal rights with the smoker......Page 335
Sharing of the gains......Page 336
Income effects......Page 337
Failures of the predictions of the Coase theorem......Page 338
Transactions costs without asymmetric information......Page 339
Collective action and externalities......Page 340
Assignment of legal rights to minimize transactions costs......Page 341
Market capitalization and the Coase theorem......Page 342
Self-esteem and social approval......Page 343
Self-defense and crime......Page 344
5.2 Public Policies and Externalities......Page 346
Who decides when an externality merits public policy?......Page 347
Personal freedom and externalities......Page 348
Taxes and subsidies......Page 349
A corrective tax......Page 350
The equivalence of the corrective tax and subsidy......Page 351
Taxes and marginal damage......Page 352
Sequencing of private resolution and public policy......Page 353
The case against subsidies......Page 354
A case against taxation......Page 355
Regulation......Page 356
Auction of quotas......Page 358
Sale of quota rights in a competitive market......Page 359
Distribution of the quota among existing producers......Page 360
C. Political decisions......Page 361
Producers as supporters of environmental policy......Page 362
Political decisions and externalities......Page 363
The origin for measuring political support......Page 365
A change in the public interest......Page 366
Political institutions and the environment......Page 367
Biodiversity......Page 368
Climate change......Page 369
The prisoners’ dilemma and impediments to international agreement......Page 371
Two rules for international assignment of emissions quotas......Page 372
Free riding by governments......Page 373
Preconditions for international agreement among globally aware governments......Page 374
Environmentalists and producers as political allies......Page 375
The case of the dolphins......Page 376
Trade in hazardous waste......Page 377
Are markets or governments to blame for environmental externalities?......Page 378
Compulsory spending......Page 379
Addictions......Page 381
Transplants and blood......Page 382
Slavery and markets in people......Page 383
Exposure to the sun......Page 384
Hyperbolic discounting......Page 385
Hyperbolic discounters......Page 386
Experiments......Page 389
Hyperbolic discounting and public policy......Page 390
Private resolution of problems of self-control......Page 391
Paternalism and usury......Page 392
Illegal markets......Page 393
B. The limits of intuition: framing and bounded rationality......Page 394
Why are the choices between lotteries equivalent?......Page 395
Framing effects......Page 397
C. Community values and locational choice......Page 398
Moral relativism......Page 399
D. Interdependent utilities and censorship......Page 400
Paternalism and eugenics......Page 402
Supplement S5A: Externalities and non-convexities......Page 404
Summary......Page 406
5.1 Externalities and private resolution......Page 411
5.2 Public policies and externalities......Page 412
5.3 Paternalistic public policies......Page 414
Supplement S5A: Externalities and non-convexities......Page 416
6 VOTING......Page 417
Voting and the Lindahl consensus......Page 421
Transactions costs and opportunism with a consensus voting rule......Page 424
A majority-voting equilibrium......Page 425
The median voter......Page 428
Does majority voting result in efficient public spending?......Page 430
The distribution of benefits in the population......Page 431
Voting versus markets......Page 432
The Condorcet winner......Page 433
Cycling or instability of voting outcomes......Page 434
Choice over different types of public goods......Page 436
Control over the agenda......Page 437
The Condorcet winner and cost-benefit analysis......Page 438
Pareto improvement and compensatory payments......Page 439
C. Logrolling......Page 440
Logrolling with efficient proposals......Page 441
Logrolling with inefficient proposals......Page 442
Logrolling with money payments......Page 443
All-inclusive logrolling coalitions......Page 444
Why is there stability in coalitions?......Page 445
D. Checks and balances......Page 446
Checks and balances in fiscal federal systems......Page 447
Instability of voting outcomes as a form of checks and balances......Page 448
6.2 Political Competition......Page 449
A. Direct and representative democracy......Page 450
Ostrogorski's paradox......Page 451
The paradox......Page 452
B. Political competition with a single issue......Page 453
Policy convergence in practice......Page 454
Expressive voters and abstention......Page 455
Convergence and primary systems of voting......Page 456
More than two candidates......Page 457
C. Political competition with multiple issues......Page 459
A special case of a stable equilibrium......Page 462
Principled political coalitions......Page 463
Expressive voting and stable outcomes......Page 464
Two-round-elimination voting......Page 465
Plurality......Page 466
Proportional representation......Page 467
Preferential voting......Page 469
Approval voting......Page 472
6.3 Voting on Income Redistribution......Page 473
A. Majority voting and income redistribution......Page 474
Majority voting when benefits are private......Page 475
Income redistribution by majority voting......Page 476
Why is majority voting in practice not maximally appropriative?......Page 479
Immigration......Page 480
Conclusions on voting on income distribution......Page 481
B. The franchise and voting on income redistribution......Page 482
C. The decision to vote......Page 483
Voter participation......Page 485
A coalition of low- and high-income voters......Page 486
A coalition of the middle class and Director's law......Page 487
Conclusions on voting......Page 488
Summary......Page 490
6.1 The median voter and majority voting......Page 494
6.2 Political competition......Page 496
6.3 Voting on income redistribution......Page 497
7 SOCIAL JUSTICE......Page 501
7.1 Social Justice and Insurance......Page 504
Risk aversion and insurance......Page 506
Inequality aversion......Page 508
Mutual risk-sharing contracts......Page 509
Social insurance......Page 510
Social welfare and Pareto improvement......Page 511
Interpersonal comparisons of utility......Page 512
Anonymity......Page 513
Distribution of predetermined income......Page 514
The leaky bucket of redistribution......Page 515
The source of the leaky bucket of income redistribution......Page 516
Feasible redistribution......Page 517
Bentham......Page 519
Rawls and the weakest link......Page 521
Bentham and Rawls as limiting cases......Page 522
The Laffer curve and income redistribution......Page 525
The choice of the social insurance contract......Page 527
Bentham's lottery and the certainty in life offered by Rawls......Page 529
The lottery from a social welfare function between Bentham and Rawls......Page 530
The fundamental choice between social equality and efficiency......Page 531
Subjective weights on efficiency and equality......Page 532
Why deviate from the objective probabilities?......Page 533
Avoidance of regret......Page 534
The work ethic......Page 535
The work ethic and tax evasion......Page 536
D. Adverse selection and time inconsistency......Page 537
A. Moral hazard and insurance......Page 539
Moral hazard and personal effort......Page 540
The prisoners' dilemma and moral hazard......Page 541
B. Behavior without moral hazard......Page 544
C. Moral hazard and adverse selection in diverse populations......Page 545
A work ethic and diverse populations......Page 547
Moral hazard due to norms from outside a society......Page 548
Sources of attitudes to a work ethic......Page 550
D. Public-policy responses to moral hazard......Page 551
Governments and moral hazard......Page 552
The two cases for incomplete insurance......Page 553
A. Altruism and charity......Page 555
Interdependent utilities......Page 556
A three-person society......Page 557
A two-person example......Page 559
Utility from giving......Page 560
The exploitation of charitable intentions......Page 561
Misrepresented preferences by the donor......Page 563
Degrees of charity......Page 564
Social status......Page 565
The ultimatum game......Page 566
Aberrant rational behavior......Page 569
Punishment of unfair behavior......Page 570
Anonymous behavior and social approval......Page 571
Differences in behavior between ultimatum and dictatorship games......Page 572
Gender differences in dictatorship games......Page 573
Estimates of intergenerational economic mobility......Page 574
Characteristics other than income......Page 575
Assortative mating......Page 576
Meritocracy in labor markets......Page 577
Moral hazard and economic mobility......Page 578
A global insurance contract behind the veil of ignorance......Page 579
The World Bank and global insurance......Page 580
Moral hazard......Page 581
The principal–agent problem......Page 582
The incentives of the donor......Page 583
Global representative government......Page 584
Supplement S7A: Measurement of income inequality......Page 585
Supplement S7B: An impossibility theorem for social aggregation......Page 587
Summary......Page 588
7.1 Social justice and insurance......Page 594
7.2 Moral hazard......Page 595
7.3 Social justice without government......Page 596
Supplement S7B: An impossibility theorem for social aggregation......Page 598
8 ENTITLEMENTS......Page 599
The choice between money and in-kind transfers......Page 601
Which form of delivery of entitlement do taxpayers prefer?......Page 605
Market responses and the value of entitlements......Page 606
Vouchers as means of delivering in-kind entitlements......Page 607
B. Education and other rejected entitlements......Page 608
Government and private schools......Page 609
Government schools and market choices......Page 610
Households that reject the entitlement......Page 611
Externalities and entitlements......Page 613
Should governments disallow private spending?......Page 614
Signaling rather than learning......Page 615
The content of education......Page 616
Entitlements and locational choice......Page 617
Unequal wages: discrimination or failure of equal opportunity?......Page 618
Gender differences......Page 619
Social identity and ex-ante equality......Page 620
Higher education......Page 621
Differences in abilities......Page 623
D. Targeted entitlements and incentives......Page 624
Why is there involuntary unemployment?......Page 625
Asymmetric information and unemployment insurance......Page 627
The schedule for payment of benefits over time......Page 628
Compulsory self-financed unemployment benefits......Page 629
Persistent welfare dependence......Page 630
Income support contingent on work......Page 631
Welfare reform......Page 637
A hunter–gatherer society......Page 639
Demonstration effects......Page 640
A free-rider problem and taxation......Page 641
Designated contributions......Page 642
Designated benefits for retired people......Page 643
Solutions to the problem of increasing tax burdens......Page 644
The demographic prisoners' dilemma......Page 645
Generational accounting......Page 647
Political procrastination......Page 648
Government bonds......Page 649
Durable productive assets......Page 650
Individual or pooled personal savings?......Page 651
Effects on savings and growth......Page 652
D. Transition from intergenerational dependence......Page 653
Voting for change......Page 654
The incentive for deferral of solving problems......Page 655
A. The problem of containing health costs......Page 657
B. The market for health insurance......Page 658
Market alternatives......Page 659
Universal health entitlements through markets......Page 660
Private competition with universal compulsory coverage......Page 661
C. Socialized medicine......Page 662
D. Health-care choices......Page 663
Summary......Page 664
8.1 The attributes and consequences of entitlements......Page 668
8.2 The entitlement to income during old age......Page 673
8.3 The entitlement to health care and health insurance......Page 674
9 CHOICE OF TAXATION......Page 677
A. The Ramsey rule for efficient taxation......Page 679
Efficient taxation of personal incomes......Page 681
Social injustice in taxes on goods......Page 682
Efficient taxation and gender differences......Page 683
Taxation of innate ability......Page 684
B. The equal-sacrifice principle for socially just taxation......Page 685
The ability-to-pay principle of taxation......Page 686
Diminishing marginal utility of income......Page 687
An income-tax schedule......Page 688
An income-tax schedule with tax brackets......Page 689
The normative question about progressive taxation......Page 690
The equal-sacrifice principle of taxation......Page 691
Derivation of an equal-sacrifice income-tax schedule......Page 692
C. Optimal income taxation......Page 694
A linear income tax......Page 695
Choice of the social welfare function for deriving the optimal tax rate......Page 697
The general optimal income-tax problem......Page 698
The trade-off between progressive and regressive taxation......Page 699
The conclusions......Page 701
Complex tax structures and tax reform......Page 702
Why are income taxes progressive?......Page 703
Progressive taxes and post-tax incomes......Page 704
Social mobility and taxation......Page 705
Social justice and taxation of capital......Page 706
Residence-based taxation......Page 707
Time inconsistency......Page 708
The corporation as an independent legal entity......Page 709
The corporate profits tax and risk......Page 710
Why are dividends ever paid?......Page 711
Why is there a corporate-profits tax?......Page 712
Tax rates......Page 713
Efficiency......Page 714
Impediments to change......Page 715
Taxes on wealth......Page 716
Taxation through inflation and financial repression......Page 717
Should indirect taxes accompany the optimal income tax?......Page 719
Choice of taxes and a leviathan government......Page 720
9.3 Fiscal Federalism......Page 721
An ideal fiscal federal structure for public goods......Page 722
Externalities......Page 723
Natural monopoly for private goods......Page 724
Fiscal federalism and insurance through regional income-pooling......Page 726
B. Tax competition......Page 727
Tax competition and tax coordination......Page 731
Is tax competition desirable?......Page 732
Local-government principal–agent problems and yardstick competition......Page 733
Moral hazard......Page 735
Rent seeking and fiscal federalism......Page 736
The common-pool problem of centralized tax revenue......Page 737
Fiscal federalism and global government......Page 740
Summary......Page 741
9.1 Optimal taxation......Page 745
9.2 Capital and other tax bases......Page 746
9.3 Fiscal federalism......Page 748
10 THE NEED FOR GOVERNMENT......Page 751
Incomes and the quality of life......Page 753
The Industrial Revolution and the middle class......Page 755
Wagner's law......Page 756
Contradictions of Wagner’s law......Page 757
Externalities......Page 758
Supply of revenue and the growth of government......Page 759
Amenability of people to taxation......Page 760
Voting by government bureaucrats......Page 761
Market specialization and interest groups......Page 762
Liberalization of international trade......Page 763
International trade policy and size of government......Page 764
Benefits of growth of government since Adam Smith......Page 766
Growth of government in the latter half of the 20th century......Page 767
Hobbes on the nature of people and government......Page 768
Locke on the nature of people and government......Page 769
Hobbes on liberty......Page 770
The encompassing interest of the leviathan......Page 771
Constitutional restraint......Page 772
Zero-based budgeting......Page 774
A. Prospects for voluntary cooperation......Page 775
A repeated prisoners' dilemma......Page 776
Can trust be measured?......Page 778
Societies with anonymous cooperative and opportunistic types of people......Page 780
Trust in anonymous market transactions......Page 781
D. Social capital......Page 782
A. Political economy......Page 783
B. Fate and moral hazard......Page 785
A view from the left......Page 786
A view from the right......Page 787
D. Human nature......Page 790
Summary......Page 791
10.1 Growth of government and the need for government......Page 793
10.2 Cooperation, trust, and the need for government......Page 796
10.3 Views on the need for government......Page 797
1.2 Efficiency and social justice......Page 799
1.3 The rule of law......Page 800
2.1 The political principal–agent problem......Page 802
2.3 Life without markets and private property......Page 804
Supplement S2B: Institutions and natural monopoly......Page 805
3.1 Types of public goods......Page 806
3.2 Information and public goods......Page 808
3.3 Cost-benefit analysis......Page 809
Supplement S3D: An efficient economy with public and private goods......Page 810
4.1 Taxation......Page 811
4.2 Tax evasion and the shadow economy......Page 812
5.1 Externalities and private resolution......Page 813
5.2 Public policies and externalities......Page 815
5.3 Paternalistic public policies......Page 816
6.1 The median voter and majority voting......Page 818
6.2 Political competition......Page 819
6.3 Voting on income redistribution......Page 820
7.1 Social justice and insurance......Page 821
7.2 Moral hazard......Page 822
7.3 Social justice without government......Page 823
8.1 The attributes and consequences of entitlements......Page 825
8.2 The entitlement to income during old age......Page 828
8.3 The entitlement to health care and health Insurance......Page 829
9.1 Optimal taxation......Page 830
9.2 Capital and other tax bases......Page 832
9.3 Fiscal federalism......Page 833
10.1 Growth of government and the need for government......Page 834
10.3 Views on the need for government......Page 835
AUTHOR INDEX......Page 837
SUBJECT INDEX......Page 843