Political Science 2211E Lecture Notes - Lecture 4: John Maynard Keynes, Pigovian Tax, Market Failure

• School: Western University
• Department: Political Science
• Course: Political Science 2211E
• Professor: Adam Harmes

Document Summary

Believes in market system, the capitalist system. Advocates some intervention to correct market failures. Efficiency and social justice is a goal of this approach. Also concerned with making the market systems more fair: reduce inequality, deal with social problems. Whe(cid:374) free (cid:373)arkets do(cid:374)"t (cid:449)ork the (cid:449)a(cid:455) the(cid:455)"re supposed to. Creates a problem that free (cid:373)arket (cid:449)o(cid:374)"t fi(cid:454) o(cid:374) its o(cid:449)(cid:374) Creates rationale for intervention to correct failure. Using governments to make markets more efficient. Microeconomics: focus on producers and consumers and individual products. Macroeconomics: focus on the economy as a whole. Keynesian welfare started at the micro le(cid:448)el a(cid:374)d started (cid:449)ith pigou, (cid:862)the eco(cid:374)o(cid:373)ics of (cid:449)elfare(cid:863) About welfare of society as a whole, not welfare programs. Market system was most efficient but subject to failures. Sometimes prices do not reflect products true value. Can lead to: over supply of bad products, under supply of good products. Use taxes and subsidies to make prices reflect cost of product.