ECN 102 Lecture Notes - Lecture 16: Tort Reform, Rent-Seeking, Black Market
Document Summary
Private goods: rival and exclusive, provided by private sector. Public goods: nonrival and nonexclusive, provided by gov"t. Natural monopoly: nonrival but exclusive, provided by private sector or government. Open-access good; rival but nonexclusive, regulated by gov"t. Optimal provision of public goods: where market demand curve intersects marginal cost curve. Role of public choice in representative democracy. Median-voter model: the preference of the median voter will dominate other choices. Under majority rule, only the median voter gets his or her way. Voters elected representatives who make public choices that reflect their constituents views. Elected officials try to maximize their political support and may cater to special interests rather than service interest of the public. Rational ignorance: voters remain largely oblivious to most public choices because cost of understanding and voting on a particular issue exceeds benefit. Special interest groups seek some favor from government.
