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“The Economic Way of Thinking”12th Edition
Chapter 11: Markets and Government
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Chapter Outline Private Versus Public? Competition and Individualism Economic Theory and Government Action The Right to Use Coercion Is Government Necessary? Excluding Nonpayers The Free-Ride Problem Positive Externalities and Free-Riders
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Chapter Outline Law and Order National Defense Roads and Schools Income Redistribution The Regulation of Voluntary Exchange
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Chapter Outline Government and the Public Interest Information and Democratic Governments The Interests of Elected Officials Concentrated Benefits, Dispersed Costs The Prisoner’s Dilemma The Limits of Political Institutions
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Introduction 市场失灵（ market failure ） :
市场过程无法达到某种最佳标准，政府的补救措施能够促使经济体系更接近假想的最优情形。
善意的人们（包括经济学家）常常以为政府官员拥有改进现实经济协作问题的信息（ information ）和动机（ incentive ）。
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Introduction
但是，政府有可能会让事情变得更糟！
James Buchanan ： 经济学家同样应该关注政府失灵（ government fail
ure ）
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Introduction
Key questions in constitutional political economy （立宪政治经济学） What should be left to the market? What are the appropriate tasks for government?
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Private Versus Public?
The market usually characterizes the private sector.
Government agencies and officials comprise the public sector.
Question Does individual self-interest play a role in the publi
c sector? Answer
Yes!
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Competition and Individualism The market sector is often referred to as the
competitive sector. Question
Is there competition in the government? Competition in the public sector
Elections Government agencies Passing legislation
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Competition and Individualism Sometimes we are told that individualism
（个人主义） is the distinguishing characteristic of the market sector.
Question What is “individualism”?
There seems no less individualism in the public sector.
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Economic Theory and Government Action Economic Theory
All participants are concerned with self-interest and behave rationally.
If the marginal revenue of an activity exceeds the marginal cost, the activity should be expanded.
If the marginal cost of an activity exceeds the marginal revenue, the activity should be contracted.
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Economic Theory and Government Action Economists do not assume that
Money or material goods are the only costs and benefits that consumers and producers care about
The interests people pursue are necessarily narrow and selfish ones
Economic theory can Throw light on the social consequences of every k
ind of human interest.
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Economic Theory and Government Action Question
Why shouldn’t that apply to the human purposes and the social processes that control the course of government activities?
Answer It does apply.
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Economic Theory and Government Action Governments:
Have limited resources. Wants exceed the capacity of the resources. Must allocate their resources. Will use incentives to determine the optimal
allocation.
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Economic Theory and Government Action 这种看待政府的方式具有如下优点 :
避免把政府看作是“解围之神”
使我们对政府的预期更加现实
促使我们询问使得政府在既定环境下有效行动的条件，而不是简单假定政府总是能够达到其愿望
把政府作为一个“它”容易产生误导：政府是在现有产权基础上互动的众多个人
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Economic Theory and Government Action What is the role of property rights in
government behavior?
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The Right to Use Coercion
Government possesses a generally conceded and exclusive right （排他性权利） to coerce adults.
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The Right to Use Coercion
Coercion （强制） To induce cooperation by threatening to reduce p
eople’s options.
Persuasion （说服） To induce cooperation by promising to expand pe
ople’s options.
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The Right to Use Coercion
对政府及其强制权传统的辩护理由： We may be able to achieve greater freedom and e
xpanded options if we all accept some limitations of our freedom and some reduction in our options.
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Is Government Necessary?
Do we have to use coercion? Couldn’t we get equally good results by relyin
g on volutary cooperation?
Example ： Would police protection be available without gover
nment?
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Excluding Nonpayers
Without government People who wanted police and/or fire protection
could pay for it. Could their neighbors be excluded? How does this impact a person’s willingness to
pay for protection?
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Excluding Nonpayers
Positive Externalities （正外部性） and Free-Riders （搭便车） Spillover benefits （溢出收益） reduce the incenti
ve to produce certain goods.
Government can create an incentive to produce goods through coercion which reduces the transaction cost.
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The Free-Rider Problem （搭便车问题） Free-Riders
People who accept benefits without paying their share of the cost of providing those benefits.
Question Why don’t people do what would clearly make the
mselves and others better off?
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The Free-Rider Problem
Answer People are guided by the costs they expect to
bear and benefits they expect to receive.
需要强调的是 搭便车概念肯定不是断言，人们完全是自私的，或
者说利他主义在社会生活中不起作用。 相反，如果不培养公民体谅、礼貌、谦逊和容忍 (e
mpathy,courtesy,humility,and tolerance) 的美德，文明社会将无法继续存在。
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The Free-Rider Problem 经济学家强调搭便车概念的重要性，其实是在
说， 人们具有有限的（或狭隘的）私利概念； 他们大体上不会像感受那些更直接地施加于他们的
成本和收益那样逼真和有力地考虑他人（尤其是较远的人）的内心感受。
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Positive Externalities and Free-Riders Positive Externalities
Exist alongside negative externalities （负外部性） . Create a disincentive to produce. Probably more prevalent than spillover costs in mo
dern societies.
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Positive Externalities and Free-Riders Exchange entails transaction costs.
Transaction Costs Impede exchanges if they exceed benefits from e
xchange.
Government Coercion An institution for reducing transaction costs throug
h the use of coercion.
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Law and Order （法律和秩序）
High transaction costs make it difficult to exclude free-riders.
Government coercion forces everyone to pay involuntary contributions (taxes).
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Law and Order
Uniform and Consistent Rules （统一和一致的规则） Increase planning confidence Contribute to cooperating society
Examples Defining property rights Enforcement of contracts
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National Defense
National Defense A public good A traditional role of government Can’t be provided privately due to the free-rider
problem. Does not have to be solely provided through
coercion.
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Roads and Schools
Question Would the quantity and quality of roads be the
same if coercion was not used to finance them?
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Roads and Schools
Transaction Costs Would be high if tolls （过路费） were relied on t
o finance roads.
Question Do others benefit from road development?
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Roads and Schools
Education People acquire education only as long as the
marginal benefit exceeds the marginal cost. Positive externalities result.
Education Less than optimal will be obtained when external
benefits are not considered. Taxes to finance education lowers the cost and
increases the demand.
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Income Redistribution
The government provides special benefits to the impoverished.
Question Why not rely on private philanthropy （慈善活动） ?
Hint: Free-riders
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The Regulation of Voluntary Exchange 为何政府对广泛的公民活动进行管制，使用强
制措施控制人们进行自愿交易的条件呢？
家长式（ paternalistic ）观点：防止倚强凌弱？
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The Regulation of Voluntary Exchange Reducing Transaction Costs？
Licensing （许可） Certification （认证） Setting standards （建立标准）
但是，为何销售者通常热情地支持政府的管制？
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The Regulation of Voluntary Exchange 利益集团的推动？
利益集团以保护消费者的名义消除竞争
为什么受害者会合作呢？为什么政府要使用强制措施维护个别人的特殊利益？
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Government and the Public Interest Government attempts to address sources of
market failure.
Transaction costs
Positive externalities
Free-riders
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Government and the Public Interest But the coercive actions taken by government
are themselves subject to the same limitation.
Coercion itself depends on voluntary cooperation.
Government will not act until particular people have been persuaded to act.
Government is people interacting,paying attention to the expected costs and benefits of the alternatives that they perceive.
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Government and the Public Interest Many people take it for granted that
Government acts in the public interest.
Suppose we define the public interest as what everyone would want if everyone were adequately informed and impartial.
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Government and the Public Interest Question
How would the lack of perfect information and incentives impact the government’s ability to act in the public interest?
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Government and the Public Interest Why are government policies dominated by s
pecial interests?
Why are governments more likely to oversupply than undersupply a public good?
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Information and Democratic Governments
Citizen voters （选民） Question
Why don’t you take the time to learn more about the candidates running for various offices?
“rational ignorance” （理性无知） exists when it’s not worthwhile to learn.
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Information and Democratic Governments Some defenders of democracy rely on electe
d representatives to acquire the information that must be available if decisions are to be made in the public interest.
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Information and Democratic Governments
Their confidence has a reasonable foundation in reality ： 议员的选票更有可能影响投票结果 议员拥有人手和其他收集信息的资源 很多人热衷于将相关信息提供给议员 议员的投票受到监督，必须进行辩护
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Information and Democratic Governments
Question Even if we can assume that legislators’ votes are
adequately informed, are we entitled to assume that they will vote in the public interest?
Are they impartial?
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The Interests of Elected Officials（当选官员的利益） Economic theory assumes that
People act in their own interest,not in the public interest.
Sometimes it will be in a government official’s interest to pursue the public interest.
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The Interests of Elected Officials But
finding ways to produce such harmony is the major issue in the design of political institutions. （政治制度设计）
We can’t simply assume this advantageous concord without asking whether the institutions under which we live are likely to produce it.
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The Interests of Elected Officials An interest in reelection （连任） is a commo
n interest among most elected officials. Question
Is an interest in being re-elected likely to lead elected officials to vote and act in the public interest?
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The Interests of Elected Officials Not necessarily!
Elected officials can’t afford to look too far ahead! Results must be available by the next election.
提供信息以及让官员对其行为负责，所带来的收益集中在特殊利益集团身上。与政治过程相关的正外部性使之成为必然！
轻轨的例子
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Concentrated Benefits, Dispersed Costs （集中的收益，分散的代价） Observation
The few who have much to gain invest vast resources in trying to influence the political process.
Observation The many with more to gain in total, but less to gai
n individually, invest almost nothing.
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Concentrated Benefits, Dispersed Costs Democratic political process （民主政治过
程） Concentrate benefits on the
Well organized Well informed Who gain the most
Disperse costs on Unorganized Ill-informed With little to gain individually
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Concentrated Benefits, Dispersed Costs It seems futile to fault legislators for this. The fault lies with the positive externalities th
at prompt most of us to behave like free riders, hoping that someone else will assume the costs of lobbying for the policies from which we would all benefit.
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Concentrated Benefits, Dispersed Costs Modern political economists
demonstrate the tendency within democratic governments to concentrate benefits and disperse costs within policy-making.
make one of the most important contributions to our intellectual understanding of why good politics is not necessarily good economics.
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The Prisoner’s Dilemma （囚徒困境） The Dilemma
Choosing whether to spend two hours per week working on a public policy issue or go bowling （打保龄球） .
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The Prisoner’s Dilemma
Others ChooseOthers Choose
EachEachChoosesChooses
Duty RecreationD
uty
Rec
reat
ion
GoodGoodGovernmentGovernment
BadBadGovernmentGovernment
GoodGoodGovernmentGovernment
PlusPlusBowlingBowling
BadBadGovernmentGovernment
PlusPlusBowlingBowling
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The Prisoner’s Dilemma Dilemmas of this sort are fairly common.
Prisoners’ Dilemma would not exist in the absence of transaction costs. Binding contracts （有约束力的合同）
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The Prisoner’s Dilemma But transaction costs prevent us from doing w
hat we all want to do. it would be much too costly to devise, write, negoti
ate, record, monitor, and enforce such contracts.
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The Prisoner’s Dilemma However, we deal with the problem in an infin
ite variety of interesting ways―formal and informal institutions（正式和非正式的制度） customs （风俗） conventions （惯例） Formal and informal contracts, guarantees, and e
ven constitutions （宪法）
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The Limits of Political Institutions What do you think?
Are there limits to what political institutions can accomplish?
Why so many people take it for granted that the government takes care of the public interest?
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The Limits of Political Institutions It may stems from
The habit of equating “government” with “nation”; The belief that government is the last resort and th
erefore must be an effective resort; The popular reasoning that all social problems are
the result of human behavior, that human behavior can be altered by law, and that government makes the laws, and so government can solve all social problems
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The Limits of Political Institutions Alexis de Tocqueville said in Democracy in A
merica(1935) There is no country in which everying can be provi
ded for by the laws or in which political institutions can prove a substitute for common sense and public morality!
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Once Over Lightly
Government actions follow decisions of citizens and government officials.
They compare marginal costs and benefits of alternative actions.
Governments have the right to use coercion. Thru coercion it is sometimes possible to
secure goods not available thru voluntary cooperation.
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Once Over Lightly
Coercion may secure the supply through lowering transaction costs.
Government actions reduce transaction costs and overcome free-rider problems.
Government coercion presupposes voluntary cooperation.
Positive externalities permeate the political process in a democratic government.
