Class Handout for Government Failure

Lecture V(Based on Text provided free on Internet.)

Government Failure

I) Rational Ignorance
a. Overall negative costs to society but individually the costs are dispersed in society while the benefits are concentrated
b. Example $1,000,000 cost to society with $800,000 benefits to 5 farmers
c. Rational ignorance on government programs
d. Rational ignorance on voting

II) Median Voter Theory
a. Median voter theory resembles bell curve
b. Politicians running towards the middle
c. Shifts in the Median vote
d. What if the best program lies to the right or left of the curve?

III) Bureaucracy
a. The Iron Triangle (Government, Bureaucracy and voters).
b. Capture Theory
c. Lack of accountability in government
d. Rent Seeking - asking the government for economic profit above and beyond what the market will yield (restricting competition)
e. Logrolling – a liberal and conservative senator both vote for the same bill. Why? Because they trade votes.
f. Earmarks – The Alaskan Bridge to Nowhere

IV) Government as Public Goods
a. Some Public choice theorists suggest that Government itself is a public good.
b. Limitations to Public Choice Theory.