Class notes
Chapter 1 - The public sector in the economy
- Course
- Institution
The public sector in the economy
[Show more]
Seller
Follow
Gauke107
Reviews received
Content preview
CHAPTER 1PUBLIC SECTOR IN THE ECONOMY
Public Economics (Calitz, et al. Chapter 1)
Public economics looks at the role of government in the overall economy
- Government plays a central role in resource allocation and distribution
- Def. = The study of the nature, principles and economic consequences of
expenditure, taxation, financing, and regulatory actions undertaken by the
non-profit government sector of the economy.
Most important tools of the government to influence economic outcomes → called
the instruments of fiscal policy - instruments are
→ expenditure
→ taxation (government income – distinguish between taxes, income, wealth &
goods and services)
→ financing (is the difference between government expenses and revenue,
deficit financing if expenses exceed income)
→ regulatory actions (not providing goods and services, but providing a
framework to ensure everything is done according to the rules)
We look at the analysing the nature and impact of the instruments of fiscal policy.
Instruments of fiscal policy
Expenditure, taxation, financing – entails procurement by the state of private
funds & spending of these funds:
o The use of instruments constitutes the direct mobilisation & allocation
of scarce resources
o The government gets involved directly.
o E.g. spending of income tax on primary healthcare, borrowing of funds
to build an irrigation dam or a highway.
Gauke Buyl DO NOT DISTRIBUTE
, Regulation → enacting a law/administratively proclaiming an enforceable
instruction that leads to a different allocate private resources that would apply
in the absence of government.
o The allocation of resources is influenced indirectly
o E.g. regulation of government forcing the manufacturers of vehicles to
install platinum catalysts in the exhaust pipes of vehicles.
Reduces carbon monoxide and regulations that prescribe the
behaviour of natural monopolies (such as electricity supply)
Governing criteria for fiscal criteria on which economic decisions in public
sector are/should be based – efficiency & equity
View of the role of government in the economy
Individualistic Public Interest Developmental State
(Mechanistic (Collective
view) view/Organic view)
Additional Notes Recognizes the Thought to exist state where politics have
supremacy of independently of concentrated sufficient
the individual & individual power,
his/her freedom preferences & goals autonomy, and capacity at
of choice of society the centre of shape, pursue
and encourage the
achievement of explicit
development objectives.
Key Characteristic 1. Maximization 1. Maximisation of Combination of individual &
of individual
(free market social welfare or social interests
welfare
economy) 2. Correcting national interest Selective intervention
Role of market failure 2. Distribution of
Government income
Policy Focus Efficiency of Combating poverty Way in which political &
resource and equity issues economic control is obtained
allocation and (distribution of & exercised
economic income).
growth
Gauke Buyl DO NOT DISTRIBUTE
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller Gauke107. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $2.84. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
67474 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now