Authors libby rittenberg 836
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Two broad perspectives are used to examine choices in the public sector.
One is the public interest approach, which uses cost-benefit analysis to find
the efficient solution to resource allocation problems. It assumes that the
goal of the public sector is to maximize net social benefits. Cost-benefit
analysis requires the estimation of benefits and costs that are not revealed
in the marketplace. The second approach to the analysis of the public
sector is public choice theory, which assumes utility-maximizing and rentseeking behavior on the part of participants in the public sector and those
trying to influence it. We examined two insights stemming from public
choice theory: the problem of rational abstention from voting and the role
of special interests.
CONCEPT PROBLEMS
1. Identify each of the following government programs as efforts to
correct market failure, to promote or discourage the consumption
of merit or demerit goods, or to transfer income.
1. Head Start, a preschool program for low-income children
2. Sports leagues for children sponsored by local governments
3. A program to limit air pollution generated by power plants
4. Species preservation efforts by the government
2. Public Broadcasting System (PBS) stations regularly solicit
contributions from viewers. Yet only about 11% of these viewers, who
on average have much higher incomes than the rest of the population,
ever contribute. Why?
3. Do you expect to benefit from the research efforts sponsored by the
American Cancer Society? Do you contribute? If you answered “Yes,”
then “No,” does this make you a free rider?
Attributed to Libby Rittenberg and Timothy Tregarthen
Saylor URL: />
Saylor.org
836
