No Free Lunch: Economics for a Fallen World: Third Edition, Revised

Chapter Fourteen: Decision-making in Democracy: Public Choice 354 CHAPTER FOURTEEN: QUESTIONS FOR REVIEW 1. True or False: a. Both public interest and public choice theories model political figures as acting in the general public interest. b. The largest percentage of government activity in terms of resource use is at the local level. c. The Federal government spending as a % of GDP has declined since WWII. d. Federal regulation adds little burden to private business activity, and is relatively constant over time. 2. Why are people rationally ignorant? 3. Is a principled politician likely to be in office a long period of time? Why or why not? 4. Describe some of the reasons collective decision-making is more complex than a private market transaction. Address both the information content and the feedback loop. 5. Evaluate the following statement: “While I don’t support government regulation generally, when the market clearly fails the government must step in.” 6. Why are special interest groups much more effective than you or I in the political process? 7. Consider Figure 14.5 . Can you think of a constitutional (rules of the game) change that could stop the logrolling from taking place? What would be the downside of that change? 8. Why does the standard deadweight loss of monopoly understate its true costs? Discuss how this will lead to socially unproductive activity. 9. Many politicians want to raise taxes as part of a “balanced” approach to our debt problem. Is that likely to work? Why or why not?