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Public Goods And Externalities

Thanks to all who came out to the bar crawl Saturday, I had a blast! We are back to the meetups again Wednesday and our focus for the coming weeks will be on Applied Economic Topics. This week we will meetup and discuss public goods and externalities. Hope to see you all there!


"Public Spending and Public Goods"
DiLorenzo, Mises University (2004, session 2)


"One Man Gathers What Another Man Spills: On Externalities, Positive and Negative"
Callahan, Economics for Real People, chapter 15

Study Questions:

1. What is welfare economics?

2. What is a positive (negative) externality? Give an example of each.

3. What was Pigou's policy recommendation in the case of a positive externality?

4. What was Pigou's policy recommendation in the case of a negative externality?

5. Explain Lionel Robbins's critique of the Pigovian analysis.

6. What is the Pareto criterion of an improvement in social welfare?

7. According to Rothbard, how can the observer draw conclusions about another's preferences?

8. What is Ronald Coase's famous treatment of this issue?

9. If transaction costs are high, is government intervention justified?

10. What is a (so-called) "public good"? Give some examples.

11. What is a free rider? How does it relate to public goods?

12. What are some problems with these objections to free markets?

13. How could a free market provide public goods? Give an example from the real world.

14. Does mainstream welfare economics smuggle value judgements into (what should be) value-free economic science?

15. Even if the market provided too little of a particular public good, should we expect government to do better?

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