Module 17: Public Economy

As President Abraham Lincoln famously said in his 1863 Gettysburg Address, democratic governments are supposed to be “of the people, by the people, and for the people.” Can we rely on democratic governments to enact sensible economic policies? After all, they react to voters, not to analyses of demand and supply curves. The main focus of an economics course is, naturally enough, to analyze the characteristics of markets and purely economic institutions. However, political institutions also play a role in allocating society’s scarce resources, and economists have played an active role, along with other social scientists, in analyzing how such political institutions work. Other chapters of this book discuss situations in which market forces can sometimes lead to undesirable results: monopoly, imperfect competition, and antitrust policy; negative and positive externalities; poverty and inequality of incomes; failures to provide insurance; and financial markets that may go from boom to bust. Many of these chapters suggest that the government's economic policies could address these issues. However, just as markets can face issues and problems that lead to undesirable outcomes, a democratic system of government can also make mistakes, either by enacting policies that do not benefit society as a whole or by failing to enact policies that would have benefited society as a whole. This chapter discusses some practical difficulties of democracy from an economic point of view: we presume the actors in the political system follow their own self-interest, which is not necessarily the same as the public good.

1. Explain the significance of rational ignorance
2. Evaluate the impact of election expenses
3. Explain how special interest groups and lobbyists can influence campaigns and elections
4. Describe pork-barrel spending and logrolling
5. Assess the median voter theory
6. Explain the voting cycle
7. Analyze the interrelationship between markets and government

To achieve these objectives: [Edit these items to match your resources and activities.]

1. Read the Module 17 Introduction 
   
2. Read Chapter 17 in the course textbook, Microeconomicss.
3. Complete Module 17 Discussion Forum.
4. Complete Module 17 Quiz.
   
5. For course instructors, list any other reading assignments here. [Include all reading assignments here that are outside of Moodle. Be as concise as possible. More information can be included in the third-party section below, if necessary.]
   
6. Complete the [specific activities in the module. Include all in the order you want them completed.]

Module Pressbooks Resources and Activities