PUBLIC SECTOR

PUBLIC SECTOR V PRIVATE SECTOR

Public sector:Public sector: everything that is ...

owned by the g____ for the benefit of all c____.

Private sector:Private sector:

everything that is ... owned by private

i____ for the benefit of the o____.

Reading: “The Public Sector” (RB, p. 34)

Read the text and explain the difference between public goods and merit goods.

1. a) PUBLIC GOODS: Goods and services provided by the state that can be consumed by everybody in a society. Find the definition of the following concepts in the reading:

They are

1. Non-rival:

(to rival = to compete)

2. Non-excludable:

(to exclude somebody =

to leave somebody out)

• Consumption by one person does not reduce the amount available to others

• Once provided, all individuals will benefit.

Why does the state have to provide

public goods?

Non-rival + non-excludable

Hard to get people to pay to consume them.

Private sector cannot make profit on them.

Unprovided by private sector.

ARE THE FOLLOWING PUBLIC GOODS? EXPLAIN BY USING THE CONCEPTS: NON-RIVAL & NON-EXCLUDABLE!

Street lights Healthcare Fireworks Electricity National defence Public roads A hamburger

HOW ARE PUBLIC GOODS PAYED FOR?

Taxes (most often) Own profit/surplus (sometimes) Philantropy: donations (rarely)

2. b) MERIT (n., v.)

Noun: If sg. has merit, it has good or worthwhile

qualities.

The film had artistic merit.

Verb: Deserve, earn.

Such ideas merit careful consideration.

MERIT GOODS: fill in the gaps market, free, expensive, subsidize,

subsidized, private (2x), social Goods or services provided free or cheaply for the

benefit of the entire society by a government. Governments _____ these goods and services or provide them _____ at the point of use because they would be too _____ and therefore under-consumed if left to the _____ forces or _____ enterprise.

Consumption of merit goods is believed to generate positive externalities- where the _____ benefit from consumption exceeds the _____ benefit.

E.g.: compulsory vaccination of children, _____ housing, higher education, the opera

MERIT GOODS: fill in the gaps market, free, expensive, subsidize, subsidized,

private (2x) social Goods or services provided free or cheaply for the

benefit of the entire society by a government. Governments subsidize these goods and services or provide them free at the point of use because they would be too expensive and therefore under-consumed if left to the market forces or private enterprise.

Consumption of merit goods is believed to generate positive externalities- where the social benefit from consumption exceeds the private benefit.

E.g.: compulsory vaccination of children, subsidized housing, higher education, the opera

1. Public Corporations 2. Municipal Enterprises

Which is run/ owned by...

A. local government?

B. central government?

Read RB, p. 34 and write questions to which the following sentences could be answers:

By the government through taxes and their own trading „surplus”.

Public goods and merit goods. Because individuals wouldn’t pay for them

and they raise the society’s standard of living. Public corporations, nationalized industries,

local authority services, etc.

Make word partnerships with the word “public” (RB, p 34)

public sector public goods public corporations public utilities public ownership public service

HW – HAND-IN ASSIGNMENT

Read MK, p. 110Answer these questions:

1. How do the Friedmans define economic freedom?

2. What is the relationship between economic freedom and human freedom?

3. Explain: “Freedom cannot be absolute.”BRING THE MACKENZIE BOOK TO CLASS

NEXT WEEK

The role of the government

Read “The Good Life Beckons” (RB, p. 36)

According to Galbraith, what are the responsibilities of the state?

Which of these serve short-term goals, and which long-term goals?

Why are there certain activities which fall “beyond the time horizon of the market economy”?

RB, p. 37/III1. evident2. low-cost3. at odds with4. illness5. to be borne in mind (to bear, bore, born(e))6. the underclass (collective noun)7. the affluent (collective noun)8. achievements9. reluctantly10. planetary

Explain what the Friedmans mean by:

“central economic planning” “economic freedom” (2 parts) “More than 40% of our income is disposed of on our

behalf by government...” “We are not free to buy an automobile without seatbelts.” “freedom to use the resources we possess in

accordance with our own values.” “You are not free to ... engage in a host of occupations

without getting a permit or licence from a government official.”

“Freedom cannot be absolute.”

What is the relationship between economic freedom and human freedom?

“laissez-faire could produce over-mighty individuals, Friedman thought. The goal should not be laissez-faire, but market competition: this, he said, would protect men from each other.”

“Neoliberals like Friedman saw economic liberty as the safeguard of all freedoms; a swelling state was the road to tyranny.”

Source: “New brooms”, The Economist, October 11, 2012

Work in groups

List the advantages and disadvantages of the welfare state.

Don’t forget to use both texts in the unit.

Welfare state

Advantages

Minimum standard of living provided for everyone (including the underclass)

Social protection Support of scientific

research that doesn’t promise short-run profit

Protection of the environment

Disadvantages

No “freedom to choose how to use our income”

High taxes No “freedom to use the

resources we possess in accordance with our own values”

Government intrusion in personal life, decision-making

Taxation: good or bad?

Why do governments impose taxes? What are taxes used for? What are the arguments for and against

taxation? Which do you agree with?

The Kansas tax-cut “experiment” The plan: What are the aims of the new

governor? http://www.youtube.com/watch?v=wzmcatWVN5

w Will it work? Listen to a small business-owner.

What is he planning to use the extra income for? http://www.youtube.com/watch?v=2u7trSbJpPc 2 years on: Did it work? http://www.youtube.com/watch?v=1cDGeBbEiYo

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