ECO 481: Public Choice Theory

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ECO 481Public Choice Theory

• Week 10Government Exploitation
• Schools

Dr. Dennis Foster
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Exploitation

• Purposive political or rent-seeking efforts
  increase ones wealth or income at the expense of
  others.
• In private sector, profit social gain.
• In public sector, profit (rent) misallocation.
• Government is the most powerful agencyin society.

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Exploitation - Taxation

• State sets the rules, but there are limits.

• Laffer Curve taxes--Long run vs. short
  run.--In SR . . . ? rates ? revenue
• Minn. 13.95 inc. tax!
• Illinois Increasing to 5.

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Exploitation - Bureaucracy

• Tend to find Q whereTB TC.
• Asymmetric information issue.
• Voting with our feet is costly.
• Wage issue
• Higher/benefits
• Overpaid? Not if XS S.

The public bureaucracy is overstaffed, overpaid,
overqualified, and well protected.
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ExploitationManipulating Median Voters

• Choose budget or doom!
• If Xr revision budget, voter will take up to
  Xb.
• BOAPW - Set Xr 0!!!
• Do median voters know what is efficient?
• Also, small incremental tax hikes hardly muster
  opposition.

Private
Text Error
Public
Xr X Xb
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Exploitation - Education

• Following Buchanan one might saythat the
  university combines students as consumers who do
  not buy with faculties or producers who do not
  sell and taxpayers or owners who do not control.
  
• Full, tenured professors - min. workload
• Raise stds. to get better students.
• Incomes increase across the board.
• Next best choices are usually poor.
• Perverted purpose of tenure.

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Exploitation - Education

• Some observations from NAU.
• Work - research, service, administration.
• Accreditation as oversight.
• No standards. Our job is to
• AZ - post tenure review ASU-West.
• Usually, pay raises are .
• Last year, market adj.
• Business college next best . . .

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Limits on Exploitation

• Consumers will move over time.
• Illinois is losing 25,000/year.
• Sprawl beyond Flagstaff city limits.
• Charter schools.
• More competition with on-line universities.
• Straining budgets are bursting.

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ECO 481Public Choice Theory

• Week 10 Part IGovernment Exploitation

Dr. Dennis Foster