CH. 6

Rent seeking

A process in which political leaders essentially rent out parts of the state to their patrons, who as a result control public goods that would otherwise be distributed in a nonpolitical manner

Logrolling

An agreement by two or more lawmakers to support each other's bills

The rational-ignorance effect refers to the

The lack of incentive voters have to become well-informed about candidates and issues because their vote is unlikely to affect the outcome of an election.

Welfare payments

(officially Temporary Assistance for Needy Families, or TANF), such as food stamps, transfer tax revenue from all taxpayers to those who meet the program's eligibility requirements.

How might increasing the level of government transfers reduce the size of the economic pie?

-Higher taxes may be necessary to finance increased transfer payments, leading to a reduction in hours worked because of a decrease in the reward for productive activity. -Greater transfer activity diverts productive resources into rent-seeking activity.

Government Bureaucracies

-funded by the legislature and are unlikely to end the fiscal year with surplus funds. -because no one owns a government bureau, there are no built-in monetary incentives to monitor their efficiency -government bureaus face no competition in the provision of services, such as granting nondriver IDs. Customer satisfaction is therefore not economically necessary.

transfer payment programs

Government pays individuals directly rather than offering them goods or services. Many government programs use transfer payments as a means of distributing wealth. The recipients of transfers do not provide goods or services in exchange for payments, which distinguishes transfer payments from other government payments.

Which of the following is a difference between the market process and the political process?

In markets, consumers pay for only the goods they want, but in the political process, everyone pays taxes for whatever the majority prefers.

If students who earn an A in a class were asked to transfer some of their points to low-performing students, which of the following would be most likely to occur?

Neither high nor low-performing students would work as hard to earn additional points.

Which of the following provides the strongest evidence that consumers value a good more than the resources required for its production?

The good is purchased by consumers willing to pay a price sufficient to cover its costs.

Why do nations often impose trade barriers that make it difficult for their own citizens to trade with people in another country?

Trade restrictions often provide benefits to highly visible special interest groups while imposing a less visible cost on the general populace

Why is it difficult to improve the well-being of a group through income transfers?

Unintended secondary effects and competition for transfers reduce the net gains of the intended beneficiaries.

rational ignorance effect

a rational individual has little or no incentive to acquire information needed to cast an informed vote.

Public choice analysis

applies the tools of economics to the political process in order to provide insight concerning how the process works

Pork-barrel legislation

legislation that gives tangible benefits to constituents in several districts or states in the hope of winning their votes in return

Special-interest programs are highly attractive to vote-seeking politicians because

members of special-interest groups favoring these programs feel strongly about them while most other voters will be uninformed on the issue

Politicians will often be able to gain from support of trade restrictions because

organized interest groups benefiting from the restrictions will make large contributions to political campaigns while most others will not feel strongly about the restrictions.

Once the criterion for receipt of an income transfer is established,

people will modify their behavior in order to qualify for the transfer, decreasing their net gain from the transfer.

shortsightedness effect

politicians will favor programs that generate current visible benefits, even if long-term costs of the project outweighs the benefits

Social Security

program that collects revenue through a payroll tax (a tax on labor income) and distributes it to retirees. Social Security, therefore, transfers income from current workers to current retirees.

The political attractiveness of tariffs, quotas, and other trade restrictions is primarily the result of

the special interest nature of trade restrictions.

Politicians have incentive to support special-interest groups at the expense of unorganized, widely dispersed groups (for example, taxpayers or consumers)

when non-special-interest voters are unconcerned or uninformed about the issue, and campaign funds are readily available from the special-interest group