Category: Economics 10e: Ch 01

Public choice theory is an area of economics that uses standard economic tools to consider the decisions made by politicians and others within the public sector. In essence the theory applies economic principles to politics. In the article below Simon Caulkin argues that public sector reform and the application of public choice theory has failed and likens the public sector reforms that have been implemented to Soviet central planning.

Labour’s public sector is a Soviet tractor factory Observer (4/5/08)


1. Explain what is meant by public choice theory.
2. Describe the principal public-sector reforms that were implemented under the Blair government
3. Discuss the extent to which recent public-sector reforms have succeeded in delivering a more responsive and efficient public sector.

As economists we often argue that choice is a good thing as it will help to create more efficient and dynamic markets. Public-sector reform has tended to focus on the introduction of choice as a way of making public services more responsive to consumer needs. But is choice always a good thing? The article linked to below from the Guardian considers the trade-off between choice and central planning.

We’re getting choice, whether we want it or not Guardian (16/3/2008)


1. Explain how increased choice helps to make the public sector more responsive to consumer needs.
2. Discuss whether centrally planned provision of public services, such as healthcare, is likely to lead to more or less efficient services.
3. Assess the extent to which increased choice in the provision of health services is likely to make health care more responsive to people’s healthcare needs.

The start of a new year is a time that many of us make New Year Resolutions. Generally we have broken these before then end of January, but a new web site called aims to helps us keep the resolutions. Can economics help us rationalise the process of making resolutions? In the article below Tim Harford (the Undercover Economist) looks at incentives and what economics can tell us about New Year Resolutions.

Rationalising resolutions MSN Slate (22/12/07)


1. Assess the importance of incentives in determining people’s economic behaviour.
2. How does the analysis of ‘rational behaviour’ help us understand the economic choices people make?
3. Discuss the likely success of the business model developed by

Al Gore’s contribution to the global climate change debate is not in question and he has, along with the IPCC, been awarded the 2007 Nobel Peace Prize for his work in raising awareness. If you haven’t seen his film “An inconvenient truth” then do get hold of the DVD – it may just be the most interesting PowerPoint presentation you will ever see! However, does he really understand the nature of the debate? The article below suggests that he has not yet taken account of the most fundamental trade-off in dealing with climate change – the trade-off between our own quality of life and that of our descendants in the future.

Save the earth in six hard questions MSN Slate (22/10/07)


1. Explain what is mean by a trade-off “between the quality of our own lives and the quality of our descendants’ [lives]”.
2. What is meant by the term ‘risk-averse’ and how is this relevant in the climate change debate?
3. Consider the questions raised by the article. Discuss how relevant the conclusion reached is in the light of these questions.

President Hugo Chavez of Venezuela has built up the pace of turning Venezuela into a socialist state with sweeping reforms, including extensive nationalisation. This has always been a controversial policy (not least with the private companies which will be taken into state ownership) and threatens to create further social tension in Venezuela.

Nationalisation sweeps Venezuela BBC News Online (15/5/07)

1. What are the economic implications of the creation of a ‘socialist state’?
2. Many of the poorest in Venezuela do not have full access to key services such as telecoms. Assess the extent to which nationalisation will help extend the reach of these services to all groups in society.
3. Discuss the arguments for and against bringing key industries into state ownership.