Lecture: Role of Government Chapter 19 Outline

Government Failure

• Consumers could band together to be a special interest group but tend not to because difficult to agree on one interest, and due to free-rider issue.
• Criticisms of capture theory
• Assumes all public officials are solely self-interested which is not the case.
• Leaves little room for ideology in politics. People assumed to do what special interest groups want even if doesn’t follow party platform

Government Failure

• Bureaucracy and efficiency
• Government is a monopoly so if tries to provide goods will it do so at the minimum cost.
• Government run by politicians who tend to prefer quick fixes rather than longer-term solutions.
• Some of these criticism could also be made of the private market.
• They do quick fixes when cleaning up environmental spills.
• Not all managers are trying to maximize company profits, they may be trying to maximize their salaries, or length of stay in the job.

Government Failure

• Don’t have capacity to administer
• Due to low wages may not be able to hire competent people.
• Corruption may be large
• More often the case in developing countries.

Role of Public and Private Sector

• No one right way
• Depends on level of income of the country
• Poor countries cannot afford to provide health care for all, so tends to be a larger role for the private sector.
• Don’t have ability to tax.
• Public funds need to be concentrated on the most cost-effective interventions.

Role of Public and Private Sector

• Rich countries can afford to be more involved in health care. How much you governments intervene often depends on beliefs.
• There is a battle over superiority of:
• Regulation: Increased government involvement through expanded regulation and government programs to provide or finance health care.