L1 主讲government和government spending

1. Government定义上有两种：
Organic view：以group 为核心，是为了group work， group benefit存在的
Mechanistic view： 偏个人主义，特点有这些：
The government is created by individuals to better achieve their individual goals.
The individual rather than the group is at the center stage, and the government only exists for the good of the individuals.
Individuals may have different needs, and policies that benefit one individual may not benefit another one.
个人主义是属于新观点，原来主要观点还是group核心观

2. 然后可以简单解释一下government size，因为这和spending其实是一个东西
定义：Size of government = volume of public spending, expressed as % of GDP.
Spending包括：Purchases of good and services.
Transfers of income to people, businesses and other governments
Interest payments on the public debt
历史发展总结（选写，不想写就不要写了，以下ppt原话）
* Public spending has increased rapidly in recent history in advanced economies. * Public spending is also rising in emerging economies. (new development) * There is a positive relationship between GDP per capita and government spending. * The composition of public spending has changed overtime. * The composition of tax revenue varies largely between countries. 3. 重点：government spending的增长
首先提一下Wagner’s law，也是gs增长的主要特点
“Public spending increases proportionally more than the growth of national income.”
然后解释理由，就是为什么会这样
有两个角度，demand和supply
3.1从demand角度来讲，有三个小点：
3.1 .1 Public goods have a high income elasticity of demand (>1)
E.g. education, health care.
When people become richer, they demand much better education and health care.
If the demand for public goods increases faster than GDP, public spending will rise overtime as a percentage of GDP.
就是说人们富了以后就会对public层面有更高的要求，自然会demand更多spending
3.1.2 Need for regulation
环境上As income grows, people become more bothered with negative externalities (clean water, clean air), and the states has to intervene (and spend resources) to regulate certain activities.
经济上Increased complexity due to economic development imposes new regulations (e.g. financial regulation).
3.1.3 Rising costs of the public goods
In the private sector, technological progress leads to substitute capital for labour.
The public sector instead is labour-intensive relative to the private sector，cannot substitute easily capital for labour
e.g. health care, education
Since the public sector cannot substitute capital for labour, its cost increases over time. Private good都可以通过技术substitute capital for labour
但public good 多为services，很难，所以cost↑
3.2从supply角度来讲，有四个小点：
3.2.1 Growth of the tax base 可以收税的人多了
With economic development, the fraction of people who can be taxed increases.
3.2.2 Amenability顺从 of people to taxation
The growth of the corporate sector reduces self-employment and makes it more difficult to evade taxation. 逃税更难了
With new technologies, the transaction costs of collection taxes have decreased. 手续费降了 It became easier to collect taxes. 收税就简单了
3.2.3主要说social spending上的花销和people相不相信lucky之间的关系（…）
There is a positive correlation between % of GDP allocated to social spending and the fractions who believe that luck determines income.
If people think that income is mainly determined by luck, then the government may compensate the ones who are unlucky. a) EU: large fraction believes that luck determines income high social spending b) US: small fraction believes that luck determines income low social spending
3.2.4 Ratchet effect 就是说一旦spending上去了，people就很难接受spending被砍 * The level of expenditure remains high after the period of upheaval剧变 * People become used to the higher level of public spending * Politically difficult to cut spending, even during recessions
e.g. Greece, France or the UK.

4. Wagner’s law的for和against
For：用了中国作为例子
Tobin (2005)
As wealth increases, people expect a higher level and improved quality of state services to match rising living standards.

The demand for government service increases with income. Increase in the number employed in social services, education, culture, government administration.

Against：
Wu and Lin (2012)
No evidence of Wagner’s law. Poor localities have larger governments
Fiscal decentralization contribute to increase local government size
Openness to trade and FDI facilitate government downsizing

L2 主讲private good， public goods 和mkt failure
这块ppt讲的有点散，我觉得考到这个题大体的行文思路可以是先强调一下government的role，然后引导到说government怎么解决mkt failure，这其中就有涉及到public goods的方法，理论上可行，但是在practice里有各种各样的矛盾就不可行了，然后接下来就解释为什么不可行。 1. The role of government
Provide the minimal state
Correct market failures
Redistribution （这一点略有争议，可以提一下）
Efficient markets generally seem to deliver very large rewards to small set of people
Government can intervene to redistribute income through taxation and transfer system
Eg：Social security
Public education, health care
Unemployment benefits etc.

为了防止anarchy（无政府状态），社会需要：
Property rights define the ownership of property and prohibit theft (+ other sets laws)
Enforcement of laws: Enforcement officers and courts
Defence from outsiders: defence spending 2. 重点讲能Correct market failures
Market failure定义: Situations in which the market, absent of government intervention, leads to inefficiencies.
表现（原因）：Externality, e.g. pollution
Without regulation, pollution would be excessive. Government intervention is required to restore efficiency.
Public goods, e.g. roads
Without government, too few roads would be build. Efficient provision of public goods requires government intervention.
然后就引到了public goods这块，public goods为什么和mkt failure有关呢 3.1 介绍public goods和private goods
2.1.2 先说类型
Private goods are rival: the amount that one person consumes is not available to others.
Private goods are excludable: it is possible to exclude someone from consuming the good.

Pure public goods are non rival: The quantity of a public good is also the quantity available to each individual. Once it is provided, everyone can consume it.
Pure public goods are non excludable: it is impossible (or very difficult) to prevent someone from consuming it.
然后还有一种impure的介于两者之间：
Impure public goods are either non rival or non excludable but not both.
Eg：Crowded city sidewalk:
→rival and non excludable 2.1.2 再说渠道
Public goods are not necessarily provided by the public sector， Individual donating money to maintain public spaces.

Government provision does not necessarily mean that it is also produced by the government
~Garbage collection: local government may hire private firms for the job
~Let private firms manage parking areas
~Hire private contractors to provide logistical support during wars (e.g. Halliburton) 2.1.3 两个goods的individual和sum的图的画法，记住下面两条原则 a) 对于private goods
Total demand是horizontal sum，就是individual的横坐标加起来变成sum图的横坐标，纵坐标不变 b) 对于 public goods
Total demand是vertical sum，就是individual的纵坐标加起来变成sum图的纵坐标，横坐标不变
图就是普通demand图的类型
2.1.4 重点！public goods和social efficiency （包括公式以及和practice的差距）
首先因为我们是写essay所以不用太懂公式是怎么假设的怎么来的，我们要说清楚的是公式是啥样代表了什么意思

这里一共有三个公式，然后最后归为一个theory，即理想状态下public goods自动能达到social efficiency

公式有：
Marginal rate of substitution (MRS) is the ratio of marginal utilities between the two goods.

Higher MRS: the more consumers benefit from extra unit of “r” compared to an extra unit of “a”， 即第一个对于Adam来说多一点r比多一点a好

Marginal rate of transformation is the ratio of the marginal costs.

it cost two units of good “a” to have an extra unit of good “r” 我觉得这里ppt写反了。。应该是一个a换两个r吧？

然后第三个公式叫Samuelson rule，它tells us how much public goods should optimally be provided (i.e. the efficient provision).

在这种情况下An additional unit of public good benefits both consumers
（不用懂为什么。。我也不懂。。反正这么说就可以了）
就是MRS的和要等于MRT时， social efficiency max
为什么是MRS的和呢？（死记！！！！）
→This is because the good is non-rival. Since a unit can be consumed by all consumers, society would like the producer to take into account all consumers’ preferences.

当MRT不等于MRS的和时 Sum MRS > MRT should increase the quantity of public good
Sum MRS < MRT should decrease the quantity of public good It is efficient to invest in public goods as long as the total MRS is larger than the MRT.
记法：不够转换就要多生产，够转换了，都多的能代替了就要少生产（不能写进essay= =）

和现实有差距的for和against
For：
由以上推导过程可以看出理想状态下mkt可以reach efficiency，但是：
现实中，Mkt并不会reach efficient solution，因为人都是自私的，而且会free ride，都想别人多贡献一些，自己少贡献一点，不到转换率不够用永远不会多贡献
There is under provision of public goods in equilibrium.
所以转换的永远不够（写essay可以写MRT always less than sum MRS）
例如：Suppose that at the current level of “r”, the MRT=1
Marginal benefits: MRS=0.6 for each
Total MRS=1.2 efficient to invest more, however neither individual will invest more.
Under-provision of public goods: Rational consumers won’t care about the benefit of the contribution to the society

Against：
例外情况时 public也会超标
Altruism: Individuals may care about the outcomes of others as well as themselves.
Warm glow: Individuals may get a psychological benefit from knowing they helped a worthy cause.
Conditional cooperation: Individuals are willing to conditionally provide public goods, as long as others do the same.

而且还会有一些干扰因素
首先The level of provision may be hard to determine， 你永远不知道到底该修多少路
其次Government programs may reflect political pressure to benefit special-interest groups
例如：Public sector workers unions may pressure the government to increase spending on government programs and administration.为了自己group的利益向政府施压
Military (including private providers) may pressure the government to increase military spending. 军队向政府施压