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i) Natural rights- Nozick. nightwatchman
ii) Empirical – Hayek, friedman. market is impersonal – so cannot be unjust.
i) utailitarian – efficiency
ii) Rawls – justice primary
i) Regulation – quantity restriction – hygiene
ii) Finance – subsidies, taxes, NHS
iii) Public production – defence
iv) Income transfers – pensions
v) Measurement of welfare basis:
(1) full income – money + non-money=potential consumption
(2) non-money income not measurable and not correlated with money
(3) time period hard to meaasure
(4) size of household
vi) Invisible hand provides reasons for intervention:
(1) perf info. Nature, prices etc. When fails mkts can make solutions or state.
(2) Future info. Insurance.
(a) Demand
(i) non-linear utility
(ii) pooling risk
(iii) credit risk of insurance company + monitoring
(b) Supply
(i) Get an actuarial premium.
(c) problems with supply
(i) individual risk must be independent
(ii) outcome must not be certain
(iii) probability must be estimatable. inflation problems with pensions. invest into inflation adjusted bonds
(iv) adverse selection – purchaser conceals information
(v) moral hazard – manipulates the probability (carelessness) or size of claim (third party payment)
(3) Perf. comp. input, output, capital mkts. Price taking&equal power.
(4) no public goods – non-rvalness, non-excludability, non-rejectability (cannot chose to consume). Different MC for extra output and user.
(5) no externalities. Coase – no problem. Fails when property rights not enforceable, large negotiations. Pigovian taax might solve.
(6) no increasing returns – MC=MR pricing inefficient.
i) Forced by the poor to rich, or chosen for altruistic motives.
ii) Good and bad consumption.
iii) cash transfers could otherwise provide all necessary intervention, unless public production is good.
iv) Measurement:
(1) poverty – based again on full income
(a) absolute
(b) relative
(c) marginal tax rates problem of means testing
(d) problems with drawing a line, Sen Gini adjusted
(2) inequality
(a) equality of opportunity
(b) which causes of money income differences is inequality (race sex etc). Natural ability (education) problems
(c) Money overstates coz
(i) different tastes for money
(ii) different life cycles
(iii) income is a random variable, so some difference in point time.
(iv) children – whether a rise in utility or fall in per capita income
(d) Lorenz curve, Gini coefficient
(i) curves crossing
(ii) only money income, no life cycle
(iii) data is not consistent over time/between countries
(iv) Atkinson, Theil – put more weight on low income inequality(=Rawls). No welfare interdependence(Sen).
i) insurance
ii) income smoothing
iii) Participation in the society through involvement
iv) ease of administration
i) Commodity taxes
ii) Income taxes
iii) National Insurance
iv) Voluntary pension schemes
v) In Kind transfers
vi) Redistributive power depends on elasticities
i) social insurance – based on contributions and some event (unemployment)
ii) social assistance – means testing, financed from taxation
iii) universal benefit – fullfillment of criteria – having a kid.
unemployment benefit – someone with full contr. record, up to a year. must seek work and work for at least 13 weeks.
sickness-paid dependent on your income, after 28 weeks turns to invalidity. first 3 days off. paid from NI.
why state?
people want insurance
compulsory because non-insurance imposes external costs. crime, lost output, badly looking poor.
why public – non independent prob-keynes. no info problems. most problem with moral hazard. private companies cannot provide jobs. in practice no private schemes.
why is sick public? econonomies of scale in providing sick and eue together.
also keynesian built in stabiliser, marxist controversial.
poor like to receive goods and rich give them.
Assesment
provision – only to average citizen – however extra can be purchased
incentives – does it cause ue? pensions reduce savings, but not much evidence that replacement rate creates ue – more of the duration of UE benefits.
horisontal equity is good. vertical not so much
NHS
efficiency
supply side – no fees
individuals dont decide consumption
finance of taxes avoiding insurance mkt
treatment free – equity and prevention, no externalities
macro efficiency – cheap, monopoly, too few resources
geographical allocation
micro efficiency – allocation, questionable.
work effort of doctors (dynamic efficiency)
equity
unimportance of income
social justice
distribution of health and healthcare controversial
Education
consumption decision imposed
free
macro efficiency impossible to q. only 10% of money goes to q – mortimore
micro efficiency of HE – funds centrally decided, non-optimal allocation?
administrative slack DES
equity
school uniforms
leave to work at 16 – now subsidy
further equation regressive le grand. atkinson