Public Choice theory
the economic analysis of government decision making politics, elections
logrolling
the trading of votes by legislators to secure favorable outcomes on decisions concerning the provision of public goods
paradox of voting
a situation where paired choice voting by majrity rule fails to provide a consistent ranking of society preferences for public goods or services
median-voter model
the theory that under majority rule the median voter will be in the dominant position to determine the outcome of an election
government failure
inefficiencies in resource allocation caused by problems in the operation of the public sector, specifically rent seeking pressure by special interest groups, short sighted political behavior, limited and bundled choices and bureaucratic inefficiencies
special interest effect
any relut of government promotion of the interests of a small group at the expense of a much larger group
rent seeking
the actions by persons firms or unions to gain special benefits from government at the tax payers or someone else expense
benefits-recieved principle
the idea that those who recieve the benefits of goods and services provided by government should pay the taxes required to finance them
ability to pay principle
the idea that those who have greater income should pay a greater proportion of it as taxes than those who have less income
progressive tax
a tax whose average tax rate increases as the tax payers income increases and decreases as the taxpayers income decreases
regressive tax
a tax whose average tax rate decreases as the tax payers income increases and increases as the taxpayers income decreases
proportional tax
a tax whose average tax rate remains constant as the tax payers income increase or decreases
tax incidence
the person or group that ends up paying a tax
efficiency loss of a tax
the loss of net benefits to society because a tax reduces the production and consumption of a taxed good below the level of allocative efficiency