11A first account August 21Word下载.docx
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11A first account August 21Word下载.docx
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CambridgeUniversityPress,2003
October15,2018
Chapter1
MARKETSANDPROPERTY
1.1Afirstaccount
1.2Propertyrightsandtheruleoflaw
1.3Lifeundermaximalgovernment
1.1
Afirstaccount
Themarketandefficiency
Individualfreedom
Spontaneousorder
Responsibilitiesofgovernment:
Whythemarketmaynotbeenough
Normativeandpositivequestions
Paretoefficiency
Socialjustice
Limitationsofgovernment
Theprivatecostofpublicfinance
Summary
Themostimportantquestionthatcanperhapsbeaskedineconomicsiswhenshouldweforgothepersonalindividualdecisionsofmarketswherewechoosehowtoearnandhowtospendincome,andinsteadrelyondecisionsofgovernment.Thisbookleadsusalongapaththataddressesthisfundamentalquestion.Weshallstudytheresponsibilitiesofgovernmentandalsothelimitationsofcallingupongovernmenttomakedecisionsforus.
Thebackgroundforourstudyistheexistenceofmarkets.Marketsallowpeoplevoluntarilytobuyandsell.Assigningresponsibilitiestogovernmentingeneralrequirestaxes,whicharenotvoluntarilypaid,althoughpeoplemaybequitecontenttopaytheirtaxesgiventhetax-financedbenefitsreceivedfromgovernment.Nonetheless,marketsarebasedonprivateindividualdecisions,whileassigningresponsibilitiestogovernmentrequirescollectivedecisionstobemade.Weshallthereforehavetostudycollectivedecisionsasmadethroughvotingbyindividualtaxpayers,andthroughrepresentativegovernmentonbehalfoftaxpayers.
Weshallbehappywithmarkets,ifmarketsachievetwobasicobjectives:
(1)efficiencyand
(2)socialjustice.Ifmarketscannotachievetheseobjectives,weshallhavetoconsiderreplacingtheprivatedecisionsmadeinmarketswiththecollectivedecisionsofpublicfinancethroughgovernment.Thepublicfinanceofgovernmentisaccompaniedbypublicpolicy.Publicpolicydetermineshowpublicspendingisfinancedthroughdifferenttaxesandperhapsgovernmentborrowingthroughsaleofbonds,andalsodeterminesthepurposesofpublicspending.
Weshallnowbeginourinvestigationoftheneedforpublicfinanceandpublicpolicywithmarketswhereneitherpublicfinancenorpublicpolicyispresent.Fromthisstartingpointwithoutgovernment,weshallinvestigatewhetherorhowpublicfinanceandpublicpolicycanimproveoutcomesofprivate,individuallymade,marketdecisions.
1.Themarketandefficiency
AcaseforthevirtueofprivatemarketdecisionswithoutgovernmentcanbetracedbackatleasttothewritingsofAdamSmith(1723-1790).Smith,whowasaprofessorofmoralphilosophy,onanumberofoccasionsreferredinhiswritingstoaninvisiblehandthatguidespersonalself-interesttooutcomesthatbenefitanentiresociety.
Voluntarymarketdecisionsarenecessarilypersonallybeneficial,sinceapersonwhobelievesthatamarketdecisionisnotinhisorherbestinterestcansimplychoosenottobuyornottosell.Theinvisiblehand,accordingtoAdamSmith,ensuresthatpersonallybeneficialmarketdecisionsarealsoatthesametimesociallybeneficial.
Theformofsocialbenefitprovidedbytheinvisiblehandthroughpersonalmarketdecisionscanbeidentifiedtobeefficiency.Theinvisiblehanddoesnotpromisesocialjustice.Efficiencyandsocialjusticearethetwoobjectiveswithwhichweshallbeconcernedinthisbook.Weshallpresentlybemorepreciseaboutthemeaningsofefficiencyandsocialjustice,andweshallseethatthetwosocialobjectivesmaynotbesimultaneouslyachievable.
AdamSmithproposedthat,becauseoftheinvisiblehand,virtuousmenandwomenareabletopursuetheirself-interestthroughmarketswithoutfeelingsofguilt.ThereareelementsofmoralphilosophyinSmith’ssuggestion.Smithwassayingthatpeoplewhopursuetheirself-interestthroughmarketsshouldnotfeelguiltythatforfailingtosetthemselvesbroadersocialobjectives,becausetheinvisiblehandwilldirectpersonalself-interesttothegoodofallsociety.Thatis,whenmarketsexist,todosocialgood,peopleneedonlyseektodopersonalgoodforthemselves.
AdamSmithalsopointedoutthatsocialgoodachievedthroughtheinvisiblehandisunintentional.Peopledonotsetouttodosocialgoodwhenmakingself-interestedmarketdecisions.TheabsenceofintenttodosocialgoodwasseenbyAdamSmithasavirtue,becausehypocrisycouldbeabsentfrommarketdecisions.Smithwrote:
“Ihaveneverknownmuchgooddonebythosewhoaffectedtotradeforthepublicgood.”
AdamSmithwouldthusadviseusbewaryofpersonswho,whenofferingtobuyorsell,claimtohaveobjectivesotherthantheirownpersonalself-interest.Weshouldbecautiouswhenofferstobuyorsellareaccompaniedbyclaimsofaltruisticmotives.Thesaying,“donotlookagifthorseinthemouth”,advisesusnottoexaminetoocloselythequalityofagiftthatweareoffered.Inamarket,however,giftsarenotgiven.Rather,moneyandgoodschangehands.AdamSmithadvisedustobewareofgiftsorbargainsinmarkets.Since,toachievebothprivateandsocialgood,peopleneedonlyprofesstoseektheirownpersonalbenefitwhentheyoffertobuyorsell.
Efficiencyinacompetitivemarket
ThereisnoformalproofinAdamSmith’swritingsthatpersonalself-interestexpressedthroughmarketdecisionsisbeneficialforasociety.InthecenturiessinceSmith’swritings,variouswayshavebecomeavailableofmoreformallyconfirmingthesocialbenefitofmarkets,whensocialbenefitisdefinedasachievinganefficientoutcome.Thesimplestmeansofproofistolookatasinglecompetitivemarketasinfigure1.1,andtoobservethatmarketdemandexpressesmarginalbenefitofbuyersthroughwillingnesstopay,andthatmarketsupplyexpressesthemarginalcostofsellers.Sincethemarketiscompetitive,individualbuyersandsellershavenoinfluenceovermarketprices.BuyerschoosequantitiestobuybysettingthemarketpriceequaltotheirpersonalmarginalbenefitMB.SellerschoosequantitiestosellbysettingmarketpriceequaltotheirmarginalcostofsupplyMC.Thereisonemarketpricethatisthesameforallbuyers,andthereforeallbuyershavethesamerealizedpersonalMBfromtheirpurchasedecisions.MarketdemandreflectstheequalizedpersonalMBofallbuyers.ThemarketsupplyfunctionlikewisereflectsthecommonMCofsellers.AtthepointEinfigure1.1thetotalquantitydemandedbyallbuyersisequaltothetotalquantitysuppliedbyallsellers,andthepricethatbuyersarewillingtopayisequaltothepricethatsellersrequireinordertosupply.WecanconfirmAdamSmith’sclaimthatpersonalmarketdecisionsaresociallybeneficial,ifwecanshowthatthemarketoutcomeatthepointEisefficient.Wewouldthenofcoursehavedefinedsocialbenefitasefficiency.
Wedefineefficiencyasmaximizingnetsocialbenefit,
(1.1)
whereBistotalbenefitandCistotalcost.InseekingamaximalvaluefornetsocialbenefitW,wearenotaskinghowtotalbenefitsBandtotalcostsCaredistributedinapopulation.Wearenotaskingwhetherthepeoplewhobenefitorincurcostsarerichorpoor.Suchquestionsaredistributional,andweaskthesetypesofquestionswhentheobjectiveissocialjustice,andnotefficiency.Inthemarketshowninfigure1.1,BisthetotalbenefitofallbuyersinthemarketandCisthetotalcostofallsuppliers.Wisthedifferencebetweentotalbenefitofallbuyersandtotalcostofallsellers,andthereforemeasuresthenetbenefitforsocietyfromexistenceofthemarket.
Themarketcansupplymanydifferentquantitiesofoutput.EfficiencytomaximizeW=B-Crequiresthataquantityofoutputbesuppliedandsoldforwhich
(1.2)
.
SinceMBofbuyersisindicatedbythedemandfunctionand-MCofsellersisindicatedbythesupplyfunction,theoutputatwhichMB=MCisuniquelyatthepointEwheredemandandsupplyareequal.ThemarketoutcomeatEinfigure1.1isthereforeefficient.Thisismoreovertheonlyefficientoutcome.TheshadedareaAEOinfigure1.1isthemaximalvalueofW=B-Cthatthemarketcanoffer.
MC(SUPPLY)
Figure1.1:
Theefficiencyofacompetitivemarket
DemandexpressesmarginalbenefitMBofbuyers.SupplyexpressesmarginalcostMCofsuppliers.AtthepointEwheredemandequalssupply,MBandMCareequal,andW=B-Cisthereforemaximized.MaximalWistheareaAEO.
IfthepointEisefficient,howcanwenonethelessknowthatthemarketwillbeattheefficientpointEandnotsomewhereelse?
AcompetitiveadjustmentmechanismwillbringthemarkettothepointE,andonceatEthemarketwillstaythere.Thecompetitiveadjustmentmechanismisillustratedinfigure1.2.
WedenotethepricethatbuyersarewillingtopayforadditionaloutputbyPB.ThepricePBisdeterminedfromthedemandfunction.WedenotethepricethatsuppliersrequiretobepaidinordertosupplyadditionaloutputasPS.Thispriceisgivenfromthesupplyfunction.
AtthequantityQ1infigure1.2,thepricePBthatbuyersarewillingtopayforadditionaloutputexceedsthepricePSthatsuppliersrequireinordertosupplyadditionaloutput.Sincebuyersarewillingtopaythehigherpricethatsellersasktosupplymoreoutput,outputsuppliedincreasesfromQ1.OutputsuppliedcontinuestoincreaseuntiltheefficientoutputQEatthepointEisreached.AtoutputQE,thepricePBthatbuyersarewillingtopayandthepricePSthatsuppliersrequireinordertosupplyareequaltothepricePE.Outputnowstaysconstant.Eisthereforethepoint
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