Political Science 1020E Lecture Notes - Lecture 12: Friedrich Hayek, Marginal Utility, Communism

• School: Western University
• Department: Political Science
• Course: Political Science 1020E
• Professor: Nigmendra Narain

Document Summary

For utilitarians, the idea of diminishing marginal utility suggests that income should be distributed : relatively equally (answer is not whichever minimizes net welfare) Individuals own things but also some state- owned enterprises. Sale of some goods is distributed? voluntary exchange prohibited. What determines which goods get produced? monopolies gets produced. A(cid:396)e(cid:374)"t (cid:373)a(cid:396)kets i(cid:396)(cid:396)atio(cid:374)al: friedrich hayek says no. It satisfies people"s (cid:449)a(cid:374)ts a(cid:374)d pa(cid:396)eto i(cid:373)p(cid:396)o(cid:448)e(cid:373)e(cid:374)t: pareto means one cannot become better off without making someone else worse, so a pareto improvement is one person becomes better off without anyone becoming worse off. Some goods have externalities: externalities means the cost or benefit of producing these goods is externalized. Cost nothing to the consumer, who would rather not have them (ie pollution: free markets oversupply them. It is cheaper to make others pay that cost. Goods with positive externalities cost nothing to the consumer, who wants them. Make it illegal (or more costly) to produce some goods with negative externalities.