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PSCI231 Chapter Notes -Gross Domestic Product, Pareto Efficiency, Imperfect Competition

Political Science
Course Code
Brent Needham

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U n i v e r s i t y o f W a t e r l o o
PSCI 231: Government and Business
Ingrid Liu
Chapters 1, 3, 4, 7, 17, 5 (Page 81-86), 6 (Page 133-138), 12, 15, 16, 10 (Page 231-249), 11, 8
and 9 for course readings

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1.1 Introduction
Government policies directed towards business
Important focus of political debate
Questions of analysis:
1. What should role of government be?
2. What factors explain actual conduct of government?
1.2 Normative Approach to Policy Analysis
Normative analysis starts with assertion that government policy should seek to promote public interest
Set of goals of government attention:
1. Economic efficiency
2. Macroeconomic stabilization and growth
3. Fairness (equity)
4. Other social objectives (ex. Promote national unity or national culture)
1.3 Positive Approach to Policy Analysis
Focuses on:
1. Objectives
2. Behaviour
3. Interaction
Of individuals and groups who influence policy decisions
Important influence on policy decisions: voting
1.4 The Major Policy Areas
Major policy areas:
International trade policy
Environmental policy
Competition policy
Price and entry regulation
Public enterprise and Crown corporations
Macroeconomics stabilization policy and public debt
Some directed towards specific firms and industries
Others are framework or background policies
1.5 Air Canada, the Airline Industry, and Public Policy
Sept 2004 Air Canada emerged from bankruptcy to make fresh start as Canada’s major airline

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Air Canada created by Government of Canada in 1937 under Trans-Canada Airlines (TCA)
Owned by gov’t – crown corporation or public enterprise
Profits and losses belong to government
1.6 Globalization, Internationalization, and Canada’s Role in the World Economy
Emergence of global financial markets has reduced the ability of any one government to control domestic
financial events
Global Production production structures in which single final product draws on production activities carried
out in a wide variety of countries
Ex. Car produced in Canada may have parts from other countries
The increasing significance of global processes and activities
Processes and activities that often transcend national boundaries
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