Wednesday, March 21, 2012

Chapters 6&7

*Sorry, I had forgotten that I left this in draft form

Cost benefit and willingness to pay; surely this seems to work out fine in the private market, money goes a lot farther than sentiment. In Frank's example of the Grandfather Clock, I agree that the most favorable outcome is for Malcolm to buy the clock for more money.Just because Susan would've maybe appreciated the clock more, all parties seemed to be better off with Malcolm getting the clock and Susan not spending beyond her means. However, I don't that this translates to the public sector. Things like noise ordinances are put in place to be fair to everyone, not cater to the party with the most money who has an opinion about it. In public matters, willingness to pay shouldn't determine the outcome, which he points out later in the chapter. I think my favorite example was the overbooked flight, the auction method definitely seems the fairest to me; nobody is having to pay (except their time and inconvenience because the flight was overbooked in the first place) and they end up being compensated for their troubles. This method I'm sure leaves all parties feeling more well represented than a situation where the highest bidder, or first person to arrive is ruled in favor of.

I think he is right about the inefficiency of distributing money to the poor, other methods are more costly and can create price controls. These programs also provide a way for the government to monitor this spending, to justify the spending, and giving tax payers someone to blame, ("it's my money anyways").

Overall, I feel that he has the right idea as far as willingness to pay in the private sector. I'm intrigued by the way  the chapter ended, I think chapter eight is going to be a good one.

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