PRINCIPLES OF MACROECONOMICS Principles Of Macroeconomics

Running head: PRINCIPLES OF MACROECONOMICS
Principles Of Macroeconomics
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1PRINCIPLES OF MACROECONOMICS
Table of Contents
Good Economic versus Good Politics........................................................................................2
Public goods...............................................................................................................................2
References..................................................................................................................................3

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Good Economic versus Good Politics
Most of the times good economics and good politics are at conflicting state. One
example can be price ceiling. This refers to a situation when government sets a legal
maximum price of a good. Rent is an example of such policy. As government imposes ceiling
on rents, demand for house increases but supply of good house falls. This will result in black
markets and bad quality houses1. This is good political policy as more people can afford
house but is bad economics as it leads to black market. Good politics often associated with
good economics as well. International trade us definitely a good politics as it enhance relation
among countries. From economic point of view also, trade is good as it raises GDP, foreign
reserves and currency strength.
Public goods
Non-rivalry and non-excludability are the two distinctive features of public goods.
However, because of these two characteristics free market fails to ensure efficient allocation
of public goods. As no one can be excluded from using a public good once the good is
served, people has a tendency to free ride. Because of free rider problem, no one has any
incentive to reveal the actual willingness to pay. The demand curve thus cannot reflect
marginal benefit to the society. Public goods thus cannot be efficiently produced by private
market2. In general, public goods though are non-excludable but in some situation, it may be
an excludable one. Public good is excludable when there is a nominal cost creating barriers to
consumption of the good. An example is post office. The service though is provided for
public low cost like stamps people not paying for stamps from using the service.
References
1 Acemoglu, Daron, and James A. Robinson. "Economics versus politics: Pitfalls of policy advice." Journal of
Economic Perspectives 27.2 (2013): 173-92.
2 Baumol, William J., and Alan S. Blinder. Microeconomics: Principles and policy. Nelson Education, 2015.

3PRINCIPLES OF MACROECONOMICS
Acemoglu, Daron, and James A. Robinson. "Economics versus politics: Pitfalls of policy
advice." Journal of Economic Perspectives 27.2 (2013): 173-92.
Baumol, William J., and Alan S. Blinder. Microeconomics: Principles and policy. Nelson
Education, 2015.