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There is a strong presumption, however, that economic welfare is reduced if the government undertakes the allocation of resources would otherwise be allocated by the unimpeded operation of market forces. The theorems of [[welfare economics]] demonstrate that market forces operating under conditions of ''perfect competition'' and ''flexible prices'' guarantee the optimum allocation of a country's resources. A centrally-determined allocation of resources cannot offer such a guarantee because those responsible lack access to the information about the preferences of consumers that is provided to a competitive market by their purchasing behaviour.  But if market forces are impeded by monopolistic possessors of ''market power'' or by the presence of ''externalities'', that information is distorted, economic welfare is diminished,  and there is a possibility that public expenditure could be used to correct the deficiency.  
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==Index and Glossary==
There is an index to the topics dealt with in the economics articles [[Economics/Related Articles|here]], and a glossary of economic terms [[Economics/Glossary|here]].


See also the  [[Politics/Index|'''index to the politics articles ''']].


[[User:Nick_Gardner#Methodology|methodology]]


{|align="right" cellpadding="10" style="background-color:#FFFFCC; width:40%; border: 1px solid #aaa; margin:20px; font-size: 92%;"
|"''The European Union is something ...
very precious, not only for us in Europe, but also for the rest of the world. Because the European Union is, in fact, the result of a project for peace that brought together nations emerging from the ruins of the Second World War. It was the European Union that united them in peace around the values of respect for human dignity, freedom, democracy, justice, rule of law and respect for human rights.''"


 
:Merci Olsson, of Nobel Med, congratulating President Barroso on the award of The Nobel Peace Prize t the European Union, 12 October 2012.
The quantification  of the economic effects of public expenditure is subject to errors and  uncertainties arising from the practical difficulty of determining the preferences of those affected and the conceptual obstacle to the aggregation of their gains and losses of economic welfare<ref> See "The Social Welfare Controversy"[http://en.citizendium.org/wiki/Welfare_economics/Tutorials#The_social_welfare_controversy]</ref>. In contrast, social welfare is necessarily maximised, according to the theorems of [[welfare economics]], by market forces operating under conditions of ''perfect competition'' and ''flexible prices''. For those reasons, it is generally presumed that social welfare is reduced if the public sector controls the provision of   goods and services that could otherwise be supplied by the private sector<ref> The article on [[public goods]] deals with circumstances under which the alternative of supply by the private sector is not available, or only partially available</ref>. That presumption is tenable only in the absence only in the absence of significant amounts of ''market power'', and it has been argued that it need not hold when there is appreciable interdependence among members of a community<ref>[http://www.questia.com/read/66063831 William Baumol: ''Welfare Economics and the Theory of the State'', Chapter 12, page 180 (summary), Harvard University Press, 1965. (accessible online to Questia subscribers)]</ref>.
|}
 
It is nevertheless common practice to evaluate public expenditure proposals, such as road improvements, using the technique of [[cost-benefit analysis]].
==Political aspects==
The conceptual obstacle to interpersonal arises from the fact that it is not possible to know what goes on in someone else's mind. But, although a full understanding is clearly impossible, some insight is often provided by introspection, and there are cases where  an  approximate comparison is all that is needed. There can be little doubt for example that a road improvement that saves a hundred lives yields benefits that outweigh the costs suffered by a few families who have to move to new homes.

Latest revision as of 04:28, 22 November 2023


The account of this former contributor was not re-activated after the server upgrade of March 2022.


Index and Glossary

There is an index to the topics dealt with in the economics articles here, and a glossary of economic terms here.

See also the index to the politics articles .

methodology

"The European Union is something ... 
very precious, not only for us in Europe, but also for the rest of the world. Because the European Union is, in fact, the result of a project for peace that brought together nations emerging from the ruins of the Second World War. It was the European Union that united them in peace around the values of respect for human dignity, freedom, democracy, justice, rule of law and respect for human rights."
Merci Olsson, of Nobel Med, congratulating President Barroso on the award of The Nobel Peace Prize t the European Union, 12 October 2012.
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