Attributed to Libby Rittenberg and Timothy Tregarthen Saylor.orgThe fact that most transfer payments in the United States are not means-tested leads to something of a paradox: some trans
Trang 1Attributed to Libby Rittenberg and Timothy Tregarthen Saylor.org
The fact that most transfer payments in the United States are not
means-tested leads to something of a paradox: some transfer payments involve
taxing people whose incomes are relatively low to give to people whose
incomes are relatively high Social Security, for example, transfers income
from people who are working to people who have retired But many
retired people enjoy higher incomes than working people in the United
States Aid to farmers, another form of non-means-tested payments,
transfers income to farmers, who on average are wealthier than the rest of
the population These situations have come about because of policy
decisions, which we discuss later in the chapter
KEY TAKEAWAYS
One role of government is to correct problems of market failure
associated with public goods, external costs and benefits, and
imperfect competition
Government intervention to correct market failure always has the
potential to move markets closer to efficient solutions, and thus
reduce deadweight losses There is, however, no guarantee that these
gains will be achieved
Governments may seek to alter the provision of certain goods and
services based on a normative judgment that consumers will consume
too much or too little of the goods Goods for which such judgments
are made are called merit or demerit goods
Governments redistribute income through transfer payments Such
redistribution often goes from people with higher incomes to people
with lower incomes, but other transfer payments go to people who
are relatively better off