哈维罗森财政学笔记全英Chapter-3.docx

哈维罗森财政学笔记全英Chapter-3.docx

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ChapterThreeToolsofNormativeAnalysis

Giventheenormousdiversityofthegovernment'seconomicactivities,somekindofgeneralframeworkisneededtoassessthedesirabilityofvariousgovernmentactions.

WelfareEconomics

Theframeworkusedbymostpublicfinancespecialistsiswelfareeconomics,thebranchofeconomictheoryconcernedwiththesocialdesirabilityofalternativeeconomicstates.Thetheoryisusedtodistinguishthecircumstancesunderwhichmarketscanbeexpectedtoperformwellfromthoseunderwhichmarketsfailtoproducedesirableresults.

1.PureEconomyExchange

AParetoefficientallocationoccurswhennopersoncanbemadebetteroffwithoutmakinganotherpersonworseoff.Paretoefficientrequiresthateachperson'smarginalrateofsubstitutionbetweentwocommoditiesequalthemarginalrateoftransformation（MRTaf=MRSAdamaf=MRSEveaf）.Paretoefficientistheeconomist'sbenchmarkofefficientperformanceforaneconomy.

Paretoimprovementisareallocationofresourcesthatmakesonepersonbetteroffwithoutmakinganyoneelseworseoff.