Tài liệu Taxes and government spending

Government spending
We may justify government spending on two grounds:
EQUITY
–a progressive tax and transfer system redistributes income from rich to poor
EFFICIENCY
–correction of market failure may improve resource allocation

Private and public goods
A private good
–if consumed by one person, cannot be consumed by another person.
e.g. dental treatment
A public good
–even if consumed by one person, can still be consumed by other people.
e.g. street lighting
There are strong externalities associated with public goods,
so government intervention may be justified to ensure
appropriate provision.