1. Manure
can generate unpleasant side effects in terms of smells, particulate matter in
the air, water contamination, and even ozone damage. In an attempt to reduce these effects and
produce more electricity some farmers are using containment areas and the methane
gas from decomposing waste can also be captured and used to run electricity
generators. According to a TID
representative this could provide “an almost endless supply of fuel in this
dairy-rich region.” (Modesto Bee 10/19/04, http://www.modbee.com/local/story/9305140p-10211546c.html). Some government grants have been made
available to encourage construction of these containment and energy generation
facilities.
Note this question has 10
parts intended to guide you in analyzing the proposal. If you think carefully each part can be
concisely explained in a few sentences.
a. In designing a benefit cost
analysis of this activity, what are some of the key data or information you would
want to gather?
b. Briefly explain an
externality related economic rationale for government intervention.
c. Briefly explain the
conceptual differences between the social costs or benefits and the on budget
costs or benefits to government agencies that might be involved in this type of
project.
d. Some taxpayers are not
opposed to turning manure into electricity, but oppose any taxpayer funds for
such proposals to encourage farmers to cleanup what they perceive as the
farmers’ mess to begin with. Can you
think of any alternatives other than subsidies that would encourage more
farmers to consider building and using these facilities?
e. The state is very concerned
about a substantial budget shortfall.
Some have suggested putting a tax on electric utilities to fund this
proposal. Briefly explain an efficiency
related rationale for such a tax.
f.
What would tend to determine the economic incidence of the tax?
g. Would a tax on electric
utilities be progressive, regressive or proportional?
h. What are some alternatives
you might consider for funding such a proposal, and why?
i.
Some people may be hurt by the taxes and some people may benefit from
the project. How does the Hicks-Kaldor
criterion suggest you choose whether to undertake this project? Why might some disagree?
j.
Does it make more sense for these policies to be handled at the
federal, state, or local level? Why?
2. According to the NY Times “flu kills about 36,000 people in the United
States and hospitalizes another 200,000”.
Recently the
Note this question has 10 parts. If you think carefully each part can be concisely explained in a few sentences using concepts and principles developed by public finance economists.
a. Please discuss some of the
key economic reasons that the government is involved in this issue.
b. Why has the government
frequently subsidized the distribution of vaccine?
c. First assume there is no
shortage of vaccine. If you were to do a benefit cost analysis of subsidizing
the distribution of vaccine, what kinds of information would you want?
d. Once you have the information you would use in a benefit cost analysis how would you handle benefits and costs that occur in different periods of time?
e. How would the current
shortage change the nature of your benefit cost analysis?
f. Does it matter that some benefits or costs
may be on-budget or off-budget items? Be sure to give an example of each
to illustrate your explanation.
g. What are some alternatives you might consider for
funding your vaccinations, and why?
h. Suppose a general sales tax is used. What
would be the likely incidence of such a tax?
i. Children and the elderly are particularly
vulnerable to illness. Many children live in poverty. Would this
matter in designing your proposal and evaluating the benefits?
j. Does it make more sense for these policies to
be handled at the federal, state, or local level? Why?