| Chapter 6 Outline |
| II. GOVERNMENT ENFORCEMENT OF PROPERTY RIGHTS |
| A. Definitions and General Comments |
| 1. A decentralized market economy requires the establishment of property rights. |
| a. The existence of property rights allows voluntary market transactions to
work well. |
| 2. Government establishes and protects property rights more efficienfiy than private firms. |
| a. Private protection can result in the free rider problem. |
| | 1. A free rider is someone who uses the goods or services provided by others without paying for them. |
| | 2. The free rider problem means that too little of the good is provided. |
| b. It is generally cheaper to have a single agency provide property rights. |
| c. The protection of property rights probably requires coercion. |
| | 1. Many individuals believe coercive powers shotrid be reserved for representative government rather than private individuals. |
| d. Since the marginal cost of property rights is zero, private provision results
in too little of the good being produced. |
| B. Crime |
| 1. In order to provide the efficient level of crime control, government must equate marginal social cost with marginal social benefit. |
| a. The marginal social benefit of crime control decreases as the number of crimes and the probability of being a victim decreases. |
| | 1. As the probability of being a victim falls, people are willing to pay less for additional decreases in criminal activity. |
| b. The marginal social cost of crime control increases as the number of
crimes and the probability of being a victim decreases. |
| | 1. To obtain additional decreases in criminal activity, more resources
must be devoted to crime control. |
| | a. Because the opportunity cost of additional resources increases,
the marginal sodal cost of crime control will increase. |
| | 2. The lower the crime rate, the greater the amount of resources used to reduce this rate by a given amount. |
| | 3. The lower the crime rate, the more freedom citizens must sacrifice in order to gain additional reductions in crime. |
| 2. Because efficiency requires equating marginal social benefit and marginal social cost, the efficient level of crime will generally be greater than zero |