ANALYZING THE CASE FOR GOVERNMENT INTERVENTION
IN A REPRESENTATIVE DOMOCRACY*
Timothy Besley
London School of Economics and Political Science
and
Stephen Coate
University of Pennsylvania
Contents:
Abstract
1. Introduction
2. Background
3. The Model
4. Political Equilibrium under the Two Regimes
5. The Case for Intervention
6. Discussion
7. Concluding Remarks
References
Appendix: Proofs of Results
Figures 1 – 5
Discussion Paper
No. TE/07/335
September 1997
*
The Suntory Centre
Suntory and Toyota International Centres for
Economics and Related Disciplines
London School of Economics and Political Science
Houghton Street
London WC2A 2AE
Tel.: 020-7955 6698
Thanks are due to Dennis Epple, Raquel Fernandez, Gene Grossman, Kevin Roberts and
a number of seminar participants for helpful comments. The authors are also grateful to the
Suntory and Toyota International Centres for Economics and Related Disciplines at the LSE
for financial support.
Abstract
The welfare economic method for analyzing the case for government intervention is
often critized for ignoring the political determination of policies. The standard method
of accounting for this critique studies the case for intervention under the constraint
that the level of the instrument in question will be politically determined. We critize
this method for its implicit assumption that new interventions will not affect the level
of existing policy instruments. We argue that this assumption is particularly
misleading in suggesting that political economy concerns must dampen the case for
intervention.
Keywords: Government intervention; public choice.
JEL Nos.: D72, H10, H41.
© by the authors. All rights reserved. Short sections of text, not to exceed two
paragraphs, may be quoted without explicit permission provided that full credit,
including © notice, is given to the source.
Contact address: Professor Timothy Besley, London School of Economics and
Political Science, Houghton Street, London WC2A 2AE. Email: t.besley@le.ac.uk