Public Economics

lecture 1: Fundamental concepts

Ing. Abdelwalid Rouag
Abdelwalid.Rouag@upce.cz
Consultation hours: Mondays 13:00 15:00
(Wednesdayss and Fridays with agreement)
2014/2015 winter semester

summary

Economy
Economy vs. Economics
Microeconomics
Macroeconomics
Public economics
Public economics and other fields of
economics
Positive and normative economics.

Economy

The large set of inter-related economic production and

consumption activities which aid in determining how
scarce (rare) resources are allocated effectively.
Allocation (distribution/use) of production factors: natural
resources, labor, capital.
Resolves the scarcity problematic -> limited resources and
unlimited peoples needs.

Economy vs. Economics

Economy then, is the human activity that consists
in producing, exchanging, distributing, and
consuming goods and service
Its studied by economics and realized inside
an economic system.
Earlier name of economics was political
economy.
Focusing on the subject of general economics, the
field can be shared into microeconomics and
macroeconomics.

Microeconomics
Studies the behavior of economic individuals such
as households and firms in making decisions on
the allocation of their limited resources.
Microeconomics examines how these decisions
and behavior affect the supply and demand for
good and services.
Analyzes market mechanisms; perfect and
imperfect competition markets that establish
relative price of goods and services.

Macroeconomics
Deals with the performance,
structure, behavior and decision
making of an economy as a whole
rather than individual market.
It study aggregated indicators such
as GDP, unemployment rates, price
indices (inflation), macroeconomic
growth, balance of payments, -> how
the whole economy functions.

Macroeconomics vs.
Microeconomics
Both are the general fields of
Economics;
Using economic models, macro and
micro aims to the global
equilibrium
.but neglect as well the economics
of non-profit sector
Public Economics or the
Economics of the Public Sector

Public economics
Science discipline which examines the reasons of existence,
the structure, functioning principals and the affectivity of the
non-profit sector.
It also refers to the study of government policy (state
intervention) in the lens of economic efficiency and equity.
Framework of the participation or not of the government in
the economic markets and to what extent its role should be.
Studies the part of the national economy within which the
public coercive power is applied for the allocation and
redistribution decisions.

Methodological approaches:
Positive vs. Normative economics
Positive economics: concerns the
description and explanation of the
economic phenomena answering the
question What is it?
Normative economics: expresses value or
normative judgment about economic
fairness, answering the question what the
outcomes of the economy or goals of
public policy ought to be?

Public economics and other

economic fields (Economics of the
public sector)
Uses the results of public economics for
examining the structures and the functioning
rules of each branch of the public sector (ex.
Education, health care, security, justice)
It also studies relations and processes linking
the public sector subjects and their relations
with economic subjects such as individuals,
households, firms, private non-lucrative
organizations)

Public economics and other economic fields

(Economics of non-lucrative organizations)

Uses results of public economics

studies for examining the structures
and the functioning rules of the nonlucrative organizations such as
foundations, churches, public high
schools, political parties

Public Finance
Science discipline which concerns the
financial flow insuring the good functioning
of the public sector
Assesses the government revenues and
expenditure: adjustment of one or the
other to achieve desirable effects and
avoid undesirable ones
Threefolds objectives- efficient allocation
of resources, distribution of incomes,
macro stabilization

Thank you for your

attention