Two broad perspectives are used to examine choices in the public sector One is the public interest approach, which uses cost-benefit analysis to find the efficient solution to resource allocation problems It assumes that the goal of the public sector is to maximize net social benefits Cost-benefit analysis requires the estimation of benefits and costs that are not revealed in the marketplace The second approach to the analysis of the public sector is public choice theory, which assumes utility-maximizing and rentseeking behavior on the part of participants in the public sector and those trying to influence it We examined two insights stemming from public choice theory: the problem of rational abstention from voting and the role of special interests CONCEPT PROBLEMS Identify each of the following government programs as efforts to correct market failure, to promote or discourage the consumption of merit or demerit goods, or to transfer income Head Start, a preschool program for low-income children Sports leagues for children sponsored by local governments A program to limit air pollution generated by power plants Species preservation efforts by the government Public Broadcasting System (PBS) stations regularly solicit contributions from viewers Yet only about 11% of these viewers, who on average have much higher incomes than the rest of the population, ever contribute Why? Do you expect to benefit from the research efforts sponsored by the American Cancer Society? Do you contribute? If you answered “Yes,” then “No,” does this make you a free rider? Attributed to Libby Rittenberg and Timothy Tregarthen Saylor URL: http://www.saylor.org/books/ Saylor.org 836