Microeconomics is a branch of economics that studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms.
Rational choice theory refers to a set of guidelines that help understand economic and social behaviour. The theory postulates that an individual will perform a cost-benefit analysis to determine whether an option is right for them. It also suggests that an individual's self-driven rational actions will help better the overall economy. Rational choice theory looks at three concepts: rational actors, self interest and the invisible hand.
Within economics, the concept of utility is used to model worth or value. Its usage has evolved significantly over time. The term was introduced initially as a measure of pleasure or happiness within the theory of utilitarianism by moral philosophers such as Jeremy Bentham and John Stuart Mill. The term has been adapted and reapplied within neoclassical economics, which dominates modern economic theory, as a utility function that represents a single consumer's preference ordering over a choice set but is not comparable across consumers. This concept of utility is personal and is based on choice rather than on the pleasure received, and so is more rigorously specified than the original concept but makes it less useful for ethical decisions.
Public choice, or public choice theory, is "the use of economic tools to deal with traditional problems of political science". Its content includes the study of political behavior. In political science, it is the subset of positive political theory that studies self-interested agents and their interactions, which can be represented in a number of ways – using standard constrained utility maximization, game theory, or decision theory. It is the origin and intellectual foundation of contemporary work in political economy.
The theory of consumer choice is the branch of microeconomics that relates preferences to consumption expenditures and to consumer demand curves. It analyzes how consumers maximize the desirability of their consumption as measured by their preferences subject to limitations on their expenditures, by maximizing utility subject to a consumer budget constraint.
Welfare economics is a branch of economics that uses microeconomic techniques to evaluate well-being (welfare) at the aggregate (economy-wide) level.
Public administration is the implementation of government policy and also an academic discipline that studies this implementation and prepares civil employees for working in the public service. As a "field of inquiry with a diverse scope" whose fundamental goal is to "advance management and policies so that government can function." Some of the various definitions which have been offered for the term are: "the management of public programs"; the "translation of politics into the reality that citizens see every day"; and "the study of government decision making, the analysis of the policies themselves, the various inputs that have produced them, and the inputs necessary to produce alternative policies." The word public administration is the combination of two words—public and administration. In every sphere of social, economic and political life there is administration which means that for the proper functioning of the organisation or institution it must be properly ruled or managed and from this concept emerges the idea of administration.
The expected utility hypothesis is a popular concept in economics that serves as a reference guide for decisions when the payoff is uncertain. The theory recommends which option rational individuals should choose in a complex situation, based on their risk appetite and preferences.
Utility maximization was first developed by utilitarian philosophers Jeremy Bentham and John Stewart Mill. In microeconomics, the utility maximization problem is the problem consumers face: "How should I spend my money in order to maximize my utility?" It is a type of optimal decision problem. It consists of choosing how much of each available good or service to consume, taking into account a constraint on total spending (income), the prices of the goods and their preferences.
Government failure, in the context of public economics, is an economic inefficiency caused by a government intervention, if the inefficiency would not exist in a true free market. It can be viewed in contrast to a market failure, which is an economic inefficiency that results from the free market itself, and can potentially be corrected through government regulation. The idea of government failure is associated with the policy argument that, even if particular markets may not meet the standard conditions of perfect competition required to ensure social optimality, government intervention may make matters worse rather than better.
Revealed preference theory, pioneered by economist Paul Anthony Samuelson in 1938, is a method of analyzing choices made by individuals, mostly used for comparing the influence of policies on consumer behavior. Revealed preference models assume that the preferences of consumers can be revealed by their purchasing habits.
William Arthur Niskanen was an American economist. He was one of the architects of President Ronald Reagan's economic program and contributed to public choice theory. He was also a long-time chairman of the Cato Institute, a libertarian think-tank.
The budget-maximizing model is a stream of public choice theory and rational choice analysis in public administration inaugurated by William Niskanen. Niskanen first presented the idea in 1968, and later developed it into a book published in 1971. According to the budget-maximizing model, rational bureaucrats will always and everywhere seek to increase their budgets in order to increase their own power, thereby contributing strongly to state growth and potentially reducing social efficiency. The bureau-shaping model has been developed as a response to the budget-maximizing model. Niskanen's inspiration could also have been Parkinson's law sixteen years earlier (1955).
In economics and other social sciences, preference is the order that a person gives to alternatives based on their relative utility, a process which results in an optimal "choice". Preferences are evaluations, they concern matters of value, typically in relation to practical reasoning. Instead of the prices of goods, personal income, or availability of goods, the character of the preferences is determined purely by a person's tastes. However, persons are still expected to act in their best interest. Rationality suggests that people act in ways which serves their best interest when they are faced with a decision. Meaning when given a set of options, you must necessarily have a set of preferences.
Household economics analyses all the decisions made by household. These analyses are both at the microeconomic and macroeconomic level. This field analyse the structures of the household and their behaviour: it includes decision making, division of labour among the household, allocation of time to household production, marriage, divorce, fertility, investment on children, resource allocation.
Rational Choice Institutionalism (RCI) is a theoretical approach to the study of institutions arguing that actors use institutions to maximize their utility, and that institutions affect rational individual behavior. Rational Choice Institutionalism arose initially from the study of congressional behaviour in the U.S. in the late 1970s. It employs analytical tools borrowed from neo-classical economics to explain how institutions are created, the behaviour of political actors within it, and the outcome of strategic interaction.
The flypaper effect is a concept from the field of public finance that suggests that a government grant to a recipient municipality increases the level of local public spending more than an increase in local income of an equivalent size. When a dollar of exogenous grants to a community leads to significantly greater public spending than an equivalent dollar of citizen income: money sticks where it hits, like a fly to flypaper. Grants to the government will stay in the hands of the government and income to individuals will stay with these individuals.
The altruism theory of voting is a model of voter behavior which states that if citizens in a democracy have "social" preferences for the welfare of others, the extremely low probability of a single vote determining an election will be outweighed by the large cumulative benefits society will receive from the voter’s preferred policy being enacted, such that it is rational for an “altruistic” citizen, who receives utility from helping others, to vote. Altruistic voting has been compared to purchasing a lottery ticket, in which the probability of winning is extremely low but the payoff is large enough that the expected benefit outweighs the cost.
The opposition between substantivist and formalist economic models was first proposed by Karl Polanyi in his work The Great Transformation (1944).
Faizul Latif Chowdhury is a civil servant from Bangladesh, who currently serves as the Director General of Bangladesh National Museum. Chowdhury has written on a variety of academic topics, including corruption in public administration, tax policy, economics of tax evasion and tax avoidance, smuggling, and international trade policy. He is also a translator of Bengali poetry, and has researched the modern poet Jibanananda Das. Currently he works at Independent University Bangladesh as adjunct professor business.
