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Definition
Interest Group Politics: if harm and benefit are concentrated Majoritarian Politics: when harm and benefit are both widely distributed Client Politics: when benefits are concentrated and harm is widely distributed Entrepreneurial Politics: benefits are widely distributed and harm is concentrated |
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Issues: basis unit of analysis Interests: groups or individuals with a stake in the issue Institutions: government and nongovt institutions where issues are addressed Information: what parties know or believe about issues |
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Issue Identification Interest Group Formation Legislation Administration Enforcement |
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-Majority rule is incapable. -Each alternative defeated by another. |
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| Arrow's Impossibility Theorem |
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-way to vote strategically -expands paradox from elections into policy -determine what's best based upon ordered preferences |
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| What is individually rational is not collectively rational |
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-Aggregate -Per Capita -Substitutes |
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-Organizing Costs -Direct Costs -Effectiveness |
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| Generic Nonmarket Strategies |
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-Representational -Majority Building -Informational |
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| Social policies of Anti-Trust Laws |
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Definition
-concern for concentrations of economic power & abuse of the power -check and balance for power |
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| Economic policies of Anti-Trust Laws |
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Definition
-protects competition -concerned with market structure, conduct of participants, and market performance |
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-receive 3x the amount of damages -encourage people to bring light on bad acts -deter people from committing bad acts |
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Section1: no conspiring between businesses -targets price fixing as price is essential Section2: no monopolization -"Big is bad" -questions to ask - Firm affect market price?
- Geographic market?
- Product?
- Legal market share? (no pred. pricing)
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-expands on Sherman Act -bans price discrimination -bans tying products -bans mergers that hurt competition -triple damages
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-prevent unfair competition -established independent regulatory agency |
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-prohibits price discrimination -exceptions - Cost justified
- Match competition
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-always a violation (per se) -focuses on attempts by companies fo fix prices on same product -ex: retailer to retailer |
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-producers of good used in different parts of production process -ex: manufacturers try to get retailers to sell at specific prices.
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-agreements or practices that are damaging to competition with no redeeming qualities -always fail the rule of reason -two ways to defend - Didn't commit the act.
- It wasn't unreasonable to commit the act.
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-high fixed costs -high barriers to entry -huge economies of scale -no substitutes
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-one group of customers pays more and another group pays less than the cost of their service
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-occurs when an individual, organization or firm seeks to make money by manipulating the economic and/or legal environment rather than by trade and production of wealth -regulation not created for market imperfections |
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occurs when politicians, who are supposed to be acting in the public interest, act systematically to favor particular vested interests this is inevitable because vested interests have concentrated financial stake in the outcomes of political decisions, thus ensuring that they will find means—direct or indirect—to capture decision makers
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| Strict Liability for Product Injuries |
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Definition
- plaintiff has to show producer was at fault
- matter of state law
- manufacturer has best idea of how dangerous their products really are
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| Insurance Theory (Product Liability) |
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- producer is best position to calculate social harm
- increase price to save money for law suits
- producer is held responsible for injuries
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| Product Liability & Social Efficiency |
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- efficiency requires balancing injury and costs
- society tolerates some injuries because preventing them would cost too much
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- efficiency requires care by producer, consumer, or both
- higher prices due to liability cash = reduced injuries
- products purchased by those who value product
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| Entitlements (Property & Liability) |
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Definition
- Property: can't infringe without consent of holding party
- Liability: can infringe but must compensate owner for loss associated with infringement
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- best social outcome whether you use property, liability, or abatement rules
- assign cost of protection to most efficient solution
- Ex: Swimming pools and fences.
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| Calabresi and Melamed Principles |
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Definition
- Assign entitlements based on knowledgeable choices about transactions costs
- Assign costs to party best able to make benefit-cost analysis
- Assign costs to party who can most efficiently reduce them
- Result: manufacturer usually responsible
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| "Command & Control" Regulation |
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- the order and enforcement of uniform rules or standards
- can cause inefficency and administrative nightmares because ignores abatement costs
- can be used to help force the development of new technologies
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| "Market Incentive" Regulation |
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Definition
- gives company control over how to meet the order rather than specific controls
- ex: credits and offsets
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| Appropriability of Intellectual Property |
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Definition
- ability to cash in
- property is central provides incentives to contribute
- determined by
- how easy to replicate discovery
- strength of public protection from discovery
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| Patents, Copyright, Trademarks, Trade Secrets |
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Definition
- Patents: balance of reward and social benefit, 20 years
- Copyrights: original expression, life of author + 70 years
- Trademarks: provides social and private value
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| Parliamentary System (Diet) |
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- aligned executive and legislative powers
- Two unequally powered houses
- House of Reps: elects prime minister and has most power
- House of Councillors: blocks legislation unless overriden 2/3 vote by reps
- Prime Minister: represents goverment convenes the cabinet
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| Japan's Ministries (Guidance): Setup |
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Definition
- Headed by a politician
- Two vice ministers
- Parliamentary Minister
- Administrative Vice Minister
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| Japan's Ministries (Guidance): Ministries |
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Definition
- Ministry of Finance
- Ministry of Economy Trade and Industry
- Posts and Telecommunications Ministry
- Construction Ministry
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| Japan's Ministries (Guidance): Directives |
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Definition
- expertise in resolving problems and devising effective policies
- ability to direct resources through regulation
- policies hard to understand by foreign business
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- European Commission: executive and administrative body
- Council of Ministers: legislative body (Regulations/Directives/Decisions/Recomm.)
- European Parliament: democratic supervision powers
- European Court of Justice: overturn decisions that conflict with EU treaties
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- gives the European Parliament the power to adopt legislation jointly with the Council of the European Union, requiring the two bodies to agree on an identical text before any proposal can become law.
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- feature of EU and Japanese where invite special interest groups to have say in policy making
- formal government sanction
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- product of a country's decision
- improve industry against rest of world
- conflicts with comparative advantage
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- happens between two governments
- agree to restrict trade
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- US passed this protectionist measure during the depression
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- US plunked billions into Europe
- Political driver
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| Comparative Advantage After WWI |
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- economic driver for market economies
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Definition
- designed to rebuild Europe
- used for 3rd world infrastructure and poverty
- US largest shareholder so get to pick president
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Term
| International Monetary Fund (IMF) |
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Definition
- responsible for short-term currency crisis
- dictates domestic policy
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| International Trade Organization (ITO) |
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Definition
- set up rules to govern international trade
- US refused
- GATT: an agreement NOT a treaty!
- Treaty needs 2/3 of senate while agreement only needs president
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| Benefits & Costs of Increasing Numbers of Market Economies |
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Definition
- Benefits: Peace, Prosperity
- Costs: Limited Sovereignty, Income Redistribution, Culture Change
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| World Trade Organization (WTO) Rules |
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Definition
- Most favored nation (MFN): everyone else gets same deal
- National Treatment: national goods don't get different treatment
- Anti-Dumping: below cost or home-market price
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| Prisoners' Dilemma (International Trade) |
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- each country has incentive to subsidize local businesses
- solved by free trade treaties
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| US Trade Act of 1974: Section 201 |
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Definition
- Escape Clause = Injury Relief
- Tariffs are allowed to be temp relief
- Conditions: applied equally, temp, offset by reductions
- reflects political realism
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| US Trade Act of 1974: Section 301 |
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Definition
- Super 301 - politically motivated
- a trade policy to force negotations
- retaliate against any country with closed markets
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| Aysmmetrical Politics of International Trade |
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Definition
- due to sunk costs and rent on resources
- creates short termi incentive to protect local markets
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Corporate Social Responsiveness |
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Definition
- responding to outside pressures
- not willing making a decision
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| Corporate Social Responsibility |
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Definition
- done under a more moral based approach
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Socially Responsible Performance |
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Definition
- direct correlation with corporate financial performance
- takes into the interest of the shareholders beyond the markets or the law
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- prefers strategic CSR
- any other forms distract from the purpose of the firm
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- businesses best position to be part of the solution
- have an ethical duty
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- Friedman approved
- Done to increase profits and firm value
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Definition
- reliance on managers for allocation of resources
- occurs because managers have discretion in options they persue
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| Corporate Control (Market) |
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Definition
- market will remove inadequate managers
- stockholders might remove philanthrapist
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