Term
1. The term public choice is associated with a particular domain of study and a particular set of tools and assumptions
Q1. What is Public Choice? |
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Definition
Its the modern application of economic tools to study problems that fall under political science. Economists acting and thinking as political scientists. It studies the behavior of politicians and govt. officials as self-interested agents and their interactions in the social system under constitutional rules. |
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Q2- What are the basic behavioral assumptions made in Public choice?
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Definition
1. Methodological individualism - structures determine the range of choices open to an individual, but individual choices determine outcomes.
2. assumption of rationality - actions are seen as rational to the extent that they constitute the best way of achieving a given goal
3. economics - tells us that all people are assumed to be rational & self-interested actors, even those in government. |
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Q3- What is "government failure" (define and give 2 examples) and why is it predicted by public choice theory? |
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When government intervention causes a more inefficient result of goods & resources, than would occur without the intervention. It may make things worse than better. It prevents efficient govt. solutions to problems. Government failure is the public sector analogy for market failure.
1st example - Pork barrell spending: tendecy by legislators to encourage govt. spending in their own constituencies, whether or not its efficient or even useful. Like $13 million for an industrial theme park in Pennsylvania.
2nd example - Regulatory Capture:
acts as an encouragement for large firms to produce negative externalities, because they advances in their self-interests instead of the publics interests.
Rent seeking and rational ignorance are 2 mechanisms which make this happen
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Term
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Q4- What are the limitations or shortcomings of public choice discussed by Hindmoor? |
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Definition
Hindmoor says that Niskanen & Tullock are guilty of comparing the fiction of a perfect market with the reality of government failure. He believes everyone is completley rational, but invidivudla rationale doesnt always agree with group rationale. |
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Term
2. Rent seeking is central to much of public choice
Q1- What are rents? |
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Q2- What is rent seeking and why is it considered bad? |
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Q3- Describe 3 examples of rent seeking |
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Q4- In what ways does rent seeking play into theories of regulation? |
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Q5- What is rent extraction and how does it account for observed behavior? |
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3. Social Choice is an essential topic within the study of Public Choice
Q1- What is Social Choice and what is its role?
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Definition
The method in which the decision gets made. Its a framework for measuring individual interests and values as an aggregate towards collective decision, to generate a fair and accurate decision. It dates back from Condorcets formulation of voting paradox, and is related to Arrow's impossibility theorem.
Role of social choice - to look for the optimal voting system
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Q2- What are the essential lessons of Social Choice? |
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Definition
1. No such thing as a general or public will
2. We shouldn’t derive the legitimacy of a decision from the process
3. We shouldn’t think that voting gives choices it’s various qualities
4. Social choice doesn't determine elections because it depends on how you set the voting system up, you can change it. Therefore the outcome can vary in different results. There is no perfect voting system.
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Q3 - What is Arrow’s Theorem and why is it important to the discussion? |
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Definition
Important because - It explains why a voting system cant adequately compensate for individual preferences when applied to a large scale system. When voters have 3 or more options, no voting system can convert the ranked preferences into a complete & transitive ranking while meeting a specific set of criteria.You know you cant get the perfect voting system.
Arrow's theorem cant have the following 4 criterias:
1- non dictatorship
2- unrestricted scope
3-pareto principle
4- independence of irrelevant alternatives |
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Q4- What role does a constitution play in the context of a social choice? |
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Definition
It establishes the guidelines for a voting & future voting systems. Its more convenient because you dont have to invent another framework of choice everytime you make another social choice. Helps avoid the circular problem of how to decide choices. Constitution needs to be flexible for change. |
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Term
4. The choice to make decisions privately vs. publicly is critical for our understanding of public choice.
Q1- What governs this choice? |
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Definition
Making collective choices can reduce transactions costs, minimizes externalities, and override individual utility. So the amount of expected utility overrides.
Working together brings incentives for a greater public utility. Public choice can be better than acting alone because it avoids the sub-optimal equilibrium. But private choices can be better because there is a loss of precision with public choice. |
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Term
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Q2- List and discuss the criteria proposed by James Buchanan |
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Definition
1. degree of certainty - An individual has the same knowledge concering alternative choices.When you choose, you dont know what the final outcome may be. And when a person is elected, you dont know if he will act favorable to you. Voters must be informed about everything, but we all know this doesnt happen.
2. degree of social participation - When you buy an iterm from a store, you dont think of the social consequences of it (represents tastes). But when you vote, you do think of the social consequences it might bring (vote represents values).
3. degree of responsibility - In a market choice you dont have an option to free ride cuz the decision to buy it is up to you. (more likely to seek precise alternatives) In a collective choice, you have an option to free ride cuz its going to be made anyway.
4. degree of coercion - In the market you pay for something you receive. When you vote you may not get what you voted for. In the U.S most people are not happy with the collective choice, but we still do it cuz theres no better alternative.
5. power relations among individuals - In the market, money and status equal power to obtain a greater share for oneself. Market choice is under conditions of social inequality. Voting however is under conditions of freedom (no coercion). Market is like one dollar, one vote. Voting is like one person, one vote.
6. nature of the presented alternatives - Market choices is like "if you want more of 1 thing, buy less of another" while voting is mutually exclusive "you only choose 1 or the other" they're non-divisible. Voting is hard cuz its difficult for someone to consider all options and make the decision alone. |
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Term
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Q3- How does the Coarse theorem bear on this issue? |
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Definition
the theorem states that if there are no transaction costs and property rights are well defined, then bargaining towards an efficient outcome is possible without government intervention.
if collective choices normally define property rights, then they're responsible for how efficient individual bargainig can be. |
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Q4- How do property rights and transaction costs enter this discussion? |
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Definition
1. Property Rights 1.As long as property rights are defined and responsibility for externalities are assigned, there is no need for governmental intervention
2. Coase theorem asserts that when property rights are involved, parties naturally gravitate toward the most efficient and mutually beneficial outcome
3. Self-interested actors will be able to bargain their way towards an efficient solution and will be able to do whatever the initial allocation of property is
2. Transaction Costs •The Coase theorem only holds true when there are zero transaction costs (the cost of participating in a market), an assumption Coase says is unrealistic
•When there are positive transaction costs, actors may be unable to reach potentially mutually beneficial exchanges and the results of any process of self-interested bargaining may not be efficient
•Where there are complete competitive markets with no transactions costs, an efficient outcome will be selected, regardless of how property rights are divided
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5. The spatial representation of voting offers unique insight to politics
Q1- How does the spatial representation of a game differ from more traditional game theoretic representations? |
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Definition
Traditional Game Theoretic Representation - You don’t really see theories, or public policy. You get defined outcomes and sure numbers, Instead of a graph with certain points on a graph. Outcomes have actual utility values assigned to them.
Spatial Representation -Whereas on the 2D graph, you have an infinite number of equilibrium points. Spatial you have utility function (how people feel at different possible outcomes, further you are from max utility the lower the possibility you will participate) what choices are best. |
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Term
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Q2 - What is the Median voter theorem and what conditions must apply for it to hold true?
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Definition
It states that with majoritarian elections along a one-dimensional spectrum, the views of the elected officials reflect the view of the median voter. The outcome of the decision is the outcome most preferred by the median voter.
conditions :
1.only 2 parties
2.political space is a single dimensional spectrum
3. parties can move and occupy any point in this dimensional space
4.parties are vote-maximizers
5.voters vote for the closest party near them
6.theres perfect information
7.voters preferences are fixed |
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Q3- What happens when you extend spatial models to more than a single dimension |
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Definition
• Rings of utility are created, as opposed to the bell in the single dimension
• Less certainty because no single equilibrium. Instead, anything along that line can be equilibrium.
• More than one issue can be represented.
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Q4- Summarize Hindmoors concerns about the median voter theorem and spatial representations in general |
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Definition
Hindmoor believes the MVT states that both parties will converge with the same idea, the median one. Really, they move closer towards a compromise, but not directly. He does not believe the political sphere is single-dimensional, nor that the information is perfect. Parties dont always make their promises, and voters are not always sure what theyre voting for. No stable equilibrium exists, and voters preferences are not fixed. |
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