good morning.

Poli 160AA Final Study Guide could someone please explain the relevance to Border Wars and about the black market for internal organs? I think when the professor talked about them in class, he just exemplified the issues related with making policies. Basically, how do you go about making a policy that is about human life and assess the costs and values of that life?

Reading List/ Lecture Notes e 9/27 Lecture 1: What is public policy?

o supply of goods and services private welfare payments to the poor, subsidies for farmers o relatively directly to certain individuals public clean air, military defense o something everyone can share and benefits from laws and regulations determined by the govt. FDA or other regulatory administrations

Why do we need public policy? o equality, trade offs o collective action working together to raise money fund programs research towards common goal generally difficult to get everyone to work together without public policy o scarcity resources and funds are finite - public policy allows us to determine which group or organization should receive funding allows for distribution of funds

How do we make public policy? o analysis how to come up with and determine best solution to problem o decision making choosing the best option from a series of plans o vote, identify problem, analyze, calculate value, decision making

Steps of Public Policy

Ex) Health Care in America 1) Define Problem - defining what the main issues is money, wrong priorities, etc. 2) Identify alternative 3) Establish Evaluation Criteria (cost-benefit, equality, efficiency, etc.) 4) Cost-benefit analysis 5) Make choice 6) Implement a policy 7) Evaluate

10/2

Rationality: The model of choice nnn

Principle of expected Utility: EU(A) = Pr(x)*u(x)+Pr(y)*u(y)+Pr(z)*u(z) o EU - expected utility o (A) - the option (in this case, A stands for attack in the scenario where you have to decide whether its worth it to attack your opponent) o Pr - probability of something happening as a result of your action (win, loss, etc.) o U - utility of that result (how much you gain from losing, winning, etc)

How do we quantify those choices? whole point: trying to gain an understanding of how people might act; predicting behavior to offer incentives Rational Choice Model requirements: gather information on effects of choices, set value of each outcome and then probability of each outcome how to calculate it: Should US attack Saddam unilaterally or comply with UN example o attack or not attack o multiply probability by value of outcome, repeat with other options and add together o Eu(Attack)=.7(Victory[10])+.2(PotentialVictory[5])+.1(Loss[0])

Who does Public Policy benefit? o varies.

Pareto o can benefit some people, and hurt no one ex) clean air *Goal: make policies that help most people and doesn't hurt as many, b/c government cant do something that benefits everyone

Things govt can do to move people forward: 1) Persuasion or education (weakest, unlikely to change peoples opinion): -Elements of Persuasion agenda setting, framing 2) Change peoples incentives (largest bulk of what govt does)

Ex. Cash for Cars 3) Coercion (force, rules, laws) a. By Rules/laws/regulations: -ex. if you want to build a car, has to fit govt regulations b. By force: -ex. have to go to school, if theres a draft you have to report to military (NOTE: We dont go straight to force mostly b/c of money, but also b/c it would be non-democratic, less efficient) Ways to Understand/Predict Public Responses: *What happens when government: -Provide welfare to mothers with extra children, perhaps the child will become more educated as a result -Sex Education may cause lower teen preg rates *Aggregating and Understanding How does government decide: 1.) Preferences 2.) Rationale: -maximizing expected benefit/utility: *whats going to benefit them the most *have preferences and tend to pursue them 3.) Certainty: -choose action to take you to wanted outcome Individuals Making Decisions: Cost vs Benefits Hajnal gave an example in class Bush declaring war on Iraq Action Outcome attack alone oust Sadam, destroy weapon, everyone loves us work w/ UN oust Sadam, everybody hates us nothing Sadam wins and has power You are given: **I dont think the EU has anything to do with cost, only probability and value, so the equation will be EU= Prob*Value + Prob*Value, etc. Probability of outcomes Cost of each outcome Value of each outcome Expected Utility Model Compare the two Prob*cost + Prob*cost+prob*cost = # prob*cost + prob*cost+ prob*cost= # Whatever # is higher, most rational decision rational= maximize expected benefit Used mainly for Welfare Benefits. NOTE: How do you give a value to e/c outcome: *Values are given according to preferences *By looking at what you WANT and the COSTS Lecture 2 Readings.... Shepsle

Ch. 2 Preferences: numbers of wants hardwired socially, economically, and ideologically to individuals. Because people arent forthright with their preferences, we have to assume their preferences. xPiy = Mr. i prefers x to y& x is better than y according to Mr. is preferences/ o xIiy= Mr. I is indifferent to the preferences. A choice is rational if the object chosen is as least as good than the others in the choosers preferences. We seek properties of preference relations that allow the chooser to order the alternative in terms of preferences. Preferences have two properties: Comparability and Transitivity. o Comparability: Alternatives are said to be comparable in terms of preference (need complete) if xPiy, yPix, xLiy. (Only if theres a line of preference/indifference) o

Comparability: Alternatives are comparable in terms of preference Transitivity: If individual prefers A to B and B to C, then they will automatically prefer A to C. I.E. McCaskill would have preferred to be senator (a) than to be nothing at all (c). -transitivity requires that the chooser not be confused in a different sense. It requires consistency something in short supply at times. f If individuals satisfy comparability and transitivity, then they posses preference ordering:

Murray Reading (sorry the formatting got all gross after transferring it from word): Dont be this is fantastic CH: 12 Incentives to Fail I: Maximizing Short-Term Gains - Overall theme is about Rational Decision-Making - CASE: changes in incentives that occurred between the 60s and 70s can explain the trends of increasing unemployment among the young, increased dropout from the labor force, higher rates of illegitimacy and welfare dependency. o Were NOT necessarily a result changes in work ethic, racial differences, or complexities of post-industrial economies o could have been predicted by changes in social policy- all were rational responses to changes (doing what you have to in order to survive and get ahead) ` o Options in 1960s (pre-reform) Harold has to get a job, whether or not he decides to stay with Phyllis. Only job is rock-bottom minimum wage ($40/40 hour week), has no future/career path. Phyllis has 3 options Support herself-either keeping the baby or giving it up o Getting a terrible minimum wage job like Harold Keep the baby- she gets $23/week in AFDC (not enough to support all 3 of them) o AFDC rules: she cannot contribute more to the budget (getting a job will make her lose benefits, dollar for dollar) Phyllis and Harold cant live together (and the money isnt enough to support 2 households) - phyllis loses benefits if they try to get around this rule o She gets to keep the baby without working Marrying Harold: o Marriage has no short-term economic implications- its a good option because it neither hurts/helps them economically o Choice is dependent mostly on noneconomic motivations

 Phyllis has the advantage of having Harold legally responsible to support her&the baby OVERALL, theres not really a good option. Probably get married because either way, Harold has to get a job and Phyllis can just rely on him. o Options in 1970s (post-reform) Now, Harold should not marry Phyllis, but still live with them. Changes in AFDC o In 1960, it was too little money to support the 3, no way to supplement it, and they couldnt live together o In 1970, all of the problems were removed. In 1970, AFDC+other welfare benefits became comparable to working. Money can be supplemented now. Keep first $30 and keep $1 for every additional $3 made. o As long as Harold isnt legally responsible for the child, his income wont count against Phyllis eligibility for benefits. He can now supplement Supreme court ruled that the presence of a man in a single womans household cannot exclude her from benefits NOW: getting married is stupid (economically) o Harold can get married, work full 40hr weeks at a terrible job o OR he can live with Phyllis (w/o getting married), not work, and have more disposable income Now, Phyllis should have the baby, not marry Harold Baby or no baby? o Only circumstance where giving up the baby is rational is if she prefers any sort of job to having and caring for the baby. Any job she gets will give her no security and wont get her a paycheck greater than what her baby would get her o So she should HAVE THE BABY. Marry Harold? o If she marries Harold, Phyllis loses AFDC benefits. If they get divorced, the chances of her getting child-support enforced is very slim o No good reason to marry Harold. OVERALL: Phyllis should have the baby and they should live together. Better: Harold has a job and supplements from the AFDC Maybe even better: Harold can go in and out of employment and collect unemployment insurance: it would give them less money than if he was employed, but AFDC alone is enough to support the 3 of them anyway. o CONCLUSION: in the 60s the incentives wouldve led them to behave in traditional working -class ways, but in the 70s changes in the incentives & rational decision making wouldve led them to becoming welfare types AFDC changes, like the 30-and-a-third rule provided an incentive for women on welfare to work, but it also provided an incentive to women not already on welfare to go on welfare&become trapped.

Waldfogel reading: Evidence that Prison Doesnt Deter Crime main question: does policing/punishment successfully deter crime? - Kind of. - prison stops crime by literally putting them in prison. Its hard to commit a crime in prison (being behind bars). - crime affects policing/punishment as much as policing/punishment affects crime.

10/4

Group Choice:
Arrows Theorem

o o o

rational actors aim to maximize their utility trying to aggregate individual preferences to group preferences and no method of aggregating individual preferences into a coherent group preference can satisfy even these most basic conditions. (expansion of Condorcet Paradox) Four conditions: Pareto optimality (P)- outcome doesnt hurt anybody, improves conditions of group as a whole universal domain (U)- must accept any ranking of the alternatives - a complete transitive set of preferences. all preferences of all voters (but no other considerations) are allowed non-dictatorship (D)- one persons preferences wont influence anyone elses preferences, cant outweigh anyones preferences Independence from irrelevant alternatives (I)- if the preferences of the individuals dont change, the preferences of the group dont change social preferences between x and y only depend on individuals preference between x and y Example with president ranking from book: Jefferson over Jackson but Obama above all. Obama is irrelevant and doesnt take away from the fact that Jefferson is still ahead of Jackson

Conclusion: Arrows is nearly impossible with a group of at least three people. There exists no mechanism for translating the preferences of rational individuals into a coherent group preference that simultaneously satisfies these four conditions. Any scheme for producing a group choice that satisfies, UPI is either a dictator or incoherent: the group is either dominated by a single distinguished member or has intransitive preferences. Condorcets Paradox o involves majority rule majority rule does not provide clear winner because individuals or groups of individuals have conflicting preferences o Even though individuals in the group each have preferences that are consistent, this need not be true of the groups preferences. o Choosing among alternatives, a majority of the time will result in majority rule, but a percent of the time (based on # of people and # of alternatives) will result in Condorcet Paradox (cycles). This means that there are instances where there are a number of conflicting majorities made up by different groups of individuals and it is hard to determine who wins the actual election/voting process. o As number of people and alternatives go up, % of outcomes that cycle go up, making majority rule outcomes incoherent. o Collective preferences can be cyclic even if individual preferences are not. Occurs because conflicting majorities are each made up of different groups of individuals.

Lecture 3: Choosing action, estimating what action will lead to, compare one action to another Aggregating preferences -whose preferences we take into account -how we aggregate those preferences No easy, right way for aggregating preferences will always be biased will have to manipulate some things

will always be room for negotiation will always be unjust Example given in class 3 friends 3 choices 1) Chargers game 2) Surfing 3) Museum at Balboa Park Dustin C S S M M C Marissa M C S Sean

Solution: #1 Round Robin 1v1 1v1 1v1 Winner gets to vs the next preference BUT this is cycling majority, no solutions (unless one person lies) #2 Agenda Setter one person picks what two choices he/she wants to compete against If you have 3 people choosing 3 options, you have problems So you have 1 person agenda set that person chooses what two options gets voted it is powerful and effective BUT unfair Arrows Theorem *See above Types of voting: Agenda Setting not always your first choice can plan things out to maximize preferences in the end Sophisticated Voting vote against your preferences to affect outcomes in the far term Sincere voting vote your immediate preferences Strategic Voting vote in a way to trade off best choice for an alternative choice sophisticated: multiple rounds, in last round you vote sincerely. strategic: one round, lets say your first preferred is not most popular, but your second choice is. You vote for second most preferred so that your last preferred doesnt win; tradeoff (Overall, no easy way to aggregate, most people try to be rational and get what he/she wants in the end) DO THEY get what they want??? or only MOST of the time???

Professor gives example of A B C D E Majority 18 12 8 6 Runoff 18 36 B wins

Sequential Runoff 18 12 10 4 18 12 10 4 18 12 14 18 24 C Wins If there is a point system, 4 points, 3 points, 2, etc, the outcome is different.

Borda Count:The Borda count determines the winner of an election by giving each candidate a certain number of points corresponding to the position in which he or she is ranked by each voter. (wiki) Can someone put an example of this? It was on the first midterm and wasnt sure how to answer. EXAMPLE: A-D are candidates, 1st-4th are preferences. 1st preference = 4pts, 2nd = 3pts, etc. The candidate with the most POINTS wins the election, so A would win despite not having the most 1st preferences. A 1st 2nd 3rd 4th Total 5 6 2 1 43 B 5 3 1 7 39 C 7 2 1 3 38 D 3 3 3 3 32

Condorcet Procedure- round robin tournament to determine if some specific alternative defeats others EXAMPLE: http://www.youtube.com/watch?v=Whh77rsDhQk (video helped me to visualize it) Some important definitions: 1. Simple Plurality: alternative w/most votes wins 2. Plurality runoff: 2 top vote getters move onto second round of simple plurality voting 3. Sequential runoff: each round alternative w/lowest votes get eliminated until one is left 4. Borda Count: alternatives are assigned pts.-one w/largest sum of pts. wins 5. Condorcet procedure: pairwise round-robin to see which alternative wins 6. Approval voting: can cast multiple votes for different alternatives-one w/majority wins

10/9
o o

Voting Methods:
sincere voting- choosing your first preference always, never deviating strategic voting- voting against what you actually want because you believe it will give you a favorable outcome in one round

Ex. If your preferences are Nader>Gore>Bush, you should vote Gore. Even though its your second choice it is better than your p. voter supports candidate that is not his/her sincere preference in order to avoid an undesirable outcome example - in simple plurality election, voter might gain better outcome by voting for less preferred but more popular choice sophisticated voting- two rounds, strategic voting in first round, sincere voting second round France has two round voting system for president, this is where sophisticated voting might come in

Lecture 4: Two themes 1) voting methods matter produce different outcomes 2) There is no one right way to aggregate preferences Goals of Democracy? (Democracy could be different things) Represent minorities Represent everyone, individuals Process, outputs?? Give everyone a fair chance to vote give everyone a fair chance to elect representatives give everyone a fair chance to have influence over policy better race relations and/or better group relations improve the conditions of those near the bottom or improve the conditions overall Some key questions to think about Ideal Democracy: Should we consider the quality of a vote? Should we consider the rights, interests of individuals or groups? Which groups should we consider? How much influence is fair influence? Should we consider substantive (whos policies get represented) or descriptive (equally representation of minorities in power) representation? Professor uses example in Egypt (Developing a new constitution) -make it fair, democratic, efficient *for example, deciding who gets to vote: under 18? prisoners? those who know nothing about politics? those who think women have no rights? *Should we make voting mandatory? *How do we best set up the vote? there is no single best way it is all going to be biased towards one group or another *What issues should we consider? NOTE: But we can come up with something that fits wherever we (as a student council) want. Counting the votes: main issues group rights vs individual rights? womens rights? direct vs representative democracy?

plurality vs proportional representation? (say or winner takes all) number of parties? geographic representation? NOTE: May have clashes if particularly focusing on one group Direct vs representative democracy 1) Representative Democracy problems? you dont make decisions candidate choose for you agents should do what we want BUT they have their own ideologies *principle-agent problems-legislators shirk their duties* corruption ideological shirking benefits? expertise efficient What about by geographic location: problems? what do you have in common with your neighbors? pork barrel politics -definition of pork barrel politics A slang term used when politicians or governments "unofficially" undertake projects that benefit a group of citizens in return for that group's support or campaign donations. This spending mostly benefits the needs of a small select group despite the fact that the entire community's funds are being used

What about an alternative, by ethnicity? What about an alternative, by party?

2) Direct Democracy we directly decide on what bills pass and which ones dont what is it? where the people have influence with the government benefits? more democratic problems? inefficient (having everyone vote on everything .___.) dumb voters evidence: many mistakes, BUT in aggregate pretty rationale tyranny of the majority bias role of $ agenda setting (put policies on ballot) influencing outcome of the vote legality implementation Overall question: Direct vs Representative Democracy

which is better? more democratic? Depends what you want Two basic kinds- plurality (winner gets all) vs proportional representation (outcome of election directly proportional to seats in legislator) Plurality vs. Proportional Representation: Proportional Representation -Each citizen cast a single vote for his or her favorite party -Add up votes for each party and then each party gets a proportion of legislative seats equal to its proportion of votes Benefits? mirrors the public everyone represented Negatives? extremists biased corrupt -Not possible to translate electoral proportions evenly into seat proportions what if you get a 4.5 number? Do you give 4 or 5? -Second issue involves who should get elected to the legislature in the first place Plurality Benefits? Fewer extremists move efficient, move forward a lot more forces compromise before election Negatives? excludes small groups tyranny of the majority For Example: fisherman who were spread out across the coast, and them being such a small part of the votes, didnt matter in a plurality word. FPTP (first-past-the-post): Each voter gets one vote and may cast it for any candidate he or she pleases -Single candidate with most votes is elected - Legislature consists of legislators elected from separate districts in this manner -Common complaint is that winner is not representative of the district, for example a district consisting of 4 different religions -If there were representation for districts heterogeneity, it would mean a larger legislature with even greater heterogeneity of views -Difficult for representatives to govern debate, deliberate, compromise SNTV (single nontransferable vote): ethnically homogeneous society like Japan uses this for larger district magnitudes -Each voter endowed with only one vote but the highest vote getters are elected from the district -More than one representative per district -Alteration from FPTP, change district magnitude from 1 to k>1 -Allows for heterogeneous interests to be represented Limited Vote- voter gets more than one vote, vote once for preferred candidates

negatives? strategic voting voter has to be more prepared bloc voting-minorities excluded How are minorities excluded in a voting bloc? If they all voted en bloc, wouldnt they be aggregating enough support to be considered in a vote? strategic voting-partial abstention (Voting for two people but end up hurting the chances of your first choice because the second vote boosted second choice) Cumulative Vote- can use all of your votes for same candidate -Minorities have a say Which is best? None, depends what youre looking for and what situation you are in Plurality examples: The United States Case Permanent Minorities group that generally loses Racial minorities Gays and Lesbians Other What recourse do minorities have? They work together forge coalitions appeal to judicial system appeal to authority Primary tool: The Voting Rights Act seeks to ensure minority have access to the vote seeks to ensure minorities have a fair chance to elect representatives of their choice What should we look at to know if it worked? Voting participation: Almost on part except in Latinos and Asians Representation: increases for elected minorities but minority groups are still underrepresented Policy Influence: not sure, no data on whether or not minority representation influenced policy making Lecture 4 readings... Voting Rights & Democratic Theory (Cain, Guinier)

voting rights laws give special representational advantages to some racial/ethnic groups but not others simple majority rule is not legit (underrepresentation) but how far should minority rights go? but proportionality emphasizes efficiency/stability over legitimacy many facets of identity (gender, race, sexual orientation, etc.) so voting laws could be fair to one but not the other affluence plays a part - not just voting political equity requires a standard for evaluating legislative info and mechanisms for overcoming inequality within the policymaking body

10/11 Cooperation and Collective Action

Lecture 5:

Cooperation public good prisoners dilemma Collective Action why we shouldnt contribute selective incentives political entrepreneurs experiential gains Social problems: They are everywhere -Ex: garbage on streets, driving & texting, national defense, jury duty -Why dont people cooperate to help produce public goods? due to costs whatever that may be someone else can do the work you do it, no one else does, waste of time Exclusion from public good is not possible Free Rider Problem Solutions to the Free Rider Program: norms(Internalized values; religion, ideology, Niceness) church giving incentives(repeated cooperation, Tit for Tat) recycling coercion(Third party enforcement) -> read the Don Corleone ex. in ch.8 pg. 249 force, jail mandate policy??? incentives rewards Example used in class Prisoners Dilemma Silent or Rat= In real world, what do you think is best strategy? student suggested Tit for Tat *Tit for Tat see above Another Example: Buying used pink minivan shirking on the agreement solutions? $5000 for a van, you dont know if it works or not -hard for two individuals in isolation to transact any simple transaction -have 3rd party enforce contract, the government, authority Collective Action: Lots of examples in history Why do you get involved in large organization? Why should you not get involved? ex. sierra club, not onyl about day offs or...??? I think because one person wont make a difference <- argument professor made in class but student contradicted him by saying if you dont do it, then who will? $10x20,000 people is a lot of money. Each individual made a choice, to feel good about themselves by helping the environment.

Logic of Collective Action: Collective Action difficult & unlikely b/c: Large groups anonymous No one individual contributions makes a difference Hard to punish free riders The result: biased & interest group systems Many groups dont form bias in the interest group system =the more people in your group, the more difficult it is Solutions to Collective Action Selective Incentives - an example of this is the cap and trade system provided to fix climate change/global warming Political Entrepreneurs- Maintain and organize latent groups. In general someone who sees a prospective cooperation dividend that is currently not being enjoyed. (page 287-288) Experiential gains Why vote? Instrumental gains- to be motivated by and directed toward some purpose or objective. (thought of as an investment activity) Experimental gains- to gain fulfillment.(consumption activity) Norms 3rd type of Question on midterm: Will give problem or context and ask questions to draw 1 out knowledge of the course o ex: Describe underlying problem with cooperation in greenhouse gases productions? collective action problems free rider problem- everybody can gain from a situation, but can gain from everyone else cooperating and not cooperating themselves (Large interest groups face this dilemma more often than small interest groups) selective incentives- could give countries preferential trading agreements /creating norms- have some kind of education campaign in order to influence the public of these other countries coercion- Create high tariffs on those who dont contribute olson?? o norms/ideology/belief systems o selective incentives o entrepreneurial leadership

Prisoners Dilemma o shows why two individuals might not cooperate even if its in their best interest to do so o Coca Cola and Pepsi example best exploit joint market power when both charge a high price you know you encounter a prisoners dilemma when the dominant strategy is not the social optimum. (meaning they could have been better off) Look for Dominant strategy

$10mil, $10mil $7mil, $12mil

 $12mil, $7mil

$9mil, $9mil

always better for them to go low but if they play this 5 times, how then might Coke act the first time? tit for tat anticipates their move for each round, down to the beginning round, has an incentive to defect in the beginning round What we need to know: tit for tat term usually for retaliation (ie. trade wars) cooperate on the first round and on the subsequent round do what your opponent did the previous round four general conditions: o the agent will always cooperate until provoked o if provoked, the agent will attack o the agent is quick to forgive (if opponent cooperates after an initial attack, the agent will then cooperate in its next turn) o the agent must have a good chance of competing against the opponent more than once grim trigger start out cooperating Change your choice when the other agent changes theirs Work backwards.

10/16 The Market Economy

Lecture 6 1. Alternatives to markets -survival of the fittest -queing -lottery -central planners 2. How markets work -Information no cheap talk -Incentives no altruism necessary every single actor in govt is/wants to maximize expected utility NOTE: might not work, maximize resources, have what you need, act on preferences of others and ourselves 3. Benefits of the market -Gains from trade - Gains in productive efficiency

- Reductions in transaction costs 4. Price: values set for goods & services determine the actions5. Demand curve (aka how prices w of ppl within the market drive the market since consumers are utility maximizing and producers are profit maximizing (this comes together to create an ideal point for price at the intersection of supply and demand) cost of A vs. cost of B ork) graphs demand for a product at different prices generally fixed but can change under certain circumstances Example in class, two types of Demand: inelastic (salt) vs. elastic (mortons salt) SHIFTS due to for reasons external to price and quantity: more people in the market, changes in tactics, changes in income, changes in prices of related goods & population size and composition SLOPE of demand curve changes due to price elasticity. If the slope is low (less than one) than the changes in price create LARGER relative changes in quantity meaning that price in elastic. If the slope is high (more than one) than the changes in price create SMALLER relative changes in quantity meaning that price is inelastic: -Can mention perfect elasticity as a good example Perspective from producer: as price goes up, supply goes up 6. Supply Curve: Economics 101 -how society deals w/ scarcity -who gets what, when and how -rational utility maximizes -collection of people exchanging goods & services Q: Is there a market for everything? Market Economy: group of people exchanging goods and services groups and institutions setting up and... What are the Preconditions for a Market? 1. Diverse Preferences 2. Diverse endowments (what e/c have to bring to table) 3. Economies of scale 4. Specialization Law of Demand (-) relationship b/t the amount of anything people will want to purchase and the price they must pay to obtain it

True or not true? True! Remember the graph! Market economy- decentralized mechanism for connecting people who want certain goods and services and people who have goods and services to provide for mutual benefit o features of the ideal market:

information- needs information to function so that players in the market can accurately gauge their preferences market assumes we all have perfect information incentives- it is assumed that since people are self-interested, they will fill in for demand by providing incentives to anyone preconditions to the existence of the market: diverse preferences people want different things, facilitating exchange differences in goals, tastes or desires diverse endowments differences in abilities, facilitating different abilities differences in endowments of productive resources and personal talents economies of scale the marginal cost of production decreases with quantity declining average costs as more output is produced specialization here are all things that only certain things are good at and it is costly to have all skills or knowledge declining average costs as the scope of one producer is decreased benefits of the market (all efficiency gains) gains from trade gains in productive efficiency reduction in transaction costs; market wants to be as efficient as possible; incentive to be open about quality of goods and thus not as much cost for buyers to go and find something of high quality; BASICALLY, people are more likely to buy your shit if its real. none of that fake gucci shit. <-- Lawls fo real doe. Key terms Prices are values set for goods and services that determine the actions of people within the market. They drive the market since consumer are utility maximizing and producers are profit maximizing (creates ideal point for price at the intersection of supply and demand, save that for later) Demand- the more things cost, the less of them people will buy. DEMAND is only about what people want. the decision making actors here are consumers demand curve shifts due to for reasons external to price and quantity: more people in the market, changes in tastes, changes in income, changes in prices or related goods and population size and composition slope of demand curve changes due to price elasticity. if the slope is low (less than 1) than the changes in price create larger relative changes in quantity meaning that price is elastic. if the slope is high then the changes in price create smaller relative change

10/18 Market Failures

Lecture 7 Review Why prefer ____? Anything non moral (market) where should govt step in Assumptions for a PERFECT market 1. Individuals should be goal oriented utility maximizes, 2. Lg.. # of buyers 3. Lg # of sellers 4. In order for market to beall agents should have full info.

5. Zero transaction costs 6. No externalities 7. No public goods ARE ^ all above assumptions met in the real world? We DO have public goods and transaction costs, most are wrong above, we are not going to always have a PERFECT market, but the job is looking at all these and see where govt have to step in Ex. 7. No Public Goods TYPES of Goods -First main attribute of goods: *rivalrous: if consumed by one person, cannot be consumed by another vs. *non-rivalrous: one persons use doesnt diminish the supply available to others *Excludable: can be owned by a single person/entity vs. *non-excludable: anyone can enjoy -Pure private goods: excludable and rivalrous -public goods: non-excludable and non-rivalrous -toll good: excludable and non-rivalrous (one persons consumption, reduces others consumption) <-- one persons consumption does NOT diminish supply to others (NON-rivalrous) -common pool resource: non-excludable and rivalrous -THIRD Category: Congestibility when the # of individuals using can change the nature of the good *not inherent in the good itself (ex. Berries in the forest OR toll road, both can change, depending circumstances/situation, it is a feature) *Where do you want government involvement in the above situations?*

Market Failures 1. Externalities: unintended by-product of producing or consuming the good A. Positive - i believe a person used an example of buying a tv so everyone else can watch. how one would regulate (like taxes) would be a different story B. Negative: pollution as byproduct of gas use Why is this a problem? Ex. Pollution, illegalities/cheating, cap & trade - using the pollution example, negative externalities cause us to drive more than is socially optimal (what the market would want us to do if it accounted for externalities) Solns.? -Tax, putting limits aka regulations (there would be the problem of having special cases in which the regulation couldnt apply), market soln. for market, cap & trade (winners are buyers, losers are poor in neighborhood) 2. Information asymmetrics one agent has more info than another agent why is this a problem? can take advantage of the situation when is this a problem? when people or companies are trying sell the same good Search goods: easy to evaluate quality ex. Clothing, pretty good sense of its value, use senses on Experience goods: require some use for evaluation ex. Pink mini van

Post-experience goods: can only assess after consumption solns. For post-experience goods -Regulations/incentives, rewarding good behavior, informational, incentive, ., outright banning (overriding?) 3. Market Failures -Monopolies: what are they? *where one company or person takes control of the whole market for that product Why is this a problem? *Producer can dictate the price Why would monopolies naturally exist? *Main reason, its a huge amt. of cost to produce goods Solution? *Regulate price, subsidize, provide public goods ourselves, How do we get other monopolies: *ex. Microsoft(?) start by buying other monopolies, How do we deal with ^those types of monopolies? * Market Failures: More Fundamental Issues 4. Poor decision making despite info/research Is this a problem? Solns.? 5. Initial distribution of resources Are unequal distributions okay? Solns.? 6. Unacceptable preferences Market solns.? Govt solns.? 7. Discrimination Is this discrimination a problem for the market? Types of Discrimination: A. Economically irrational discrimination taste for discrimination inaccurate stereotypes Can the market deal w/ this? B Rational discrimination Con Discrimination in Hiring: Chicago Employers: -racial hierarchy of employees *class and location also matter -is this discrimination? -what would you do? -what can govt do?

10/30 Introduction to different stages, Agenda Setting, Problem Definition

Public Policy Making - The act of creating, adopting and implementing (P,P,P) - Problem, Policies, and Politics The policy Process- seven steps 1) Problem definition: Evaluating in order to appraise the policies effectiveness 2) Identifying Alternatives: Affected by hidden cluster 3) Establish evaluation criteria: values and feasibility 4) Estimate costs & Benefits: 5) Decisions: 6) Implementation: 7) Evaluation: 2

Agenda Setting- Affected by visible Cluster (P, P, VP) - Problem, Policies, and Visible participants 1) Problem itself- Widely discussed by public 2) Protest- gIve the problem the attention that is needed. 3) Political change- Election results ( Ex. Electing a new president) 4) Key players: 5) Policy Entrepreneurs: (Political Leadership) : Interest group representatives; Invest their resources 6) Media: give people something to think about

Readings: Border Wars Marek:

The number of arrests of people crossing the border and the cost of patrolling the border are increasing. Big concern is OTM (other than Mexico) immigrants-- basically people from the middle east using the mexican border to get into America. Terrorists! Catch and Release- release people after catching them illegally crossing the border because there is not enough room in the jails. Chetroff wants to increase detention space and wants military support.

Public Policy Making Anderson:

With time, the definition of public vs private issue has changed (i.e. domestic abuse) a problem is a problem only if something can be done about it. Defining a problem: o magnitude? big or small behavioral change needed? tractability Ways to get attention for a problem: protest, media, changes in statistics, etc. Ways to go about Agenda Denial: problem is not appropriate for government action, express fears about societal consequences of government action, problem can be solved as easily without government action, the problem needs to be studied more, recourse may be directed to electoral activity Issue attention Cycle: o pre-problem: only has notice from a small amount of people o Alarmed discovery and euphoric enthusiasm. Something causes public to become aware of problem, strong desire to quickly solve it o Realizing Cost of significant progress. o Gradual decline in intensity of public interest o Post-problem. less attention, often programs/policies created persist and have some impact.

Defining the Heroin Problem Moore:

Different Objectives, different people see different problems with heroin Thus have different solutions

I.E. some people believe heroin users behave so poorly because it illicit, and that if heroin was made legal/taxed, these people want to stop the prohibition of heroin use The seriousness of the heroin problem is directly correlated to the number of people who use

11/1 Identity Alternative Policies

Policy Alternatives A) Types of Policies - 1)Informational: Weakest, do not change costs and benefits, at most change the perceived costs and benefits. a. Public appeals b. Informational provision. c. Mediation: (non coercive measures) (helps bring parties together) d. Voluntary standards: e. Negative publicity: - 2) Inducements: offer negative and positive changes that alter the costs and benefits. A. positive Inducements 1) Bargaining: (Collective decision making)- negotiation. Informal Procedure 2) Contracting: Economic controls 3) Tax preferences /exemptions 4) Loans: Public 5) subsidies: purposes are advanced through aid. B. Negative Inducements 1) Taxation: Provides revenue and encourages behavior. -3) Coercion A. require compliance- regulation, labeling, price ceiling/ price floor and licensing ( government authorization required) B. Prohibition: Criminal Laws

Anderson Techniques of Control:

Noncoercive forms of action: mediation, conciliation, declarations, voluntary standards Inspection Licensing/enabling action Loans, subsidies, and benefits contracts General Expenditures: can be used to increase economic activity in depressed areas, promote competition, etc . Market and Proprietary Operations: purchase and sale of government securities is a tool to expand or contract money supply in the economy. Taxation Directive Power: issuing orders or directives that are binding on private parties Services Informal Procedures Sanctions: devices/penalties/rewards that agencies use to encourage or compel compliance

Taxing the Fat in your food Shadi:

Health care costs up, in big part to rising obesity. Not fair that nonobese taxpayers have to pay for rising health care Tax fatty foods: use the money to pay for rising healthcare costs and subsidize healthy foods for low income families. Con: tax is not enough to reduce obesity (would also need bans on advertising and increased labeling, etc.) , not efficient- targets everyone and not just the obese, also tax sedentary activities (computer, etc)?

11/6 Establish Evaluation Criteria

The Art of Political Decision Making Efficiency: Maximizing ration of Benefits and Costs. Pareto Efficiency: no way of improving the situation of one person without making that of another person worse, the solution found is Pareto- efficient. Security: a) Physical Security: Protect citizens from physical threat. b) Basic needs: Provide enough to economically, physically/ and mentally Liberty: Freedom to act on your own. protect social order - Main Issue with Liberty? - When should public policy limit individual policy on anatomy, Only when it could harm others. Human Dignity: Ensure that no individual is forced to choose an option that violates norms of self-respect and pride. (difficult to define in practice)

11/8 Cost- Benefit Analysis and Decision Making

How do we value life? a. Human Capital: each persons earnings over a lifetime, the more you make in your lifetime the more you are worth. b. Willingness to pay: risk accepted/ dollar paid c. court case settlement: size of awards by settlement d. Individual appraisal: Surveys of public. Ex. ask the public how much they would pay to avoid death. Cost- benefit process 4-steps ( prospective evaluation technique) 1) Identify all of the effects- costs and benefits: What groups are entitled to be considered: direct or indirect groups. 2) Place dollar values on costs and Benefits: easy for items bought and sold in the market. Difficult for good health and prolongation of life. 3) Discount future costs and Benefits: needed to equate the value of present and future effects. 4) Compare costs and Benefits: Benefits > Costs - Policy is acceptable of direct, indirect, current and future. Five key Concerns: 1) Substitution effect 2) Discounting: No scientific way of determining discount rates 3) valuing Human lives

4) Sensitivity analyst 5) concerns other than efficiency: Having good data

11/13 Implementation, Evaluation (What happens after a bill becomes a law)

Theories of decision Making 1) Rational: Comprehensive model - Logically go through the process of trying to come up with option with highest expected utility. This is a data driven process, gather evidence and go based on that 2) Incremental: investigate alterations to existing programs. Theres a status quo in place, and you can only move it so much, i.e. given whats already there, where can you go from there ex. of Facebook, you cant create anew, you have to have something much better than Facebook and move forward from there, because Facebook has become the standard 3) non decisions: More problems that we ignore than we address. Decision to ignore can be viewed as greatest power. 4)multiple advocacy: (most accurate) Competition of ideas and viewpoints. Actors advocate rather than analyze. Power of ideas: How someone presents their ideas is vital to how others perceive it. It can be advantageous in some cases. framing: limited ( people grow skeptical) Implementation: -Someone (not policy maker) has to implement the policy -Set up incentives for agent -Key issue: principal-agent problem Types of Evaluation - Impressionistic: Cursory look back- (did it work) - process Evaluation: look at the outputs of policy ( follow actions, costs, outcomes) Systematic Evaluation: Comprehensive analysis that tries to consider all factors. ex: Before and after study experimental design Quasi- experimental study

DEBATES Death Penalty Resolution: We should end the death penalty. PRO: Innocent people are at risk, infrequently used, expensive, better alternative, government should not murder people for any reason. CON: 12/6 REVIEW Lecture -Focus heavily on the new material, since there is less of it -Know the basics of each political debate -what was each resolution? I. Voting Systems -Real world electoral rules which attempt to aggregate preferences -Strategic Voting... Backwards induction

II. Games -Prisoners Dilemma was not on the midterm, so its a good candidate for the final III. Market -Preconditions of a market -Diversity of Endowments -Diversity of Preferences -Assumptions of a perfect market IV. Policies -Advantages/Disadvantages of Coercion -Give an example V. Utilitarian 1 3 7 =11 2 3 5 =10 3 3 3 =9 (SUM) Raulsian 1 3 7 =1 2 3 5 =2 3 3 3 =3 (LOWEST) Multiplicative 1 3 7 =21 2 3 5 = 30 3 3 3 =27 (PRODUCT) Utilitarian Raulsian - who has the lowest output? you dont know which one of these you will be when you make the rules. Issues with competition/incentive. Multiplicative - a mix of Utilitarian and Raulsian. Quantifies and tries to make it equal. VI. Framing -How are problems defined? What problems are important?

Shepsle Reading: Ch 2-7

Chapter 2:
o

Rationality: The Model of Choice:

rationality- economic approach to politics irrationality- people have wants and beliefs Preliminaries o modern man and woman are economic and social animals o Internal environment: are influenced by material, economic wants and preference which includes: religion, moral, ideals, altruistic impulse, kinship o external environment: uncertainty o instrumental rationality: acting in accord both with one's preferences and one's beliefs o methodological individualism: rational choice approach Motivation

o o

consumer: how to spend monetary endowment (budget) to achieve a maximum of contentment o producer: how best to combine inputs to maximize their profit o workers: time is their endowment for purchasing power/leisure o investors: wealth is their endowment for long-run return o it is hard to narrow down to a specific set of rules, because most of the times, the situation can vary due to individual characteristics The Simple Logic of Preference and Choice: o Property 1: Comparability (Completeness) alternatives are to be comparable o Property 2: Transitivity (consistency) x --> y--> z then x--> z o preference ordering: <,>,=, etc o transitivity is difficult to obey- uncertainty The Maximization Paradigm environmental uncertainty and beliefs: o certainty- i know that door knob will turn o risk- there is a 50/50 chance that the door will open or be locked o uncertainty- imprecise relationship between actions and outcomes thus impossible to predict o utility number: u(x), u(y), u(x), etc much larger number for the favorite, close in magnitude numbers for alternatives o Principle of Expected Utility: method for assigning a single number to each action-lottery and then choosing the one with the largest number

Chapter 3: Analyzing Politics

preference diversity- an affliction with no known cure short of authoritarian measures round-robin tournament- each alternative is pitted against each other alternative and, if one is preferred by a majority to all the others, then it is declared sincere preference- voting for the one that the voter wants strategic/sophisticated preference- voting against the voter's wants which will eventually lead to preferred outcome o can be a problem because there are multiple majorities, not just "the" majority o it works best with small number of people and options individuals possess coherent, transitive preferences, groups dont group choice- intransitive, cycle with a different majority coalition supporting the winner in each pair-up comparison agenda procedure- agenda setter (individuals/subcommittee) is charged with assembling an order of voting for the larger group

Chapter 4: Group Choice and Majority Rule

Cyclical Majorities:

Condorcet's Paradox: violates transitivity a>b>c> then >a things make pure majority rule setting more complicated o increase the number of individuals (N) or alternatives (M) o Probability
o

Cyclical Majorities and Divide the Dollars Arrow's Theorem o assumptions: no method of aggregating individual preferences into a coherent group preference can simultaneously satisfy even with minimal conditions o rationality assumption- R is complete and transitive o 4 conditions (UPID) Universal Domain (U)- universally applicable mechanism of group choice that responds to the preferences of group member Pareto Optimality (P) Independence of Irrelevant Alternatives (I) Nondictatorship (D) o any scheme for producing a group choice that satisfies U,P, and I is either Dictatorial or incoherent

Chapter 5

Spatial Elections o politicians seek to maximize their votes o alternative is to maximize their vote plurality o political position- some location on the ideological continuum (0,100) o being very close to the opposite coalition's ideology will lead to greater number of supporters because it will attract voters from the middle as well leapfrogging- vulnerable candidates leapfrog over to opponent's position in order to be closer to the median centripetal tendency- convergence on the ideal point of the median voter ex British politics- losing party at least tries to be look like the successful one o candidates' tendency to move toward middle of the spectrum

Chapter 6

strategic thinking and rational foresight backward induction sophisticated voting- voting against one's true preferences at one stage of the legislative process in order to achieve an even better outcome o backward induction on fixed agenda strategic voting-

Chapter 7

Voting Methods o Components: the inputs required voters must provide information on every possible pair-wise comparison this is required for a sequential runoff, borda count, condorcet procedure what the procedure does to those inputs simple plurality voting- voter casts a single vote for a single alternative, and the alternative with the most votes wins plurality runoff- voter casts a single vote for a single alternative, and the two alternatives with the most votes move to a 2nd stage in which the balloting is repeated between these two survivors according to simple plurality voting sequential runoff- each voter casts a single vote for a single alternative, the alternative with the fewest votes is eliminated, repeated until there is a single alternative left borda count- a scoring system much like that used in international track competition, each voter expresses personal preferences over the 5 alternatives by awarding 4 pts to 1st choice, 3 points to 2nd choice, 2 pts to 3rd, 1 pt to 4th, and 0 pt to 5th, alternative with the largest sum of pts wins condorcet procedure- to determine whether there is some specific alternative that can secure a majority against each of the others in a pairwise round-robin tournament approval voting- no limit on the number of votes a voter can cast, casts votes for all those alternatives that the voter approves of, may cast votes for all the alternatives, non of them or any number in between, winner is the alternative that receives the most approval votes the output or outcome produced collective preference ordering- to guide the agent to make the decision because group's alternative may not be available the final outcome is a function of the inputs Electoral Systems o representation- electoral arrangement that places priority on the degree to which the elected reflect/represent their constituencies o governance- arrangement yielding elected representatives capable of acting decisively o proportional representation vs. plurality voting o 5 components: v- number of votes/voter p- if v>1 whether voters must cast all v votes, or may partially abstain c- if v>1 whether voters may cumulate their votes, or must distribute them k- the number of legislators to be elected/district, district magnitude f- electoral formula o plurality- voters cast votes for individuals rather than party lists, vote getters win

First Past the Post (FPP)- each voter gets one vote, may cast it for any candidate, the single candidate with the most votes ( not necessarily a majority) is elected district gets a single representative- not representing the entire district's needs/wants Limited Voting (LV)- endows each voter with more than one vote but fewer than K, still allowing for K winners Single NonTransferable Vote (SNTV)- more than one representative is to be elected from a district and each voter (still) casts one vote, then, under LV, more than one representative is elected from a district and each voter may cast multiple votes causes plumbing- voting for your favorite candidate Cumulative voting (CV)- voters not only partially to abstain, but also to cumulate their votes can assure their modicum of representation by cumulating their votes favored in multimember districts Equilibrium central tendency- candidates tend to converge on the median voter's ideal point location, caused by centripetal forces --> toward another, for small K dispersed tendency- candidates tend to distribute themselves along the dimension, adopting distinctive policy positions, caused by centrifugal forces--> away from one another to differentiate, for big K Single Transferable Voter (STV, Hare system)- kinda of like spillover, once a winner gets the alloted votes to win, then all the excess votes go to the next winning candidate and so on q- quota v- # of voters s- # of available seats proportional- voters vote for parties, seats are allocated in proportion to the vote pooled by each party to produce a legislature that mirrors the larger society it is difficult to translate electoral proportions evenly into seat proportion "fractional seats" Representation vs. Governance (PR vs. Plurality) Duverger's Law third parties and candidates will be loath to enter the race because they have so little chance of winning ANYTHING PR systems are associated with multiparty competition

how to create evaluation criteria:

utilitarian- add all the outputs rawlsian- pick the lowest output multiplicative- multiple all the outputs