Advanced Political Economy & Social Choice Theory: Key Concepts and Models

Arrowís Theorem (1951)

There is no method for aggregating individual preferences into a coherent group (social) preference which can satisfy minimal criteria of fairness and consistency.

Universal domain

Any rational individual preference orderings is admitted; no restriction on preferences.

Collective rationality

Collective decision-making delivers a complete and transitive preference ordering.

Unanimity

If everyone prefers x to y, so does the society.

Independence from Irrelevant Alternatives (IIA)

Social preference between x and y is not influenced by the way individuals rank x or y with respect to any other available alternative z.

Non-dictatorship

There is no individual whose preferences are constitutionally the preferences of society.

Fehr and Gatcher

Humans engage in altruistic punishment, willingly incurring personal costs to penalize free-riders.

The logic of collective action (Olson 1965)

Distinguishes between privileged and latent groups.

Black MVT (1948)

Single-peaked preferences, one-dimensional policy; Median voter is the Condorcet winner.

Downs (1957)

Office-seeking parties with credible commitment; Both parties converge to the median.

Alesina (1988)

Partisan parties, repeated elections; Convergence if parties are sufficiently patient.

Citizen-Candidate Model

Entry costs, no commitment; Multiple equilibria and policy divergence.

Robin Hood Paradox (Lindert)

Redistribution is often lowest where poverty and inequality are highest.

Free Lunch Puzzle

Reduces the incentive to work.

Roberts-Meltzer-Richard (RMR) Model

Greater inequality leads to more redistribution.

Lindert (1996)

Found higher inequality often corresponds with lower government spending, contradicting RMR; reason: institutions.

Prospect of Upward Mobility (Bénabou & Ok, 2001)

People vote based on expected future income, not just current income.

Structure-Induced Equilibrium (Shepsle, 1979)

Political institutions create stable outcomes by limiting which policies can be adopted.

Veto Players (Tsebelis, 2002)

Individuals or groups whose approval is required to change policy.

Duverger's Law

Plurality voting encourages a two-party system; proportional representation encourages a multi-party system.

Persson & Tabellini

PR systems devote more spending to social welfare; Presidential systems spend less on welfare programs.

Rational Ignorance (Downs, 1957)

Since one vote is extremely unlikely to change an election, investing significant time learning politics is often irrational.

Information, Wealth & Redistribution (Larcinese)

The richer you are, the greater the return from becoming politically informed.

Behaviour Irrelevance (Lupia & McCubbins)

Detailed political knowledge may not substantially change voting behavior.

Outcome Irrelevance (Feddersen & Pesendorfer)

Society can still reach good collective decisions because informed citizens effectively guide outcomes.

Iyengar and Kinder (1987)

Agenda setting hypothesis - salience attributed to issues; The priming effect.

Minimal Effects Theory (Columbia School)

Early research argued that media mostly reinforces existing beliefs.

Radio and the New Deal (Strömberg)

Media availability affected where government money was allocated.

Fox News Natural Experiment

Causal relationship between voting behavior; 200,000 red votes in Florida.

Minimalist Democracy

Peaceful transfer of power (Popper); Losers accept outcomes in exchange for future chances (Przeworski); Competitive struggle for votes (Schumpeter).

Besley/Fearon Critique

If voters have genuine preferences over candidate identity, they can't credibly commit to a pure performance.

Maskin & Tirole (2004)

May induce officials to pander to public opinion and put too little weight on minority welfare.

Mays Theorem (1952)

Majority rule is the unique SWF satisfying anonymity, neutrality, and monotonicity.

Gibbard (1973)

Every voting scheme with at least three outcomes is manipulable.

Romer and Rosenthal

Without agenda setter: median voter theorem; with agenda setter: Structure Induced; The Setter Model.

Mckelvey's Theorem

A point close to center of yolk is beaten by more distant point; Preference relation does not reveal collective choice.

Virginia School (Public Choice)

Emphasizes how political institutions create rents and encourage competition over them.

Regulatory Capture (Chicago School)

Explains how industries can capture regulators and shape policy for private benefit.

Tullock (1967)

Argued that resources spent obtaining rents are socially wasteful because they produce no new wealth.

Shleifer & Vishny (1991)

Countries with more lawyers tended to experience slower economic growth.

Political Capture (Dal Bó, 2007)

A majority can often be bought; The winning coalition depends on voting rules; Under unanimity, capture becomes much harder.

Resource curse

Occurs when valuable natural resources encourage rent-seeking instead of productive investment.

Weber: Charismatic Authority

Exceptional qualities.

Great Man Theory

Leaders are born, not created.

Modern Critique (Margaret Levi)

Leadership is therefore both agency and institution.

Leaders as Focal Points (Schelling & Myerson)

Leaders solve coordination problems.

Leading by Example (Hermalin)

Instead of simply telling followers the truth, leaders signal information through costly actions, transmitting credible information.

Leaders as Network Nodes

Good leaders have trustworthy advisers.

Acemoglu & Robinson

Institutions matter most.

Commitment Device Theory

Democratization is a credible commitment to avoid revolution.

Evidence (Dal Bó, Dal Bó & Snyder)

Dynastic bias occurred among legislators, who were about 255 times; evidence of elite persistence despite increased enfranchisement.

Niskanen

Bureaucracy exploits informational advantages; budgets too large, output too abundant.

Miller-Moe

Active, informed legislature leads to bilateral bargaining, balanced relationship.

McNollgast

Legislature creates agents, controls appointments, sets procedures; asymmetric advantage for politicians.