Political economy flashcards

Pork-Barelling

Federal spending on inneficient local projects (concentrated benefs for spreaded costs)

Strategic Interdependence

Benefs non-exclusive but indivdiual bears private costs

Norm of reciprocity

coop= rational strategy (not altruism —> self-interest)

Netting’s communal land tenure conditions (Japan/Switzerland)

Low value per unit of land, unreliable yields, large territory, low potential for intensification, large groups needed for capital investment

Long-enduring instits conditions

Defined boundaries, local conditions, collective-choice, monitoring, graduated sanctions, resolution mechanisms, not challenge by gov (nested enterprises)

Similarities

Stable pop (low discount rates), complex environ., norms, low inequality, collective, differs across settings

Törbel, Switzerland

Local official (fines) who has acess to CPR, rules to regulate, wintering/cow rules, labor contrib/fees proportionate to cattle use, village statute (citizens), alp association

Japan

Households, minimal coercion, village assemblies (harvests, sustainability)

Huertas Rules specify:

Water allocation, droughts, scarcity, maintenance, elections fines

Difference Valencia/Alicante

Only one irrigation community (Tibi Dam)

Zangeras (Philippines)

1 day of labor/season, allocation proportionnate to it (+ material contrib, share)

Comply when:

Believe collective objective, others will too

Monitoring

Byproduct of resource use by appropriators themselves, interrdep w/rules

Best response

The one that maximizes payoff when you know what the other does

Dominant strategy (special Nash)

Best response regardless of what they do

Nash equilibrium

Best response to best response, no unilateral deviation is profitable, multiple ones

Strategic ≠ Social Interactions

At least one person can lose/win depending on the other’s action (stratgeic: know they impact the other)

Social dilemma

Don’t fully take into account externalities (antibio)

Human behavior driven by

Self-interest + Social Prefs (Altruism, Reciprocity, Inequality-Aversion)

Resolve Social Dilemmas

Social prefs or instits

R; T; S; P

Temptation, Reward, Punishment, Sucker’s Payoff

Types of goods

Public, pribate, CPR, club

Pareto Optimum

You can’t gain w/o someone else losing

Spatial Theory

Political positions can be ordered along a left-right-center spectrum

3 integrated components of spatial theory

Voter Choice, Party Platform Selection, Quality of Outcomes

Types of disagreements (politics)

Values, judgement

Core Assumptions of One-Dimensional Spatial Model

Unidimentionality, Single-Peaked preferences, Sincere Voting, (Symmetry)

Median Voter Theorem

Unidimentionality, Single-Peaked preferences (cycles), Symmetry, Majority Rule

Conditions Spatial Modeling

Ordered Alternatives, Continuous Policy Space

Ordered Dimension Assumption

Policy alternatives can be arranged from less to more along 1 dimension

Contributions of Spatial Theory

Power lies at middle and stab depends on distrib of prefs and rules to aggregate

Diff btw all

• Spatial theory = “preferences live in space”

• Ordered dimension assumption = “that space has a shared ordering”

• 1D spatial model = “everything happens on one line with single-peaked preferences”

Info Assymetry

One party to an exchange knows something relevant

Types of Info Assymetry

Hidden actions/attributes

Hidden actions, moral hazard

DURING: Some actions can’t be monitored (more driving risks) (efficiency wages)

Hidden attributes

BEFORE: market for lemons (missing market, unravelling)

Adverse selection

When terms of trade cause the lezst desirable participants to remain in the market

—> Health insurance (solutions: compulsory or universal tax-funded)

Moral hazard

Situation in which one party takes an action that affects wellbeing/profit of others but that action can’t be observed or enforced through contract

Control opportunism in delegation

Ex ante, ex post, norm-based

Motivations to delegate

Time/effort, expertise, Commitment, Resolve disputes, Avoid blame

Accountability depends on

Principal’s ability to evalue agent’s preferences (Bureaucratic/Electoral Agency)

Principal-agent theory

Rational-choice framework where principal structures incentives to induce agent to act in ways he prefers

Incentive Compatibility

If makes it worthwhile for agent to behave as principal prefers

Agency Loss

Gap btw action principal would take if all info/one they induce given constraints

Fight moral hazard

Performance measure, align incentives, contracts, contingent renewal

Fight adverse selection

Signalling, Screening