Positive Political Economy

What is positive political economy?

Interdisciplinary field that uses economic methods and analytical political science to understand and predict political behavior by studying political decision-making, collective action, political institutions, and public policy.

What are the 3 principles of rational choice approach?

1. Methodological individualism

2. Goal oriented behavior

3. Optimizing decision-making

What is methodological individualism?

Group activities can be explained as a consequence of the decisions made by individuals

What is goal-oriented behavior?

All individuals are assumed to have goals and make choices to advance those goals

What is optimizing decision-making?

Individuals choose the best of the available means to advance their goals

What is rational choice approach?

Individual preferences are taken as given

External environment is often characterized by uncertainty about how individual actions make translate into outcomes

Individuals also have beliefs about how individual actions may connect to outcomes based on experience and learning

What is instrumental rationality?

Acting in accord with preferences and beliefs

What does rational choice require? (2 properties)

Individual preferences are complete and transitive

Complete preferences

All alternatives are comparable

Transitive preferences

If x = y and y = z , then x = z

What is utility maximizing behavior?

Individuals will make choices that maximize the benefit (utility) to them

What is utility?

Relative value assigned to outcomes

What is expected utlity?

The sum of all outcomes weighted by the probability of each action

What is individual choice?

Individuals choose actions that can influence the outcome, but they can’t always choose the outcome

• uncertainty causes individuals to form expectations (E) about these outcomes