Primer Parcial - Public Choice

Public Choice (PC)

A research program that applies the methods and tools of economics to analyze political decision-making and the resulting public policy outcomes.

Methodological Individualism

The foundational principle that individuals are the fundamental evaluating, choosing, and acting units, focusing analysis on individual choices and their aggregation.

Homo Economicus

The postulate that individuals, whether acting in markets or politics, are modeled as seeking to further their own self-interest, with motives remaining constant across institutional settings.

Politics-as-Exchange

The view that politics is a complex exchange structure among individuals seeking to secure collectively defined objectives that cannot be efficiently secured through simple market exchanges.

Catallaxy

An approach to economics that emphasizes the process of exchange and voluntary agreement among persons, rather than value maximization or allocation efficiency.

Spontaneous Order

The principle that complex social order and coordination can emerge naturally from the actions of many individuals pursuing their own interests, without central design.

Constitutional Political Economy (CPE)

The area of inquiry focused on the study and analysis of comparative rules and institutions that constrain the behavior of political and economic agents.

Rules (Institutional Constraints)

The framework or set of constraints that coordinate the actions of individuals in society, which fundamentally influence the resulting aggregate outcomes.

Hobbesian Jungle

The state of nature where rules are absent, leading to perpetual conflict ("war of all against all") and a life that is "solitary, poore, nasty, brutish, and short".

Median Voter (M)

The voter located exactly in the middle of the political preference distribution; in majority rule, the candidate who wins this voter's support wins the election.

Electoral Competition/Convergence

The dynamic where candidates competing for the median voter's support are driven to move their platforms toward the center, making their policies look more alike.

Extreme Candidates

Political candidates whose platforms are located far from the median voter's position, making them unable to win general elections under majority rule.

Coercion (Government)

The defining characteristic of government allocation where taxes and regulations are imposed by force on citizens, contrasting with the voluntary nature of market transactions.

Information and Incentives (Problems)

The two major real-world problems that prevent government policymakers from identifying and implementing theoretically optimal policies.

Public Interest (Critique)

The concept rejected by Public Choice, arguing that there is no public interest beyond the sum of the individual interests of the people involved.

Market Failure

A description used in traditional economic analysis when markets fail to allocate resources efficiently due to factors like externalities, public goods, or monopolies.

Government Failure

The situation where government actions or interventions lead to inefficient or suboptimal outcomes, often due to misaligned political incentives or concentrated interests.

Concentrated Interests

Small groups (e.g., specific firms or industries) that are easy to organize and have a strong incentive to lobby for policies that grant them substantial, focused benefits.

Dispersed Costs

Costs that are spread thinly across a large population (e.g., taxpayers), resulting in minimal incentive for individuals to organize in opposition to policies.

Rent Seeking

The competition among interest groups for government-created wealth transfers (rents), which expends real resources (e.g., lobbyists, attorneys) that do not add to economic output.

Welfare Cost (Rent Seeking)

The amount of real resources wasted in the process of rent seeking, representing a net loss to the economy and society.

Regulatory Capture

The process where regulatory agencies, initially created to protect the public, eventually come to serve the concentrated interests of the firms and industries they are supposed to regulate.

Budget Maximization (Bureaucrats)

The primary incentive facing government bureaucrats, who seek to enlarge their agency's budget and scope of authority to gain job security, power, and prestige.

Constitutional Reform

The proposed strategy for improving political outcomes by focusing on altering the rules (the constitution of policy) rather than merely adjusting strategies of play within existing rules.

Unanimity Rule (Wicksellian Ideal)

The condition where political decisions or, more practically, the constitutional rules themselves, are selected by the agreement of all participants, serving as the political analogue to freedom of exchange.

Rules of the Road (Example)

An analogy used to show that rules provide predictability and informational boundaries necessary for individuals to pursue their separate, independent goals without conflict.

Coordination Game

An interaction where all parties benefit significantly from adopting any shared rule because the rule provides necessary information, and the temptation for individual defection is low.

Prisoners' Dilemma

A classic game theory illustration demonstrating why privately rational, utility-maximizing behavior by individuals can lead to a suboptimal outcome that neither participant desires, necessitating a socially binding rule.

Tragedy of the Common

An economic outcome where a common resource is overutilized; PC identifies this as a failure of rules (absence of property rights), not a failure of the market process.

Nonteleological (Market Rules)

The idea that the choice of market rules cannot be based on achieving specific, precise predetermined outcomes, because the ultimate beneficial results are discovered only as they spontaneously emerge.

Unconstrained Democracy

A political system without constitutional limits, which can be dangerous because it enables voters and interest groups to demand special favors, potentially leading to the state violating individual rights.

Churning State

A political condition resulting from unconstrained democracy and distributional politics, characterized by constant and wasteful fighting over redistribution of wealth.

Political Business Cycle

The phenomenon where incumbents have an incentive to implement overly stimulatory policies prior to elections to boost their reelection chances, often leading to subsequent inflation or budget deficits.

Constitutional Design

The process of examining how groups collectively choose their institutional constraints or framework, often contrasted with day-to-day policy decisions.

Free Exchange

A process resulting from voluntary trade, adherence to which provides crucial information about the normative status of the outcome, presuming it to be efficient (satisfying the Pareto test).

Process (Normative Relevance)

The argument that the way outcomes are generated (adherence to fair rules) is intrinsically relevant for normative evaluation, regardless of the final outcome itself.

Laissez-faire (Legal Order)

The principle that markets require a pro-competition legal framework including property rights, contract enforcement, and anti-trust laws, proving that laissez-faire does not mean the absence of all rules.

Benevolent Despot (Critique)

The idealized notion of a ruler or policymaker who acts solely to promote the common welfare, which Public Choice theory urges economists to reject in favor of analyzing real-world incentives.

The Social Dilemma

A generalization of the Prisoners' Dilemma, suggesting the ubiquity of the problem of reconciling the behavior of separately motivated persons to generate tolerable social outcomes.

Veil of Ignorance

The idea that when choosing among rules that operate over a long sequence of plays where individual fortunes are uncertain, the choice will tend to be based on generalizable criteria of fairness.