PubPol Real Me Midterm Review

Types of Biases

blind spot, motivated reasoning, disconfirmation biase

blind spot bias

failing to recognise own cognitive bias

motivated reasoning

reasoning toward a conclusion you already want to reach

disconfirmation bias

demanding a higher standard of evidence for information that does not reflect your ideology

Requirements of competitive markets

no externalities, perfect information, everyone is a price taker with no market power

requirement of pareto efficient econ

competitive markets

What prevents market power?

many buyers/sellers, homogrenous goods, free entry and exit (ex no long term leases or exclusive contracts of IP rights, etC), costless complete informaiton

Four most common market failures

public goods, externalities, information asymmetries, monopolies

two qualities of public goods

nonrival and non excludable

Good that is... excludable and rival?

private good, efficient market supply

Good that is... excludable and nonrival

toll good, typically under consumed, society forgoes potential gains (ex. artificial scarcity of patented drugs)

Good that is... non-excludabe and rival

open access good, tupically over consumed, tragedy of the commons (ex. over fishing_

Good that is... nonrival and nonexcludable

pure public good--typically under produced bc of free rider problem (ex. public radio)

Types of externalities

Gen--when the cost/benefit of producing or consuming a good falls on a third party (often society) that was not involved in the decision, positive--magncal private benefit is less than the social beenfit, so the good is underproduced/consumed (ex, public education); negative externality--private cost is less than social cost, so the good is overproduced/underconsumed (ex gas)

Def of information assymetry

One party of a transaction nows more about the quality of the good/service than the other, common when quality is hard for consumers to observe I(ex experience goods that are only known after use, or post experience goods where wuality is hard to judge even after use [ex pharmaceuticals[)

information

claims of fact, influenced by whoever is sharing them

data

collected according to statistical protocols

evidence

reliable data that has been analyzed and interpreted

Types of program evaluation

1. needs assessment 2. designa dn theory assessment 3. process evaluation and monitoring 4. impact evaluation 5. efficiency evaluation

four types of validity

construct, statistical conclusion, internal, external

construct validity

are you measuring what you want to measure? Or are you measuring some weird random stuff

statistical conclusion validity

are your stats good? Concerns of spurious significcance, statistical power (is your sample too small), violated test assumptions, fishing/p-hacking

internal validity

is the effect you found actually caused by the program? Example of threats include selection bias, attrition, maturatino/natural growht over time, larger social trends, seasonality, regression to the mean, contamination/spillovers, etc

external validity

are your findings generalizable? study volunteers generally WEIRD, can one study in one area/context apply to another

types of policy analysis

classical, policy/program design, hybrid

where do policy solutions come from?

Theory: certain types of solutions align with certain types of problems. Politics: options already on the table in political dialogue. Reform: existing policies that could be reformed. Replication: solutions from analogous policy contexts. Innovation: designing something new

Government policy instruments

Subsidies, safety nets, taxes, regulations/rules/rights, government provision, market stimulation

general revenue tax

normal taxes, literally the only policy objective is to raise money for the govenrment. NOT designed to correct market failures, produce deadweight loss

pigouvian taxes/incentive based taxes

goal to change behavior, not raise money, often used for negative externalities (ex taxing soda)

Forms of subsidies

grants, vouchers, in-kind benefits (direct provision of a good), tax savings

types of tax savings

tax deducation--reduced portion of income subject to tax (more useful to the rich), tax credit--reduces the amount of tax owed, refundable tax credit--recipients receieve the full credit even if it exceeds the tax they owe

things safety nets can address

unacceptable distributional outcomes, information asymmetries (ex foreclusure assistance), decisiions under constraints (ex. FEMA)

principle agent problem

government (princple) can't control how cash gratns are used, so turn to vouchers or in kind benefits

regulations vs rules vs rights

regulations govern market behavior, rules govern property/criminal law, rights govern constitutional law

common policy analuysis criteria

effectiveness, efficiency, equity, political feasibility, implimentation feasibility, legal feasibility (when picking, go from most to least important)

Two important things for consumption

constraints (ex. money) and preferences

Four behavioral assumptions

People have preferences, prefer more over less, and are willing to substitute. The marginal value of a good decreases as one consumes more of it (diminishing marginal value)

value of a good

what people are willing to give up to obtain it (ex. a good that costs X dollars, people are giving up X dollars worht o fother good)

marginal value

the maximum a consumer is willing to pay for one more unit of a good, or the minimum they would accept to give up one more unit

diminishing marginal value

marginal vlaue falls as you consume more of a good (ex first glass of water after a marathon vs the 8th)

Optimal purchase

consumers keep buying until MV = P

Consumer surplus

value of purchase - cost

producer surplus

value of sale - cost of producing good

know terms law of supply law of demand

price elasticity of demand

how tied to change in price the quantity demanded is

income elasticity of demand

responsiveness of quanitity demanded to a change in income (ex. there is probably a floor to how much an employed person can save on food)

what makes demand more price sensitive

availability of close substitutes, share of income spent on good, amount of time to adjust

normal good

demand increases as income increases

inferior good

demand decreases as incme increases (ex. canned meat)

Per unit taxes

drive aprice wedge between what th econsumers pay and what preducers receive -> reduction in quanitity traded

Tax vs surplus

n an efficient (competitive) market, a tax reduces total surplus. Part of the lost consumer and producer surplus becomes government revenue (GR); the rest is lost entirely

Deadweight loss

decrease in total surpls caused by market distortion

stuttoruy incidence vs tax incidence

statutory--group that must literaly pay hte tax (ex. business), tax incidence is who actually must pay (sometimes shifted to consumers). Generally determined by which side (producer or consumer) is more elastic

lump sum taxes

Flat fee, no x variable, such as car registration. In theory they are nondistortionary and do not have deadweight loss but people hate them

per unit subsidies increase quanittiy traded beyond the efficient level (also lead to DWL)

Effects of price floor

prices held artificially high --> excess supply, gov sometimes buys surplus

effects of price ceiling

prices held artificially low --> shortages, Government may supply supply

ways to limit monopoly power

antitrust laws, market regulation/intervention, unions, technologoical destruction

policy options for existing monopoly

mandate price ceiling, govenrment takeover, subsidize the monopolist