ECON 116 Midterm Practice Flashcards

Flashcards covering key economic concepts, research methodologies, and institutional theories from the ECON 116 Midterm Exam.

Externalities

A market failure where perfectly competitive markets without intervention do not maximize social surplus; Pigouvian taxes can correct negative ones, while Pigouvian subsidies can correct positive ones.

Coase Theorem

A theory stating that efficient outcomes are possible without government intervention if transaction costs are low and property rights are clearly defined.

Common resources

Goods that are characterized as being nonexcludable and rival.

Club goods

Goods that are characterized as being excludable and nonrival.

Private goods

Goods that are characterized as being excludable and rival.

Public goods

Goods that are characterized as being nonexcludable and nonrival.

Tragedy of the commons solutions

Methods to prevent resource overuse including creating property rights, command and control (regulation), and cultural norms.

Randomized Controlled Trials (RCTs)

A research method where randomly assigning individuals ensures two groups will be identical on average due to the Law of Large Numbers, provided the sample size is large enough.

Regression discontinuity design

A method that compares observations within a bandwidth around a cutoff, where those close to the cutoff are considered as good as randomly assigned to treatment or control.

Difference-in-differences assumption

The requirement that, in the absence of a policy or event, the treatment and control groups would have continued to follow parallel trends in the outcome.

Correlation

A relationship between two variables where a causal relationship or the direction of causality cannot always be established.

Economic consequence of the Holocaust

Research indicates a direct economic consequence in Russia and Germany was the disruption of human capital.

Opportunity cost (Civil Conflict)

The theory that higher prices for labor-intensive crops reduce conflict probability by making the cost of participating in violence higher.

Rapacity effect

The theory that an increase in international prices for appropriable resources, like oil or coltan, increases the probability of conflict due to the gains from violence.

Democratic peace theory

The hypothesis that democracies are less likely to go to war with one another than they are with autocracies.

Rainfall inequality

Heterogeneous shocks in rainfall that can affect income inequality and increase ethnic conflict in Africa.

Epidemiological approach

A method to disentangle the effects of culture from institutions by comparing children of migrants who live under the same institutions but have parents from different countries.

Protestant ethic

Max Weber's claim that Protestantism pushed believers toward hard work, savings, and investment, serving as an explanation for the rise of capitalism.

State capacity

A concept consisting of fundamental elements including fiscal capacity (tax extraction) and legal capacity.

Generalized trust

A cultural trait where societies spend fewer resources to monitor partners, employees, and suppliers, or enforce rules.

Extractive institutions

Institutions established by colonizers that served as a determinant for the reversal of fortune in income per capita observed in former colonies.

De jure political power

Political power that is allocated specifically by law or formal political rules.

De facto political power

Power that is not determined by formal law but rather by factors such as the distribution of resources.

Efficient institutions view

The view that societies choose the set of institutions and regulations that are socially efficient.

Ideology/beliefs view

The view that different institutions are chosen because leaders or societies have different beliefs about what is socially efficient.

Incidental institutions view

The view that institutions are the unintended consequences or by-products of other social interactions or historical accidents.

Social conflict view

The view that institutions are chosen by the groups controlling political power for their own benefit rather than for social efficiency.

Threat of revolution responses

The three options available to elites in the Acemoglu, Johnson, and Robinson model: democratization, concession, or repression.