Political Economy Terms

Bootleggers and baptists

Bootleggers supported regulatory restrictions to eliminate competition. They support in the background by offering donations and providing political power.

Elasticity

a measure of how much the quantity demanded or supplied of a good responds to a change in price or another economic variable.

Signaling

How to identify ones social class or how the represent themselves.

Rent

The value of a unique asset that ca’t be easily replaced

Rent-Seeking

Trying to influence political power/levitation state to alter agstate to alter against trade to benefit oneself

Rent-creation

What politicians do/regulaation by the government

Framing

The way choices are presented may affect how they’re made

Subjective Utility

the idea that the value of goods, policies, or outcomes depends on the individual preferences and perceived benefits of each person rather than any objective measure.

Prospect Theory

Illustrates cognitive limits of society limits of rationality. People tend to choose low valued guaranteess over high-valued expected gains. People tend to fear expected losses over certain losses even if the certain loss is greater and people tend to exaggerate rare low-rsik probabilities and discount command high risk probabilities

Common Pool Resources

Rivaled not common pool resources but solutions to the TotC collective action problems if hence require team production or conservation.

Social Trust

confidence that others will act honestly and cooperatively.

Production Possibility Frontier

A curve that shows the maximum combinations of two goods an economy can produce when all resources are used efficiently.

Free-Riding

Not participating or contributing within something that benefits the community

Moral Hazard

Exists when insurance coverage in and of itself affects the way you behave. 1. If an insurance company can’t observe your care level 2.People do not bear the risks of their own actions.

Deadweight Loss

Imposes a cost but has no gain in society or social benefit

Equilibrium

Point where each player unilaterally picking a new strategy unchanged.

Transaction Costs

The resources needed to define and monitor costs

Property rights

A property rule allows parties to negotiate their own outcome moving the resource to its highest value.

Externalities

Transactions between 2 people affects 3rd party

Pooling

High quality and low quality type of individuals

Separating Equilibrium

Signal receivers can distinguish between different types of senders

Transitivity

Consistency

Offsetting Behavior

The technical ability of a safety feature to lower the risks of harm is offset by the behavior of the person using the future.

Utility maximization

People maximize utility

Opportunity costs

the value of the next best alternative foregone when making a choice.

Public Goods

Goods or services where the ability to consume the good is not excludable thus no one or few have an incentive to pay for the provision and hence there is no incentive to supply it

Club Goods

Public good exclusively for people within the club

Trade-Offs

are situations where choosing one option means giving up another.

Hierarchy

system in which people or things are ranked one above the other based on authority, importance, or status.

Markets

Voluntary contract allowing affordable property rights

Community

Common norms and rituals that rely on a set of common values and norms to allocate resources

Tradegy of the commons

There are no limits on access to a reaource with the result that the resource is overused

Game Theory

Groups that are good at solving the collective action problem tend to win

Prisoners Dillema

Situation where in mutual cooperation it is in the intreest of all players to cooperate, but individualistic to not cooperate

Behavioral Economics

How cognitive biases affect economic decisions and how markets may lessen these biases but cannot completely remove them.

Thick Rationality

Context and culture used to maximize rationality of the market

Thin Rationality

Context and culture not included in rationality of the market

Principal-Agent problems

An individual employs another to perform a task

Residual claimancy

the right of owners to receive whatever remains of a firm's profits after all other obligations, such as wages and debts, have been paid.

Price mechanism

Means of communicating information about needs, desires and the best use of resources within a society.

Collective Action

Most political and economic action us based on cooperation

Consistency/Transitivity

Preferences must be transitive so theres no deadweight loss

Institutions

Established rules, laws, or organizations that shape and govern social, economic, and political behavior.

Emergent Order

Without anybody acting as a central coordinator, society writ large is able to to provide for an incredible array of needs, wants and desires “order emerges from anarchy”

Latent groups

groups whose members share common interests but have not yet organized or acted collectively to pursue them.

Privileged groups

groups whose members can organize and achieve their common interests easily because the benefits of doing so outweigh the costs.

Transaction costs

the expenses incurred when making an economic exchange, such as searching for information, bargaining, and enforcing agreements.

Incentives

are rewards or penalties that motivate people to behave in a certain way.

Triangulation

the use of multiple methods, data sources, or perspectives to study a problem and improve the accuracy or credibility of results.

Transfer

the movement of resources, money, or responsibilities from one person, group, or place to another.

Methodological individualism

The basic unit of analysis is the individiual

Marginal Utility

the additional satisfaction or benefit gained from consuming one more unit of a good or service.

Gifting economies

goods are given without explicit payment, which can create deadweight loss (DWL) because resources may not be allocated efficiently compared to market exchanges.

Utility maximization

People maximize utility

Pareto Optimality

A state in which resources are allocated so that no one can be made better off without making someone else worse off.

Expected Utility Maximization

The world is filled with risk and a rational decision maker aims at achieving their highest expected utility

Gains from trade

are the benefits or increased welfare that individuals or countries receive by specializing in production and exchanging goods or services.

Coase Theorem

property rights are well-defined and transaction costs are low, private parties can negotiate to resolve externalities efficiently without government intervention.

Assurance Game

Multiple equilibrium points

Public Choice

the study of how self-interest and incentives influence the decisions of voters, politicians, and government officials.

Information Asymmetric

Consumers and producers don’t always have equal information

Behavioral symmetry

The idea that individuals or groups respond in similar ways to comparable incentives or situations.

Government

An authority with a monopoly on coercion the territory it presides over is based on force

Governance

Existence of some mechanisms or institutions that provide and enforce social rules and social order (monopoly coercive)