Downs 1957

Introduction to Government and Economics

• Government's decisions greatly affect the economy.

• Modern economics needs to see government as part of the economy, not just an outside influence.

• Traditionally, it was thought that the economy could regulate itself without government help.

Public Finance and Economic Theory

• Two areas challenge the traditional view:

• Public Finance: According to Hugh Dalton, it studies how government affects the wealth and its distribution in a society.

• Welfare Economics: Economists like Abba Lerner suggest the government should try to improve overall social welfare.

Motives for Government Action

• Government actions might not always aim to improve social welfare.

• Schumpeter points out that personal or political gains can influence decisions.

• Theories about government should consider self-interest as a motivator.

Definitions and Axioms

• Government: An organization with power to enforce rules and make final decisions in a society.

• Democracy: A political system featuring multiple parties, regular elections, and equal voting rights for citizens.

• Axioms:

1. Political parties want power for the benefits it brings.

2. Winning parties have control until the next election.

3. Government power is broad but limited by political freedoms.

4. Everyone acts rationally to achieve their goals.

• Main Idea: Parties create policies mainly to attract votes, not just to help people.

Government Decision-Making Models

• Examined under two conditions:

1. With complete information

2. With limited information

Decision-Making in Perfect Information

• Government actions are based on what voters are expected to do and what the opposition is planning.

• Key points:

1. Government decisions depend on expected voter behavior.

2. Voters decide based on their past experiences with government actions.

3. Voter opinions are based on how well a party has performed.

• Parties plan their actions in advance, considering what the current government is doing.

Imperfect Information in Political Action

• Citizens often don't know enough about what the government does or what other options exist.

• Effects of Limited Knowledge:

1. Persuasion: Lobbyists use specific information to sway undecided voters.

2. Decentralization: Power is distributed as representatives are relied upon to understand public opinion.

3. Social Bias: Unequal access to information leads to some people being taken advantage of.

Influences of Ideologies

• Ideologies help voters make decisions but can hide real differences in policies.

• Parties use ideologies to make things simpler for voters, but they can't change too much without losing trust.

Political Parties and Voter Distribution

• Two-Party Systems:

• Parties tend to move towards the center to attract more voters.

• Multi-Party Systems:

• Variety leads to coalition governments and diverse policy integration.

• Political balance is about the number of parties and where they stand based on voter distribution.

Cost of Information and Rational Citizen Behavior

• Getting political information is costly, leading citizens to stay uninformed and, often, uninterested.

• Many citizens believe their individual vote won