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Ch09 Reading Political Economy

Ch09 Reading Political Economy

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Published by Katherine Sauer

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Categories:Types, School Work
Published by: Katherine Sauer on Jan 04, 2012
Copyright:Attribution Non-commercial


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Political Economy (ch 9)
 A. Unanimous Consent on Public Goods Levels
1. Lindahl Pricing
is a way of financing public goods by charging individuals their marginalwillingness to pay.- Erik Lindahl in year ________ Marginal Willingness to Pay refers to:Benefit taxation refers to:
Problems with Lindahl Pricing:
 a. preference revelation problem b. preference knowledge problemc. preference aggregation problem
. Mechanisms for Aggregating Individual Preferences
1. Direct Democracy in the US
 Direct Democracy means that:- it remains strong in America at the local level- it has __________________ in the 20
centuryDirect Democracy also plays an important role at the state level.A
allows citizens to vote on ___________________________________________ that have already been passed by the state legislature.All states allow
legislative referenda
which means:24 states allow
popular referenda
which means:
Voter Initiatives
are more frequent than referenda.- if collect enough signatures, then can place legislation on the ballot24 states allow voter initiatives.- the first two were in Oregon in _______ - about _____________ voter initiatives have been filed since the first
- about _____________ of those actually made it to state ballots and _____ have passed- about __________ of all initiative activity occurs in six states: Arizona, California,Colorado, North Dakota, Oregon, and WashingtonInitiatives were very popular in the early 20
century (Progressive political movement).- 1911 to 1920 there were _____________ initiatives on state ballots- by the 1960s ___________________________________________ - 1978 California passed Proposition 13 and sparked a wider ³tax revolt´ in other statesand initiatives ______________________________________________________ - in 1990s __________________________________________________________ - since 1996 ________________________________________________________ 
2. Majority Voting: When it Works
In practice, the government does not use Lindahl pricing and its unanimous consent.
Majority Voting
is a common mechanism for:A voting mechanism is successful if it can consistently aggregate individual preferences into a socialdecision.Conditions for Consistency- dominance- transitivity- independence of irrelevant alternativesIn reality, majority voting can produce a consistent aggregation of individual preferences only if  preferences are restricted to take a certain form.
3. Majority Voting: When it Doesn¶t Work 
means that majority voting:Sometimes with majority voting we are unable to aggregate individual preferences into a __________________ social outcome.- this creates
agenda setting power 
which means:
. Arrow¶s Impossibility Theorem
 There are certain situations for which ________________________________ can produce a consistentoutcome. Nobel Lauriat Kenneth Arrow¶s insight (1951):
Arrow¶s Impossibility Theorem
says that there is no ____________________________ rule that converts individual preferences into a consistent aggregatedecision without either --
Restricting Preferences to Solve the Impossibility Problem
 Most common way to restrict preferences: impose
single-peaked preferences
which means:This makes utility fall as choices move away from the peak (in any direction).By contrast, multi-peaked preferences would:
5. Median Voter Theory
If the preferences are single-peaked, then majority voting will deliver a consistent aggregation of  preferences of the individual voters.Under this assumption, we can make an even stronger statement about the outcome of majority voting.The
Median Voter Theorem
says that the majority voting will yield __________________________  ______________________________ if preferences are single-peaked.- the
median voter
is the voter who¶s tastes/preferences are in the ____________________ of the set of voters- an ______________ number of voters have tastes for more of the public good as havefor less of the public good
Potential Inefficiency:
 - intensity of preference
C. Representative Democracy
1. Vote-Maximizing Politicians Represent the Median Voter

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