Why do we need Governme

nt?

“A state of nature….solitary, poor, nasty,

brutish, and short”
-Thomas Hobbes, The Leviathan, 1651.
Individuals and Government

 Society is composed of rational self-interested

individuals (the rationality assumption)
 In each choice, individuals are driven to maximize the
benefit of an action….
 ……while simultaneously diminishing the cost.
 Government decisions are the expression of collective
choice and compromise among self interested
individuals.
 Absent rules or formal authority, collective decision-
making is difficult.
Collective Action Dilemmas
Collective action problems refer broadly to a
series problems associated with organizing
groups of self-interested, rational individuals,
and persuading them invest individual work and
resources in order to produce jointly desired
ends.
 Coordination Dilemma

 Free Riding

 Prisoner’s Dilemma

 Common Pool Resource Dilemmas

 Tragedy of the Commons

Coordination Dilemmas

 Even when parties prefer the same outcomes, it is

often difficult to coordinate choice.

 As the size of groups increase, coordination

becomes more difficult.

 Decision rules and delegation help solve

coordination problems.

 Examples: The Coordination Game andThe Dating

Game.
The Prisoner’s Dilemma
Bonnie

Keep Quiet Testify

Clyde Keep Quiet 1,1 3,0

Testify 0,3 2,2

The Coordination Game
Driver 1

Right Left

Driver 2 Right Live, Live Die,Die

Left Die,Die Live,Live

The Dating Game
Insert Girlfriend Name Here

Tarantino Film Rom Com

Brett Tarantino Film 2,1 0,0

Rom Com 0,0 1,2

Free Riding
 Groups are made up of self interested
individuals.
 In groups, there is an incentive individuals to
free ride and shirk responsibility.
 Avoid cost of collective decision while enjoying
rewards.
 The problem is, if all behave in this manner, than
the desired outcome falls apart.
 Examples: Union participation, Party
Planning, School Funding
Prisoner’s Dilemma
 Individuals pursuing their own self interest can
produce collectively bad outcomes
 Demonstrates the problem of trust in political
decision-making
 Cooperation is difficult to achieve.
 Problem arises because decision-makers must
sacrifice something of value to receive payoff.
 Institutions solves collective action by
facilitating communication, and instituting rules
elevating the cost of individual self interested behavi
or
.
The Chicken Game
New Kid

Swerve Straight

Jealous Boyfriend Swerve 0,0 -1,1

Straight 1,-1 -100,-100

The Chicken Game

 Problems of trust and cooperation are

exacerbated when there is conflict between
actors over resources, decisions, etc.
 Again, pursuit of individual best interests may
yield collectively poor outcomes.
 Actors prefer not to yield to each other,
however the result is catastrophic when
neither side yields
 Solutions: Pre-commitment
Public Goods and Collective Actions
Dilemmas
 Public Goods present especially difficult
collective action problems in Government.
 These Goods are all or nothing propositions.
They are either provided or not.
 Non-Excludable
 Non-Rivaled
 Thus incentive to free ride is especially high.
 Ex: Clean Air, Clean Water Supply, National
Defense
Tragedy of the Commons and Common
Pool Resource Dilemmas
 Common pool resource dilemmas emerge
from a conflict over finite resources between
individual interests and the common good.
 Example: Fishing or Water Use
 Long term fish supply is healthier if fish supply is not
overly harvested in a given year
 Each fish captured increases individual profit (good is
rivaled)
 Each fish captured decreases future fish supply
 Formal Governmental Solutions
 Individual and Communal Solutions
Resolving Collective Action
Problems
 Resources, Monitoring and Enforcement
costs.
 Transaction costs—time and effort invested to
understand alternatives, compare preferences,
make joint decisions.
 Conformity costs– the cost of compromise when
agreeing to less than ideal policy.
Constitution and Government
 Constitution of government creates a set of rules and provides a
set of rules prescribing the political process these institutions must
follow to reach collective agreements.

 Government refers to those institutions created and charged with

making and enforcing collective agreements.

 A government is vested with unique authority—the legitimate use of

coercive force to gather resources and ensure compliance.
Constitutions Determine Costs of Collective
Action
 Constitutional Decision-Rules
 Plurality
 Majority
 Supermajority
 Unanimity

 Delegation of Authority
 Direct Democracy
 Republicanism
 Authoritarianism
Government Resolves Collective Action
Problems with Lawmaking and Policing
 Formally or informally alter individual preferences to produce
desired outcomes
 Incentives
 Punishments
 Decision-making rules
 Procedures
 Fishing Licenses and Quotas
 Fines and overuse fees
 Prison
 Lawsuits and Standing
 Mandatory Compliance
 Taxation
 Regulatory Policy
The Origins of the American
Constitution
 How did the political, social, demographic, economic and
cultural experience of early America shape the design of
the Articles of Confederation and the Constitution?
 What led to the creation of the Articles of Confederation?
 Who were the winner and losers under the Articles of
Confederation? Why
 How did the experience of self governance under the
Articles of Confederation shape the design of the
Constitution of the United States?
The American Experience: The Evolution of
the Rules of the Game

 “It seems to have been reserved to the

people of this country, by their conduct
and example, to decide the important
question, whether societies of men are
really capable or not of establishing good
government from reflection and choice, or
whether they are forever destined to
depend for their political constitutions on
accident and force.”
 Alexander Hamilton, Federalist 1, 1787.
A Profile of the Pre-Revolutionary
Colonies
 Diversity in Language, Religion and Country
of Origin
 Diverse Economies
 Constant Presence of Military Threat
Tradition of Self Governance

 Home rule (taxes and domestic affairs to the

colonies)
 Elected Assemblies
 Asserted right to levy and collect taxes
 Tradition of written constitutions
Limitations of this self governance

 England retained control over military and

trade.

 Little negotiation or incentives for action

between colonies.
Impetus for Revolution

 After 7 Years War, England needs to raise

revenue.
 Challenges home rule by establishing taxes,
famously with the Stamp Tax of 1765, and
later the Tea Tax in 1773.
 We don’t mind taxes, we just don’t like these
taxes. But why?
British Response Galvanized Americans

 Britain responds with the Restraining Acts

and Coercive acts (Intolerable Acts)
 Closed all MA ports
 Dissolved MA assembly
 Decreed British troops be quartered in
American homes
 Americans and British soldiers charged with
crimes be sent to England.
Declaration of Independence
 We hold these truths to be self-evident, that all men are created
equal, that they are endowed by their Creator with certain
unalienable Rights, that among these are Life, Liberty and the
pursuit of Happiness. — That to secure these rights, Governments
are instituted among Men, deriving their just powers from the
consent of the governed, — That whenever any Form of
Government becomes destructive of these ends, it is the Right of
the People to alter or to abolish it, and to institute new Government,
laying its foundation on such principles and organizing its powers in
such form, as to them shall seem most likely to effect their Safety
and Happiness.
Factors shaping the Articles of Confederation
 Experience with Monarchy created deep
distrust of centralized authority
 Value domestic independence.
 Little experience with interstate cooperation,
especially in defense or trade.
Provisions of the Articles of Confederation

 Created a permanent Congress where each state

received one vote
 Major laws—taxes and constitutional change require
unanimous agreement of all states.
 Military: States raise revenue, taxes, and outfit troops
for battle. National military command answers to
congress.
 No national executive or judiciary.
 States retain authority to negotiate trade overseas.
 States print and coin there own money.
 Virginia Pound, Connecticut Shillings, and Rohde Island Dollars
Speaking of Collective Action…
 What are the strengths and weaknesses of
this system?
 What drawbacks are built into the articles of
confederation?
 Do the decision rules create high or low
transaction costs?
 Do the decision rules create high or low
conformity costs?
Collective Action and The Articles of Confederation:
Lapses and Breakdown

 Military
 Economic
 Debt
 Trade barriers.
 Security problems
 Popular pressure and state governance.
Losers in the Articles of Confederation

 Merchants
 Southern Tobacco Farmers
 Creditors
 Others.
Constitutional Convention.
 The Virginia Plan
 Create a bicameral national legislature
 Lower chamber voted by popular election
 Upper chamber appointed by state legislatures.
 National legislature would elect President and Judiciary.
 Empower national government to pass laws and veto
states.
Opposition to the Virginia Plan

 Opposition emerged from small states who,

potentially would lose in two key ways
 Representation based on population took
away power at the national level.
 National veto over state laws striped
individual state power.
The Great Compromise
 The Great Compromise
Congress: Two chambers
 Senate, 2 reps per state, 6 year term
 House of Representatives selected by popular election
and based on population size.
 Unanimous agreement part of the constitution gone, and
replaced by majority
 Constitution Provides broad powers express and implied
powers to Congress– evidenced in the necessary and
proper clause.