POSC 182E, Politics and Economic PolicyWinter 2023

Professor Nick Weller

Class Information

Syllabus is also on Canvas/eLearn; please look at it for important dates and information

There is a syllabus quiz posted that is due at the end of this week

Assignments will become “live” before they are due

Course announcements will be made via email or posted to Canvas as an announcement

Office Hours: Thursday, 10-11:00am or by appointment

Appointment link posted in Canvas



Syllabus Quiz: 5%  Due this Friday

Midterm: 25%  In class

Assignments: 30%  already posted

Final Exam: 25%

The final exam is a “take home” exam. I will post it on Canvas and you will have 72 hours to complete it. It will be due on March 24 by 6pm.

Discussion Section: 15%

Determined by your TA

Class Participation & Discussion

Participation in class benefits us all

Visit office hours, ask during live classes, or send me an email, but please don’t wait to ask questions.

Recommendation letters

Your TA, Eunseong Oh, will distribute the syllabus separately.

If you have any concerns about section, please contact me.

How to Read Political Science

What’s the point of the article?

Of what is the author trying to convince you?

Use reading short cuts

Read the abstract/section headings

Skim and then (re)read

Why am I teaching this course?

Study abroad in Kenya as a junior convinced me that affect of politics on economics/policy is the most interesting topic in social science

Since that time I’ve been thinking about the topics in the course as a student, employed, grad student and now professor

Key question for the course

How does politics affect the economic policies adopted by governments?

Answer: It’s complicated

Any other answer is a lie

Learning more will make us less certain about many things

We will learn about theories/explanations for how politics and economics interact


What will we try to understand?

Preferences of relevant economic/political actors

Focus largely on groups rather that individuals


Not just preferences, but also INTENSITY of preferences

How are preferences translated into policy?

Who votes?

Who lobbies? What interest groups exist?

How do institutions channel policy demands into policy?

What policy outcomes do we observe?

What Is Policy?

It is what government does (at all levels)

Just because government “does something” does not imply that the policy fixes/improves outcome(s)

Kraft and Furlong, Public Policy, 6e, SAGE Publishing, 2018.


Why do governments create policy?

Political reasons

public opinion/pressure from active groups

Moral or ethical reasons

Power of public opinion or a social movement

Economic and market failures

The market does not solve or creates a problem

Another policy might create a problem that needs remedying

Kraft and Furlong, Public Policy, 6e, SAGE Publishing, 2018.


Monopolies: One entity has too much control over the market.

Leads to higher prices and/or lower quality than absence of monopoly

Externalities: Effects external to a transaction without compensation for the transaction

Negative: third party harmed by a transaction (e.g., pollution)

Positive: third party benefits from a transaction (e.g., education)

Kraft and Furlong, Public Policy, 6e, SAGE Publishing, 2018.


Economic and Market “Failures”

These are considered failures relative to perfect, competitive markets which exist almost never or are simply a modeling convenience.

Externality—transaction between two parties affects a third party

Negative externality – someone else is harmed because of other person’s actions

home foreclosures – property values

water pollution – farmers – runoff

air pollution – burning coal

Positive externality – education for children or higher education. All taxpayers benefit. Our region benefits when you finish college – why?

fix up neighborhood – all benefit

Information Failures

Incomplete information

Consumers are unable to make some decisions on their own due to complexities

Not a problem for certain items

Can be a problem for complex items that are difficult to understand, for example, purchasing health insurance, privatizing Social Security

Kraft and Furlong, Public Policy, 6e, SAGE Publishing, 2018.


Economic and Market Failures

Information failures—in a perfect market consumers have the information they need. Medicare Part D. Privatize Social Security—can everyone be a smart investor?

4. Protection of Public or Collective Good

Free market transactions might harm things we all use or enjoy

For example, wetlands, clean air, beautiful places

Government protects/provides jointly consumed or collective resources, for example, national security, natural resources

Kraft and Furlong, Public Policy, 6e, SAGE Publishing, 2018.


Economic and Market Failures

Example—national security—safety is a collective good

Example—state smoking bans—the air, or not being exposed to tobacco, is a collective good

Kraft and Furlong, Public Policy, 6e, SAGE Publishing, 2018.


Exclusion: Can you prevent people from consuming/using

Joint Consumption = Rivalry

Use by 1 person affects use by other people

Further information:

Public Goods

Joint consumption also called rivalry

No joint consumption = individuals use it and can use it up

Joint consumption = shared, not sold to an individual

Exclusion feasible – not everyone uses it

Exclusion not feasible – affects the entire public

1. The government protects things that the free market wouldn’t protect

Does not protect pure private goods, which are not subject to market failure

2. Toll goods, government subsidizes to keep these goods affordable so that all people can access the service (electricity, roads)

3. Common pool – shared resources; everyone uses these goods. If left alone, individuals might use the goods up or destroy them, so government protects

4. Pure public goods – national defense; there is no market incentive at all for this type of thing; it wouldn’t happen if not for the government.

Government Intervention or Not

Reasons FOR government intervention do NOT imply government should intervene

Gov’t can do something doesn’t mean gov’t SHOULD do something

Moral reasons

Tradeoffs of intervention

Time/Money/Attention may be misallocated

Intervention makes things worse

Roadmap for first few weeks

Analytical tools/perspectives for the class

Types of good (public, private, toll, common pool)

Last lecture

Collective Action

Exit, Voice and Loyalty

Tyranny of the Minority

Political Responsiveness

Logic of Collective Action, Olson

In many settings there are advantages to group action compared to individual action. Why? Examples?

Olson argues that groups do not form just because its advantageous

What is the basic problem that those who want to create a group face?

According to Olson, what inhibits collective action?

The dilemma of collective action

All others
Join Don’t Join
YOU Join 3, 3 0, 5
Don’t Join 5, 0 1, 1

The first number in each cell is what “YOU” receive for that action and the second number is what ‘All others” receive for that action.

Payoff Structure

People not in the group cannot be excluded from the benefits of the group (i.e. group benefits are a public good)

Why? What types of benefits might these be?

No individual’s decision to join or not affects the group’s ability to provide benefits

What will “rational” people do in the situation above?

What does this imply about collective action?

Imagine I tell you all that if at least ½ of you attend an extra two hour, in-person class that I’ll give EVERYONE an extra 3 points on the first paper even for those who do not attend the extra class.

What will would you expect to happen?

Example Collective Action Problem

Attend Extra Class if ½ attend

Each person gets 3 points if >1/2 attend

There’s a cost, c, to attend class

What will YOU do?

What will OTHERS do?

Attend Don’t Attend
YOU Attend 3-c, 3-c 3-c, 3
Don’t Attend 3, 3-c 0, 0

Collective action problems

What are other examples of collective action problems?

Examples in politics

using a common pool resource such as a fishery. The fishery does better if we each restrict our fishing but individually it’s not in my interest to resist fishing because oothers will continue to fish and I’ll be lleft out of that

federal budget: country might benefit from a balanced budget but each legislator benefits from maximize spending.

Lobbying for a group good – such as tariffs or less business regulation


Overcoming Collective Action

Selective incentives

Provide incentives for contribution (i.e. NPR tote bag)

Privileged actor/leader

One actor who incurs cost to provide the good/take action

Ethics/social norms

Make participation seem ethically “good”


Require taxes to be paid


All these approaches rely on changing payoffs

Exit, Voice and Loyalty, Hirschman

What is the key point of his argument? What is he trying to help readers understand?

What does each of these mean in politics?




How do these options differ between politics and economics?

How does the effectiveness of these options vary with how easy the other options are to use?

Key point: How to respond to organizations with which one is dissatistfied.