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
Grading
Grades
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
7
What will we try to understand?
Preferences of relevant economic/political actors
Focus largely on groups rather that individuals
Why?
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.
9
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.
10
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.
11
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.
12
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.
13
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.
14
Exclusion: Can you prevent people from consuming/using
Joint Consumption = Rivalry
Use by 1 person affects use by other people
Further information:
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?
| Others | |||
| 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
21
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”
Compulsion
Require taxes to be paid
Other?
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?
Exit
Voice
Loyalty
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.
Exit
Voice
Loyalty
23
image1.png
