Institutions & the Environment

Question 1

the environment + extractive institutions

Answer 1

• Depends on the small ruling elite ie. If dictator happens to care: environment is protected/If dictator cares only about small ruling elite: no environmental protection

But poverty, no (or little) economic activity = no environmental
pollution

Question 2

Inclusive institutions + environment

Answer 2

One inclusive economic institution = Provision of public good that benefits all
- Environment = public good
- So inclusive institutions should produce clean environment
- Especially with all incentives to innovate technologically
- Since in inclusive: broad cross-section of society has political power
- And broad cross-section of society wants clean environment

• But this is not what happened: Massive pollution in inclusive

Question 3

Median voter in inclusive institutions

Answer 3

Maybe not true that:
- Broad cross-section of society wants clean environment
- In fact, in inclusive, it is not really “broad cross-section” that decides
- It is the median voter (view slide 8 of chapter 6: The Median Voter Theorem basically says that in a two-party system, politicians tend to adopt policies that appeal to the average voter’s preferences to win elections.)

Question 4

Problems with the Median voter theorem

Answer 4

Certainly, here are the issues with the Median Voter Theorem broken down:

Problems with the Median Voter Theorem:

1. Single-Issue Limitation:
   
   • The model only works if there is only one issue, such as redistribution.
   • It does not work with multiple issues, as redistribution may not be the most important issue in elections. Other social issues might take precedence.
2. Assumption of Uniform Importance:
   
   • Assumes that the issue at hand (e.g., redistribution) is the most important one to voters, which may not always be the case.
   • Voters may prioritize various issues differently, leading to a more complex decision-making process.
3. Platform Convergence vs. Reality:
   
   • The theorem implies that all politicians’ platforms will converge to the preferences of the median voter.
   • However, observations show significant differences among politicians’ platforms, with not all aligning with the center.
4. Empirical Challenges:
   
   • While there is empirical evidence suggesting strategic platform adjustments by politicians, such as shifting towards the center to capture votes, it doesn’t always align perfectly with the predictions of the Median Voter Theorem.
   • Real-world political dynamics and individual candidate strategies can lead to deviations from the expected convergence.

Question 5

What is considered the most serious problem in the world?

Answer 5

poverty

Question 6

What is considered the most serious problem for inclusive institutions?

Answer 6

poverty and environment as a close second.

Question 7

Income decile

Answer 7

• “On a scale of incomes in which 1 indicates the “lowest income
  decile” and 10 the “highest income decile” in your country, we would
  like to know in what group your household is (counting all wages,
  salaries, pensions and other incomes)
• The median voter is at a 5 and their most pressing concern still remains poverty

Question 8

Link with environment and income

Answer 8

median voters believe poverty is the bigger issue (than environment) so environment is a poverty problem.
–> if median voter is poor: the pyramid of Maslow needs first priority is to make ends meet

Question 9

What are the yellow vests

Answer 9

• Origin: Yellow Vest movement began in France in 2018.
• Slogan: Highlighted the struggle of ordinary people to make ends meet amid elite concerns about global issues.
• Financial Strain: Movement rooted in the “fin de mois” sentiment, signifying the challenge of meeting monthly expenses.
• Trigger: Sparked by the government’s implementation of a carbon tax, leading to increased gas prices.
• Demand: Protesters, wearing yellow vests, called for lower gas prices, feeling unfairly burdened by the increase. (carbon tax)

Question 10

what is carbon tax

Answer 10

Make people pay according their environmental degradation
- Polluters should pay: There is a negative externality imposed on other by my consumption of gas/If I am not made to pay for this negative externality, I will overconsume gas
- Solution = carbon tax
- Internalizes externality: Not only fair, but also efficient

• yellow vests hate it because it ignore politics

Question 11

What are some solutions?

Answer 11

MORE inclusive economic institutions, not less
- They generate broad based economic growth
- Therefore enrichment of the median voter
- Median voter demands public good (the environment) delivered by inclusive
political
- Additionally, inclusive = favors technological innovation = finding better ways to
protect the environment

–> Optimistic scenario:
- Median voter will care more about the environment
- Therefore inclusive political institutions
- Will provide inclusive economic institutions
- Which includes the environment
- Facilitated by technological innovation
- Answer to initial question:
- Inclusive institutions have produced pollution: Contradiction?
- Answer: median voter theorem
- If median voter does not care…

Question 12

Is this a long-term optimistic scenario

Answer 12

Can behavior be changed right now?
- In the short run
- With simple interventions

Question 13

Energy use

Answer 13

Energy = primary source of pollution…Is it possible to reduce energy consumption?
1. Increasing price not ideal (think about the yellow vests)
2. Subsidies for new technologies: can be expensive and long-run

Question 14

what is OPower?

Answer 14

Opower program: social comparison-based home energy reports are
repeatedly mailed to more than six million households nationwide
- Reports:
Personalized energy use feedback
Social comparisons
Energy conservation information
- Mailed to households every month or every few months for an indefinite
period (Long-run)
- Utilities hire Opower to send the reports primarily because the resulting
energy savings help to comply with state energy conservation requirement
- results: there’s backsliding ie. people revert back to old ways but not completely = sustained long-run effect

Question 15

Other possible results of the OPower program

Answer 15

Effect is seasonal
- Bigger in winter or summer
- Means changes to heating or cooling
Utilities offer rebates on energy-efficient appliances, isolation or
heating/colling systems
- Treatment group uses more rebates
- But authors do not find large effects on energy use through that mechanism
= So maybe smaller changes (i.e., energy-saving lightbulbs) or behavioural
changes