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EC320 PUBLIC POLICY > LECTURE 5 > Flashcards

LECTURE 5 Flashcards

1
Q

Direct democracy

A

voters directly cast ballots in favour or opposition of particular projects.

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2
Q

2 forms of direct democracy

A
  1. Referendum

2. Voter initiative

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3
Q

How do referendum and voter initiative differ?

A

Referendum = already passes state legislation.

Voter initiative = vote to then be proposed as legislation.

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4
Q

Indirect democracy =

A

voters elect representatives who then make decisions about public projects.

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5
Q

Another name for indirect democracy

A

representative democracy

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6
Q

Majority voting is a method to…

A

aggregate individual voters into a social decision.

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7
Q

What’s a majority?

A

50% + 1 of the total votes.

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8
Q

3 conditions on preferences for majority voting to lead to a consistent aggregation.

A
  1. Dominance.
  2. Transitivity.
  3. Independence of irrelevant alternatives
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9
Q

What does dominance mean?

A

If all individuals choose X over Y, SWF should rank X > Y

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10
Q

What does transitivity mean?

A

If the SWF ranks X>Y and Y>Z, then it must rank X>Z

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11
Q

What does Independence of irrelevant alternatives (IIA) mean?

A

If SWF ranks X > Y, then another alternative Z is introduced, this should not affect pairwise ranking X > Y regardless of how Z relates to them.

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12
Q

Method to determine majority winner if there are 3 alternatives and 3 individuals with rankings over them?

A

PAIRWISE comparisons for each alternative
A vs B: which wins majority from 3 voter’s ranks?
A vs C
B vs C
Which ever wins in all pairwise comparisons = majority voting winner.

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13
Q

What is cycling and what does it violate?

A

Cycling = when majority voting does not deliver a consistent aggregation of preferences. Transitivity is violated and there is no clear winner.

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14
Q

CONDORCET PARADOX =

A

Individual transitivity –> social intransitivity

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15
Q

ARROW’S IMPOSSIBILITY THEOREM

A

There is NO social decision rule that converts individual preferences into a consistent aggregation decision without either restricting preferences or imposing a dictatorship.

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16
Q

INPUT arrows impossibility theorem

A 
I = IIA
N = Non-dictatorship 
P = Pareto efficiency/dominance
U = Unrestricted domain 
T = Transitivity
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17
Q

What’s the issue if IIA is not satisfied?

A

Government could add irrelevant alternatives and affect the outcome of voting.

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18
Q

What is non dictatorship? What can it solve?

A

One person’s preferences should not determine the social outcome alone. Can solve intransitivity, but unfair.

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19
Q

What’s Pareto efficiency/dominance?

A

If all individuals rank X > Y, the SWF should rank X > Y.

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20
Q

What’s unrestricted domain?

A

SWF must account for any possible individual ranking - must choose a winner for any group of people with any set of preferences.

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21
Q

ARROW’S IMPOSSIBILITY THEOREM relating to INPUT

A

When there are >2 options, NO collective decision making process can satisfy all INPUT conditions.

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22
Q

2 common solutions to arrows impossibility.

A
  1. Single peaked preferences

2. Place different weights on different individuals depending on intensity of preferences.

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23
Q

Why do we also use pairwise comparisons for majority voting?

A

To reduce problem from choosing among many options to choosing among 2 at a time.

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24
Q

CONDORCET WINNER =

A

the option that defeats all others in pairwise comparisons by majority voting.

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25
Q

The existence of a Condorcet winner requires…

A

Single peaked preference.

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26
Q

What are the axis for graph of single peaked preferences?

A

Y axis = utility / rank / score

X axis = alternative e.g. low, middle, high school spending.

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27
Q

Single peaked means…

A

Constantly increasing
Constantly decreasing
OR go up, reach a peak, then down.

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28
Q

An example of preference shape of graph that are not single peaked

A

Go down, reach a minimum, then up - unclear how it continues after so we do not know the peak.

29
Q

SO: if preference are single peaked, majority voting –>

A

TRANSITIVE ordering

Condorcet winner

30
Q

Median voter =

A

The voter whose peak is at the median of the spectrum on an issue.

31
Q

Median voter works when there’s an X number of voters?

A

ODD number of voters.

32
Q

Median voter theorem states that…

A

The peak of the median voter is the Condorcet winner.

33
Q

Does the MVT ensure efficiency? Explain.

A

NOT necessarily.
Efficiency requires sum SMB = SMC (Samuelson)
I.e. efficiency looks at AVERAGE MB - NOT median.
MVT only efficient if median = average, which tends not to be true.

34
Q

Why can socially desirable projects be rejected by MVT?

A

Because MVT doesn’t account for INTENSITY of preferences - just uses median MB, doesn’t sum up MBs.

35
Q

MVT is a convenient way to predict outcomes for what type of democracy?

A

REPRESENTATIVE/INDIRECT - candidates should align their policies to the preferences of the median voter to get elected.

36
Q

6 assumptions of MVT when it predicts outcomes for representative democracy.

A
  1. 1D policy space.
  2. Only 2 candidates at a time - pairwise voting.
  3. No ideology or influence
  4. No selective voting
  5. No money
  6. Full info
37
Q

Assumptions of MVT: explain ID policy space issue.

A

MVT only allows for a single issue to be considered.
In reality, voters based their votes on a manifesto of issues and may lie at different points of the spectrum on different issues.

38
Q

Assumptions of MVT: explain only 2 candidates issue.

A

Can only have 2 candidates running for office. NO stable equilibrium if. > 2 candidates because always an incentive move in response to other’s position.

39
Q

Assumptions of MVT: explain no ideology issue.

A

Assumes candidates will align themselves to the policy of the median voter as they only care about maximising votes. But they may be reluctant to deviate from their ideologies.

40
Q

Assumptions of MVT: explain selective voting issue.

A

MVT assumes all people affected by the public good vote - in reality on a selection do. Moving away from median could increase turnout.

41
Q

Assumptions of MVT: explain no money issue.

A

The model ignores the influence of money in elections - may position towards extremes in order to maximise fundraising = indirectly maximise votes over LR.

42
Q

Assumptions of MVT: explain full info issue.

A

Assumes perfect info along 3 dimensions:

  1. Voter knowledge of issues.
  2. Politician knowledge of issues.
  3. Politician knowledge of voter preferences and hence median voter.
43
Q

Borda voting =

A

scoring method. N options, individual’s first rank gets N points, last rank gets 1 point. Scores added up and option with highest score wins.

44
Q

2 pros of Borda voting

A
  • Always picks a winner even when no Condorcet winner.

- considers ranks over all alternatives

45
Q

Major con of borda voting

A

VIOLATES IIA = can manipulate voting outcome

46
Q

Plurality voting =

A

Only 1st ranked choice counts and given 1 point. Winner = option ranked first by most people.

47
Q

pro and con of alterantives to majority voting relating to condorcet winner

A 
pro = always pick a winner even if Condorcet doesn't exist.
con = do not always choose the Condorcet winner when one exists.
48
Q

pro of plurality (1)

A

simple method: only need 1st choice,

49
Q

3 cons of plurality

A
  1. fail to choose condorcet winner
  2. Dispenses all info but first choice
  3. strategic voting: if think 1st choice doesn’t have real chance of winning, may vote for 2nd choice to stop least favourite winning.
50
Q

Approval voting =

A

Each voter can approve as many options as they like. Voting for one doesn’t exclude approving others. Winner = one with most approval votes.

51
Q

4 pros of approval

A
  1. incentive to be honest - no cost of voting for an option unlikely to win.
  2. Can express range of preferences
  3. Simpler than Borda
  4. Only need to vote once unlike pairwise voting.
52
Q

2 cons of approval

A
  1. Fail to pick up Condorcet winner

2. doesn’t account for intensity of preferences

53
Q

Runoff voting =

A

2 rounds of plurality voting.
Count 1st place votes, if majority = winner.
If no majority, eliminate least preferred and 2nd round

54
Q

1 pro of runoff

A

Seems fair and widely used.

55
Q

2 cons of runoff

A
  1. fail to select Condorcet winner

2. Violates +VE responsiveness

56
Q

What’s +VE responsiveness?

A

A fundamental principle of democracy. Changing the preferences of some voters e.g. swap 1st and 2nd place for one voter should NOT reverse social aggregate - but it does for runoff. An option receiving extra support in the 1st round can end up losing overall!!

57
Q

Lobbying =

A

the expenditure of resources by certain individuals or groups in an attempt to influence the political process.

58
Q

2 functions of lobbying

A
  1. provides funds for campaigns.

2. reveals preferences to politicians.

59
Q

How does lobbying affect MVT outcome?

A

Can correct inefficiencies in theory as can allow intensity of preference to play a role.

60
Q

When does lobbying actually lead to inefficiencies?

A

When MVT outcome already socially optimal, but those against it are a small group with strong incentives so are more political organised to oppose it –> inefficient outcome. If public has imperfect info / doesn’t pay attention.

61
Q

Gov failure =

A

the inability or unwillingness of the government to act primarily in the interest of its citizens.

62
Q

Bureaucracies =

A

organisations of civil servants that are in charge of carrying out services of the government BUT follow their own self interest.

63
Q

Leviathan theory of the gov

A

Voters cannot trust the government to spend their taxes efficiently since gov is a monopolist who tries to maximise size of public sector and takes advantage of electoral ignorance.

64
Q

What’s a middle ground solution to the natural monopoly problem? How does it deliver efficiency?

A

Contracting out: gov retains responsibility but hires private sector firms to actually provide the good. Harness competition through competitive bidding and grant right to most efficient firm.

65
Q

What’s the problem w contracting out?

A

Potential for corruption - bidding in contracting not efficient in reality, may award contract to provider who assists them in maximising own bureaucratic power or offers bribes.

66
Q

Electoral accountably -

A

the ability of voters to throw out corrupt regimes.

67
Q

Inclusive growth -

A

work in interest of people, civil servants paid MPL, extend political rights, secure property rights, law and order, constraints on politician.

68
Q

Extractive growth =

A

power held by small self-serving elite, no constraints on politicians.

EC320 PUBLIC POLICY (7 decks)

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