Rational Choice Theory Flashcards
What are the basic assumptions of RC theory?
A. Follows the principle of methodological individualism ( behaviour of people and their outcomes are analyses based on personal coast-benefit analyses
B. Follows the principle of micro-economic theory: actors Always maximise their utility given their goals and preferences
Who did the different versions of RC theory
Korobkin and Ulen
What did Korobkin and Ulen did? Explain
The different types of RC theory :
1. “Thin version”
A. Definitional version (interpretivism):
-assumption that people make rational décisions following preferences/ goals to maximise their ends
-BUT we don’t know the goal, how did the decision was taken and why
-not falsifiable, broad so almost everything is rational
B. Expected utility version:
-the how is added: by calculation and by determining for each option the cost and benefits
- “Thick version”:
A. The self-interest version:
-the why is added: to satisfy my own interests
B. Wealth maximization version:(positivism)
-a choice is rational when I hot money out of it
-
Def of RC theory
. Model that simplifies complex social and political behaviour
. Assume that décisions are based on individual’s goals and preferences
. Focus on thé goals and the strategy employed
. Goals and strategy must bé clearly cited before thé analyse bcs otherwise it become a tautology
PS follows the road of economics due to:
. Creeping ‘economism’: eco models are aplied to political phenomena-> influenced the académic researches…
. Straightforwardness of eco principle: borrows clear and simple eco logical( consumer maximizing utility, producers who aims to maximize incomes …)
. Ease of making prediction (espcially thick version bcs Richer context)
Inadequacies of RC theory
.use of ‘calculating’ behaviour sa a tool for theory (assuming that indiv act are based on calculated coast-benefits analysis): often unclear motives
.cultural History: behaviour can be motivated by culture, id (ex:cross the road at a red light)
. expérimental psychology: lack of consistency of some behaviour( rational if I chose according to m’y préférence but prefering A over B has noting rational)
.Cognitive psychology: changing behaviour to feat thé expectations
. Political science: RC theory=/ collective action
. Challenge with préférences and stratégies: when they are ambiguous or unknown, tautology
. Thé existence of Homo Oeconomicus: thé portray of the perfect rational economic actor des not ecist
What is the chicago school of public choice?
- applies economic reasoning, particularly rational choice theory (emphasizes self-interest and rational calculation in understanding political behavior and critiques government intervention in markets), to political decision-making
-> RATIONAL calculation: political actors are compared to market participants, and everyone try to maximize their utility (Voters: seek policies that maximize their personal welfare or interests; politicians: maximize votes, often by catering to key constituencies or interest groups; bureaucrats: maximize budgets, influence, or job security).
->SELF-INTERESTS: government actors act solely in the public interest: NO, they are guided by personal incentives, such as re-election, career advancement, or financial gain: costbenefit analysis
_key features:
. Using eco quandaries (dilema) on political PB: applies economic principles to explain political inefficiencies and predict outcomes
.critics on gov intervention in the market (sp by Robert-Lucas): inefficient bcs often rational expectations theory: political actors anticipate thé conséquences of policy changes, which affect how efficient the policies Can be over thé Time ( ex: people know that if thé gov lower thé taxes, it is going to Rise again After: not only RC but also rational expectations)
.public choice theory as “offensive and provocative”: ( Milton Friedman), political actors, like market participants, are primarily motivated by self-interest rather than altruism
What is the harmony of interests ( if it doesn’t exist)
Individual self-interest that clash, preventing thé achievement of collectivity optimal outcomes
PB of having divergent interests ( no harmony of interests)
. Fallacy of composition: what is rational and beneficial for an indiv is maybe not for the group as a whole
. Collective action issue (Manclur Olson)
What are the different types of good and according to who?
Mankiw:
Excludability( whether it is possible to prevent someone to use thé good)
Rivalery( whether one personnes use of thé good reduces it’s availability for thé others)
.private good: excludable and rival
.club good: not rival but excludable
.common good: rival but not excludable
. Public good: not rival and not excludable
Solution for the lack of harmony of interests
.capture theory (George Stigler): Regulatory agencies, though created to regulate industries in the public’s interest, often end up being “captured” by the very industries they are meant to oversee.
Why This Happens: Industries have concentrated, strong incentives to influence regulatory bodies, while the general public’s interest is diffuse and weaker. As a result, regulators may adopt policies that favor the industry, fail to enforce regulations effectively…
-> Capture Theory aligns with RC theory by showing how the self-interested behavior of individuals and industries undermines institutional effectiveness
.coercive mechanisms: using external enfoncement to align indiv actions with collective goals
. Incentivizing coopération: modifying thé play-off structures to make coopérative stratégies more appealing ( sanctions or rewards)ex bonus and malus for cars
Def of office-seeking and policy-seeking
. Office seeking actors: actors that make policy only in order to have thé benefits associated with holding office ( power, money, prestige)
=/. Policy seeking actors: seek to achieve ideological believes
Forming coalition for office seeking actors
. Minimal size for a wining coalition( a coalition that if you withdraw one part, it become a minority) bcs thé less they are, the less thé pay-off has to bé shared (the more seats, power… a party has)
What are the 3 more popular games of Game Theory
. Chicken game
.prisonniers dilemma
. Assurance game
Tips to recognise which game it is
- situation
-preferences ( rate from 4: thé best to 1: thé worst outcome) - fill the Matrix ( me on the side of it and the other on thé top)
- Wonder thé questions what is thé best for me to do if THE OTHER cooperate, then deflect:
. If u do thé same as the other: assurance game
. If thé dominant outcome is deflection: prisoner’s dilemma
.chicken game: if with threat I Can try to persuade thé others to cooperate while I am not BUT vital danger of thé worst outcome: both deflect
Assurance game
.parties benefit the most from mutual cooperation, but cooperation requires assurance that the other party will also cooperate (each player must believe the other will follow through for mutual gains to materialize)
. You do thé same as what thé others does: incertain outcomes but if rational actors: collective action
. Préférence/payoff structure: both cooperate> no one cooperate> I deflect and the other coop > he cooperates and the I deflect
.=/ prisoner’s dilema: strong incentive for both parties to cooperate + primary challenge is uncertainty about the other side’s intentions
Prisoner’s dilemma
. Dominant outcome at the end of both questions is deflect
.worst outcome that thé other wins
. Préférences: I win> both deflect> both cooperate> thé other win
Chicken game
.worst outcome is that both deflect
. Préférences: I win and he cooperates> both cooperate> i cooperate he deflects> both deflect
.try to persuade thé other but then RISK TOTAL LOST
Solutions to the chicken game
. Signalling intentions: convincingly demonstrating a commitment to a certain couse of action before thé interaction begins ( ex stop arme race: Say it and do it)
. Pre-commitment: locking into a strategy to show resoluteness and influence thé opponent’s decision
Solutions for thé prisoner’s dilemma
. Coercion: imposition of rules or authority( Léviathan type) to ensure compliance and collective bénef
. Shadow of thé future: encouraging répétéd interactions to Foster trust and coopération (expectations of futur engagements)
. Sélective inventives: providing extra bénef to encourage participation in coopérative behaviour
the principle of collective action and by who?
Manclur Olson: difficulties groups encounter when trying to achieve common goals and some movements or organizations struggle to mobilize members, especially when the goals are diffuse or benefits are shared broadly. It also highlights the importance of leadership, communication, and institutional design in overcoming collective action problems.:
-public goods and free riding (public goods= not rival and not excludable): Because individuals can benefit from public goods without contributing, they have an incentive to “free-ride,” leading to under-provision of these goods.
-group size: Smaller groups: more successful bcs the benefits of action are more concentrated, and it is easier to monitor and incentivize participation
-selective incentives: collective action often requires selective incentives, which are benefits available only to those who participate or contribute (bad or good reward)
-rational self-interests: Individuals act in their own self-interest, meaning they may not participate in collective efforts unless they perceive personal benefits
Who did the theory of coalition
William Riker
ex of chicken game
lethal (risk of total lost) arm race:
pref: both c> I D he C > he D I C > both D
answer to ?: if he D=C; if he C=C
ex of assurance game
nuclear arm reduction treaty:
pref: both C> I D and he C> both D> I C and he D
answer ?: if he D=D; if he C=C : same
ex of prisonner’s dilema
costly but not lethal security dilema
pref: I D he C> both C> both D> he D I C
answer to ?: if he D=D: if he C=D -> best outcome is deflection
