ECON 4300 Study Guide - Final Guide: Economic Rent, Rationality, Rent-Seeking
5 Oct 2018
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Public choice: one made through political interaction of many people according to established rules. Difference in modeling the self-interest of policy-makers and bureaucrats . Policy makers have a self interest to stay in power. Bureaucratic self-interest: expand the budget of the bureau as much as possible to gain power and influence. Maximize probability of winning election, prestige, power & control, inputs (self-interest) Politicians are not benevolent, they are self interested as all humans. Lindahl tax prices: the tax share an individual must pay per unit of public good. Implementing given example in table format: tyranny of the majority vs. Tyranny of the minority/hold-out problem policies fail to pass unanimously, individuals have incentive to hold back their vote to acquire benefit from majority in favor of action. Unanimous voting makes this problem the most visible. Representative democracy: 1-dimensional voting preferences, bell-shaped distribution, voters choose the candidate who is closest to their ideology.
