06Politicaleconomy答辩.ppt

倪秋菊制作 Political economy--Public choice Government is a necessary evil. That government is the best which governs least. Power corrupts; absolute power corrupts absolutely--Lord Acton The field that applies economic principles to the analysis of political decision-making. How well do various decision-making procedures translate the preferences of their citizens into collective action? 1、Features of public mechanisms The two problems of governmental decision-making: Problem of preference revelation Problem of preferences aggregation How to make collective decision according to individualistic preferences? voting Unanimity rule: everyone of the voters must agree with a program to let it get approval. Majority voting rule: more than half of the voters must agree with an alternative to let it get approval. (Simple majority,2/3majority) Unanimity rule vs Majority rule Unanimity rule Advantage: No one will be exploited (Pareto efficient) Disadvantage: Enormous decision-making costs. Difficult to get everybody’s consent for an issue Majority voting rule: Advantage: low cost; easy to make terms Disadvantage: can’t be Pareto efficient; voting paradox; logrolling. 2 Direct democracy Voters to make the public decision directly without the representatives and politicians. 2.3 Single-peaked preferences -p110 Peak: a peak in an individual’ preferences as a point at which all the neighboring points are lower. A voter with single-peaked preferences: the voter moves form her most preferred outcome in any and all directions, whose utility constantly falls. A voter with double-peaked Preferences: the voter moves form her most preferred outcome, whose utility falls at first, but then goes up. When the preference of every voter is single-peaked, the majority voting can end up with a consistent outcome: median voters win. Direct Democracy - Logrolling Loss of welfare 3 Representative democracy Individuals vote for representatives who make the decisions. Demand: Voters – interest groups