Public Choice Theory Microeconomics Dr. D. Foster.
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Transcript of Public Choice Theory Microeconomics Dr. D. Foster.
![Page 1: Public Choice Theory Microeconomics Dr. D. Foster.](https://reader035.fdocuments.us/reader035/viewer/2022062301/56649f115503460f94c23f5e/html5/thumbnails/1.jpg)
Public Choice Theory
Microeconomics
Dr. D. Foster
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Political Choices . . . Political Choices . . . Economic ReasoningEconomic Reasoning
Not how the system shouldshould work . . . How the system doesdoes work.
Are politicians/bureaucrats/employees …-- rational ?-- self-interested ?-- like the rest of us ?
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Two Basic Decisions: Two Basic Decisions: How much to tax? How much to tax? How much to spend?How much to spend?
Vote for a new defense system? Vote for a new social program?
What is the downside ?What is the downside ?
Does President Haeger President Haeger want more $ for NAU? Does Paul Gosar Paul Gosar want more $ for USGS?
Is there any incentive to keep costs down ?Is there any incentive to keep costs down ?
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Characteristics of the Public SectorCharacteristics of the Public Sector
Choices are enforceableenforceable.-- stop lights-- military draft-- drug laws-- eminent domain
Choices are restrictedrestricted (“lumpy”)-- Grand Canyon: buses or train?-- Chose candidate A or B?-- Is there any difference . . .
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The Median Voter ModelThe Median Voter Model
If preferences are peaked . . . If we vote for the person closest to us . . .
Candidates should congregate near the middle!
Candidate A wins !!
median voter
50%50%
A BA’ B’A”
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Voting SystemsVoting Systems
What’s so great about majority rule?What’s so great about majority rule?-- It is just like football !!
The market results in proportionalproportional “rule.”
Public choices may be inconsistent.inconsistent. Public choices may be inefficient.inefficient.
Point voting ? Continuous elections ? Non-geographic voting ?
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Inconsistent outcome: Inconsistent outcome: Want a park?Want a park?
City council has 3 choices for land parcel:A – Turn it into a park.B – Use it for low-income housing.C – Allow for commercial development.
Polling indicates that:40% favor A > C > B35% favor B > A > C25% favor C > B > A
How do you frame a vote between just two ?How do you frame a vote between just two ?
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Inefficient outcome: Inefficient outcome: Build a road?Build a road?
A road can be built that benefits 3 people. The cost is $300, and each would pay an equal share. They benefit as follows: John – $ 200$ 200 George – $ 90$ 90 Janet – $ 80$ 80
Will they vote to raise taxes to pay ?Will they vote to raise taxes to pay ?
What can we do to alter the outcome ?What can we do to alter the outcome ?
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Why is inefficiency a rational outcome?Why is inefficiency a rational outcome?
VotersVoters – information is costly (rational ignorance) -- Does your vote count ? -- Can you trust political ads ?
Special interestsSpecial interests -- Spread costs; concentrate benefits. -- How about a Help-Dr.-Foster tax ? It’s a dime.
BureaucratsBureaucrats -- What are their incentives ? -- Whom do they serve ?
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Case Study: 1986 Congressional RaceCase Study: 1986 Congressional RaceDistrict #1 – State of HawaiiDistrict #1 – State of Hawaii
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Cec Heftel wants to run for Governor !
He is currently the US Rep. for District 1.
Mid-summer 1986
One problem: He must resign to run !
So, he resignsSo, he resigns
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Need #1Need #1: Fill vacancy through Jan. 1987.
Need #2Need #2: Select nominees for general election.
Need #3Need #3: Elect Congressman in November.
Mid-summer 1986
PrimarySeptember
GeneralNovember
Elections
Solution: Combine #1 & #2 in September.Solution: Combine #1 & #2 in September.
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The PlayersThe Players Mid-summer
1986Primary
SeptemberGeneral
November
Elections
Pat Saiki (R)Pat Saiki (R)
Neil Abercrombie (D)Neil Abercrombie (D)
Mufi Mufi Hanneman (D) Hanneman (D)
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The RulesThe RulesAnyone can vote in the primary.Anyone can vote in the primary.
Mid-summer 1986
PrimarySeptember
GeneralNovember
Elections
The TwistThe TwistSaiki has no discernable competition.Saiki has no discernable competition.
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A graphical look at public supportA graphical look at public support
Mid-summer 1986
PrimarySeptember
GeneralNovember
Elections
N.A. M.H. P.S.
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September Results:September Results:
Pat Saiki wins Pat Saiki wins Republican primary.Republican primary.
Mufi Hanneman wins Mufi Hanneman wins Democratic primaryDemocratic primary
Mid-summer 1986
PrimarySeptember
GeneralNovember
Elections
Neil Abercrombie wins Neil Abercrombie wins Special Election !!!Special Election !!!
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November Results:November Results:
Mid-summer 1986
PrimarySeptember
GeneralNovember
Elections
Pat Saiki wins Pat Saiki wins election !!!election !!!
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RepublicansRepublicans voted for voted for MufiMufi in in primary - the “weaker” candidate, primary - the “weaker” candidate, and and he winshe wins!!!!!!
RepublicansRepublicans & & DemocratsDemocrats have an have an incentive to vote for their favorite in incentive to vote for their favorite in the special election; the special election; Neil winsNeil wins!!!!!!
Abercrombie supporters Abercrombie supporters voted for voted for Saiki in general election - Saiki in general election - retribution against Mufi’s campaign.retribution against Mufi’s campaign.
What happened ?What happened ?
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SaikiSaiki won a second term (1988-1990). won a second term (1988-1990). SaikiSaiki ran for senate in 1990 - lost ran for senate in 1990 - lost
-- was selected to run SBA by Bush I. -- was selected to run SBA by Bush I. AbercromieAbercromie ran again, and won, in 1990. ran again, and won, in 1990.
-- served until 2010. -- served until 2010. HannemanHanneman lost 1990 race for District 2. lost 1990 race for District 2.
-- later served on Honolulu City Council. -- later served on Honolulu City Council. Cec Cec HeftelHeftel lost bid for governorship. lost bid for governorship.
DebriefDebrief
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AbercromieAbercromie wanted to be governor in 2010. wanted to be governor in 2010. -- resigned from District 1 seat in 2010! -- resigned from District 1 seat in 2010!
HannemanHanneman becomes Honolulu mayor in 2004. becomes Honolulu mayor in 2004. -- re-elected in 2008. -- re-elected in 2008. -- wants to be governor in 2010! -- wants to be governor in 2010!
AbercromieAbercromie wins primary and general elections. wins primary and general elections. DjouDjou becomes interim Rep. for District 1. becomes interim Rep. for District 1.
-- loses general election. -- loses general election.
Debrief IIDebrief II
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Public Choice Theory
Microeconomics
Dr. D. Foster