TAILIEUCHUNG - Lecture Economics: Chapter 22 - Dean Karlan, Jonathan Morduch

Chapter 22 - Political choices. In this chapter you will learn: What the predictions and assumptions of the median-voter theorem are? What the characteristics of ideal versus real voting systems are? How to explain the idea of a rational voter and rational ignorance?. | Chapter 22 Political Choices © 2014 by McGraw-Hill Education 1 What will you learn in this chapter? • What the predictions and assumptions of the median-voter theorem are. • What the characteristics of ideal versus real voting systems are. • How to explain the idea of a rational voter and rational ignorance. • Why policies that provide concentrated benefits to a few while imposing diffuse costs on the majority persist. • Why corruption and rent-seeking can persist in a democratic system. © 2014 by McGraw-Hill Education 2 The economics of elections • Electoral political economic models assume voters: – – – – Are rational and do what is in their best interest. Have preferences regarding policy. Have full information about candidates. Vote for the candidate whose policy platform most nearly resembles their preferences. • Once candidates are elected into office, they simply implement the platforms on which they were elected. • In this way, rational voters directly determine the shape of public policy. © 2014 by McGraw-Hill Education 3 1 The economics of elections • Elections are often modeled based on the median-voter theorem. – Politicians maximize their votes by taking the policy position preferred by the median voter. • The conditions to assure this outcome are: – Only two candidates. – People vote for the candidate whose position is closest to their own. – Single, one-dimensional policy question. – Candidate wins by majority vote. © 2014 by McGraw-Hill Education 4 The economics of elections • To illustrate the theorem, consider an election with seven voters with the following preferred spending levels. • Candidate A advocates relatively low spending, while Candidate B advocates very high spending. Candidate A (wins 5 votes) Candidate B (wins 2 votes) Low spending High spending • Voters vote for the candidate that has a spending level policy closest to their preferred spending level. • Candidate A wins 5 votes, while Candidate B wins 2 votes. © .

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