Globalization: Markets, Instututions & Policy. Professor O’Halloran Lecture 3. Preferences (interests). Government. Policies (legal constraints on economic or social activity). electoral process. governmental process. Basic Approach. Preferences In -- Policies Out. Issues emerge,
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(legal constraints on economic or social activity)
governmental processBasic Approach
Non-ExcludableDefinition of Public Goods
Macy’s Day Parade
Oil Pools below >1 country
Interpretation of payoffs:
0 = Temptation
-1 = Reward
-5 = Punishment
-10 = Sucker
Condition: T > R > P > S
(1’s payoff, 2’s payoff)
The dominant strategy is for both players to defect, so individually rational behavior produces a socially suboptimal outcome.
Equilibrium Amount of Political Action
Political ActionThe Market for Political Action
rivers and harbors
welfare (increases)Wilson/Lowi Matrix
If the proposed policy is adopted, how does the policy change the distribution of costs and benefits?