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Rational / Utilitarianism

Rational / Utilitarianism. Paradoxes of rationality. Mancur Olson. Mexican migrant workers Fire in a theater Urban sprawl Problem of Collective Action Benefits of collective good are available to everyone. Costs are experienced individually Leads to “free-riding .”

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Rational / Utilitarianism

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  1. Rational / Utilitarianism Paradoxes of rationality

  2. Mancur Olson • Mexican migrant workers • Fire in a theater • Urban sprawl • Problem of Collective Action • Benefits of collective good are available to everyone. • Costs are experienced individually • Leads to “free-riding.” • Additional problem of small inputs: Individual contributions is too small to make a difference.

  3. Collective Action Problem • Solutions • Power • Selective incentives • Small group size

  4. Prisoners dilemma • Don’t confess, partner doesn’t confess = 0yrs • Don’t confess partner confesses = 10yrs • Confess, partner doesn’t confess = 1yr • Confess, partner confesses =5 yrs. • Solutions: trust, norms, ideologies.

  5. Prisoners dilemma • Basic point: Suboptimal outcome because of lack of coordination. Each actor I worse off because of lack of trust and communication.

  6. Other deviations • Transaction costs lead to contracts. • Small inputs leads to bunching of choices

  7. Policy implications • James Buchanan on budget deficits. • James Coleman on investment in children.

  8. Thomas Schelling—”Tacit coordination” • There are ways that coordination can take about without direct communication: if there is a salient feature in the environment: “focal points.”

  9. March and Simon • Solution is Optimal when: • All alternatives can be clearly compared. • One alternative is clearly preferable. • Solution is satisfactory when: • There are criteria describing minimally satisfactory alternatives. • Alternative meets these criteria.

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