Chap006 - Chapter 6 Political Economy Chapter 6 Political...

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Chapter 6 – Political Economy Chapter 6 – Political Economy 1. a. Below, the preferences for Person 1 and Person 2 are drawn. Same procedure is used for the other three people. b. C wins in every pairwise vote. Thus, there is a stable majority outcome, despite the fact that persons 1, 2, and 3 have double-peaked preferences. This demonstrates that although multi-peaked preferences may lead to voting inconsistencies, this is not necessarily the case. 2. The votes by the Senators from the northeast and south to subsidize each other’s interests are consistent with the logrolling model. The senators from the affected states made the deal for advantage their constituents at the expense of other regions. 3. a. Three percent a year. b. Assuming that the public sector uses only labor as an input, the price of the public good increases by three percent a year. c. The size of government increases. For further discussion of this phenomenon, see the paper by W. J. Baumol, “Macroeconomics of Unbalanced Growth: The Anatomy of Urban Crises,” American Economic Review, 1967. 4. Yes, it is consistent, because the theory says that when unanimity is required, no decisions are likely to be made. A majority system might be more suitable, although it is subject to cycling and other problems. 5. If these figures are true, then the predictions of the median voter theory are not accurate – that is, majority voting will not reflect the preferences of the median voter but rather the median participating voter. The reason for this is because of the different turnout rates for individuals in different income categories. Consider this simple example: suppose that voters have single-peaked preferences, and they are trying to determine how much should be spent on national defense. Their preferences are listed as follows: 19
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Chap006 - Chapter 6 Political Economy Chapter 6 Political...

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