Political Economy 201: Assignment 1
1. A tax authority must decide on a tax and transfer scheme. It knows that half the population
will be unemployed this year with only $400 in income from odd jobs. The other half will
Study Guide for PECO Assignment 1
Tax and Rank
A tax authority must decide on a social insurance scheme. It
knows that half the population will unemployed this year with only
$400 in income from odd jobs. The other hal
Political Economy 201: Assignment 2
1. Suppose that the Georgetown Chess Club must vote on a restaurant to celebrate its championship in the World College Chess Tournament. Being a logical group it rst sets a particular
Analytical Tools for Political Economy
Table of Contents
The Social Choice Idea
Social Welfare Aggregation
Identifying the Basic Problem
Social Welfare Functions
Axiomatic approach to Social Rationality
The basic idea: specify fundamental desiderata that you want your social
welfare function Wu to satisfy.
PECO 201 Analytical Tools for Political Economy Module 1
Prof. Josep Colomer
Prof. Roger Lagunof
Office hours: Tues. 4pm or by appointment
Office: ICC 588
Office hours: Tues. 1-2pm until 10/22,
thereafter, or by appointment.
Office: ICC 573
Candidates with Policy Preferences in the HD Model
Candidate j = A, B has a preference
candidate j is elected
(xk j )2
Uj (x) =
(xj j )2 + if
candidate k = j is elected instead
Case 1: A < M < B .
Then both locate at the median!
A republic, if you can keep it.
A lady asked Dr. [Benjamin] Franklin, Well Doctor what have
we got, a republic or a monarchy? A republic, replied the
Doctor, if you can keep it. (McHenry, The American
I = cfw_1, . . . , n a society of n people/citizens, indexed by i.
A consumption bundle. x = (x 1 , x 2 , . . . , x ). Here, there are
ui (x) - the utility of person i for bundle x. Writing ui (x
Social Choice Rules
To study behavior we need to consider social choices not social rankings.
A social choice rule is a mapping C that maps from preference proles u
to social choices in A. We write C (u) = x to mean that society s
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