経済の世界

Politics through the Lens of Economics

Masayuki Kudamatsu

5 October, 2016

経済学の世界

Politics through the Lens of Economics

Masayuki Kudamatsu

Is Economics Interesting for you

as ... ?

Is Economics Interesting for you

as a natural scientist ?

Yes, because it's a science

on human society

Is Economics Interesting for you

as a humanities major?

Yes, because it's an art/design

to see the real world

Is Economics Interesting for you

as other social scientists?

Yes, because it's methodologically complement to learn policy lessons

Today's Road Map

What is economics?

How is it applied to analyze politics?

Aim of this course

Grading policy

Wait.

 

Who am I, by the way?

Who am I ?

Born and bred

in Tokyo

Study PhD

in London

Do research

in Stockholm

What did I research?

Democracy in Africa

helps more babies survive

Connections

AND good job performance

promote politicians in China

Aim of This Course

Get used to reading in English

Solve a problem, not a quiz

No exam. Essay instead.

Therefore

Don't call me

"Sensei."

And

I might be wrong. You might know better.

We all strive to solve a problem.

Today's Road Map

What is economics?

How is it applied to analyze politics?

Aim of this course

Grading policy

3 Defining Features of  Economics

Reference: Acemoglu, Laibson, and List Economics, chapters 1-2.

How individuals make choices

1

Economists investigate:

Buy iPhone 7 or not

How individuals make choices

1

Economists investigate:

Apple: how many iPhone 7 to produce

How individuals make choices

1

Economists investigate:

Get married or not

How individuals make choices

1

Economists investigate:

Study now or later

How individuals make choices

1

Economists investigate:

Vote for LDP or not

1

Economists think:

Individuals choose

the best

affordable

option

1

Economists think:

Individuals choose

the best

affordable

option

It meets each individual's objective

1

Economists think:

Individuals choose

the best

affordable

option

Within the budget

Within 24 hours a day

Among the list of candidates

1

Defining Feature of Economics #1

Individuals choose

the best

affordable

option

Optimization

1

Example:

Take this course for credit or not?

Benefits

(Is it the best?)

 

Intellectual fun

Learning English

Love politics

etc.

Costs

(Is it affordable?)

 

Another fun course

Difficult to get credit

etc.

How the choice of individuals

affect society?

2

Economists also investigate:

Price of low-cost airline tickets

How the choice of individuals

affect society?

2

Economists also investigate:

Traffic jam

Choice of

individuals

2

Notice:

Many people choose to drive

Society

More traffic jam

Some start using public transport

Less traffic jam

2

Economists think:

Society is a situation in which

no one benefits

from choosing another option

2

Society is a situation in which

no one benefits

from choosing another option

Equilibrium

Defining Feature of Economics #2

2

Example:

If many students take this course...

Less interaction with me

during lectures

Proof

of a great course

This adjustment process continues

until we reach the equilibrium

Some students

drop out

More students

join the course

Today, economics is also about...

20 years ago, economics was all about optimization and equilibrium

20 years ago, economics was all about optimization and equilibrium

Today, economics is also about

Defining Feature of Economics #3

Empiricism

3

Economists think:

building

models of the world

Our knowledge comes from

 and checking if the models are

consistent with data

3

Economists think:

building

models of the world

Our knowledge comes from

 and checking if the models are

consistent with data

Simplified

representation

of the world

3

Economists think:

building

models of the world

Our knowledge comes from

 and checking if the models are

consistent with data

Simplified

representation

of the world

3

Economists think:

building

models of the world

Our knowledge comes from

 and checking if the models are

consistent with data

Many models

logically possible

3

Economists think:

building

models of the world

Our knowledge comes from

 and checking if the models are

consistent with data

Many models

logically possible

Allow us to pick the best model

3

Economists think:

building

models of the world

Our knowledge comes from

 and checking if the models are

consistent with data

How?

3

To check a model's consistency with data, economists:

Collect many observations

Tease out causality from correlations

and

Example:

Does economic development

bring about democracy?

You: No, because China is still not a democracy.

Economist: But that could just be an outlier.

3

Collect many observations

Figure 1 from Acemoglu et al. (2008)

3

Economist: No, that's a correlation, not a causality.

Correlation

between A & B

A causes B

B causes A

C causes A & B

3

You: The higher GDP per capita, the more democratic

3

Correlation

between A & B

A causes B

B causes A

C causes A & B

Tease out causality from correlations

Tools

to tease out causality from correlations

Randomized control trials (RCT)

cf. drug tests

Natural experiments

e.g. weather

Regression discontinuity design

e.g. close elections

3

Economics

Optimization

Equilibrium

Empiricism

II

+

+

Summary

Today's Road Map

What is economics?

How is it applied to analyze politics?

Aim of this course

Grading policy

7models of politics

(an overview of the course)

Median Voter Theorem

Each politician proposes a policy (say, a tax rate)

Citizens vote for a politician whose policy is closest to their ideal

A politician with the largest number of votes wins

Theorem says:

All politicians propose a policy that divides citizens in half:

e.g. 50% prefer a higher rate; 50% prefer a lower rate.

1

Citizen Candidate Model

Each citizen decides whether to become a candidate for office

Each citizen chooses which candidate to vote for

Winning candidate enacts his/her own preferred policy.

Equilibrium: median citizen may not run for office.

2

Each politician is also a citizen.

Probabilistic Voting Model

Voters can be grouped into three:

Loyal

to ruling party

Loyal

to opposition

Not loyal to any

(swing voters)

The model predicts: 

Politicians (both ruling party and opposition) propose

a policy that pleases swing voters,

not loyal voters. 

3

Condorcet Jury Theorem

Each citizen learns about whether a proposal is good

Citizens vote on the proposal (i.e. a referendum)

The proposal is enacted if a majority of citizens vote in favour.

Theorem says:

A majority voting outcome is more likely to be correct

than each citizen's own judgment

(if citizens are not very stupid)

4

Political Agency Model

Conflict between politicians and citizens (e.g. corruption)

Ruling party politicians

choose a policy

Citizens

choose which to vote for:

ruling party or opposition

Winning party politicians

choose a policy in the next period

5

Legislative Bargaining Model

One legislator proposes a policy

All legislators vote on the proposal

If a majority vote in favour

the proposal is enacted

Otherwise

the status quo policy stays

6

Campaign contributions

Lobbyists

bid against each other

for a policy favour

Information transmission

Lobbyists

inform politicians

of which policy is good

Models of Lobbying

Two views

7

How interest groups affect policy-making

That's the end of today's academic material.

 

Next is what you care the most about...

Grading

will be based on an

writing assignment

(Solve a problem, not a quiz)

Writing Assignment

Pick a policy that

you think will improve our society

but is not enacted in the country of your choice

Discuss whether each of the 7 models of politics

can explain why the policy is not enacted

Either in Japanese or in English

Rule of picking a policy

Don't pick the same policy as someone else's

If you choose a policy in a non-democratic country, ask me first.

At the beginning of each lecture, you can declare the policy of your choice so no one else can choose the same one.

Submission Deadline

Email a PDF copy to kudamatsu@osipp.osaka-u.ac.jp by

9 am on

Thursday 16 February

Our last lecture

Exam period

1 February

8-14 February

For your information: 

Office Hour

Every Wednesday

14:40 - 16:10

(right after this lecture)

at Room 603 of OSIPP

(number 6 in the map)

Or make an appointment by email

Lecture slides

will be available at

by the beginning of each lecture

Political Economy

It refers to at least 4 (very) different academic fields

Marxist economics

19th-century Economics (and Political Science)

A sub-field of international relations in political science

A field of economics, formerly known as public choice

An extra note on the term

Politics through the Lens of Economics: Lecture 1 - Introduction

By Masayuki Kudamatsu

Politics through the Lens of Economics: Lecture 1 - Introduction

  • 2,006