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