Name:_______________________

Economics 410 Final

Prof. Bryan Caplan

Spring, 2001

Instructions:

·        You have 2 hours, 30 minutes to complete this exam.

·        Write all answers directly on the exam.

·        You may use any books, notes, or other materials that you wish, but avoid spending too much time on any one question.

·        Partial credit may be awarded on all questions.

·        The maximum possible number of points is 200.

·        You should have 7 pages, counting this one.

Part 1: True, False, and Explain

(10 points each - 3 for the right answer, and 7 for the explanation)

State whether each of the following twelve propositions is true or false.  In 2-3 sentences (and clearly-labeled diagrams, when helpful), explain why.

1.  T, F, and Explain:  The socially optimal level of car pollution is zero, but due to the logic of collective action the market does not deliver this outcome.

2. In a typical jury decision, the outcome ("guilty" or "not guilty") must be unanimous.

T, F, and Explain:  A juror's probability of decisiveness is 1.

3. Suppose that politicians care SOLELY about winning and there is no uncertainty.

T, F, and Explain:  Extremist voters (i.e., those who are willing to boycott the election or vote for a third party) will have no effect on equilibrium platforms.

4.  Suppose that there are three voters who put the following dollar values on political outcomes:

 Czarism Social Democracy Communism Czar Nicholas \$4000 \$600 \$0 Kerensky \$0 \$800 \$300 Lenin \$100 \$0 \$200

T, F, and Explain:  With zero transactions costs, Czarism would win, but with sufficiently high transaction costs, Social Democracy will win.

5.  T, F, and Explain:  Under federalism, states where expressive voting is more intense will tend to lose population.

6.  T, F, and Explain:  Wittman argues that the passage of pro-veteran referenda is consistent with his views on pressure groups.

7.    T, F, and Explain:  Wittman admits that due to asymmetric information (voters know less than government workers and politicians), government tends to be too large, but argues that this problem can be easily controlled by using "optimal punishment."

8.  Suppose 19 professors are voting about whether to tenure an assistant professor.

T, F, and Explain:  Voting will become less expressive if faculty expect the vote to be close.

9.  "If one focused on... for example, party loyalty or ideological identification - our prediction is that that characteristic would explain at least as much of electoral behavior and resultant political outcome as does the self-interest account." (Brennan and Lomasky, Democracy and Decision)

T, F, and Explain:  Empirical evidence on the SIVH supports Brennan and Lomasky's prediction.

10.  T, F, and Explain:  According to Caplan ("The Logic of Collective Belief"), voters are often irrational, but at least tend to become more rational when they vote about issues of great social importance.

11.  Caplan ("Systematically Biased Beliefs About Economics") finds that more educated people tend to disagree less with economists than the general public.

T, F, and Explain:  This suggests that more educated people are merely better informed than less educated people, not that they are "more rational" in the rational expectations sense.

12.  T, F, and Explain:  Dictatorships have markedly lower average growth than democracies, probably because dictators choose policy much more selfishly than democracies.

Part 2: Short Answer

(20 points each)

In 4-6 sentences, answer all four of the following questions.

1.  Carefully contrast self-interested, ideological, and group-interested voting, using a specific example.

2.  Suppose there is a unicameral legislature and a president with an absolute veto, with the following defense spending preferences:

\$0                  \$L                   \$L0                     \$E                      \$E0

What are the lowest and highest levels of spending that might be approved?  Why?  What is the lowest spending level a pacifistic Supreme Court might impose by creative interpretation?

3.  How well (or badly) does Tiebout competition work in the United States?  Explain your answer.

4.  What is the "Miracle of Aggregation," how does Wittman use it, and how does Caplan critique it?