Name:_______________________

Economics 410 Final

Prof. Bryan Caplan

Spring, 2009

Instructions:

·        You have 90 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 100.

·        You should have 4 pages, counting this one.

Part 1: True, False, and Explain

(10 points each - 2 for the right answer, and 8 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.  Suppose 20% of voters want to increase defense spending, 40% want to reduce it, and 40% was to keep it at its current level.

T, F, and Explain:  According to the Median Voter Theorem, the current level of defense spending must be efficient.

2. T, F, and Explain:  Neither the Miracle of Aggregation nor optimal punishment strategies work if all voters have literally zero political knowledge.

3. T, F, and Explain:  In the Tiebout model, states where anti-market bias is more intense will tend to lose population.

4.  Suppose the Council of Economic Advisors could veto U.S. tariff legislation with a majority vote.  The median CEA member’s most-preferred tariff is 0%, the median Congressman’s is 20%, the median Senator’s is 30%, and the President’s is 10%.

T, F, and Explain:  In Cooter’s model of division of powers, the equilibrium tariff rate will lie between 10% and 20%.

5.    “Other authors... have argued that politicians can take continuing and full credit for pork going to their district but only partial and onetime credit for getting rid of pork altogether.” (Wittman, The Myth of Democratic Failure)

T, F, and Explain:  Wittman accepts this assumption, but argues that political competition can easily take care of the problem.

6.  T, F, and Explain:  Caplan argues that democracy would work better in the real world if the SIVH were true.

(20 points each)

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

1.  “But the large economic groups that are organized do have one common characteristic which distinguishes them from those large economic groups that are not...” (Olson, The Logic of Collective Action)  What “one common characteristic” is Olson talking about, and how exactly does it work?  Apply Olson’s analysis to a specific example.

2.  When dictatorships turn into democracies, government policies often do not change very much.  Using everything you have learned in this class, give TWO plausible explanations for why “regime change” would not lead to major policy change.