Economics 854 Final

Prof. Bryan Caplan

Spring, 2011




·        You have 120 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 120.

·        You should have five 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 six propositions is true or false.  In 2-3 sentences (and clearly-labeled diagrams, when helpful), explain why.


1.  T, F, and Explain:  The empirical evidence against the SIVH undermines the central conclusion of Wittman’s The Myth of Democratic Failure.


















2.  According to Mises’ Democracy-Dictatorship Equivalence Theorem, dictatorships adopt the policies favored by their median citizen.


T, F, and Explain:  This does not imply that on average, democracies and dictatorships will have identical policies.













3. True, False, and Explain: Education, job security, and income level all make people “think like economists,” but conservative ideology does not.













4.  “To deal with this welfare bug problem, we could also allow such proposals to be vetoed if another market clearly estimated bad consequences for welfare as it will be defined in the future, say in one year. If someone then spotted a bug, they could bet that elected representatives would agree that it is a bug and fix it within one year. If speculators agreed, the proposal would not be implemented.” (Robin Hanson, “Shall We Vote on Values But Bet On Beliefs?”)


T, F, and Explain:  Hanson is essentially proposing futarchy constrained by a supermajority veto.
















Part 2: Short Essays

(20 points each)

In 6-8 sentences, answer all of the following questions.


1.  Bartels’ “The Opinion-Policy Disconnect” points out important inconsistencies in public opinion.  Use both expressive voting theory, and rational irrationality to explain these inconsistencies.  Which theory is more plausible?  Why?




















2.  Apply Mosca’s insights in chapter 7 of The Ruling Class to any political movement you know a lot about.  Give details.  From Mosca’s perspective, what would be the most surprising fact about the political movement you’re discussing? 





















3.  Suppose you’re an advisor to Gorbachev in 1985.  You want to help him maximize the Soviet Empire’s economic growth subject to the constraint that he remain dictator for the rest of his natural life with 90% probability.  Taking full advantage of your knowledge of public choice and dictatorship, write a short Machiavellian political-economic strategy memo to Gorbachev.





















4.  Caplan argues that from a global point of view, national defense cannot be a public good.  Explain his argument.  Does this have any interesting policy implications?  Why or why not?