Name:_______________________

Economics 854 Final

Prof. Bryan Caplan

Spring, 2012

Instructions:

· 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. “[M]any of Beard’s examples are efficiency enhancing rather the distributive, and... the most important redistributive effects were of a different level and kind from the ones considered by Beard.” (Wittman, The Myth of Democratic Failure)

T, F, and Explain: Buchanan would largely agree with Wittman’s critique of Beard.

2. In an “idea trap” model, suppose that ideas remain fixed if growth is good, but improve if growth is mediocre or bad.

T, F, and Explain: This implies two steady-state equilibria, one where growth, policy, and ideas are all good, and another where growth, policy, and ideas are all bad.

3. Suppose voters have rational expectations about everything except for the effect of policies.

True, False, and Explain: If voters vote on a purely retrospective basis, this will only partially mitigate the effects of their biased policy beliefs.

4. T, F, and Explain: Economic calculation under worldwide socialism is impossible.

Part 2: Short Essays

(20 points each)

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

1. In the real world, to what extent is ideological voting a symptom of expressive voting? What kinds of voter behavior are evidence of one but not the other? Explain your answer.

2. Construct a simple example with rational expectations where voters’ asymmetric information increase demand for government. Does your example have any real-world relevance? Why or why not?

3. The Kim family has ruled North Korea for three generations. Doesn’t the stationary bandit model imply that the country should be prospering? If so, what’s wrong with the stationary bandit model? If not, why not?

4. Vigorously defend Tyler Cowen’s “network industries” critique of anarcho-capitalism against his critics.