Economics 854 Midterm

Prof. Bryan Caplan

Spring, 2014

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: As platform convergence increases, the probability of voter decisiveness falls.

FALSE. As platform convergence increases, voters have less reason to disagree, so p, the probability a voter votes “yes,” moves toward .5. Furthermore, as platform convergence increases, voters have less reason to vote, so (2N+1), the number of voters, goes down. Both of these effects increase the probability of voter decisiveness.

2. “Like Sherlock Holmes or Miss Marple, you should ask why cycles do not occur in particular political systems. As you will see, the means by which a democracy avoids intransitive cycles often marks its character.” (Cooter, The Strategic Constitution)

T, F, and Explain: According to Cooter, the main reason why cycles do not occur is that public opinion is basically one-dimensional.

FALSE. Cooter doesn’t appeal to the dimensionality of public opinion. Instead, in the next paragraph, he appeals to agenda setting. Elsewhere in the book he talks about political bargaining.

3. Suppose you are trying to predict individuals’ views on a wide range of issues.

T, F, and Explain: Failing to control for education will noticeably inflate the apparent effect of ideology and personal income on issue views.

FALSE. Failing to control for education definitely inflates the apparent effect of income on issue views. But education and left-right ideology are virtually uncorrelated, so failing to control for education will not inflate ideology’s apparent effect.

4. T, F, and Explain: According to Levitt (“How Do Senators Vote?”), senators have become more responsive to the electorate over time, possibly because of the increasing availability of political information.

FALSE. On p.437, Levitt states that, “Senators in the 1970’s [versus the 1980’s] are more responsive to state voters both within and outside their support constituency.” He further explains that, “The decline in responsiveness to voters has been matched by a sharp increase in the importance of party (0.04 versus .16).”

Part 2: Short Essays

(20 points each)

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

1. Name a real-world situation where the logic of collective action leads to a more efficient outcome. Carefully explain the private costs, private benefits, social costs, and social benefits that lead to this fortuitous result.

Consider Italy in 1945. Communism was very popular – though short of a majority – and Communists almost certainly cared about their political goals more than competitors. If every Italian Communist had gone into the streets to fight for Communist revolution, they probably would have prevailed, establishing a Stalinist dictatorship. However, most Communists – like most people – succumbed to the logic of collective action: “Why should I go risk my life for Stalinism, when I probably won’t make a difference anyway?” As a result, Italy did not get a Communist revolution, which would have been a disaster. Private costs: Effort and danger of fighting for Communism. Private benefits: Basically nothing, as with most political action. Social costs: The misery of war. Social benefits: Negative, since Communist dictatorship would have been terrible.

2. In the GSS, the question POPGRWTH asks:

The earth cannot continue to support population growth at its present rate.

1=”strongly agree”; 2=”agree”; 3=”neither agree nor disagree”; 4=”disagree”; 5=”strongly disagree.”

Here are the results if you regress POPGRWTH on log real family income (LREALINC), years of education (EDUC), ideology (POLVIEWS, 1=”extremely liberal”, 7=”extremely conservative”), dummy variables for race (BLACK, OTHRACE) and sex (1=male, 2=female), number of children (CHILDS), Biblical literalism (BIBLE, 1=”word of God”, 2=”inspired word”, 3=”book of fables”), and age.

How well do these results fit what we have learned about the effects of self-interest, group-interest, and ideology on public opinion? Be careful to point out any anomalies, and discuss magnitudes as well as statistical significance.

We’ve learned that self-interest has little effect on public opinion, but group interest and especially ideology matter a lot. Looking at this regression, we see:

1. Conservatives worry a lot less about population growth, as you’d expect. The same goes for Biblical literalists, consistent with the classic view that God wants mankind to “be fruitful and multiply.” So ideology broadly defined seems to have its usual power.

2. Blacks worry less about population growth. This fits a group-interest story, given the historic connection between population control and racism. The same holds for people with more kids. Population control is unlikely to personally affect people who already have large families. But people with large families probably identify with people who want to have large families in the future.

3. In terms of self-interest, you would expect older people to worry less about population growth. After all, they need young people to fund their retirements and provide elder care, and they’ll likely be dead before any long-run environmental harm kicks in. But the data show the opposite. Furthermore, since population control normally focuses on low-income people, you might expect high-income people to be more in favor of population control. Once again, the opposite is true.

Overall, then, ideological voting and group-interested voting fit the facts, and the SIVH does worse than chance.

3. If both the SIVH and the Tiebout model were true, how would the tax policies and demographics of the state of Virginia change? Justify your answer.

It is tempting to say that rich voters would vote against redistribution, and poor voters would vote in favor. But the Tiebout model, redistribution is basically impossible; if you try it, the net losers flee, short-circuiting any redistribution. So redistributive taxes would vanish throughout Virginia. This in turn would attract a lot of high-income population from outside of Virginia and spark an exodus of low-income population, raising Virginia’s per-capita income. Since public schooling redistributes from the childless to families with kids, you should also expect family size to shrink and average age to rise.

4. How would U.S. political outcomes change if you gave two votes to every citizen high in Disagreeableness? Feel free to speculate, but be sure to reconcile your predictions with Gerber et al’s “Personality Traits and the Dimensions of Political Ideology.”

Gerber et al report that Agreeableness is a robust predictor of economic conservatism but not social liberalism. So handing two votes to the Disagreeable would sharply shift the position of the median voter in the direction of more free-market policies. You should expect to see less regulation, lower taxes, and less redistribution. You should not however expect changes on gay marriage or abortion. Other changes: Political rhetoric and debates would rely less on emotion, and more on logical arguments and hard data. In slogan form: “Hard heads, hard hearts.”