PS 0200 CLASS SESSION NOTES Professor Krause (Fall 2007)

1. PS 0200 CLASS SESSION NOTESProfessor Krause (Fall 2007) UNIT I: FOUNDATIONS OF AMERICAN GOVERNMENT

2. CHAPTER 1 THE FIVE PRINCIPLES OF STUDYING POLITICS

3. I.1.A WHY GOVERNMENT? • Maintain Order: Prohibit Anarchy • Property Rights: Required of a Capitalist System • Provide Public (Collective) Goods: Indivisible Benefits • The “Free–Rider” Problem

4. I.1.B WHAT IS POLITICS? • The Study of How Attitudes, Opinions, and Preferences are Formed (Pre–Conditions) • The Study of the Distribution of Authority in the Public Sphere • Influencing Government: Elections, Institutions, and Policies • “Who Gets What, When, How?” (Lasswell)

5. I.1.C. FORMS OF GOVERNMENT • Autocracy: Dictatorship (Monopoly of Power) • Oligarchy: Small group of influential government decision makers (Oligopoly of Power) • Democracy: The polity has some influence over government policy (Imperfect Competition of Power)

6. I.1.D. TYPES OF GOVERNANCE (“SYSTEMS OF RULE”) • Constitutional Democracy: limits on what government controls (substantive) and how they do it (procedural) • Authoritarianism: no formal limits to government power, yet informal limits do exist based upon social, political, or economic institutions. • Totalitarianism: Nor formal or informal limits to government power

7. I.1.E. THE FIVE PRINCIPLES OF POLITICS • RATIONALITY PRINCIPLE: Most Political Behavior has a Purpose • Rationality is defined in terms of the Efficient Pursuit of Obtaining Specified Goal(s) (Instrumental). • EX. 1: Who Did you Vote for in the 2004 Presidential Election? Why? • Exceptions: How Attitudes, Opinions, and Preferences are Formed – Psychological or Sociological Component • Exceptions: Study of Individual–Level Political Phenomena Divorced from Collective Outcomes

8. “FIVE PRINCIPLES” (Continued) • COLLECTIVE ACTION PRINCIPLE: Most Political Behavior Involves Multiple Individuals or Groups with Different Preferences (and hence, Goals) Working Together to Achieve an Outcome. This Requires Resolving Conflict Among Actors. • Exceptions: Study of Individual–Level Political Phenomena Divorced from Collective Outcomes

9. TYPES OF POLITICAL BARGAINING • Informal Bargaining: “Backroom Deals” • E.G.: Logrolling and Side Payments in Legislatures • Formal Bargaining: Governed by Formal Rules • E.G.: Open versus Closed Rules in Legislatures • Group Membership: Sanctioning “Free–Riders” by providing Selective Benefits which Accrue Only to Participant–Members of a Group • E.G.: NRA, AARP • EX. 4: NRA, AARP

10. “FIVE PRINCIPLES” (Continued) • INSTITUTION PRINCIPLE: Formal Rules and Procedures Shapes Politics • The Design of Institutions Affect the Distribution of Government Authority • EX. 5: The Political Organization of Congress • Jurisdiction: “Turf Wars”: Divided versus Overlapping Jurisdictions. • Decisiveness: How Decision Outcomes are Attained? • E.G.: Motion to Close Debate in a Legislature (“Move the Previous Question”)

11. “FIVE PRINCIPLES” (Continued) • Agenda Control: What Issues are Formally Considered for Government Action? • E.G.: The Power of Legislative Committee Chairs • Veto Power: The Capacity to Defeat Issues on the Agenda • EX. 8: The Executive Veto

12. “FIVE PRINCIPLES” (Continued) • Delegation: The Essence of American Democracy; Transferal of One’s Own Authority to Another Individual or Party • Principal–Agent Problems: The Basic Relationship Involving the “Delegater” (Principal) and the “Delegatee” (Agent) • Transaction Costs: The Costs Incurred by the Principal to Ensure that the Agent does not Deviate from the Principal’s Preferences.

13. “FIVE PRINCIPLES” (Continued) • POLICY PRINCIPLE: Political Outcomes are the Products of Individual Preferences and Institutional Procedures • E.G.: U.S. Supreme Court Decision Making: Individual Preferences × Majority Rule = Median Voter • E.G.: Theory of Minimum Winning Coalitions: Individual Preferences × Majority Rule = Median Voter

14. “FIVE PRINCIPLES” (Continued) • HISTORY PRINCIPLE: The Past Plays a Role in Determining the Present & Future Courses of Action & Outcomes • Path Dependence: Certain Outcomes are Made More or Less Likely Attributable to Historical Evolution • EX. 11: Why Has the American Presidency Grown as an Institution since WWII?

15. I.1.F. WHY DELEGATE AUTHORITY IN A REPRESENTATIVE DEMOCRACY? • Functional Specialization / Division of Labor (Weber) • Place a Premium on Policy Expertise • Mitigate Collective Action Problems

16. I.1.G. BALANCING FREEDOM & ORDER • Obtaining the Optimal Level of Liberty • Choice Relates to Preferences of Political Actors (Both Government & Non–Governmental)

17. I.1.H. THE INSTABILITY OF MAJORITY RULE • Cycling on More than One Issue Dimension: MVT No Longer Provides a Unique Equilibrium Prediction (McKelvey’s Chaos Theorem) • Protection of Minority Rights (Super–Majortiarianism)

18. I.S.1. PATH DEPENDENCE • Current Political Outcomes & Choices are a function of past political outcomes & choices. • E.G.: The Creation of Independent Regulatory Commissions to Thwart Jacksonian “Party Spoils” System of the 19th Century • E.G.: Adoption of Policies in the American States (ranging from Morality Policies to Tax Changes)

20. A PRIMER ON RATIONAL CHOICE THEORY CONCEPTS & APPLICATIONS TO THE STUDY OF AMERICAN POLITICS

21. I.S.2a. WHAT IS “CLASSICAL” RATIONAL CHOICE”? • Assumes that all political actors are rational (i.e., an action is rational to the extent it is correctly designed to maximize goal achievement, given the goal in question and the real world as it exists – Dahl and Lindblom: efficient pursuit of goals). • Actors maximize utility (i.e., satisfaction) without any innate constraints – the only constraints are external to the decision maker (E.G., Resources, Legal Authority)

22. WHAT IS “BOUNDEDLY” RATIONAL CHOICE”? • Assumes that all political actors make rational choices, yet nonetheless possess nontrivial cognitive and informational (incomplete and/or imperfect) limitations that result in suboptimal behavior • Cognitive Limitations = Information Processing is Flawed • Incomplete Information = Limited Information • Imperfect Information = “Bad” Information

23. STRATEGIES FOR COPING AS A ”BOUNDEDLY” RATIONAL AGENT • Incrementalism: Rationally coping with the aforementioned limitations by altering behavior in a piecemeal, gradual manner. • Serial Updating: Updating information from the past (albeit imperfectly) to make decisions.

24. I.S.3. COST–BENEFIT ANALYSIS • Decision Rule: • NB > 0: Positive Net Benefits (Prefer Action/Choice) • NB = 0: Zero Net Benefits (Indifferent) -- NB < 0: Negative Net Benefits (Do Not Prefer Action/Choice)

25. CBA APPLICATION OF RATIONAL CHOICE: VOTER TURNOUT IN AN ELECTION • The Riker–Ordeshook Turnout Decision Calculus R = (P × B) + D – C • R = Net Benefit (Reward) of Voting • P = Probability your Vote will Break a Tie in an Election Contest • B = Utility Difference from your preferred candidate (Candidate “1”) winning over the other candidate (Candidate “2”) – i.e., Candidate Dissimilarity Index • D = Downs’ Value of Democracy Continuing (D > 0)(or else the political system would fail if no one voted) • C = Costs of Voting (C > 0)

26. I.S.4.MEDIAN VOTER THEOREM • The median voter is the most pivotal voter – true for elections or governmental decisions in majoritarian setting.

27. CRITICAL ASSUMPTIONS OF MVT • Single–peaked preferences that are symmetric (i.e., there is a unique most preferred policy outcome termed an ideal point and any deviation from it is suboptimal from the individual’s perspective with the same preference intensity).

28. CRITICAL ASSUMPTIONS OF MVT(CONTINUED) • Quadratic (Risk–Averse Preferences): this is not necessary, rather a simplifying assumption for technical reasons. • The individual’s utility function looks like: • where Ui = individual’s utility • xi = actual policy or candidate position • xi* = ideal policy or candidate position

29. CRITICAL ASSUMPTIONS OF MVT(CONTINUED) • Unidimensional Policy Space (Liberal–Conservative Continuum): Multidimensional policy spaces can be problematic (see Arrow’s Theorem: no stable point in the policy space unless you restrict individuals’ preferences via agenda control power; McKelvey’s Chaos Theorem: All points in a two–dimensional space can be reached if there is pairwise voting under majority rule.

30. CRITICAL ASSUMPTIONS OF MVT(CONTINUED) • Simple Majority Voting Rule: Does not consider supermajorities (e.g., amendments to the U.S. Constitution), nor multiparty (proportional representation) democracies that are fractured and thus require coalitions (e.g., France).

31. CRITICAL ASSUMPTIONS OF MVT(CONTINUED) • Normal Distribution of Voters: Or some other distribution where the greatest mass is located at its center.

32. SPATIAL REPRESENTATION OF MTV • Median Voter Theorem (Hotelling, 1929): “If there are voters at every point on the scale and parties A & B start at 25 and 75 and move at the same rate, then they will converge to the same location until all voters are indifferent between them (Figure 1 – Downs 1957: 117, An Economic Theory of Democracy).” • A → *C*A ← C • |__________|____________|____________|____________| • 0 25 50 75 100

33. THEORETICAL PREDICTIONS: MEDIAN VOTER THEOREM • Elections: Political parties try to converge to the center to maximize votes. The party who comes closest to the ideological center (aka median voter) wins the election contest. • Policy: The winning proposal or critical actor is the median one since it obtains the 50% + 1 vote needed to pass.

34. SOME APPLICATIONS OF MEDIAN VOTER THEOREM • Supreme Court decision making • Congressional committee decision making • Public spending decisions made by citizens via referenda • E.G., Bond Issues • U.S. election contests

35. I.S.5. PRINCIPAL–AGENT THEORY • Based on hierarchical and contractual relationships • Principal: one whom delegates authority to another. • Agent: to whom the principal entrusts authority.

36. WHY DELEGATE? • Efficiency/Productivity/Social Welfare gains from functional specialization & expertise. • Mitigate collective action problems among a large number of decision makers.

37. THE PRINCIPAL’S PROBLEM • How to ensure that the agent acts in her best interests? This means that she must design an incentive structure such that the agent will efficiently serve the interests of the principal. • Design a monitoring mechanism that allows for sanctions and rewards based on the agent’s behavior observed ex post.

38. THE PRINCIPAL’S CONSTRAINTS • She cannot observe actual behavior of the agent in the ex post contracting situation (moral hazard). • She does not know the agent’s “true type or nature” prior to selecting them (i.e., ex ante). (adverse selection) • She cannot perfectly monitor the agent’s actions.

39. AGENCY COSTS FACING THE PRINCIPAL • Moral Hazard: The risk that a party involved in a transaction has not entered a contract in good faith by either providing misleading information, or has an incentive to deviate from its contractually agreed upon behavior – i.e. “Shirking” • Therefore, a contract cannot verify the behavior of another party. Moral hazard is a problem due to the choice of the informed party (agent) making an incorrect choice.

40. AGENCY COSTS FACING THE PRINCIPAL(CONTINUED) • Adverse Selection: The inability to verify a particular key trait of another party involved in the transaction that is relatively fixed, if not immutable. It is imperfectly inferred by the principal from proxy information or characteristics. • Therefore, adverse selection is a problem of the uninformed party (principal) making the incorrect choice.

41. APPLICATION OF PAT:Voters and Politicians in a Representative Democracy • Principal: Voters • Agent: Politician • Moral Hazard: Once elected, the politician does not represent the interests of their constituents back home (“Gone Washington” syndrome) – “Shirking” • Adverse Selection: Voter selects someone who does not share their policy preferences (i.e., voter ignorance about the candidates in an election) • Monitoring Mechanisms: Politician’s voting record, debates, public forums, etc... • Sanction/Reward: Election Contest

42. I.S.6. TRANSACTION COST THEORY • Costs incurred from the activity of producing or delivery of some particular good or service. • North (1990: 27): The costs of exchange between two parties, which is a function of information costs, protecting rights, and policing & enforcing of agreements

43. I.S.6. TRANSACTION COST THEORY(CONTINUED) • Total Costs = Classical Production Costs (Labor, Capital, Land) + Opportunity Costs + Transaction Costs

44. TRANSACTION COSTS IN POLITICS • Governance Structures serves as an important aspect of TC theory. • Monitoring and enforcement “back–end” mechanisms of principal–agent models represent a particular type of transaction cost – i.e., the cost of monitoring and enforcement. • High transactions costs make market solutions to public problems very difficult since bargaining is constrained and the existence of public property and/or private property rights. • Even government coercion solution will entail some level of transactions costs since monitoring and enforcement activities are necessary to ensure compliance to the law.

45. EXAMPLES OF CONDITIONS THAT INCREASE TRANSACTION COSTS • Government Gridlock (e.g., divided government, ideological divergence, larger multiparty coalitions) • Interest group influence (multiplicity of actors makes the costs of arriving at a collective decision more costly) – regulatory capture • Politicized Judiciary & Bureaucratic Agencies • Credible Commitment Problems • Raises transactions costs • (Why? Because more uncertainty about course of action)

46. TRANSACTION COST POLITICS • Transaction costs in politics are not inherently bad, but rather they must be weighed in relation to the benefits that they bring about.

47. I.S.7. GAME THEORY • Definition: An approach to social and political analysis which assumes that behavior is rational and uses the common game as a model of politics. • Game theory is relevant to the study of politics because it analyzes conflict situations – goal is to find the best strategy to follow in a given particular situation.

48. ELEMENTS OF GAME THEORY • Players (i.e., participants) have both goals and resources. The goal of each player is to follow a rational strategy that will enable them to maximize gains and/or minimize losses. • Payoff is the outcome of a game which is attached to a strategy. • 2–person games:(1) zero–sum, (2) negative–sum, and (3) positive–sum. • In non–zero sum games, the players have some overlapping/ common interests by definition

49. EQUILIBRIUM CONCEPT • Nash Equilibrium: The condition, whereby the configuration of strategies among players is such that each person’s strategy is best for her, given that all other players are also playing their equilibrium strategies. (Dixit and Skeath 1999: 82)

50. DOMINANT STRATEGY • The strategy that outperforms all other strategies used by a given player in a game. • A dominant strategy is not one that necessarily provides a player with higher payoffs than their opponent, but rather provides the player with higher payoffs than they would receive from playing some other strategy.