PS 1 Midterm Review

1. PS 1 Midterm Review Nandita, Aala, and Mashail

2. Specifics of the exam

3. Format of the Exam • All of the exam is in class: Blue book for 1 hour 20 minutes • Three components • IDs • Short answers • Essay Question (Released already) • Advice for preparation: spend half of your time on lecture notes and half on readings • This review is comprehensive but not exhaustive

4. The IDs • You will be given a word • Provide the definition • Provide some context as to why this term is relevant • Answer should be brief but thorough (~2 sentences) • Here’s an example of some answers that could be given…

5. ID: Dutch Disease • Wrong Answer: Dutch Disease is a disease that Dutch people brought to the colonies. • Poor Answer: Dutch Disease is [the/an example of] the resource curse. • Decent, but Incomplete Answer: Dutch disease is when the economy depends on one product, so other products are uncompetitive. • Complete Answer: Dutch disease occurs when the economy is oriented toward one export (usually a natural resource), which leaves other exports uncompetitive when the value of the currency rises. This provides one rationale for the resource curse.

6. The Short Answer • You will be given a question or statement • Answer all parts of the question • Answers should be concise and thorough (~1 paragraph) • Here’s an example of some answers that could be given…

7. Short Answer: Explain the “geography hypothesis” in regards to economic development. What are some arguments made to support this hypothesis? Provide one critique against it.

8. Examples of Answers Part I • Poor Answer: The geography hypothesis is where geography is used to explain economic development. An argument for it is when the climate is good, the economy grows. • Decent, but incomplete answer: The geography hypothesis is where scholars use geographic factors such as location and climate of an country to explain its level of economic development. For example, countries in hot climates might be more susceptible to diseases, which means people are not productive there. A critique for this argument is the reversal of fortune argument.

9. Example of Answer Part II • Complete Answer: The geography hypothesis is where scholars use geographic factors such as location and climate to explain variation in economic outcomes. Sachs et al (2001) particularly highlight that countries that are landlocked and are in tropical areas face obstacles to innovation and development because transportation costs for trade are high, people are more susceptible to disease, and the land is not conducive for high levels of agricultural productivity. Acemoglu (2003) counters this argument by noting that centuries ago, countries that were in the tropical areas were richer than those in the temperate zones, and therefore, geography alone is inadequate in explaining economic outcomes. This notion is known as the “reversal of fortune.”

10. Political Representation and Accountability

11. Median Voter Theorem • Assume every voter has an ideal point that falls on a unidimensional line • Under majority rule and open proposals, the median voter’s ideal point is the stable equilibrium • No politician would have incentives to deviate • Limitations: fails once multiple dimensions are included  simplified view of the world

12. Electoral Rules (Aggregating Votes into Districts) • District Magnitude: number of seats in a district (generally number of competitive parties is M+1) • Electoral Formula: how votes translate into seats • Plurality: : winner who receives most votes wins • Ex: First Past the Post, Alternative Vote • Proportional Representation: parties receive seats proportional to vote share • Usually a party list • Duverger’s Law: plurality electoral systems favor the creation of a two party system

13. The Principal-Agent Problem: A Challenge to Representation • Components • Principal: the one who delegates in hopes that their wishes are implemented/interests are represented • Agent: the one who actually does the implementing • Issues: • Principal does not have perfect capacity to observe/monitor behavior of agent • Agent has incentives to shirk if there is preference divergence

14. Other Threats to Representation • Gerrymandering: packing vs. cracking • Corrupting Power of Money • Determining who can run vs. affecting policy • Disproportionate Cost of Voting • Patronage politics • Solutions to PA problem require citizens to have more knowledge and ability to detect deception than they have

15. Inequality and Institutions

16. What is good for development? • Property rights! • Property rights contracts –> specialization  economic efficiency welfare increases

17. Why are some countries poor? • Bad policies • Easterly • Institutions • Engerman and Sokoloff • Geography • Sachs et al.; Acemoglu • Natural resources • Collier ** For each theory, don’t take at face value, think about evidence consistent with it and critiques. • Bad policies • But bad policies are politically determined. (Haber on Mexican bank crises) • Institutions • But where do good institutions come from? Colonization? Geography? Slave trade? • Geography • But what about “reversal of fortunes”? • Natural resources

18. What are correlates of inequality across countries? • Correlation: • High inequality, modest redistribution countries are more likely to be autocratic than low inequality, high redistribution countries • Why? • Meltzer-Richard model – citizens influence redistribution policy. Median voter decisive for policies. • In autocracies, citizens don’t have (decisive) say in state policies.

19. Explain variation in redistribution within democracies • Iversen & Soskice • Redistribution policy is determined by the electoral systems and the class coalitions they engender • Electoral formula  coalition behavior  systematic differences in the partisan composition of governments  different distributive outcomes. • Other explanations? • Ideas about luck; fairness; social mobility • Diversity • Governments weigh distortions from redistribution differently

20. What influences redistribution in U.S.? Why redistribution low? Why doesn’t median voter get redistribution? • Who participates matters • Civic volunteerism model tells us: people who have resources (time, money, civic skills), are politically interested, and are asked to participate actually participate thee most • Based on this model, rich most well positioned to influence policies • Organized (business) interests • Interests groups that solve the collective action problem, can coordinate members influence policies • Voters’ limited knowledge about redistribution • Don’t know about “submerged state” and “tax expenditure” • Thus, little awareness of upward redistribution • And less support for reforms and downward redistribution • Prejudice • Government supplied shortages

21. Inequality and populist politics