CPE Final Exam Terms With 100% Correct Answer 2023
Tiebout Model - correct answer-• A theory where you have a lot of local governments providing the public goods and services
• The local governments best know their constituents and they can provide them with the things they want
• By allowing the local governments to compete with each other, citizens will live under the government that gives them what they want (since all individuals are different and have personal evaluations) and the governments will provide good things for their citizens because they don't want them to leave
• This is a nonpolitical solution to the free-rider problem in local governance
• Citizens shape the government
Curley Effect - correct answer-• When a politician uses wealth reducing policies to drive out those who do not support him
• This politician is tipping the balance of votes in his direction through implementing policies that strangle economic growth
• Government shapes the citizens
• Example:
o "Let's say a mayor advocates and adopts policies that redistribute wealth from the prosperous to the not so prosperous by bestowing generous tax-financed favors on unions, the public sector in general, and select corporations. These beneficiaries become economically dependent on their political patrons, so they give them their undivided electoral support—e.g., votes, campaign contributions, and get-out-the-vote drives. Meanwhile, the anti-rich rhetoric of these clever demagogues, combined with higher taxes to fund the political favors, triggers a flight of tax refugees from the cities to the suburbs. This reduces the number of political opponents on the city's voter registration rolls, thereby consolidating an elect
Protective, Productive, and Predatory State - correct answer-• We want protective and productive with having a predatory state
• Protective: A protective government carries out the tasks assigned to it by the established constitution and doesn't make any "choices"
• Productive: that agency through which individuals provide themselves with "public goods" in post-constitutional contract
• Predatory: in this position, each person has some incentive to initiate conflict, to engage in predatory activity
Constitutional Rules Impacted by play at Post Constitutional Level - correct answer-• The purpose of constitutional economics is to legitimize the existence of a constitutionally circumscribed state and to discuss what type of constitutional rules could reasonably reach unanimous consent at the state of constitutional choice. Rational contractors will unanimously agree to less than unanimity rules, which reduce decision-making costs with respect to routine collective decisions.
• Post constitutional analysis involves the examination of strategies players adopt within defined constitutional rules and principles. During the post constitutional stage players treat the rules of the game as constraints and devise strategies to deal with them.
Politics without Romance - correct answer-• James Buchanan
• Public choice theory is the avenue through which romance notions of the workings of the government has been replaced with more realistic notions
• Public choice theory models the realities rather than the romance of political institutions
• "Public choice theory has been the avenue through which a romantic and illusory set of notions about the workings of governments and the behavior of persons who govern has been replaced by a set of notions that embody more skepticism about what governments can do and what governors will do, notions that are surely more consistent
with the political reality that we may all observe about us."
Emperor's Singing Contest - correct answer-• The problem is that the second singer might be much worse than the first singer
o We should just look at half of the problem before declaring a solution
• This is an example of how we act in public choice
o We begin by implementing stuff (like markets) then we later find out that is doesn't work so we stop it and we just go with other method (government)
o We do this because we just assume that government can solve the problems
• When there are market failures, we often just think that the government should be used to correct them
o This is what economists thought for a long time
• This teaches us that just because you can see a flaw in one does not mean the other is the most optimal choice
Friedman's 4 ways to Spend Money - correct answer-On Me On You
Spend Mine Worried about Costs and Benefits Worried about the Costs
Spend Yours Worried about the Benefits Don't care about either
• Government is spending someone else's money on someone else
o They don't care about the costs or the benefits and they don't economize and they don't seek the highest value
o This is the result of 40% of our national income- according to Friedman
X-Inefficiency - correct answer-• Decreased efficiency in a situation even if the company
is producing the correct amount of output
o This can occur when there is not competition
• When we don't use inputs efficiently with the given outputs
• The difference between efficient behavior of business assumed or implied by economic theory and their observed behavior in practice caused by a lack of competitive pressure.
Tiebout Model - correct answer-• A theory where you have a lot of local governments providing the public goods and services
• The local governments best know their constituents and they can provide them with the things they want
• By allowing the local governments to compete with each other, citizens will live under the government that gives them what they want (since all individuals are different and have personal evaluations) and the governments will provide good things for their citizens because they don't want them to leave
• This is a nonpolitical solution to the free-rider problem in local governance
• Citizens shape the government
Curley Effect - correct answer-• When a politician uses wealth reducing policies to drive out those who do not support him
• This politician is tipping the balance of votes in his direction through implementing policies that strangle economic growth
• Government shapes the citizens
• Example:
o "Let's say a mayor advocates and adopts policies that redistribute wealth from the prosperous to the not so prosperous by bestowing generous tax-financed favors on unions, the public sector in general, and select corporations. These beneficiaries become economically dependent on their political patrons, so they give them their undivided electoral support—e.g., votes, campaign contributions, and get-out-the-vote drives. Meanwhile, the anti-rich rhetoric of these clever demagogues, combined with higher taxes to fund the political favors, triggers a flight of tax refugees from the cities to the suburbs. This reduces the number of political opponents on the city's voter registration rolls, thereby consolidating an elect
Protective, Productive, and Predatory State - correct answer-• We want protective and productive with having a predatory state
• Protective: A protective government carries out the tasks assigned to it by the established constitution and doesn't make any "choices"
• Productive: that agency through which individuals provide themselves with "public goods" in post-constitutional contract
• Predatory: in this position, each person has some incentive to initiate conflict, to engage in predatory activity
Constitutional Rules Impacted by play at Post Constitutional Level - correct answer-• The purpose of constitutional economics is to legitimize the existence of a constitutionally circumscribed state and to discuss what type of constitutional rules could reasonably reach unanimous consent at the state of constitutional choice. Rational contractors will unanimously agree to less than unanimity rules, which reduce decision-making costs with respect to routine collective decisions.
• Post constitutional analysis involves the examination of strategies players adopt within defined constitutional rules and principles. During the post constitutional stage players treat the rules of the game as constraints and devise strategies to deal with them.
Politics without Romance - correct answer-• James Buchanan
• Public choice theory is the avenue through which romance notions of the workings of the government has been replaced with more realistic notions
• Public choice theory models the realities rather than the romance of political institutions
• "Public choice theory has been the avenue through which a romantic and illusory set of notions about the workings of governments and the behavior of persons who govern has been replaced by a set of notions that embody more skepticism about what governments can do and what governors will do, notions that are surely more consistent
with the political reality that we may all observe about us."
Emperor's Singing Contest - correct answer-• The problem is that the second singer might be much worse than the first singer
o We should just look at half of the problem before declaring a solution
• This is an example of how we act in public choice
o We begin by implementing stuff (like markets) then we later find out that is doesn't work so we stop it and we just go with other method (government)
o We do this because we just assume that government can solve the problems
• When there are market failures, we often just think that the government should be used to correct them
o This is what economists thought for a long time
• This teaches us that just because you can see a flaw in one does not mean the other is the most optimal choice
Friedman's 4 ways to Spend Money - correct answer-On Me On You
Spend Mine Worried about Costs and Benefits Worried about the Costs
Spend Yours Worried about the Benefits Don't care about either
• Government is spending someone else's money on someone else
o They don't care about the costs or the benefits and they don't economize and they don't seek the highest value
o This is the result of 40% of our national income- according to Friedman
X-Inefficiency - correct answer-• Decreased efficiency in a situation even if the company
is producing the correct amount of output
o This can occur when there is not competition
• When we don't use inputs efficiently with the given outputs
• The difference between efficient behavior of business assumed or implied by economic theory and their observed behavior in practice caused by a lack of competitive pressure.
