CPE Final Exam Terms| 81 Questions &
Answers 100% Correct
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:
, CPE Final Exam Terms| 81 Questions &
Answers 100% Correct
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
electoral majority for the anti-wealth party. It also shrinks the tax base of the city, even as the
city's budget swells."
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
, CPE Final Exam Terms| 81 Questions &
Answers 100% Correct
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."
, CPE Final Exam Terms| 81 Questions &
Answers 100% Correct
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
Answers 100% Correct
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:
, CPE Final Exam Terms| 81 Questions &
Answers 100% Correct
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
electoral majority for the anti-wealth party. It also shrinks the tax base of the city, even as the
city's budget swells."
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
, CPE Final Exam Terms| 81 Questions &
Answers 100% Correct
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."
, CPE Final Exam Terms| 81 Questions &
Answers 100% Correct
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
