The Economics of Political Action

The Economics of Political Action.

The economics of political action refers to the study of how individuals and groups make decisions about political participation and how those decisions affect public policy. It is an interdisciplinary field that combines elements of economics, political science, and sociology.

One of the key concepts in the economics of political action is the idea of rational choice. This theory suggests that individuals will make decisions about political participation based on a cost-benefit analysis, weighing the benefits of participation against the costs. Factors such as time, money, and the likelihood of success are all considered in this analysis.

Another important concept is the idea of collective action. This refers to the difficulty of coordinating and motivating individuals to take part in political activities. Collective action problems can arise when the benefits of political participation are shared among a large group, but the costs are borne by individuals. This can lead to a situation where individuals choose not to participate, even though the group as a whole would benefit from their participation.

The economics of political action also considers the impact of political institutions on individual behavior. For example, the design of electoral systems and the structure of political parties can affect voter turnout and political participation.

The field of the economics of political action also looks at how economic incentives affect the political process. For example, how taxes, subsidies, and regulations affect the behavior of firms and individuals, and how these policies in turn shape the political process.

In conclusion, the economics of political action is an interdisciplinary field that studies how individuals and groups make decisions about political participation and how those decisions affect public policy. It is based on the concepts of rational choice, collective action, and the impact of political institutions and economic incentives on the political process. It helps to understand the behavior of individuals and groups in the political sphere and how it can shape public policy.

1.The rational ignorance effect implies that a rational individual will:

likely not spend much time gathering information on political candidates because their vote is unlikely to change the outcome of the election

spend a significant amount of time gathering information about candidates and their positions because of the large influence government action has on their lives

vote in every election for which they are eligible to vote

support candidates who favor policies that impose clear costs on them as taxpayers but provide no offsetting benefits

2.Which of the following is not true of public sector action?

Voters face a bundle purchase problem in that they must choose among candidates who represent a bundle of positions on issues

Public sector organization can break the linkage between payment and consumption of a good

The distribution of income and influence are distributed roughly the same in the public sector as in the market sector

Political action based on democratic majority rule creates losers as well as winners

3.Which of the following is often used as a device to obtain funding for a group of projects intensely desired by regional or interest groups that would be unlikely to pass if voted on separately?

Voter referendum

Unanimous voting requirements

Pork-barrel legislation

Double-blind voting

4.A special-interest issue is:

an issue that generates special study and concern as it will affect a large number of citizens

an issue that requires a special election or vote separate from other issues

an issue that generates substantial personal benefits for a small number of individuals in a politically-active interest group while having widespread costs on taxpayers

an issue that generates widespread benefits for society and is financed through widespread taxation

5.Economic analysis suggests that

once elected to office, representatives are able to put aside all self-interest and focus on the public good rather than catering to special interest groups who provide votes, campaign contributions, and other forms of political support

because all government outcomes are done based on unanimous voting, we can be sure that public sector actions benefit all citizens

voters have a strong incentive to be informed about and participate in the political process because their vote is likely to sway political outcomes

there is a strong tendency for government bureaucrats and employees to want to expand their budgets well beyond what would be economically efficient

6.Which of the following is a difference between the private sector and the public sector?

In the private sector, decision-making involves direct voting of elected representatives through legislative procedures, while in the public-sector, none of the actions involve any legislative procedure

Private-sector action is based on mutual agreement, while public-sector action is based on majority rule

In the private sector, the individual’s power to make his preferences count on specific issues is limited, while in the public sector, the individual’s preferences play a dominant role

Private-sector action is based on majority rule, while public-sector action is based on mutual agreement

7.When which businesses succeed are driven by political connections rather than market forces, this is known as a system of:

hyperforcism

business collectivism

crony capitalism

libertarianism

8.Which of the following is an example of a transfer payment?

Unemployment benefits paid by the government to individuals

Wages paid to an employee of a corporation

Profits earned by the owner of a business

Rent paid to a landlord who owns a building

9.Which of the following occurs as the size of government expands as a share of the economy due to greater use of transfers and subsidies?

Taxes necessary to finance government will fall

Greater rent-seeking and crony capitalism will occur

Economic efficiency and growth will be enhanced

Less government debt will be accumulated

10.Which of the following is a result of the rational ignorance effect?

Most voters spend more time acquiring information about their own congressional representatives than they do about the products they buy

Because all political outcomes produce the same benefit, most voters should simply flip a coin to decide on how to vote on political issues

Most voters spend little time gathering information about political decisions, and many also choose not to vote

Citizens are very knowledgeable about where their elected officials stand on all political issues

11.pecial interest issues in which the benefits are concentrated and the costs are widespread:

are likely to secure unanimous approval by all citizens

are only likely to be adopted when they are also economically efficient

generally are not supported by elective representatives due to the harm they cause to society as a whole

are likely to be adopted even when they are inefficient

12.Crony capitalism is the situation where:

the allocation of resources is determined by political favors rather than by consumer preferences

the activities of business firms are unregulated

consumer preferences are the main driver of the allocation of resources

the free market sector is widely used to allocate goods and resources

13.Which of the following is true of the public sector?

Goods are rationed and allocated by market determined prices

Political influence by special interest groups and reelection concerns play a large role in the allocation and determination of government activity

Political authorities implement only those programs that are unanimously agreed upon by all citizens

There is a one-to-one relationship between a person’s payment and receipt of a good produced in the public sector

14.Which of the following is true of the shortsightedness effect?

It is a situation in which legislators are in favor of proposals with clearly

It is a situation in which legislators are against proposals yielding clearly

It is a bias inherent in the political process that leads to the misallocation

It is an important feature of the political process because of which unproductive

15.Identify a similarity between the government sector and the market sector.

The provision of goods in both sectors is free and has no opportunity cost

The nature of competition and the criteria for success in both the sectors are the same

The concept of scarcity is absent in both sectors

The opportunity cost of resource use is present in both sectors

16.According to public-choice analysis, which of the following is most likely to increase the incentive for well-organized groups to expend resources seeking government favors?

An increase in government income subsidies and transfer payments

More widespread use of user charges to fund government programs

A broad decrease in government spending and lower business regulation

A decrease in the use of debt to finance government operations

17.Politicians have a strong incentive to support special-interest issues because:

they are generally economically efficient, generating substantially more benefits for society than the costs

special-interest voters vote for or against candidates strictly on the basis of whether they are supportive of their positions, and are an attractive source of campaign resources, including financial contributions

they benefit a widespread group that represents a majority of citizens

this is a trick question, politicians never favor special-interest issues because they are inefficient and counterproductive

18.Which of the following refers to payments to individuals or institutions that are not linked to the current supply of a good or service by the recipient?

Transfer payments

User charges

Disposable income

Supply payments

19.The cost of a government service can be linked to the benefits received by:

taxing all citizens equally to provide the service

restricting the consumption of good to only those of the winning pollical party

using a system of user charges to finance the costs of the service

financing the service through imposing higher corporate income tax rates

20.Under crony capitalism, the government:

does not regulate or control the actions of business

rejects campaign contributions from special-interest groups

provides equal treatment to all citizens and businesses

uses regulations and laws to favor those most willing to provide political support

21.Which of the following is true regarding production within the public sector?

Public sector production generally is accomplished at a lower cost than private production due to the lack of a need to earn profit for shareholders

Public sector production is often done at a level less than would be efficient because of the strong incentives for resource conservation and cost control within government agencies

Public sector production is often inefficient because of the lack of signals such as profit and loss, the absence of mechanisms like bankruptcy, and the lack of personal returns from cost saving measures

Public sector production is less influenced by special interest groups and political incentives than is private production

22.Which of the following is true of public-choice economists?

They use public interest to analyze private markets

They do not use empirical data to test their theories

They assume that once people begin to act or participate in the political process, that they set their individual self-interest aside in favor of the public good

They use self-interest and the structure of incentives to analyze political choices and the operation of government

23.Which of the following is meant by collective decision-making?

Combining multiple private and public issues into one single bill to be voted on to lower the number of times one must provide input and participation

The use of the public sector to allocate economic resources, often involving voters, legislators, and public employees and bureaucrats

The use of the market sector, involving many individual consumers and business firms to allocate economic resources

The use of all possible information on costs and benefits collected from all participants in making economic allocation decisions

24.Which of the following is true of political candidates?

Their actions and positions will be heavily affected by the pursuit of votes, contributions, and support from special interest groups

They spend very little on their political campaigns because they know the money can be better used to help those in need

Once a candidate enters a race they generally are able to put aside any personal interest they have and focus on pursuing only the public good without influence from interest groups

They are held responsible for the positions and promises they make during the campaign once they are in office under the same contract laws that make a business live up to the promises made when selling a product

25.Which of the following terms is used by economists to describe actions taken by individuals and groups seeking to use the political process to take the wealth of others?

Resource-seeking

Asset-seeking

Wealth-seeking

Rent-seeking

26.The “bundle purchase” problem in public sector action refers to:

a situation in which a newly elected public sector representative must cater to a bundle of special interest groups to ensure reelection

the problem faced by voters while choosing among candidates who each represent a bundle of positions on issues

a situation in which consumers must purchase large quantities of an item to get a discount at a retail store

the problem faced by the head of a government agency who must produce a bundle of goods for citizens within the same agency

27.Resources are often inefficiently used in the government sector because:

decision-makers in the public sector do not stand to personally benefit if public production is done more efficiently

all government employees are lazy and do not care about their jobs or how well they do them

taxpayers do not care how much of their income is taken by government in the form of taxes to finance government operations

of a failure of special interest groups to participate in the political process

28.Which of the following is true regarding government spending as a share of the U.S. economy?

Government spending as a share of the economy has declined rapidly since 1930

Government spending as a share of the economy fell from 1930 to 1980 but has risen since

Government spending as a share of the economy has remained roughly unchanged since 1930

Government spending as a share of the economy has grown rapidly since 1930

29.Public-choice analysis:

applies the principles and methodology of economics to the operation of the political process

fails to provide an explanation for why so many people do not become informed and vote in elections

applies the principles and methodology of political science to the operation of the economic process

suggests that public sector action is guided by an invisible hand toward outcomes consistent with economic efficiency

30.Logrolling involves the practice:

of vote trading by politicians in order to get the necessary support to pass desired legislation

of bundling unrelated projects into a single bill benefitting many interests

of searching for and acquiring the information needed to cast an informed vote

of users making payments for services provided by the government

31.Which of the following is a similarity between market entrepreneurs and crony capitalists?

The actions of both increase economic efficiency

Both are directed by the pursuit of profit

The actions of both serve the best interests of society

Both ensure the equal treatment to all individuals and businesses under the law

32.Promising to eliminate all current student higher-education debt is a good way for a candidate for political office to get the support of which subset of voters?

taxpayers who have already paid off their student loans

students who fully paid for their college by working jobs while attending college

those who have only finished high school

recent college graduates who have a large amount of student loans they haven’t repaid

33.A representative government will tend to undertake projects that are productive when:

the distribution of benefits is concentrated and that of costs is widespread among voters

the distribution of costs is concentrated and that of benefits is widespread among voters

the distribution of benefits and costs are both widespread among voters

all citizens are taxed to pay for the project

34.Political action:

benefits some citizens and harms the others when decisions are made by majority rule democratic voting

is rarely influenced by special interest group pressures and concerns for reelection

benefits all citizens equally when decisions are made by majority rule democratic voting

is guaranteed to produce outcomes consistent with economic efficiency

35.For the smooth operation of markets, a government should:

discourage the enforcement of contracts

make regulations that restrict entry into markets

refrain from protecting private property

refrain from using selective transfers, subsidies, and taxes to favor some at the expense of others

36.Which of the following holds true when voters pay for a government project in proportion to the benefits received from it?

All voters pay an equal amount

All voters lose even if the project is productive

All voters gain even if the project is unproductive

All voters gain if the project is productive

37.A political project is truly productive only when:

it is possible to allocate the costs in a way that all voters gain

it creates current benefits to a concentrated group at the expense of widespread costs in the future that are hard to identify

it passes by only a narrow majority in the democratic voting process

it is favored by a powerful special interest group and the costs are hidden from most voters

38.As a result of the shortsightedness effect, elected political officials:

have less incentive to spend on programs designed to provide benefits before the next election

have less incentive to use debt financing for current projects

have a strong incentive to spend on programs designed to provide highly visible benefits before the next election

have a strong incentive to levy taxes

39.Which of the following is true of rent-seeking behavior?

Rent-seeking involves investing resources in lobbying and other activities designed to gain favors from the government

Rent-seeking involves engaging in charitable activities to gain the confidence of customers

Rent-seeking would become more widespread if new stronger constitutional constraints were enacted that prevented politicians from taking the property of some and transferring it to others

People will spend less time rent seeking when the government becomes heavily involved in income transfer activities

40.Which of the following is true of the income-transfer activities of the U.S. government?

They have grown substantially since 1930

They have been negative as a share of GDP since 1930

They have declined substantially since 1930

They have remained constant since 1930

41.The political process will be more likely to accept productive projects and reject unproductive ones when:

benefits are concentrated and costs are widespread

approval requires majority voting rather than unanimous approval

both benefits and costs are widespread

benefits are widespread and costs are concentrated

42.Public-choice analysis:

highlights the importance of institutions, constitutional rules, and procedures that encourage productive political actions and restrain those that are counterproductive

assumes that individuals acting in the public sector are able to put aside their personal self-interest and incentives to instead pursue the public good

fails to explain how the political process really works

indicates that a larger government sector will generally help to improve economic efficiency and lower the extent of rent seeking and crony capitalism

43.Which of the following is true of government bureaucrats?

They are personally rewarded when they find ways to cut costs and save money for taxpayers

They have a strong incentive to expand their budgets well beyond what would be economically efficient

They generally have an incentive to try to lower their budgets by achieving their agency’s goals quickly and efficiently

They always support the interests of the voters over those of special interest groups or the pressures put on them by political leaders

44.Rent-seeking leads to a(n):

increase in an economy’s output level above its potential

decrease in economic efficiency

shift of resources into productive activities

increase in an economy’s income level

45.If the government uses resources to achieve one goal, those resources are unavailable to achieve others. This implies that:

the goods produced by the government sector are always excludable in nature

the opportunity cost of resource use is present in the government sector

the opportunity cost of resource use is missing in the government sector

resources are allocated inefficiently in the market sector

46.Which of the following is a larger share of federal government spending?

Social Security

Interest on the national debt

National defense

Transportation

47.Which of the following is true of government spending on income transfers?

It has declined rapidly over the years

It has always been higher than spending on health care

It has grown rapidly over the years

It has always been lower than spending on interest payments

48.Which of the following is true of the government sector?

Government provided goods are generally free for society as there is no opportunity cost of resources nor profit earned, unlike the market

Unlike the market, government can never break the linkage between payment and consumption of a good

Competition is present in the government sector, but its nature and criteria for success differ from the market

Unlike the market, that has the potential for failures, the public sector always achieves efficient outcomes

49.Which of the following is the larger category of state and local government spending?

Transportation

Public welfare and health

Police and fire protection

Social Security

50.Crony capitalists succeed by:

providing political support such as campaign contributions and votes in exchange for political favoritism

only undertaking activities that are productive and economically efficient for society

paying higher taxes to the government, while receiving less government benefits

focusing on satisfying consumers rather than on satisfying politicians

The Economics of Political Action.

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