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Candidates and the Median Voter Model A wide range of persons choose to become candidates for public office. But these candidates seem to behave in similar patterns. Why do candidates who are often very different in political opinions, backgrounds, personalities, etc. seem to behave so much alike? The median voter model provides an explanation. The median voter model suggests that the median voter (the one in the middle) must be captured to achieve a majority vote. If two candidates are on opposite sides of an issue, or on the same side, the candidate closer to the median position will capture the median voter and the majority of the votes. Example 5: If Candidate Waffle realizes that Candidate Waver is positioned closer to the median voter, Candidate Waffle will want to move closer to the median position. If Candidate Waver realizes that Candidate Waffle is now positioned closer to the median voter, Candidate Waver will want to move closer to the median position. The median voter model predicts that a candidate will behave in certain predictable ways in his or her pursuit of the median voter: 1. Aim for a middle-of-the-road position. A candidate who is too far from the middle-of-theroad will lose the median voter to his or her opponent. A candidate may stake out a fairly extreme position during the nomination process, in order to appeal to the most committed members of the candidate’s party. But after receiving the nomination, the candidate will want to move toward the median position. 2. Label his or her opponents as extremists. At the same time that Candidate Waffle tries to move toward the middle, Candidate Waffle will try to portray Candidate Waver as on the fringe, and out of touch with the desires of the average voter. 3. Adjust his or her positions in response to polls. Candidates will take polls to try to determine what the median voter wants. Candidates may have to change their positions on issues in order to get more in tune with the median voter. 4. Speak in general rather than specific terms. To appeal to the median voter, candidates will speak in general terms in favor of goals that the median voter will support (e.g. a strong economy, efficient government, better education, crime reduction, etc.). Candidates will try to avoid revealing specific details about how they might plan to accomplish these popular goals (e.g. free trade agreements, closure of redundant military bases, tuition vouchers, construction of new prisons, etc.), to avoid offending voters who might disagree with the specifics. Policies favored by the median voter (who likely will be ill-informed on most issues) will not necessarily be the most economically efficient policies. The candidates’ pursuit of the median voter may result in government failure. Elected Officials Once a candidate is elected to public office, what will he or she do? An elected official may have a strong desire to support policies that will benefit the general public by increasing economic efficiency or by promoting long term economic growth. But will an elected official actually support such policies? Elected Officials and Short Run Focus Elected officials tend to have a strong desire to remain elected officials. Thus, an elected official will tend to focus on winning the next election. An elected official will naturally support policies that improve his or her chances of winning the next election, and will naturally oppose policies that harm his or her chances of winning the next election. Thus, an elected official will tend to support policies that yield benefits in the short run (before the next election) and impose costs in the long run (after the next election). This will be true even if the long run costs of the policies exceed the short run benefits. Likewise, an elected official will tend to oppose policies that impose costs in the short run and yield benefits in the long run. This will be true even if the long run benefits of the policies exceed the short run costs. FOR REVIEW ONLY - NOT FOR DISTRIBUTION 28 - 3 Public Choice and Government Failure
The short run focus of elected officials can lead them to support policies that are economically inefficient (impose costs that exceed benefits) and to oppose policies that are economically efficient (yield benefits that exceed costs). Thus, the short run focus of elected officials can lead to government failure. Elected Officials and Special-Interest Groups Elected officials tend to have a strong desire to remain elected officials. Thus, an elected official will tend to focus on winning the next election. To improve his or her chances of winning the next election, an elected official will be responsive to the goals of special-interest groups. A specialinterest group is a group of people who are especially interested in a particular governmental policy. Usually, the group is strongly affected by the policy. Teachers will be especially interested in education policy. Peanut farmers will be especially interested in the peanut subsidy policy. A special-interest group is usually very small in size compared to the total population. This small size can actually increase the political influence of the special-interest group. A special-interest group will support policies that yield a concentrated benefit for the members of the interest group, and impose a cost that is usually dispersed over a large number of other people. Or a specialinterest group will oppose policies that impose a concentrated cost on the members of the interest group, and yield a benefit that is usually dispersed over a large number of other people. The concentrated benefits or costs experienced by the special-interest group will cause the interest group to act in certain ways that will increase the interest group’s political influence. The dispersed benefits or costs experienced by other people (outside the interest group) will cause them to act in ways that increase the interest group’s political influence. The influence of specialinterest groups is increased by: 1. Low voter turnout. Low voter turnout in political elections increases the influence of the people who do vote. Special-interest group members (expecting a concentrated benefit or cost) are likely to have a high voter turnout. Other people (expecting only dispersed benefits or costs) are likely to have a low voter turnout. Example 6: A vote on a bond issue to provide funding for the local library system is held. Library employees will be especially interested in the outcome of this vote. Library employees make up a tiny percentage of eligible voters. But library employees have a voter turnout of nearly 100%. Other eligible voters have a very low voter turnout. So the special-interest group (library employees) has a greater influence due to the low voter turnout by most voters. 2. Rational ignorance. Special-interest group members (expecting a concentrated benefit or cost) will be well-informed about the issue of concern to the interest group. Other people (expecting only dispersed benefits or costs) will likely be ill-informed about the issue of concern to the interest group. Example 7: Elected Official Cater is deciding how to vote on an upcoming issue. A vote one way will benefit a special-interest group. The group will be well-informed about how Elected Official Cater votes on this issue, and may reward Elected Official Cater for a favorable vote with campaign contributions and other support. A vote the other way will yield a dispersed benefit to the general public. The general public will be ill-informed about how Elected Official Cater votes on this issue, and probably won’t support or oppose Elected Official Cater based on this particular vote. Elected Official Cater will likely respond to the special-interest group on this issue. 3. Lobbying. Special-interest group members (expecting a concentrated benefit or cost) are likely to contribute money to hire lobbyists to try to persuade elected officials to vote a specific way on “their” issue. This lobbying is a type of rent seeking. (We discussed the socially wasteful nature of rent seeking in Chapter 22.) Other people (expecting only dispersed benefits or costs) are unlikely to lobby elected officials about the issue. The number of registered lobbyists indicates that special-interest groups do a lot of lobbying. FOR REVIEW ONLY - NOT FOR DISTRIBUTION Public Choice and Government Failure 28 - 4
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PRINCIPLES OF ECONOMICS JEFF HOLT S
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Principles of Economics, 6th Editio
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16. Study Guide for Chapter 7 17. C
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11. Appendix: Book Review - “The
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20. Appendix: The NCAA Cartel 21. S
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Introduction: A Brief History of U.
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In the twentieth century, per capit
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Appendix: The 35 Largest National E
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Multiple Choice: ___ 1. The Jamesto
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2. Describe the economic cost of th
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Chapter 1 Scarcity and Choices The
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Example 5B: At the end of 1982, the
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Example 11: When Cindy quits her jo
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consequences may result in failure
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An upward sloping curve (as in Exam
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In making decisions, humans tend to
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5. ______________________ _________
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___ 13. If the value of one variabl
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Y Point X Y A 0 1 B 3 3 C 6 5 D 9 7
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Chapter 2 Trade and Economic System
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Example 4B: The following quantitie
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1. An increase in the quantity of r
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3. For whom to produce? This is det
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The graph below illustrates the shi
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The two primary economic systems ar
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___ 12. The capitalist vision sees
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___ 25. According to the book “Ca
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Chapter 3 Demand, Supply, and Equil
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. For inferior goods, income and de
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The same information can be placed
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Not only does a free market elimina
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$7 - 6 - 5 - S 3 S1 S 2 Price 4 - 3
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Example 17: The graph below illustr
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Questions for Chapter 3 Fill-in-the
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___ 12. Assuming a market originall
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$8 - 7 - 6 - 5 - Price 4 - 3 - 2 -
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Chapter 4 Inflation and Unemploymen
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Computing the Rate of Inflation The
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Full Employment Though unemployment
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3. Cyclical unemployment - due to d
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During the Great Depression, the ec
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Appendix: Think Like an Economist -
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Answer questions 8. and 9. based on
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___ 25. The extension of unemployme
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Chapter 5 Measuring Total Output: G
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5. Leisure. Leisure time is by defi
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The U.S. is a high per capita GDP c
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Example 17: In “An International
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The simple circular flow diagram be
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___ 3. Which of the following would
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2. Explain what nonproduction trans
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Chapter 6 The Aggregate Market The
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Example 2C: Assume the same facts a
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Example 5B: The price of crude oil
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Price Level Real GDP SRAS AD 2 AD 1
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Appendix: Why the Aggregate Demand
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___ 3. DEF Company can invest in ne
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2. List and explain the two factors
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Chapter 7 Classical Economic Theory
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Notice that the investment demand c
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Long-Run Equilibrium If Real GDP is
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Example 6B: When the economy is in
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Laissez-faire If the economy is sel
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___ 5. According to Say’s Law: a.
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3. On the graph below, draw an aggr
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Chapter 8 Keynesian Economic Theory
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Example 2B: The graph below illustr
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Example 5: Assume that the table be
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Notice on the graph on the previous
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According to Keynesian theory, a ch
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“The General Theory” also inclu
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___ 8. If the consumption function
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3. If the MPC is .667, and investme
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Chapter 9 Fiscal Policy The basic e
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Keynesian Fiscal Policy Theory and
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Example 5A: The federal government
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The Laffer Curve What will happen t
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Appendix: The Importance of Incenti
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___ 4. A decrease in government exp
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2. Explain what automatic stabilize
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Chapter 10 Money, Money Creation, a
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Example 4B: The castaways on Gillig
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Looking at the balance sheet below,
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Demand-side One-shot Inflation Exam
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4. Inflation increases uncertainty
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life; it came into existence not by
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calculated by using the potential d
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___ 12. If the required-reserve rat
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4. Referring to the balance sheet f
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Chapter 11 The Federal Reserve Syst
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5. After Bank X sells the $300,000
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Low Mortgage Interest Rates Mortgag
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Relaxed Standards for Mortgage Loan
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The Bursting of the Housing Bubble
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On February 17, 2009, the federal g
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Fed policies caused short-term inte
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___ 10. The Fed’s most important
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___ 25. In response to the recessio
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Chapter 12 Monetary Policy The basi
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2. A change in aggregate demand (AD
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Monetarist Transmission Mechanism C
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3. Borrowers do not have to seek ou
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Appendix: Book Review - “The Age
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Questions for Chapter 12 Fill-in-th
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___ 16. The primary source of incom
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7. According to Alan Greenspan, wha
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Chapter 13 Taxes, Deficits, and the
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Example 5: In 2015, Taxpayer A had
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of $5 and a quantity of 10 units. T
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The complexity of the tax law also
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the current government spending and
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cut of 1964. The top rate was lower
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___ 6. Federal excise taxes: a. are
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3. How would eliminating the loopho
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Chapter 14 Economic Growth The basi
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2. Labor. Labor can contribute to e
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estricting international trade (e.g
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An improvement in technology (e.g.
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The table below shows the economic
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will increase both Real GDP and per
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___ 8. Which of the following is co
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___ 26. The opinion that economic g
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Chapter 15 Less Developed Countries
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Example 8: Countries A, B, C, and D
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Obstacles to Economic Development f
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c. Restrictions on international tr
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Appendix: Book Review - “The Powe
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Example 25: In Brazil, about half t
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Study Guide for Chapter 15 Chapter
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___ 13. Among the counterproductive
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4. List four ways that governments
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Chapter 16 International Trade The
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Other Benefits of Free Internationa
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Example 6: The graph below illustra
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competitive disadvantage. But dumpi
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is only 25% as productive as before
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Smith was skeptical of government a
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___ 4. For Country X, what is the o
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___ 18. Frédéric Bastiat’s “P
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4. On the graph below: (1) What is
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Chapter 17 Elasticity We are often
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Example 4A: What is price elasticit
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Example 5A: Gertie’s Gas and Go i
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Example 10A: When the price of Good
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Example 13B: On the graph below, su
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$7 - 6 - 5 - Price 4 - 3 - 2 - 1 -
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In the long run, would the deadweig
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___ 7. The factors that determine w
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3. a. Which price (or prices) from
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Chapter 18 Utility The basic econom
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Nonetheless, society generally assu
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Example 9: Capital City operates a
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Marginal rate of substitution - the
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The diamond-water paradox is the ob
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Complete the table below to answer
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4. The graph below shows indifferen
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Chapter 19 The Firm The basic econo
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than contributing to team productio
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1. Difficulty in raising large amou
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Corporations also use self-financin
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Example 24: A blacksmith who produc
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For financing needs, proprietorship
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___ 13. Corporations: a. are comple
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5. List two things that the absence
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Chapter 20 Production and Costs The
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In Example 5B, Birdwell finds that
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variable cost initially decreases,
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Quantity TC MC AFC AVC ATC 0 240 X
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If the scale of operation is increa
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average total cost. Average fixed c
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___ 11. Concerning the cost curves:
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5. Complete the following cost tabl
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Chapter 21 Perfect Competition The
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Even though a perfect competitor ca
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Example 6C: This example builds on
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At what price will there be neither
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Appendix: Perfect Competition in th
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Multiple Choice: ___ 1. A perfect c
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___ 17. Perfect competition: a. req
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Answers for Chapter 21 Fill-in-the-
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Chapter 22 Monopoly Of the four mar
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3. Exclusive ownership of an essent
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maximizing quantity (4 units) creat
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$22 - 20 - 18 - 16 - 14 - Deadweigh
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2. Negotiating, beginning at a high
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Legal barriers are created by gover
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___ 8. The slope of the demand curv
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Price Quantity 3. List some of the
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Chapter 23 Monopolistic Competition
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For Percomp (the perfect competitor
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Example 7A: The graph below represe
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Example 9: The Organization of the
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Example 12 illustrates the dilemma
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its current price and quantity. The
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___ 14. Game theory: a. is a method
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Answers for Chapter 23 Fill-in-the-
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Chapter 24 Factor Markets The basic
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$ $240 - 200 - 160 - 120 - 80 - 40
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Since producers will attempt to equ
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2. Differences in nonmoney aspects
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were his strikeouts, walks, and hom
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___ 3. To maximize profits, a produ
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___ 19. According to the book, “M
Page 408 and 409: Multiple Choice: 1. a. 8. c. 15. d.
Page 410 and 411: Chapter 25 Labor Unions The primary
Page 412 and 413: The elasticity of demand for union
Page 414 and 415: Example 4A: Assume that the graph b
Page 416 and 417: Notice from the graph in Example 6
Page 418 and 419: Wage Factory A Quantity of Labor S
Page 420 and 421: As a cartel, a labor union faces a
Page 422 and 423: ___ 10. For a monopsony: a. there i
Page 424 and 425: 3. The graph below represents a lab
Page 426 and 427: Chapter 26 Interest, Present Value,
Page 428 and 429: An increase in expected rates of re
Page 430 and 431: An asset is valuable because we exp
Page 432 and 433: Example 13B: General Ordnance prove
Page 434 and 435: Appendix: Present Value Table One f
Page 436 and 437: ___ 4. An increase in expected rate
Page 438 and 439: Problems: 1. List and explain the t
Page 440 and 441: Chapter 27 Market Failure The basic
Page 442 and 443: External Benefit If a market genera
Page 444 and 445: Example 2: To encourage the consump
Page 446 and 447: $100 - 90 - 80 - MSC 70 - $ 60 - 50
Page 448 and 449: A common good is nonexcludable. Non
Page 450 and 451: Study Guide for Chapter 27 Chapter
Page 452 and 453: ___ 5. What government policy would
Page 454 and 455: 4. Based on the information on the
Page 456 and 457: Chapter 28 Public Choice and Govern
Page 460 and 461: Example 8: According to State and F
Page 462 and 463: Example 10: When Elvis Presley was
Page 464 and 465: 4. Pessimistic bias. This is the te
Page 466 and 467: ___ 5. An elected official will: a.
Page 468 and 469: 2. If a certain policy will yield s
Page 470 and 471: Chapter 29 Government Regulation of
Page 472 and 473: underproduction is the amount that
Page 474 and 475: micromanagement results in business
Page 476 and 477: market. They may agree with their c
Page 478 and 479: Questions for Chapter 29 Fill-in-th
Page 480 and 481: ___ 10. The public interest theory
Page 482 and 483: 4. List the four types of costs imp
Page 484 and 485: Chapter 30 Agriculture and Health C
Page 486 and 487: weather may cause bumper crops. Bad
Page 488 and 489: Security and Rural Investment Act o
Page 490 and 491: Example 12: From 1960 to 2013, the
Page 492 and 493: 1. NHI would provide universal heal
Page 494 and 495: d. Insurance providers are not allo
Page 496 and 497: Study Guide for Chapter 30 Chapter
Page 498 and 499: Answer questions 7. through 10. by
Page 500 and 501: ___ 21. If there were no individual
Page 502 and 503: Chapter 31 Income Distribution and
Page 504 and 505: Income is more equally distributed
Page 506 and 507: over a typical career is the accumu
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Ideal Income Redistribution The ide
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Poverty - a family whose income fal
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Appendix: Income Inequality around
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How is this story an analogy for th
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___ 2. In 2013, the Lowest Income 6
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Problems: 1. Explain the two primar
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Absolute advantage - when one natio
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Fiat money - money by government de
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Nonrivalrous good - a good for whic
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Absolute advantage, 16-9 Absolute e
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“Company town”, 25-6 Comparativ
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Eli Lilly and Company, 22-1 Emergen
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Houston, Texas, 15-10 Human capital
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Market, 3-1, 3-8-9 Market basket, 4
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Political bias, 9-4, 12-7 Political
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Short run production, 20-2-3 Short-
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Upturns, 9-4 USDA, 27-9, 30-1-2, 30
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