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Rational / Utilitarianism

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Problem of Collective Action. Benefits of collective good ... Small inputs leads to bunching of choices. Policy implications. James Buchanan on budget deficits. ... – PowerPoint PPT presentation

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Title: Rational / Utilitarianism


1
Rational / Utilitarianism
  • Paradoxes of rationality

2
Mancur Olson
  • Mexican migrant workers
  • Fire in a theater
  • Urban sprawl
  • Problem of Collective Action
  • Benefits of collective good are available to
    everyone.
  • Costs are experienced individually
  • Leads to free-riding.
  • Additional problem of small inputs Individual
    contributions is too small to make a difference.

3
Collective Action Problem
  • Solutions
  • Power
  • Selective incentives
  • Small group size

4
Prisoners dilemma
  • Dont confess, partner doesnt confess 0yrs
  • Dont confess partner confesses 10yrs
  • Confess, partner doesnt confess 1yr
  • Confess, partner confesses 5 yrs.
  • Solutions trust, norms, ideologies.

5
Prisoners dilemma
  • Basic point Suboptimal outcome because of lack
    of coordination. Each actor I worse off because
    of lack of trust and communication.

6
Other deviations
  • Transaction costs lead to contracts.
  • Small inputs leads to bunching of choices

7
Policy implications
  • James Buchanan on budget deficits.
  • James Coleman on investment in children.

8
Thomas SchellingTacit coordination
  • There are ways that coordination can take about
    without direct communication if there is a
    salient feature in the environment focal
    points.

9
March and Simon
  • Solution is Optimal when
  • All alternatives can be clearly compared.
  • One alternative is clearly preferable.
  • Solution is satisfactory when
  • There are criteria describing minimally
    satisfactory alternatives.
  • Alternative meets these criteria.
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