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Economics Problems - Page 3

Blogs > Milton Friedman
Post a Reply
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Jibba
Profile Blog Joined October 2007
United States22883 Posts
Last Edited: 2009-04-16 23:46:55
April 16 2009 23:45 GMT
#41
On April 16 2009 06:27 Savio wrote:
Show nested quote +
On April 16 2009 06:01 Jibba wrote:
On April 16 2009 05:45 Savio wrote:
On April 16 2009 05:38 Jibba wrote:
Here's a question for you: Is voting for President in the United States a rational act?

Strictly speaking in a cost/benefit analysis, ignoring any sense of 'duty.' Maybe if you live in Palm Beach County, FL, but what about if you live in Utah or NY?


Yes. You can't just assign the possible effect your vote might have as the only benefit. People make choices that make them happy or feel good and so you can't ignore "duty" or any other sense that might encourage them to vote.

Just like giving to charity is also rational.

If you count what makes people feel good, then how do you apply rational choice theories to actual predictions/models? This is what econometric modeling is based around - that people make rational cost/benefit analyzes. Since there's no way to measure "goodness," how do you make the model?



It depends on what your modeling. Each model will have different measure. If you are modeling behavior like spousal abuse, you will use different measures than if you are modeling a company's production choice.

Generally speaking, the easy models to make are when you are modeling the decisions of a company in a market because they tend to be driven by simple things that you can measure (namely short term profits). This is why most economic models may use money...because they are modeling a relatively simple thing (a company) and not a very complicated thing (an individual person).

This is why I'm talking about presidential voting. If you want to use rational choice to prove why people vote in presidential elections, the formula would be something like this:
P(U1 - U2) + C > 0

P is the probability of your vote's importance, which is measured by its ability to break a tie, but with an electoral college there is 0% chance of that happening. For local->Senate (and this is only a modern development, not how the framers intended), yes, but not in a presidential election. So as an individual, if you don't vote, it has no bearing.

U1/U2 are obviously the two sides of the vote (which always comes down to two sides as I briefly mentioned in the other thread), so Republicans and Democrats.

C is the cost of voting. For many people, it's extremely little, but for others there's constraints like time and transportation, and in our system you have the right not to vote (which is not true in a lot of European countries, which is largely why our turnouts seem "bad"; there's no coercion.)

Now, you could add in other variables like Duty or Millsian self-interest (the fear of what would ensue if no citizen voted), but these cannot be quantified.

In: P(U1 - U2) + C + D + SI > 0
D and SI are qualitative variables, So you can SAY that everyone is rational (which I'm alright with), when you factor in things like preferences/culture/etc., and you can still make general inferences off of your findings, but any attempts to quantitatively model it are inherently flawed, which is a huge kick in the nuts to rational choice economists and political scientists everywhere.

In case you're wondering, this is what I'm working off of here. Downs goes with the second version of that model, and I think it's bogus.
ModeratorNow I'm distant, dark in this anthrobeat
Savio
Profile Joined April 2008
United States1850 Posts
April 17 2009 04:10 GMT
#42
On April 17 2009 08:45 Jibba wrote:
Show nested quote +
On April 16 2009 06:27 Savio wrote:
On April 16 2009 06:01 Jibba wrote:
On April 16 2009 05:45 Savio wrote:
On April 16 2009 05:38 Jibba wrote:
Here's a question for you: Is voting for President in the United States a rational act?

Strictly speaking in a cost/benefit analysis, ignoring any sense of 'duty.' Maybe if you live in Palm Beach County, FL, but what about if you live in Utah or NY?


Yes. You can't just assign the possible effect your vote might have as the only benefit. People make choices that make them happy or feel good and so you can't ignore "duty" or any other sense that might encourage them to vote.

Just like giving to charity is also rational.

If you count what makes people feel good, then how do you apply rational choice theories to actual predictions/models? This is what econometric modeling is based around - that people make rational cost/benefit analyzes. Since there's no way to measure "goodness," how do you make the model?



It depends on what your modeling. Each model will have different measure. If you are modeling behavior like spousal abuse, you will use different measures than if you are modeling a company's production choice.

Generally speaking, the easy models to make are when you are modeling the decisions of a company in a market because they tend to be driven by simple things that you can measure (namely short term profits). This is why most economic models may use money...because they are modeling a relatively simple thing (a company) and not a very complicated thing (an individual person).

This is why I'm talking about presidential voting. If you want to use rational choice to prove why people vote in presidential elections, the formula would be something like this:
P(U1 - U2) + C > 0

P is the probability of your vote's importance, which is measured by its ability to break a tie, but with an electoral college there is 0% chance of that happening. For local->Senate (and this is only a modern development, not how the framers intended), yes, but not in a presidential election. So as an individual, if you don't vote, it has no bearing.

U1/U2 are obviously the two sides of the vote (which always comes down to two sides as I briefly mentioned in the other thread), so Republicans and Democrats.

C is the cost of voting. For many people, it's extremely little, but for others there's constraints like time and transportation, and in our system you have the right not to vote (which is not true in a lot of European countries, which is largely why our turnouts seem "bad"; there's no coercion.)

Now, you could add in other variables like Duty or Millsian self-interest (the fear of what would ensue if no citizen voted), but these cannot be quantified.

In: P(U1 - U2) + C + D + SI > 0
D and SI are qualitative variables, So you can SAY that everyone is rational (which I'm alright with), when you factor in things like preferences/culture/etc., and you can still make general inferences off of your findings, but any attempts to quantitatively model it are inherently flawed, which is a huge kick in the nuts to rational choice economists and political scientists everywhere.

In case you're wondering, this is what I'm working off of here. Downs goes with the second version of that model, and I think it's bogus.


That wikipedia article is interesting. It sort of backs up what I said to Choros about how 2 very similar politica parties as we have now does not represent the failing of our political system, but rather is proof that it is working properly.

I bet that is an interesting book. His point about dual peaked political spectrum leading to extremism made me think about how hard it is to get the Iraqi politicians to compromise with eachother and it provides an explanation that I can understand. I think I understand that a lot better now from only reading the article.

Also, if I may make some alterations to your voter equations:

The way you have explained it, a voter would vote if Q is positive in this equation:
Q=P(U1,U2)B - C.

Where Q represents your costs benefit analysis of voting, P is the probability of your voting making a difference (which is a function of the political struggle U1 and U2 but not simply U1-U2), and B is the benefit the voter would recieve if his candidate won (you left that out). Obviously someone who genuinely doesn't care who wins will have a small B while an activist would have a large value for B. C like you said is the cost of voting.

So that is the model you are talking about. Now I say that it HAS to include at least 1 other variable that we can call all the "intangible" benefits of voting such as sense of duty, sense of purpose, sense of team, whatever.

So it should be Q=P(U1, U2)B - C + N

Where N is the intangible benefits of voting. This N, for example would tend to be smaller for young people (this is why young people don't vote very often), and large for old people (the most reliable voting block in the US). So you can see that even if P = 0, if N is greater than C, then the person will still vote. For young people often C>N so they don't vote and for most old people, N>C so they do vote.

This year, there was sort of a frenzy for Obama at university campuses. I saw at my school that everyone was asking, "Have you voted for Obama yet?" taking it for granted that we would all vote for him. But there was still a bit more pressure on young people so their N went up a little bit and a few more of them voted.

You can't leave N out, because it IS the important factor. P is virtually 0 for everyone, but N and C really determine whether people will vote. (this is also why parties rent buses to move people because that lowers peoples C to hopefully below their N).

The inherent vice of capitalism is the unequal sharing of the blessings. The inherent blessing of socialism is the equal sharing of misery. – Winston Churchill
Jibba
Profile Blog Joined October 2007
United States22883 Posts
April 17 2009 05:35 GMT
#43
I like your revisions, but it still leads me to ask how you can you do quantitative research with it? I can see how rational choice works if you qualitatively analyze it (like you would when looking at N), but the common move when using rational choice is to put it into some type of nomothetic formula, such as game theory. If everyone has different characteristics that determine rationality (N), but you can't measure N, how can you find what a rational actor would do?

A series of preference questions maybe? Directly attaching numbers is a mistake, but you could use comparisons to find out people's highest priorities in relation to one another? Then again, that also assumes people know what their priorities are.
ModeratorNow I'm distant, dark in this anthrobeat
Milton Friedman
Profile Blog Joined June 2006
98 Posts
April 17 2009 13:27 GMT
#44
Median voter theorem and the Condorcet process perhaps? When it comes down to two choices the only vote which matters is the preference of the median voter. In that sense no one else could bother voting since it's only the median voter who determines the outcome or everyone else could vote and not have any effect. If everyone is rational then everyone knows this.

The economics of democracy isn't something I'm familiar with at all.
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