Exam Flashcards
(24 cards)
What is rent seeking
“Rent-seeking is the use of resources to obtain wealth transfers rather than to produce wealth.” -Gordon Tullock
Murphy reasons’s on why rent-seeking is so costly to growth
1) An increase in rent-seeking can become attractive to others players, instead of investing in productivity, creating a new suboptimal equilibria
2) Public rent-seeking is highly detrimental for innovation, given that the money subtracted for lobbying. Innovation is essential for economic growth.
What is the main collective action problem according to Olson?
Collective actions require people to contribute to group efforts that benefit everyone. People can still free ride and enjoy the benefit. Successful collective action relies on providing individual incentives.
Why smaller groups are more effective in organising collective actions?
the smaller the group the easier to coordinate, and to distribute benefits of collective action and to enforce contributions. Small groups are also more effective in rent-seeking because they can poll better the resources and be identifiable to the policymaker.
What is Peltzman’s view about on efficient regulation against rent-seeking?
an (in)efficient regulation requires that prices have to be raised on to the point where marginal gain votes obtained from producers perfectly offset marginal loss votes lost among consumers.
What is the government for the Virginian school?
Is a political system that provide quasi-market setting for brokering wealth transfers and extorting rents. Often the market value of the forgone alternative exceeds the value of the option chosen.
what is the culture of rent seeking?
is the culture that legitimises activities, reducing the mental costs in participating. it can coexist with other cultures and can be supported by them.
What the transition of post-soviet Russia teaches us?
That a transition without strong institutions and a judiciary system lead to the widespreading of traditional cultural norms and the domain of the most powerful.
what is the problem of rent seeking in patents?
patents give monopoly rightsand this can stifle innovation, especially when ineffective idle patents are issued, and company just threaten other company to suit them just to avoid others to work around the patent.
What’s the difference between crony capitalism and conventional rent-seeking
Differently from conventional rent seeking, in crony capitalism politicians and regulators actively use businesses to advance their own political agendas and those of favoured groups.
What is a social norm?
A social norm is a shared rule or expectation about how people should behave in a given context, based on what is considered normal, appropriate, or acceptable by the group or society
What is strategic complementarity?
Strategic complementarity refers to a situation in game theory or economics where the best action for one player increases with the level of action taken by others.
What is the rationale between discrimination game?
What is the luxury axiom?
it asserts that parents send children to work only when they are driven to it by poverty
What does legal centralism state?
the state is the only creator of rights
What is pareto efficiency
A situation is Pareto efficient when you can’t make someone better off without making someone else worse off. It’s a very basica concept of efficiency, that implies not to leave mutual gains on the table. There is though no value judgment in it.
What is the mechanism design theory?
A branch of economics that studies how to design rules or institutions (called mechanisms) that lead individuals, acting in their own self-interest, to produce socially desirable outcomes — even when their private preferences or information are not known to the designer.
What is monotonicity
We say a social choice rule is monotonic if, when an alternative x is chosen and individuals change their preferences to rank x higher (or its competitors lower), then x should still be chosen.
What does Sen’s liberalism-pare paradox says?
if we want to achieve a social choice, both respecting pareto efficiency and minimal liberalism, we have to forego to one of them.
What does Nurkse’s theorem claims?
It claims that countries are underdeveloped because of a vicious circle of demand failure. More in details: without economies of scale, the cost per unit stays the same so no cost-advantage to scale up. moreover, people are poor so they will not buy more if the producer increase the supply. The only self-sustaining sector comes with those sector (like food) which react positively to an increase in demand.
What does the Harrod-Domar model claims?
It claims that economic growth happen when people save and invest rather than consume everything today.
