Voting over economic plans

We review and provide motivation for a one-sector model of economic growth in which decisions about capital accumulation are made by a political process. If it is possible to commit for at least three periods into the future, then for any feasible consumption plan, there is a perturbation that is majority-preferred to it. Furthermore, plans that minimize the maximum vote that can be obtained against them yield a political business cycle. If it is impossible to commit, voters select the optimal consumption plan for the median voter

The Effect of Punishment Severity on Plea Bargaining

This study examines whether criminal suspects facing more severe punishments are more likely to go to trial. Sample selection makes it difficult to obtain valid proxies for severity; for instance, I expect severity to be positively related to the prosecutorﾒs decision to indict, to indict in federal court (versus state court), and to try the suspect. Theoretical and empirical findings indicate that in samples containing only indicted, convicted, or tried suspects, reasonable proxies for severity may be negatively related to actual severity. The assignment of defendants to judges randomizes the severity of punishment in a manner that is unrelated to sample selection. Thus, by examining the effect of these assignments, I find that a 10-month increase in prison sentences raises trial rates by 1 percentage point

Equilibria Resistant to Mutation

The paper requires that equilibrium behavior for two person symmetric games be resistant to genetic evolution. In particular the paper assumes that the evolution of genotypes selecting a behavioral rule can be described according to some generalization of the replicator model. This paper defines an equilibrium concept, 'evolutionary equilibrium', which is defined as the limit of stationary points of the evolutionary process as the proportion of the population that mutates goes to zero. Then the set of evolutionary equilibria, as defined in the paper, is a nonempty subset of the set of perfect equilibria (and thus of the set of Nash equilibria) and a superset of the set of regular equilibria and the set of ESS

Laws of Large Numbers for Dynamical Systems with Randomly Matched Individuals

Biologists and economists have analyzed populations where each individual interacts with randomly selected individuals. The random matching generates a very complicated stochastic system. Consequently biologists and economists have approximated such a system with a deterministic system. The justitication for such an approximation is that the population is assumed to be very large and thus some law of large numbers must hold. This paper gives a characterization of random matching schemes for countably infinite populations. In particular this paper shows that there exists a random matching scheme such that the stochastic system and the deterministic system are the same. Finally, we show that if the process lasts finitely many periods and if the population is large enough then the deterministic model offers a good approximation of the stochastic model. In doing so we make precise what we mean by population, matching process, and evolution of the population

Fictitious Play: A Statistical Study of Multiple Economic Experiments

This paper illustrates the use of a full Bayesian procedure to update an experimenter's belief over various economic behavioral hypotheses using data from a variety of (potentially very different) experiments. Our example uses experimental data to update our belief as to whether individuals select strategies according to fictitious play. We endow the experimenter with priors over the events that players act according to fictitious play and according to the Cournot process. We then numerically compute the likelihood function for each experiment by replicating the experimental design and running the experiment with robots that behave according to each of our hypotheses. Updating experiment by experiment shows that some of the experiments favor Cournot, but most of them favor fictitious play as the more likely hypothesis. This illustrates the limitations of a classical procedure that can take only one experiment into consideration since some of the experiments may be misleading. Indeed, when we did the overall updating using 9 experiments, we found that, for any priors, the overall posterior put probability very close to one on the individuals acting according to fictitious play. Given the heterogeneity in the payoffs and design of the experiments that we combine for that overall posterior, it is clear that there is no classical procedure that would offer the same type of information

Political Competition in a Model of Economic Growth; Some Theoretical Results

We study a one-sector model of economic growth in which decisions about capital accumulation and consumption are made through a political process of two candidate competition. Each voter's utility for a consumption stream is the discounted value of that voter's utility of consumption in each period. We consider the case when voters' one period utility functions for consumption are identical but discount factors are different. We are particularly interested in the conditions under which neoclassical optimal growth paths occur, and conditions in which political business cycles occur. The answer depends on the ability or inability of the candidates to commit to multi-period investment strategies. If candidates can commit indefinitely into the future, then a political (majority rule) equilibrium path will not exist if all discount factors are different. For any feasible consumption path, there is a perturbation which is majority preferred to it. For any neoclassical optimal path there exists a perturbated path that is preferred to it either unanimously or by all but one voter. These results are true even if the perturbations can differ at no more than three consecutive periods from the original path. If candidates are unable to commit to multi-period plans, we show there is a unique subgame perfect, stationary, symmetric equilibrium to the infinite horizon two candidate competition game; namely the optimal consumption path for the median voter. The equilibrium is unique in the following sense: It is the unique limit of subgame perfect equilibria to the finite horizon electoral game. In the case when candidates can commit for a finite time into the future, we show that a stationary minmax path (a path which minimizes the maximum vote that can be obtained against it) yields a political business cycle

Equilibria Resistant to Mutation

The paper requires that equilibrium behavior for two person symmetric games be resistant to genetic evolution. In particular the paper assumes that the evolution of genotypes selecting a behavioral rule can be described according to some generalization of the replicator model. This paper defines an equilibrium concept, 'evolutionary equilibrium', which is defined as the limit of stationary points of the evolutionary process as the proportion of the population that mutates goes to zero. Then the set of evolutionary equilibria, as defined in the paper, is a nonempty subset of the set of perfect equilibria (and thus of the set of Nash equilibria) and a superset of the set of regular equilibria and the set of ESS

Intended and Unintended Consequences of Prison Reform

Since the 1970s, U.S. federal courts have issued court orders condemning state prison crowding. However, the impact of these court orders on prison spending and prison conditions is theoretically ambiguous because it is unclear if these court orders are enforceable. We examine states' responses to court interventions and show that these interventions generate higher per inmate incarceration costs, lower inmate mortality rates, and a reduction in prisoners per capita. If states seek to minimize the cost of crime through deterrence, an increase in prison costs should lead states to shift resources from corrections to other means of deterring crime such as welfare and education spending. However, we find that court interventions, that are associated with higher corrections expenditures, lead to lower welfare expenditures. This suggests that the burden of increased correctional spending is borne by the poor. Furthermore, states do not increase welfare spending after their release from court order; making the reduction in welfare spending permanent. Thus, our results suggest that states do not respond to prison reform in the manner prescribed by the deterrence model. States' responses to prison reform are most consistent with the predictions in the empirical public finance literature that indicate stickiness in expenditure categories and that increases in spending in programs that affect the poor generate declines in expenditures in other program that are also targeted to the poor.

Laws of Large Numbers for Dynamical Systems with Randomly Matched Individuals

Biologists and economists have analyzed populations where each individual interacts with randomly selected individuals. The random matching generates a very complicated stochastic system. Consequently biologists and economists have approximated such a system with a deterministic system. The justitication for such an approximation is that the population is assumed to be very large and thus some law of large numbers must hold. This paper gives a characterization of random matching schemes for countably infinite populations. In particular this paper shows that there exists a random matching scheme such that the stochastic system and the deterministic system are the same. Finally, we show that if the process lasts finitely many periods and if the population is large enough then the deterministic model offers a good approximation of the stochastic model. In doing so we make precise what we mean by population, matching process, and evolution of the population