Bargaining Unexplained

We know that people strike bargains and that civilized life could not proceed otherwise. We do not know how bargains are struck. We have no explanation of bargaining, comparable to the general equilibrium in the economy, accounting for essential features of bargaining as we know it with reference to universal self-interested behaviour subject only to economy-wide rules. This claim is supported here in a survey of the principal models of bargaining: as a reflection of a shared sense of fairness, as an imposed sequence of offers, as a source of transaction cost and as a species of conflict. Also discussed is the dual role of bargaining in politics as a necessary complement to voting and as an impediment to the exploitation of minority groups.Bargaining, Comprimise, Fairness, Self-interest, Transaction cost, conflict

Three Stories about the Chance of Casting a Pivotal Vote

People vote from self-interest or from a sense of duty. Voting from self-interest requires there to be some chance, however small, that one's vote swings the outcome of the election from the political party one opposes to the political party one favours. This paper is a discussion of three models of how that chance might arise: the common sense model inferring the probability of a tied vote today from the distribution of outcomes in past elections, person-to-person randomization where each voter looks upon the political preferences of rest of the electorate as analogous to drawings from an urn with given proportions of red and blue balls, and nation-wide randomization where voters are lined up according to their valuations (positive or negative) of a win for one of the two competing parties, but where chance shifts the entire schedule of preferences up or down. Emphasis is on the third model about which this paper may have something new to say.Pivotal voting, Duty to vote, Compulsory voting

The Marginal Cost of Public Funds is the Ratio of Mean Income to median Income

The marginal cost of public funds is the equilibrium price at the intersection of the appropriately-defined demand curve for and the supply curve of public expenditure. In a world with identical people and with no excess burden of taxation, that price would have to be 1. Otherwise the median voter's choice of a demogrant - or of its opposite, a head tax - fixes the marginal cost of public funds at the ratio of the mean income to the median income. A proof of this assertion is presented not for its realism, but because it calls attention to the interaction of the different influences upon the marginal cost of public funds.Marginal Cost of Public Funds

The Distributive Implications of Patents on Indivisible Goods

Patents raise the price and reduce consumption of the patented good, but the resulting deadweight loss is thought to be worth bearing when patent protection is required as an incentive to invention. The newly-invented good generates a residual surplus, making people better off than they would be if the good had not been invented. This well-known argument is usually framed in a context where people are identical, everybody's demand curve for the newly-invented good is the same and everybody shares to some extent in the residual surplus. However, when the newly-invented good is indivisible - like a heart transplant or the treatment of AIDS, where, in effect, a person consumes either one full unit of the good or none - the effect of a patent is to concentrate the entire benefit of the patented good upon the rich, leaving the poor no better off than if the good had not been invented.Patents, Indivisible Goods

Mysterious Bargaining

Economists do not understand how bargains are struck. A bargain is the sharing of a pie between two or more people who are collectively entitled to the pie but cannot appropriate it until they agree how large each person's slice is to be. We know that people do strike bargains and that civilized life could not proceed otherwise. We do not know how the required agreement is reached. Theorists have solved the bargaining problem, but only by the imposition of strong, artificial and unrealistic constraints. Trusting that the existence of some complex solution has been demonstrated, applied economists are content to postulate a simple one: that bargainers split the difference in actual disputes. This paper begins with examples of imposed bargaining solutions in politics and corporation finance. There follows a critical examination of the principal bargaining theories - based on notions of fairness or of imposed bargaining procedures - with emphasis on the fragility of their assumptions and on their susceptibility to threats and blackmail. The paper closes with a brief discussion of connections among theories of bargaining, rent-seeking and conflict.Bargaining, Fairness

Noise in One-Dimensional Measurement-Based Quantum Computing

Measurement-Based Quantum Computing (MBQC) is an alternative to the quantum circuit model, whereby the computation proceeds via measurements on an entangled resource state. Noise processes are a major experimental challenge to the construction of a quantum computer. Here, we investigate how noise processes affecting physical states affect the performed computation by considering MBQC on a one-dimensional cluster state. This allows us to break down the computation in a sequence of building blocks and map physical errors to logical errors. Next, we extend the Matrix Product State construction to mixed states (which is known as Matrix Product Operators) and once again map the effect of physical noise to logical noise acting within the correlation space. This approach allows us to consider more general errors than the conventional Pauli errors, and could be used in order to simulate noisy quantum computation.Comment: 16 page

Comments on "The Optimal Supply of Public Goods and the Distortionary Cost of Taxation"

An ideal planner would follow the original Samuelson rule: to undertake each and every public project, program or activity up to the point where the sum of its marginal benefits is just equal to its marginal cost. Actual governments modify the rule in response to the marginal cost of public funds and the shadow price of public expenditure. The first of these modifications is an additional cost of public revenue, over and above the tax people actually pay, when people rearrange their affairs to minimize their tax bills. The second is the effect - sometimes positive and sometimes negative - of the provision of the public project, program or activity on total tax revenue. Kaplow can be interpreted as arguing that these modifications cancel out, leaving the original Samuelson rule in tact. He turns out to be right for public provision of intermediate goods that augment output but do not themselves enter as arguments in the utility function. Otherwise he is mistaken.Public Goodes, Deadweight Loss