POLITICAL ECONOMY

This module contributes to the fulfilment of the program’s learning objectives of the Curriculum ECONOMICS-QEM of the Master's Degree Programme in ECONOMICS, FINANCE AND SUSTAINABILITY [EM15]. The course is entirely taught in English.

The goal of this course is to introduce you to the field of positive political economy, which seeks to understand and explain policy outcomes and political behavior. We will analyze the decision-making process of rational political actors in the context of institutional constraints. In addition, we will apply economic theories and concepts to gain a better understanding of the outcomes of collective choice and their implementation. Details are provided in the following sections.

The students must meet the minimum credit requirements for the Master's Degree Programme in ECONOMICS, FINANCE AND SUSTAINABILITY [EM15].

The course will cover the following topics (tentative):

1. Introduction ([S] Ch.1&2; 12/9)

(a) Motivation;
(b) Microeconomics review

2. Group Choice ([S] Ch.3&4;13/9, 14/9)

(a) Majority rules
(b) Condorcet's Paradox
(c) The “Divide the dollar" example

3. Social Choice ([S] Ch.3&4, [LN];19/9, 20/09, 21/9)

(a) Arrow's Theorem with proof
(b) May's Theorem and Black's Theorem
(c) Single-peakedness

4. Spatial Models of Majority Rule ([S] Ch.5; 26/9, 27/9, 28/9)

(a) Geometric Approach
(b) The median voter
(c) McKelvey's Theorem and Plott's Theorem
(d) Down's Model
(e) Applications

5. Strategic Behavior and Majority Rule ([S] Ch.6; 3/10, 4/10, 5/10)

(a) Basics
(b) Gibbard-Satterthwaite Theorem with proof
(c) Examples

6. Voting Methods and Electoral Systems ([S] Ch.7; 10/10, 11/10)

(a) Voting Methods
(b) Electoral Systems

7. Information aggregation ([LN] 12/10)

(a) Condorcet's Jury Theorem

The main book is [S] Analyzing Politics: Rationality, Behavior, and Institutions by K. Shepsle; W.W. Norton.No particular edition is required.
Other useful references:
[AB] David Austen-Smith, Jeffrey S. Banks (1999), Positive Political Theory I. University of Michigan Press (Chapters 2, 4)
[M] Moulin, H. (1988). Axioms of Cooperative Decision Making (Econometric Society Monographs). Cambridge: Cambridge University Press (Chapters 10–11)
[LN]. Lecture notes are a key part of the course material.
Additional readings might be assigned to link the theory to real-world examples.

A single in-person closed-book written exam will be taken to verify that the students have acquired the necessary knowledge.

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Traditional front lectures, seminars and class discussions. Class recordings are not going to be made available except if exceptional circumstances occur.

This syllabus is provisional and may be subject to changes. Any change will be made public on the Moodle page of the course.