Gate-Keeping and Public Goods

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RODRÍGUEZ FERNÁNDEZ, Darío (conference group: 58234) Political economy and public choice – Homework n. 2

1) The speaker of the House has gate-keeping power. She makes proposals to the floor and, if not accepted, the status quo is implemented. Discuss the consequences of implementing a closed rule or an open rule. In the following essay, I will try to explain the different consequences of implementing an open or a closed rule. First of all, we consider some assumptions:    There is a status quo. We can either be in an open rule or close rule. Speaker can choose between proposing something and don’t propose anything (in this case, the outcome is the status quo).

Closed Rule A close rule means that there is a take-it-or-leave it proposal. The speaker of the House makes an offer that can be accepted by the floor. Let’s take a look at the different variables:    AM = policy preferred by the median legislator A0 = status quo AG = policy preferred by the gate-keeper

A0

AM

A1

The possible outcomes are A0, A1 and AG. This outcome will depend on AG: 1) If the policy preferred by the speaker of the House (AG) is placed at the left of A0, he will not even propose it as the floor will reject it for sure. The reason is that A0, which is the status quo, is closer to the policy preferred by the median legislator (AM). 2) The second option is that AG is between A0 and A1, in that case, the proposal would be accepted by the floor no matter where this offer is located. Hence, the speaker would propose AG, which will be the final outcome. 3) The third and final option is that the speaker proposal is placed at the right of A1. In that case, as he knows the floor preferences, he will simply propose A1 as is as preferred as the status quo by the floor. Hence, the outcome will be A1. So as a conclusion, the unique possible outcomes are A0, AG and A1. The only case in which AM would be the outcome will be if AG=AM (speaker proposal is equal to median legislator preferences).

RODRÍGUEZ FERNÁNDEZ, Darío (conference group: 58234) Political economy and public choice – Homework n. 2 Open Rule The difference between the closed an open rule is that the speaker of the house can propose a policy and the floor can make amendments to it.

A0

B

AM

A1

Once again, the outcome will depend on AG: 1) If AG is located on the left of A0, the speaker would not propose anything. The reason is that if he proposes, the floor would make amendments on it and the distance between AG and the outcome would increase. As we assume that all the players are rational and perfectly know other players’ preferences, the speaker would not propose anything and the outcome will be A0. 2) The second option is that AG is located between A0 and AM. There we could have two outcomes, which will depend on where AG is exactly located. If AG is located between A0 and B, the same thing than before would happen. The outcome would be A0 so the speaker chooses to not make any proposal. Hence, the outcome will be A0. However, if AG is located between AM and B, the outcome would be AM as the floor will amend the proposal of the speaker. 3) Finally, if AG is located on the right of AM, the outcome would be AM as the floor would amend speaker’s proposal. In conclusion, the only difference between open and closed rule is the possible outcomes. That is, using a closed rule, the possible outcomes are A0, AG and A1. If we use an open rule, the possible outcomes will be A0 and AM. In a political point of view, an open rule is always better as the outcomes tend to be closer to AM and then closer to what the median voter wants.

RODRÍGUEZ FERNÁNDEZ, Darío (conference group: 58234) Political economy and public choice – Homework n. 2 3) Define a public good and how the theory of public goods can help us understanding the behavior of individuals in organizations. Discuss which remedies can be adopted to overcome collective action problems.

Public goods are...
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