3.4. Understand Political Pressures

1. Put your phone in your bag!

PUT YOUR
PHONE IN
YOUR BAG!
DR. TURAKULOV VALIJON | INTRODUCTION TO ECONOMICS

2.

Week #1: Foundations: Incentives & Trade-offs
Week #2: Margins & Gains from Trade
Week #3: Exchange & Transaction Costs
Week #4: Firms, Profits & Income
Week #5:Value, Wealth & Sources of Progress
Week #6: Market Forces & Unintended Effects
TOPIC OF THE WEEK:
Week #7: Institutions that Support Progress
Week #8: Midterm Exam
Week #9: Macro Stability & Policy
Week #10: Trade & Part 3
Week #11: Government’s Basic Roles
Week #12: Political Economy & Rules
Week #13: Government Support Programs
Week #14: Planning & Competition
Week #15: Final Exam

3.

DR. TURAKULOV VALIJON | INTRODUCTION TO ECONOMICS

4.

DR. TURAKULOV VALIJON | INTRODUCTION TO ECONOMICS

5. Understand Political Pressures

UNDERSTAND POLITICAL
PRESSURES
ELEMENT 3.4

6. Review

REVIEW
DR. TURAKULOV VALIJON | INTRODUCTION TO ECONOMICS

7. Traits

TRAITS
Joint
consumption
Non-
excludable
Free riders
cause
underprovision

8. Negative Externality

NEGATIVE EXTERNALITY
Private cost < social cost
Pollution example
Outcome: overproduction

9. Positive Externality

POSITIVE EXTERNALITY
Private benefit < social benefit
Vaccines example
Outcome: underproduction

10. Private Solutions

PRIVATE SOLUTIONS
Internalize
benefits
Community
rules
Reputation
pressure

11. Understand Political Pressures

UNDERSTAND POLITICAL
PRESSURES
ELEMENT 3.4

12. Learning Objectives

LEARNING
OBJECTIVES
Compare market decisions
(voluntary exchange) vs
political decisions (majority
rule).
Understand rational
ignorance and why voters stay
uninformed.
See how these lead to
government failure.

13. Markets vs Politics

MARKETS VS POLITICS
Markets: trades
only if all sides
benefit.
Politics: 51% can
impose costs on
100%.
Creates win–lose
outcomes.
Example: stadium
tax burden for all
taxpayers.

14. Rational Ignorance

RATIONAL IGNORANCE
One vote rarely changes outcome → low incentive to
research.
Voters rely on surface info
Research shows that majority of voters do not name the
candidates even!
Consumers research because choices directly affect them.

15.

DR. TURAKULOV VALIJON | INTRODUCTION TO ECONOMICS

16.

DR. TURAKULOV VALIJON | INTRODUCTION TO ECONOMICS

17. Consequences of Voter Ignorance

CONSEQUENCES OF
VOTER IGNORANCE
Policies shaped by
impressions, not analysis.
Inefficient policies stay
popular if costs are
hidden.
Special interests exploit
low voter attention.
Political info asymmetry
lowers decision quality.

18. One-Size vs Variety

ONE-SIZE VS
VARIETY
Politics delivers
uniform outcomes
for all.
One-size policies
create conflict.
Markets provide
variety for diverse
tastes.

19. Example: School Choice

EXAMPLE: SCHOOL CHOICE
Voting for groceries → same basket for all.
Markets allow varied education choices.
Politics enforces one curriculum.
Markets serve minorities; politics is winner-take-all.

20. Incentives: Profits vs Votes

INCENTIVES:
PROFITS VS VOTES
Businesses profit by
creating value.
Politicians seek votes
via targeted benefits.
Costs spread to all
taxpayers.
If possible, let business
decide on its own!

21. What then?

WHAT THEN?
Shift decisions to markets when possible, allowing
individual choice.
Decentralize decisions to local levels to match local
preferences.
Add variety within public systems (multiple options instead
of one rule).
Public vs private education
DR. TURAKULOV VALIJON | INTRODUCTION TO ECONOMICS

22. Government Failure

GOVERNMENT
FAILURE
Government can
misallocate resources.
Signs: small groups
gain, public pays.
Failure from majority
rule, ignorance, onesize policy.
Good policy requires
understanding both
failures (market vs
gov)

23. Summary

SUMMARY
Markets: voluntary,
diverse; politics: majority
rule.
Rational ignorance
reduces policy quality.
One-size outcomes
ignore preferences.
Political incentives
distort choices.
Government failure
exists; incentives matter.

24. Any questions?

ANY QUESTIONS?
DR. TURAKULOV VALIJON | INTRODUCTION TO ECONOMICS

25. Thanks

THANKS
DR. TURAKULOV VALIJON | INTRODUCTION TO ECONOMICS