MATHEMATICAL MODELS: RATIONAL CHOICE THEORIES OF POLITICS & SOCIETY

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1 MATHEMATICAL MODELS: RATIONAL CHOICE THEORIES OF POLITICS & SOCIETY James Johnson ICPSR Summer Program Session I ~ 20 June- 15 July 2011 jd.johnson@rochester.edu Rational Choice Theory actually consists of a family of theories, usually but not always mathematical, that investigate the ways that actions taken by rational individual decision makers can interact in often surprising ways to generate stable aggregate outcomes. This workshop is an introduction to rational choice theories and their uses in social science. It focuses on the logic of rational choice analysis in both explanatory and, to a lesser extent, normative contexts. The aim of the workshop is to both impart the basic techniques of rational choice modeling and explore the intuitive and theoretical issues that motivate and limit any use of those techniques. The workshop especially is concerned with matters of how we might interpret and empirically test formal models. In other words we will focus on the problem of determining just what any particular class of rational choice theories tells us about the social and political world and just how it purports to do so. Topics include models of voting, bargaining, collective action, social norms, institutions, and even culture. Readings are drawn from economics, political science, sociology and anthropology. Although the workshop does not presuppose familiarity with either game theory or the mathematics needed to solve game theoretic problems, some prior knowledge of those topics will be an advantage. Students interested in this workshop are therefore strongly advised to take the Game Theory workshop in the first session. Class format throughout will combine lecture and discussion, but the balance will shift from the former to the latter as the session progresses. Since the success of the workshop depends in large measure on student participation I expect students to come to class prepared. That means that I expect students to at least try to do the assigned reading in advance. It also means that there are no free-riders I treat all students - whether or not they are registered for a grade - as full participants for purposes of participation and discussion. Students who register for a grade must write two short papers on topics to be negotiated with me. They should speak with me very early in the session. PLEASE NOTE: We will start in on the Gamm and Shepsle paper on the first day! Assigned Readings What follows is a list of assigned readings, often accompanied by recommendations for further readings (marked *) that provide either helpful background or more detailed

2 theoretical or technical presentations of issues raised in the assigned material. I propose the recommended readings solely as a guide for those who might wish to pursue topics in greater depth. Both assigned and recommended readings are available in the Summer Program library. I also append a list of reliable texts and a schedule of when I anticipate covering which parts of the assigned materials. I: Basic Issues in Rational Choice Explanation Gerald Gamm and Kenneth Shepsle "Emergence of Legislative Institutions," Legislative Studies Quarterly 14: Jon Elster "The Nature and Scope of Rational Choice Explanation." In Actions and Events, ed. E. Lepore and B. McLaughlin. Basil Blackwell. Debra Satz and John Ferejohn "Rational Choice and Social Theory," Journal of Philosophy 91: Daniel Hausman "Rational Choice and Social Theory: A Comment," Journal of Philosophy 92: * Donald Davidson Essays on Actions and Events. (Oxford: Oxford University Press). [Chapters 1,12]. * Jon Elster Explaining Social Behavior. Cambridge UP, pages , II: Preferences and Rationality James Morrow Game Theory for Political Scientists. Princeton University Press. [Chapter 2] Daniel Hausman Mistakes about Preferences in the Social Sciences, Philosophy of the Social Sciences 41:3 25. * Daniel Hausman Revealed Preference, Belief, and Game Theory, Economics and Philosophy 16: *Colin Camerer Behavioral Game Theory. Princeton UP. *James Johnson Consequences of Positivism, Comparative Political Studies 39: * David Kreps A Course in Microeconomic Theory. Princeton University Press. pp , * Amartya Sen Behavior and the Concept of Preference. In Jon Elster, ed. Rational Choice. New York University Press, * Amartya Sen Internal Consistency of Choice, Econometrica 61: * James March. "Bounded Rationality, Ambiguity and the Engineering of Choice" In Jon Elster, ed. Rational Choice. New York University Press, * Ariel Rubinstein Modeling Bounded Rationality. MIT Press. * Amos Tversky and Daniel Kahneman. "The Framing of Decisions and the Psychology of Choice" In Jon Elster, ed. Rational Choice. New York University Press, 1986.

3 III: Modeling Rational Action A: Markets: Coordinating Parametric Action in a Decentralized Environment: Gary Becker The Economic Approach to Human Behavior. In Jon Elster, ed. Rational Choice. New York University Press, Paul Milgrom and John Roberts Economics, Organization & Management. Prentice Hall. [Chapter 3]. * Kenneth Arrow Rationality of Self and Others in an Economic System, Journal of Business 59:S * Keith Dowding Choice: Its Increase and Its Value, British Journal of Political Science 22: * David Kreps A Course in Microeconomic Theory. Princeton. [Chs. 1,6] * Andrew Hindmoor Rent-Seeking Evaluated, Journal of Political Philosophy 7: B: Politics and Society: Strategic Interaction in the Rest of the World Thomas Schelling The Strategy of Conflict. Harvard University Press. [Ch. 1]. Thomas Schelling Micromotives and Macrobehavior. W.W. Norton. [Chapters 1 and 3]. Avinash Dixit Thomas Schelling s Contributions to Game Theory, Scandinavian Journal of Economics 108: Roger Myerson Learning from Schelling s The Strategy of Conflict, Journal of Economic Literature 47: * Jon Elster Ulysses and the Sirens. Cambridge University Press. * Vincent Crawford "Thomas Schelling and the Analysis of Strategic Behavior." In Strategy and Choice ed. R. Zeckhauser. MIT Press. C: Game Theory [i] Basics. John Harsanyi Advances in Understanding Rational Behavior. In Jon Elster, ed. Rational Choice. New York University Press, Ariel Rubinstein "Comments on the Interpretation of Game Theory," Econometrica 59: Roger Myerson "On the Value of Game Theory in Social Science," Rationality and Society 4:62-73.

4 [ii] Solving Games. Robert Lowry Clinton "Game Theory, Legal History, and the Origins of Judicial Review," American Journal of Political Science 38: Robert Gibbons "An Introduction to Applicable Game Theory," Journal of Economic Perspectives 11: Jack Knight and Lee Epstein On the Struggle for Judicial Supremacy, Law & Society Review 30: * James Morrow Game Theory for Political Scientists. (Princeton: Princeton University Press). [Chapter 3-7]. [iii] Some Matters of Interpretation. David Kreps Game Theory and Economic Modeling. Oxford: Oxford University Press. [Chapters 2-5]. Roger Myerson Nash Equilibrium and the History of Economic Theory, Journal of Economic Literature XXXVII: Thomas Schelling The Strategy of Conflict. Harvard University Press. [Chs. 2-5]. Robert Sugden and Ignazio. Zamarrón Finding the Key: The Riddle of Focal Points, Journal of Economic Psychology, 27: * Ken Binmore Essays of the Foundations of Game Theory. Blackwell. * John Geanakoplos Common Knowledge, Journal of Economic Perspectives 6: * David Austen-Smith and Jeffrey Banks Social Choice Theory, Game Theory, and Positive Political Theory, Annual Review of Political Science 1: * Eddie Dekel, et al Recent Developments in Modeling Unforeseen Contingencies, European Economic Review 42: * Richard Swedberg Sociology and Game Theory, Theory & Society 30: C: Bargaining Theory Jon Elster The Cement of Society. (Cambridge: Cambridge University Press). [Chapter 2]. Gary Miller Managerial Dilemmas. (Cambridge: Cambridge University Press). [Chapter 2]. * Howard Raiffa The Art and Science of Negotiation. (Cambridge: Harvard University Press). * John Sutton "Non-Cooperative Bargaining Theory: An Introduction," Review of Economic Studies 53:

5 * H. Peyton Young, ed Negotiation Analysis. (Ann Arbor: University of Michigan Press). * Ariel Rubinstein "On the Interpretation of Two Theoretical Models of Bargaining." In Barriers to Conflict Resolution, ed. K. Arrow, et al. (New York: W.W. Norton). * Gideon Doron and Itai Sened Political Bargaining. Sage. * Ken Binmore and Partha Dasgupta, eds The Economics of Bargaining. Basil Blackwell. IV: Public Goods, Collective Action, and the Possibility of Decentralized Coordination A: Rescuing Decentralized Solutions I: The Coase Theorem R.H. Coase The Firm, The Market and the Law. (Chicago: University of Chicago Press). [Chapters 5 & 6] Joseph Farrell Information and the Coase Theorem, Journal of Economic Perspectives1: Richard McKelvey and Talbot Page Taking the Coase Theorem Seriously, Economics and Philosophy 15: B: Rescuing Decentralized Solutions II: Mechanism Design Gary Miller and Thomas Hammond Why Politics is More Fundamental than Economics, Journal of Theoretical Politics 6:5-27. Leonid Hurwicz But Who Will Guard the Guardians? American Economic Review, 98: David Kreps A Course in Microeconomic Theory. Princeton. [Ch. 18]. Eric Maskin Mechanism Design: How to Implement Social Goals. American Economic Review 98: , Gary Miller The Political Evolution of Principle-Agent Models, Annual Review of Political Science 8: Roger Myerson "Perspectives on Mechanism Design in Economic Theory." American Economic Review, 98: C: Rescuing Decentralized Solutions III: Community Michael Taylor The Possibility of Cooperation. (Cambridge: Cambridge University Press) [Chapters 2-4]. Randall Calvert "Leadership and Its Basis in Problems of Social Coordination," International Political Science Review 13:7-24. * James Morrow Game Theory for Political Scientists. (Princeton: Princeton University Press). [Chapter 8-9]. * Russell Hardin Collective Action. (Johns Hopkins University Press). * Thomas Schelling Micromotives and Macrobehavior. (New York: W.W. Norton). [Chapter 7].

6 *Norman Schofield "Anarchy, Altruism and Cooperation," Social Choice and Welfare 2: * Adam Przeworski A Better Democracy, A Better Economy, Boston Review (April/May) V: Centralized Institutions and the Necessity of Politics A: Social Choice Kenneth Arrow Collected Papers of Kenneth Arrow, Volume 1: Social Choice & Justice. Harvard University Press. [Chapters 4 & 12]. Amartya Sen Rationality and Social Choice, American Economic Review 85:1-24. * Timothy Feddersen Rational Choice Theory and the Paradox of Not Voting. Journal of Economic Perspectives 18: B. Institutional Equilibria: Legislatures Kenneth Shepsle "Studying Institutions," Journal of Theoretical Politics 1: Gerald Strom The Logic of Lawmaking. (Baltimore: Johns Hopkins University Press). Keith Krehbeil Legislative Organization, Journal of Economic Perspectives, 18: * Gary Cox The Uncovered Set and the Core, American Journal of Political Science 31: * Nicholas Miller, Bernard Grofman and Scott L. Feld The Geometry of Majority Rule., Journal of Theoretical Politics 1: C. Equilibrium Institutions Douglas North A Transaction Cost Theory of Politics Journal of Theoretical Politics 2: Randall Calvert. 1995a. "The Rational Choice Theory of Social Institutions." In Modern Political Economy ed. J. Banks and E. Hanushek. (New York: Cambridge University Press). Randall Calvert. 1995b. "Rational Actors, Equilibrium and Social Institutions." In Explaining Social Institutions ed. J. Knight and I. Sened. (Ann Arbor: University of Michigan Press).

7 Jack Knight Institutions and Social Conflict. Cambridge University Press. [Chapters 1-3,5]. Jack Knight "Models, Interpretations and Theories: Constructing Explanations of Institutional Emergence and Change." In Explaining Social Institutions ed. J. Knight and I. Sened. (Ann Arbor: University of Michigan Press). * Lorene Allio et al Post-communist Privatization as a Test of Theories of Institutional Change, in The Political Economy of Property Rights, David Weimer, ed.. Cambridge University Press. * Keith Dowding Power. University of Minnesota Press.. * Jack Knight and Douglass North Explaining the Complexity of Institutional Change, in The Political Economy of Property Rights, David Weimer, ed.. Cambridge University Press. * Terry Moe Power and Political Institutions, Perspectives on Politics 3: VI: Thinking About Models: Conceptual Problems & Empirical Assessment Paul MacDonald Useful Fiction or Miracle Maker: The Competing Epistemological Assumptions of Rational Choice Theory, American Political Science Review 97: Curtis Signorino Strategic Interaction and the Statistical Analysis of International Conflict, American Political Science Review 93: Kevin Clarke and David Primo Modernizing Political Science: A Model-Based Approach, Perspectives on Politics 5: James Johnson What Rationality Assumption? Or, How Positive Poltiical Theory Rests on a Mistake. Political Studies 58: Alan Gibbard & Hal Varian Economic Models, Journal of Philosophy 75: Robert Sugden Credible Worlds: The Status of Theoretical Models in Economics, Journal of Economic Methodology 7:1-31. Robert Sugden Credible Worlds, Capacities and Mechanisms, Erkenntnis 70:3 27. * Gary Cox "The Empirical Content of Rational Choice Theory: A Reply to Green and Shapiro." Journal of Theoretical Politics 11: * Jim Granato and Frank Scioli Puzzles, Proverbs and Omega Matrices: The Scientific and Social Significance of EITM Perspectives on Politics 2: * Donald Green and Ian Shapiro Pathologies of Rational Choice Theory. Yale University Press. [Chapters 1-3,6,8]. *Daniel Hausman "Economic Methodology in a Nutshell," Journal of Economic Perspectives 3:

8 * Peter Hedstrom and Richard Swedberg Rational Choice, Empirical Research, and the Sociological Tradition, European Sociological Review 12: * James Johnson "How Not To Criticize Rational Choice Theory: The Pathologies of Commonsense," Philosophy of the Social Sciences 26: * Larry Laudan "A Problem Solving Approach to Scientific Progress," In Scientific Revolutions ed. Ian Hacking. (Oxford: Oxford University Press). * Rebecca Morton Methods and Models. Cambridge University Press. * Trond Petersen "On the Promise of Game Theory for Sociology," Contemporary Sociology 23: * Karl Popper "The Rationality Assumption," In Popper Selections, ed. David Miller. Princeton University Press. * Robert Sugden Credible Worlds, Capacities and Mechanisms, Erkenntnis 70:3-27. VII: Rational Choice In Strange Places Anna Harvey Partisanship as a Social Convention, Rationality and Society 13: Christopher Achen Parental Socialization and Rational Party Identification, Political Behavior 24: David Kreps "Corporate Culture and Economic Theory." In Perspectives on Positive Political Economy ed. J. Alt and K. Shepsle. Cambridge University Press. Avner Grief "Cultural Beliefs and the Organization of Society," Journal of Political Economy 102: Robert Bates, et al The Politics of Interpretation: Rationality, Culture, and Transition, (corrected version). Politics and Society 26: James Johnson How Conceptual Problems Migrate: Rational Choice, Interpretation & the Hazards of Pluralism. Annual Review of Political Science 5: * Michael Chwe Rational Ritual. Princeton. * James Johnson "Symbol and Strategy in Comparative Political Analysis," APSA-CP Newsletter of the APSA Organized Section in Comparative Politics (Summer). * James Johnson "Why Respect Culture?" American Journal of Political Science 44: * Robert Nozick The Nature of Rationality. Princeton UP.

9 Appendix: Some Advice on Texts For a good, relatively non-technical overview of rational choice theory see: Itzhak Gilboa Rational Choice. For those interested in the historical development of rational choice theories, there are two volumes that collect many of the seminal papers. Iain McLean and Arnold Urken, eds Classics of Social Choice. University of Michigan Press. Harold Kuhn, ed Classics in Game Theory. Princeton University Press. In recent years numerous texts have appeared that offer good background to this course and a solid foundation for further study in this area. Several texts, listed roughly in ascending order of technical difficulty, cover social choice theory. John Bonner Introduction to the Theory of Social Choice. Johns Hopkins UP. Paul Johnson Social Choice: Theory and Research (Quantitative Applications in the Social Sciences #123). Sage Publications. John Craven Social Choice. Cambridge University Press. David Austen-Smith and Jeffrey Banks Positive Political Theory I: Collective Preference. University of Michigan Press. A good reference book containing relevant short encyclopedia entries covering a wide variety of topics in game theory from The New Palgrave: A Dictionary of Economics is: John Eatwell, et al. eds Game Theory. W.W. Norton. Steven Durlauf & Lawrence Blume, eds Game Theory. Palgrave Macmillan. There are many recent, reliable game theory texts. Here is a good selection. Again, they appear roughly in order of increasing level of technical/mathematical difficulty. Avinash Dixit and Barry Nalebuff Thinking Strategically. W.W. Norton. Douglas Baird, et al Game Theory and the Law. Harvard University Press. Ken Binmore Fun and Games. D.C. Heath. Avinash Dixit and Susan Skeath. Games of Strategy. W.W. Norton. Robert Gibbons Game Theory for Applied Economists. Princeton University Press. Eric Rasmussen Games and Information. (4 th Ed.) Blackwell. Martin Osborne Game Theory. Oxford University Press. Drew Fudenberg and Jean Tirole Game Theory. MIT Press. Martin Osborne and Ariel Rubinstein A Course in Game Theory. MIT Press McCarty, Nolan and Adam Meirowitz Political Game Theory. Cambridge University Press. David Austen-Smith & Jeffrey Banks Positive Political Theory, II. Michigan Roger Myerson Game Theory. Harvard University Press There is always the most important question - Why Do We Care? And that question is at the intersection of analytical, explanatory, and normative tasks. You might start with either of these texts: Adam Przeworski States & Markets: A Primer in Political Economy. Cambridge UP.

10 Amartya Sen Rationality & Freedom. Harvard University Press. And for some intriguing interviews with some prominent game theorists about why they care: Vincent Hendricks & Pelle Hansen, eds Game Theory ~ 5 Questions. Automatic Press/VIP. Class Schedule Here is a rough guide to when we will cover the various readings. Hopefully we will not diverge from this plan too much! Week One June 20 Monday - No Class 21 Tuesday - Introduction; Gamm & Shepsle 22 Wednesday - Elster; Satz & Ferejohn; Hausman; Morrow 23 Thursday - Morrow (con t.); Hausman 24 Friday - Becker; Milgrom & Roberts; Schelling (both) Week Two July 27 Monday - Harsanyi; Rubinstein Myerson; Clinton; Gibbons 28 Tuesday Gibbons (con t); 29 Wednesday Knight & Epstein; Kreps;; 30Thursday - Schelling; Sugden & Zamarrón; Myerson 1 Friday Elster; Miller Week Three 4 Monday - No Class 5 Tuesday - Coase; Farrell; McKelvey & Page 6 Wednesday - Hammond & Miller; Taylor; Calvert 7 Thursday - Arrow; Sen 8 Friday - Shepsle; Strom; Krehbeil Week Four 11 Monday - North; Calvert; Knight 12 Tuesday MacDonald; Signorino; Clarke/Primo 13 Wednesday - Johnson; Gibbard & Varian; Sugden 14 Thursday - Harvey; Achen; Grief; Kreps 15 Friday - Bates, et al; Johnson