Political Economics

This course examines political behaviour through the lens of modern economic tools, treating political agents-such as politicians, voters, and interest group members-as rational actors pursuing their own interests, similar to consumers in a market. In modern democracies, resource allocation occurs not only through markets but also through political decisions. For instance, taxes collected from total production fund public goods, services, and direct transfers to individuals. Understanding these political processes is essential to comprehending how the economy functions as a whole. The course explores key models in political economics and the empirical evidence supporting their implications. It begins with social choice theory and foundational theoretical models, including the median voter model, probabilistic voting, and the citizen-candidate framework. Topics such as agency problems, rent-seeking by politicians, political budget cycles, lobbying, and campaigning are also covered. The second part of the course adopts an applied focus, addressing recent theoretical developments and empirical findings on topics such as the role of information and mass media, the labor market for politicians, the rise of populism, and political dimensions of immigration and climate policy. The course concludes with an analysis of how institutions and other persistent factors shape modern economic development.