Question

With limited public resources, politicians face a tradeoff between policies that heighten international security and policies that improve domestic prosperity. Suppose that, based on what we see from policy proposals, Democrats favor prosperity relatively more highly, while Republicans favor security relatively more highly. Consider prosperity and security to be two goods that people value and require tradeoffs. Put security on the Y-axis and prosperity on the X-axis.

a. Suppose that the different policy preferences stem from different perceptions of the costs of each policy. For example, suppose that Republicans do not think that long-term international entanglements will be particularly costly, while democrats think that they will be extremely costly. Likewise, suppose that Democrats think that the costs of their favored domestic policies will be much lower than Republicans estimate. Illustrate this contrast using budget lines and indifference curves. It may help to make one figure for Republicans and another for Democrats.

b. Now suppose that the different policy proposals instead stem from differences in tastes or preferences. For example, suppose that Democrats’ ideal vision of the country requires that citizens are prosperous and domestic spending is high; suppose that Republicans’ ideal vision of the country emphasizes strength and security. Illustrate this contrast using budget lines and indifference curves. It may help to make one figure for Republicans and another for Democrats.

c. Suppose that the public has grown upset with the constant disagreement between Democrats and Republicans. Further suppose that a commission has been set up, and its only goal is to reduce disagreements between the two parties. Of the two possible cases described above, which one (a. or b.) do you think generates the greater likelihood of leading to increased levels of agreement? Why? What types of things might the commission do to bring about agreement if this case was the actual case? Feel free to keep your argument general.

Answer 1

B) In this case, we will get the similar results as we observed in part a. However, the line of reasoning will be different.

For democrats, since they value the domestic properity more than international security, they will allocate huge chunk of their budget to domestic security. The IC curve is drawn on the same lines as in the first part.

Similar reasoning can be given for the Republicans.

Hence, we will get the same diagrams as we got in first part.

C) In this case, the agreement might be reached if the commission suggests using the empirical estimates to assess which type of policies we require more. The policies can then be made on the basis of this empirical analysis.

Another kind of agreement can be reached if a certain proportion of money is allocated to both kind of policies and only one type of policy is not favoured.

Yet another kind of agreement can be reached if such kind of policies are pursured which will keep in view the national interest and prosperity and at the same time strenghthen the international prosperity.