Game Theory and Public Policy
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Game Theory and Public Policy

Roger A. McCain

Game theory is useful in understanding collective human activity as the outcome of interactive decisions. In recent years it has become a more prominent aspect of research and applications in public policy disciplines such as economics, philosophy, management and political science, and in work within public policy itself. Here Roger McCain makes use of the analytical tools of game theory with the pragmatic purpose of identifying problems and exploring potential solutions in public policy.
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Chapter 16: Toward Political Economy

Roger A. McCain


Political economy is an integrated study of economics and politics that allows us to pose and tentatively to answer both positive questions such as “whose interest is state action likely to advance?” and “what are the likely consequences of such-and-such economic policy?” and normative questions such as “what policies would best advance the interest of the whole population?” Since the formation of coalitions is a foundation both of politics (states, parties) and economics (business firms) the framework developed in this part of the book would seem to provide a language for political economy. This chapter will sketch some concepts toward such a political economy. When we represent the “game” of social interaction either in coalition function or, as in this part of the book, in partition function form, each agent is supposed to be a member of exactly one coalition. In our actual life most of us are members of more than one coalition, and may be members of many: we may be members of a political party and a lobbying organization for a particular cause, a church, a local congregation or parish, a social club, we may be employed by, or be investors in, one or more business firms, be a member of a rural electrification cooperative, a farmer cooperative, and a mutual bank, and engaged in a very large number of agreements for the exchange of particular goods and services. In order to bring this reality within the range of a theory that employs partition functions, we must...

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