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Diminished-Dimensional Political Economy

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Abstract

Economists' policy advice is based on models of responses by a variety of economic entities to policy adoptions. There is compelling evidence that these entities do not optimize in at all the fashion that mainstream economics assumes. Rather, they limit decision-making to solving problems of much smaller dimensionality. We consider how political economy goes awry when ignoring diminished dimensionality, and some research avenues opened up by this realization.

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  • Ronald M. Harstad & Reinhard Selten, 2014. "Diminished-Dimensional Political Economy," Working Papers 1414, Department of Economics, University of Missouri.
    • Handle: RePEc:umc:wpaper:1414
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    1. Laffont, Jean-Jacques & Tirole, Jean, 1986. "Using Cost Observation to Regulate Firms," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 614-641, June.
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    10. Pascaline Dupas & Jonathan Robinson, 2013. "Why Don't the Poor Save More? Evidence from Health Savings Experiments," American Economic Review, American Economic Association, vol. 103(4), pages 1138-1171, June.
    11. Ronald M. Harstad, 2011. "Behavioral Efficiency I: Definition, Methodology and Demonstration," Working Papers 1120, Department of Economics, University of Missouri.
    12. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
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    Cited by:

    1. Schnellenbach, Jan & Schubert, Christian, 2015. "Behavioral political economy: A survey," European Journal of Political Economy, Elsevier, vol. 40(PB), pages 395-417.
    2. Kuehnhanss, Colin R. & Heyndels, Bruno & Hilken, Katharina, 2015. "Choice in politics: Equivalency framing in economic policy decisions and the influence of expertise," European Journal of Political Economy, Elsevier, vol. 40(PB), pages 360-374.
    3. Bednar, Jenna & Page, Scott E, 2025. "Institutions and cultural capacity: A systems perspective," Journal of Economic Behavior & Organization, Elsevier, vol. 234(C).

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    Keywords

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    JEL classification:

    • D6 - Microeconomics - - Welfare Economics
    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government

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