Transcript faculty.georgetown.edu

Rational expectations &
time-inconsistent preference problems
James Raymond Vreeland, Georgetown University
Korea University Summer Campus Faculty
Global KU Frontier Spirit
Aug 2009
Lesson from the Mid-term & from the option to
assign 0 weight to the final:
• As long as there is a credible threat that the
exam will count, it can solve your timeinconsistent preference problem
• Why can I get away with this at summer
campus?
• Reputation – I wouldn’t do this on my home
campus, or if I came to KU every summer
• But ultimately, the test didn’t matter – it was just
a mechanism to get you to solve your timeinconsistent preference problem
Weighting the final exam &
Rational expectations
•
Rational expectations: the best predictor for future performance is past
performance
•
Expected final grade = midterm grade
•
More precisely:
•
Final grade = midterm grade + >shock<
•
The shock is unobserved to me a priori
•
I don’t know if you worked harder in the beginning or the end of the semester
•
But I suspected that most of you worked harder in the second part (and give
your grades, I was right)
•
Still, unless your performance deviated a GREAT deal, you ended up with the
same grade as the mid-term
•
So, for most of you, allowing you to weight the exam made no difference
•
Still, assuming you – yourself – knew how well you did, then you should assign
high weight only if you thought you did better
•
Thus, the option was an act of generosity… which some didn’t take!!!!
Note
• Basically I gave you the option of dropping
your poorer performance
• (though you had to decide without knowing
the 2nd grade)
Final exam
Descriptive stats (for those who took the exam)
Mean:
77
Median:
85
Min:
34
Max:
100
Standard Deviation:
19
Number of exams:
39
Recall mid-term:
Descriptive stats (for those who took the exam)
Mean:
71
Median:
68
Min:
40
Max:
96
Standard Deviation:
16
Number of exams:
36
ISC 335 Final Exam Grade Distribution
8
7
Number of students
6
5
4
3
2
1
0
34
37
40
43
46
49
52
55
58
61
64
67
Grade
70
73
76
79
82
85
88
91
94
97 100
Recall mid-term
ISC 335 Midterm Grade Distribution
10
9
Number of students
8
7
6
5
4
3
2
1
0
<40
40-44
45-49
50-54
55-59
60-64
65-69
70-74
Grade range
75-79
80-84
85-89
90-94
95-99
Final grades
Point distribution
Number of students
16
14
12
10
8
6
4
2
0
D
D+
C
C+
B
B+
A
A+
B+
A
A+
Point
Hypothetical distribution
Number of students
12
10
8
6
4
2
0
D
D+
C
C+
B
Point
Why the games?
• To amuse myself?
• Pedagogic justification: What lesson have I been trying to
teach you all semester?
• THE LESSON OF USING AN INSTITUTION TO SOLVE A
TIME INCONSISTENT PREFERENCE PROBLEM!
• The (credible) exam ties your hands
• Commitment
– Hands tying of present government (two level game) – change the
payoffs for other veto players
– Hands tying of future governments – LOCK-IN!
– Hands tying of present governments – signaling resolve to foreign
and/or domestic audiences
Secret bonus level lecture!
Domestic institutions under
dictatorship story… or
CAT Selection:
Why Dictatorships enter into the
UN Convention Against Torture
The Puzzle (Hathaway 2003):
Percent entering
Dictatorships practicing torture and entering into the CAT
CIRI data
Hathaway data
10%
8%
6%
4%
2%
0%
1
2
3
4
5
1
2
3
n=82
(signed)
n=170
(signed)
n=272
(signed)
n=125
(signed)
n=52
(signed)
n=101
(signed)
n=328
(signed)
n=316
(signed)
n=84
(ratified)
n=189
(ratified)
n=310
(ratified)
n=148
(ratified)
n=68
(ratified)
n=109
(ratified)
n=356
(ratified)
n=378
(ratified)
Torture rating
%signed
%ratified
I will explain this puzzle…
•
The solution has to do with political
institutions under dictatorship
•
Particularly: multi-party dictatorships
•
I will explain that…
1. We observe more torture in MP
dictatorships
2. MP dictatorships are more likely to enter
into the CAT
My solution begins with the logic of torture:
• Torture is more likely when power is shared than when power
is absolute (Kalyvas 2000, Arendt 1970).
• A measure of power sharing?
• Some dictatorships allow for
– INDEPENDENT POLITICAL PARTIES (Gandhi 2003).
• Under no-party & one-party states, limitations are obvious.
– No ambiguity.
• With multiple political parties, some degree of dissent is
endorsed by the state.
– Ambiguity. Some people go too far.
• I predict torture to be ironically higher in more liberal
dictatorships with multiple political parties.
Will no/one-party states enter into the CAT?
• They are not anti-torture.
• One reason we observe low levels of torture is
because of the FEAR of torture.
• They face no pressure from organized
alternative political parties to adopt the CAT.
• I predict no/one-party states are less likely to
sign/ratify the CAT.
Will multi-party dictatorships enter into the CAT?
• Institutions like multi-parties “encapsulate” parts of society
into the regime (O’Donnell 1979, Gandhi and Przeworski
2006).
• Regime faces pressure from organized political parties.
• Policy concessions (Gandhi 2004).
– Spend more on education, less on the military
• Entering the CAT is a form of policy concession.
• I predict more liberal dictatorships will be more likely to
sign/ratify the CAT.
Empirical evidence
• Show that MP dictatorships have more
torture
• Show that MP dictatorships are more likely
to enter into the CAT
Dictatorships with parties have higher levels of torture
Ordinal logit
Fixed effects
logit
Duration
dependence
logit
0.58***
0.71**
0.80***
(standard error)
(0.15)
(0.34)
(0.22)
GDP/capita
0.02
-0.33
-0.01
(standard error)
(0.03)
(0.35)
(0.03)
Growth
0.01**
0.01
0.02**
(standard error)
(0.003)
(0.01)
(0.01)
0.002***
0.12**
0.001*
(0.001)
(0.04)
(0.001)
-0.01***
-0.01
-0.01***
(standard error)
(0.002)
(0.01)
(0.003)
Civil war
0.79***
0.57
0.41*
(0.17)
(0.47)
(0.24)
Parties
Population
(standard error)
Trade/GDP
(standard error)
Communist
(standard error)
-1.10**
-0.69
(0.36)
(0.68)
To put this plainly:
holding other things equal…
• For every 100 observations of dictatorships with no
political parties and low levels of torture during a year,
one can expect 7 of them to practice high levels of
torture the following year (plus or minus 4).
• For every 100 observations of dictatorships with
political parties and low levels of torture during a year,
one can expect 14 of them to practice high levels of
torture the following year (plus or minus 6).
• I conclude that torture is, somewhat counter-intuitively,
more prevalent in dictatorships with multiple political
parties.
Dictatorships with parties are more likely to sign/ratify the CAT
Signing –
Hazard ratios reported
Torture &
Parties
Full spec
Ratification –
Hazard ratios reported
Torture &
Parties
Full spec
Stripped spec
Parties
2.11**
2.87**
2.45**
2.18
2.87**
(p-value)
(0.02)
(0.01)
(0.01)
(0.13)
(0.02)
Log torture
1.79*
1.19
1.66
0.89
1.35
(p-value)
(0.10)
(0.68)
(0.22)
(0.83)
(0.51)
Communism
2.65*
1.13
1.50
(p-value)
(0.09)
(0.91)
(0.57)
Regional score
0.64
9.96**
9.16***
(p-value)
(0.74)
(0.04)
(0.01)
Number under
0.96
0.97
0.97
(p-value)
(0.33)
(0.39)
(0.12)
Muslim
1.90
1.56
1.44
(p-value)
(0.25)
(0.42)
(0.47)
GDP/capita
1.06
1.07
(p-value)
(0.17)
(0.20)
Population
1.00
1.00
1.00*
(p-value)
(0.16)
(0.20)
(0.06)
Trade/GDP
0.99
0.99
(p-value)
(0.20)
(0.33)
Ratifying the CAT
0.00
0.25
0.50
0.75
1.00
Kaplan-Meier survival estimates, by party
0
5
10
analysis time
party = 0
party = 1
15
The story explains…
• Why governments with more torture enter into the CAT:
– We observe more torture because power is divided
(political parties).
– Governments enter the CAT as a concession to the
interest groups represented in the political parties.
• Why governments without torture do not enter the CAT:
– There is less torture because there is more fear of torture.
– The last thing these regimes–that rely on fear–want to do
is make a gesture that they oppose torture.
– These regimes are not anti-torture, and face no pressure
to enter into the CAT.
THANK YOU
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