How an ineffective agent can increase his budget

Abstract

This paper explores an agent's behavior when he values a large budget, and when his effort in one period affects the budget he gets in the following period. In particular, we shall see that the agent who works little, or takes insufficient care, may enjoy a large budget. That in turn can lead to costly projects. For example, in 2006 during construction of the Big Dig in Boston, a concrete ceiling panel and debris weighing 24,000 kg fell on a car, killing a passenger (Flint, 2015). The project suffered from faulty epoxy, light fixtures dropping, and seawater leaks. But rather than canceling or downsizing the project, the cost ballooned from $2.6 billion to nearly $15 billion. Cost overruns exceeding $1 billion at the Veterans Affairs hospital in Colorado arose in large part because of a design that often sacrificed affordability in the name of aesthetics (Matthews, 2016). Such behavior often has the characteristic of "throwing good money after bad." Consider an example from Kenya (Human Rights House Foundation, 2007

Modern Political Economy: A Brief History and Some Applications

“…He concludes that interest group activity will be largely efficient economically, since-according to his assumptions-the public will be sensitive to inefficient policies (deadweight losses) promoted by any interest groups. This game-theoretic trend has only intensified over the years, as is evidenced by perusing not only specialty MPE journals, such as Public Choice (see Bolle and Otto, 2021), Rationality and Society (see Bertolai and Scorzafave, 2020), Journal of Theoretical Politics (see Pond, 2021), or Economics and Politics (see Terai, and Glazer, 2021). Political economy themes using game theory is also suffused in the mainstream, flagship journals across the social sciences.…”