States, Markets, and Rational Individuals
Instructor: Edwin Camp
Class Time and Location: Th 1:30-3:20 RKZ 301
Office: RKZ 421
Office Hours: T 2:00-4:00 or by appointment
Email: edwin.camp@yale.edu
Objectives of the course:
Rational choice provides a largely cohesive framework for understanding political economy. One goal of this course is developing this framework to provide an understanding of the relationship between politics and economics. A second goal of the course is to provide students with a set of tools that they can use to critically evaluate theories and understand problems of political economy. A third goal of this course is to critically evaluate the rational-choice framework and identify its limitations.
In this seminar we survey theories of the market and the state using the rational choice paradigm. In the first part of the course we develop a rational choice framework to gain insight into major questions of economics and politics. Such questions include the following. Why do individuals cooperate? Why do individuals fail to cooperate? What are the implications of this success or failure? What is magical about markets? How does social order arise without coordination? Under what conditions do markets fail?
How and why do states facilitate or stifle market activity? Can individuals make collective decisions? Can the governed hold the governing accountable?
After using rational choice to gain leverage over major questions in economics and politics, we will critically evaluate rational choice theory. The criticisms will take aim at the normative implications of rational choice, its misapplications, and finally its scientific pretensions. The goals of this critical evaluation are to understand the limitations of rational choice, but to also appreciate its role in social science when used appropriately.
Books:
Shepsle, Kenneth A., and Mark S. Bonchek. 1997. Analyzing Politics: Rationality,
Behavior, and Institutions. W.W. Norton & Company.
Bowles, Samuel and Foley, Duncan. 2012. Coordination, Conflict & Competition: A
Text in Intermediate Microeconomics. Unpublished Manuscript.
Taylor, Michael. 2006. Rationality and the Ideology of Disconnection. Cambridge:
Cambridge University Press.
Green, Donald P., and Ian Shapiro. 1994. Pathologies of rational choice theory: a critique of applications in political science. New Haven: Yale University Press.

Elinor Ostrom, Governing the Commons: The Evolution of Institutions for Collective
Action. Cambridge: Cambridge University Press, 1990
Expectations and Requirements: The requirements of this course include class participation, two short response papers, six homework assignments, one in-class midterm, and a final paper.
In-Class Midterm Exam: TBA
Class Participation: Students are expected to come to class prepared to actively discuss the readings each week.
Two short response papers: Each response paper should consist of a concise but critical evaluation of the week’s readings. These papers should not exceed more than 1 page, single-spaced, 12-point font. The response papers should be emailed to the professor at least 1 day in advance of the class. Students can chose the classes for which they would like to write a response paper.
Six Homework Assignments: Some of the course will cover slightly technical material.
To ensure comprehension, there will be six required homework assignments. Homework should be submitted in the following class period.
Final Paper: Students are required to write a final paper that is about 15 pages in length.
In this final paper, students can use the tools of rational-choice theory to make a policy recommendation regarding an important problem in political economy. Alternatively, students can use an empirical example in politics or economics to evaluate the strengths and weaknesses of rational choice theory. As part of this requirement, students will be required to submit a paper proposal that will be circulated to the class.
Grading:
Class participation: 10%
Homework and Response papers: 30%
In-class midterm: 25%
Final paper: 35%
Academic Honesty: It is the student’s responsibility to avoid plagiarism. Please see: http://writing.yalecollege.yale.edu/what-plagiarism

Outline of the Course
Week 1 Introduction: What is Rational Choice
Shepsle, Kenneth A., and Mark S. Bonchek. 1997. Analyzing Politics: Rationality,
Behavior, and Institutions, Chapter 1-2
Suggested reading:
Elster, Jon. 1989. Cement of Society, Chapter 1
Week 2 Cooperation and Collective Action
Shepsle, Kenneth A., and Mark S. Bonchek. 1997. Analyzing Politics: Rationality,
Behavior, and Institutions. Chapter 8-9
Suggested Reading:
Olson, Mancur. 1971. The Logic of Collective Action . Cambridge: Harvard University
Press.
Bowles, Samuel. 2004. Microeconomics: Behavior, Institutions and Evolution. Russell
Sage Foundation. Chapter 1
Hardin, Russell. 1996. “Trustworthiness”, Ethics 107: 26-42
Week 3 Cooperation and Trust
Bowles, Samuel and Gintis, Herbert. 2007. "Homo Economicus and Zoon Politicon:
Behavioral Game Theory and Political Behavior," Oxford Handbook of Contextual
Political Analysis.
Putnam, Robert. 1993. “What Makes Democracy Work?” National Civic Review.
Bowles, Samuel, and Gintis, Herbert. 2002. Social Capital and Community Governance.
The Economic Journal 112.
Auyero, Javier. 2000. “The Logic of Clientelism in Argentina: An Ethnographic
Account,” Latin American Research Review 35: 3.
Suggested:
Dennis Chong. 2000. Rational Lives: Norms and Values in Politics and Society.
University of Chicago Chap 1

North, Douglass. 1991. “Institutions”, The Journal of Economic Perspectives 5: 97-112
Stokes, Susan and Cleary, Matthew. 2006. Democracy and the Culture of Skepticism.
Russell Sage Foundation. Pages 1-14.
Grief, Avner. 1994. “Cultural Beliefs and the Organization of Society”, Journal of
Political Economy 102: 912-950.
Chong, Dennis. 1992. “Reputation and cooperative behavior.”
Social Science Information
31: 683.
Week 4 Cooperation Continued: Public Goods and the Commons
Bowles, Samuel and Foley, Duncan. 2012. Coordination, Conflict & Competition: A
Text in Intermediate Microeconomics. Unpublished Manuscript. Chapter 7.
Suggested Reading:
Shepsle, Kenneth A., and Mark S. Bonchek. 1997. Analyzing Politics: Rationality,
Behavior, and Institutions. Chapter 10
Week 5 Communities and the Commons
Elinor Ostrom, Governing the Commons: The Evolution of Institutions for Collective
Action. Cambridge: Cambridge University Press, 1990
Suggested Reading:
Ostrom, Elinor. 2010. "Beyond Markets and States: Polycentric Governance of Complex
Economic Systems." American Economic Review, 100(3): 641-72.
Week 6 Spontaneous Order
Bowles, Samuel. 2004. Microeconomics: Behavior, Institutions, and Evolution. Russell
Sage Foundation. Chapter 2.
Suggested Reading:
Przeworski, Adam. 2003. States and Markets: A Primer in Political Economy.
Cambridge University Press. Chapters 2-4.
Week 7 Bargaining and Markets
Bowles, Samuel and Foley, Duncan. 2012. Coordination, Conflict & Competition: A
Text in Intermediate Microeconomics. Unpublished Manuscript. Chapter 9.

Suggested Reading:
Ronald Coase, “The Problem of Social Cost.” Journal of Law and Economics vol. III,
(October 1960), pp. 1-44.
Week 8 Midterm
Week 9 Preference Aggregation
Shepsle, Kenneth A., and Mark S. Bonchek. 1997. Analyzing Politics: Rationality,
Behavior, and Institutions. Chapter 3-4
Miller, David. 1992. “Deliberative Democracy and Social Choice.” Political Studies,
Special Issue: 54-67.
Recommended:
Shepsle, Kenneth A., and Mark S. Bonchek. 1997. Analyzing Politics: Rationality,
Behavior, and Institutions. Chapter 5
Sen, Amartya. 1998. “The Possibility of Social Choice”, Economic Sciences.
Aldrich. 1995. Why parties? The origin and transformation of party politics in America.
Chicago: University of Chicago Press.
Week 10 Strategic Behavior and Electoral Systems
Shepsle, Kenneth A., and Mark S. Bonchek. 1997. Analyzing Politics: Rationality,
Behavior, and Institutions. Chapter 6-7.
Suggested Reading:
Boix, Carles. 1999. “Setting the Rules of the Game: The Choice of Electoral Systems in
Advanced Democracies” American Political Science Review 93:3
Week 11 Legislatures and State Bureaucracies
Shepsle, Kenneth A., and Mark S. Bonchek. 1997. Analyzing Politics: Rationality,
Behavior, and Institutions. Chapter 11-13.
Week 12 Rational Choice Debate: Misapplications of Rational Choice
Taylor, Michael. 2006. Rationality and the Ideology of Disconnection. Cambridge:
Cambridge University Press.
Suggested Reading:

Amarta Sen. 1977. “Rational Fools: A Critique of the Behavioral Foundations of
Economic Theory”, Philosophy and Public Affiars 6: 317-344.
Hirschman, Albert O. 1984. “Against Parsimony: Three Easy Ways of Complicating
Some Categories of Economic Discourse” Bulletin of the American Academy of Arts and
Sciences, 37(8): 11-28.
Week 13 Rational Choice Debate: Is Rational Choice Scientific?
Green, Donald P., and Ian Shapiro. 1994. Pathologies of rational choice theory: a critique of applications in political science. New Haven: Yale University Press. Chapters
1-5, 8.
Clarke, Kevin A. and Primo, David M. 2012. A Model Discipline: Political Science and the Logic of Representations. Oxford: Oxford University Press. Chapters 2-4.
Suggested Reading:
Debra Satz and John Ferejohn. 1994. “Rational Choice and Social Theory,” The
Journal of Philosophy. 91: 71-87.
Wagner, R. Harrison. 2001. “Who’s Afraid of ‘Rational Choice Theory’?”
Chong, Dennis “Rational choice theory’s mysterious rivals”, Critical Review: A Journal of Politics and Society, 9: 1-2, 37-37.