Monetary policy tools

WEBVTT
Kind: captions
Language: en

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- What we're going to do in this video

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is think about Monetary Policy,

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which is policy that
a Central Bank can use

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to affect the economy in some way.

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This is often contrasted
with Fiscal Policy,

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and that would be a government

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deciding to tax or spend in some way

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in order to make
adjustments to an economy.

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But to help us think
through Monetary Policy

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let's bring up our model
for the money market.

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And just as a little bit of a review,

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here on the horizontal axis
I have the quantity of money,

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or else we could imagine that say the M1,

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which is cash in circulation
and checkable deposits,

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and then here in the vertical axis

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we have our nominal interest rate.

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In this model we have assumed

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a perfectly inelastic money supply;

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that's why we have this vertical line,

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which isn't exactly how the world works

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but we'll go with that for
the sake of this video.

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And then we have the
demand curve for money.

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At high nominal interest rates,

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the opportunity cost of
keeping cash is very high

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so people would not want
to keep much of it around.

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And then when nominal
interest rates are low

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the opportunity cost, or
at least the perceived

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opportunity cost of
holding cash is a lot lower

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so people might wanna hold more of it

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and so you have a higher demand for money.

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And this point where the supply
and the demand intersect...

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We have seen this before,
this point of equilibrium,

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we see that that would result

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in our equilibrium nominal interest rate.

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But let's say this is
the world that we are in,

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and we are in a recessionary
or a negative output gap.

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And you are the Central
Bank of this country.

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What could you do?

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Well in general, you would say

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"Well it would be nice if nominal
interest rates were lower,

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"then maybe people would
be willing to borrow more,

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"there'd be more of a demand for money,

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"and they would use that money
in order to make investments,

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"or in order to consume more

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"and we could close
"that recessionary gap".

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But how would you lower interest rates?

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Well one way would be to
increase the money supply.

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If we could shift this vertical
line to the right somehow.

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But how would you do that?

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We often talk about Central
Banks printing money

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but how did they get that money
actually into circulation?

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How did they actually
increase the money supply?

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Well there's a couple of
tools at their disposal.

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One is the idea of Open Market Operations.

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Open Market Operations,

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and this is the tool that
Central Banks most typically use.

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Let's say that this is a
bond that I currently own,

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and a bond is a loan to some
entity and this paper says

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"Hey that entity is going to pay you back

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"with interest at some
point in the future".

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And let's say this is a government bond.

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Let's say it's to the U.S. Government.

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What the Federal Reserve
might do in the United States,

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the Central bank, and this is
how most Central Banks work,

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the Federal Reserve says

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"Hey, I want to increase
the money supply".

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And so they say "Hey I'm gonna go into

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"the open market and buy a bond."

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So, I might not know
who's buying that bond

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but it happens to be the Federal Reserve.

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And so instead of selling
it to someone else

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who would give me cash that's
already in circulation,

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the Federal Reserve

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would be introducing new
cash into circulation.

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This might be money
that they just printed.

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and I'll say printed in quotes,

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because there's not a lot of physical cash

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or at least as much as there use to be.

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These could just be digital numbers

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in banking account at certain places.

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But it has the same functional idea,

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that this is part of the monetary base.

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And then we've talked about this before.

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You have a money multiplier.

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I would put this into a bank,

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the bank would loan out a proportion

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of that based on the Reserve requirements,

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and then whoever gets that
would deposit it in a bank

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and that bank could loan
out a certain proportion.

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Let's say that the Central Bank

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bought this from me for $1000,

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and let's say that our current

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reserve requirement is equal to 12.5%.

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Well the effect on the
money supply over here

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won't just be $1,000.

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Instead we would move $1,000
times the money multiplier.

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And so this would be equal to,

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so we would have $1,000,

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and what's the multiplier going to be?

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Well it's going to be
one over 12.5%, 0.125.

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One over 0.125, this
right over here is eight.

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So the money multiplier here is eight.

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So the effect of buying that $1,000 bond

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with new printed currency so to speak,

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printed cash so to speak,

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would actually be to increase
the money supply by $8,000.

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$8,000 increase in money supply.

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And obviously $8,000 is not
going to make a big deal

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to an economy like the United States.

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But imagine if this was $100 billion.

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Well then this would be $800
billion right over here.

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And what would happen to this curve?

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Well it would move over,
let's say it moves over here.

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And so this is money supply
curve two, and then this is M2,

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and now what is our
equilibrium interest rate?

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Well our equilibrium interest rate,

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our nominal interest rate
has now gone down; R2.

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And this would hopefully have the effect

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that the Central Bank wants.

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That hey, now that nominal
interest rates have gone down

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people might borrow more
for more consumption,

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for more investment, and close
that negative output gap.

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And it can work the other way as well.

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Imagine if in this
situation right over here,

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we were in an inflationary output gap.

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A positive output gap.

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The economy was overheating in some way,

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and the Central Bank
wanted to cool things down.

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Well the way they could
do is they could say

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"Well if interest rates
were a little bit higher

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"that might slow things down,

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"there might be less
consumption, less investment".

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How would they do that?

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Well, instead of what they did here

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where they bought bonds to inject cash,

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they could do the opposite.

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They could take bonds
that the Central Bank has

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and they could sell those bonds

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and then that would take
cash out of the system.

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By taking that cash out of the system

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it would take reserves out of the system,

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and it would have the opposite effect,

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and it would shift the
money supply to the left.

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And then you would have the
effect of raising rates.

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Now another way of
shifting the money supply

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to the right or the left here,
increasing or decreasing it,

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is by changing the actual
reserve requirement.

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This is done less frequently
than the Open Market Operations

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but we'll see that that
could have the same effect.

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If the Central Bank which can
set the reserve requirement

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were to change it from 12.5%,

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and were to instead make it let's say 10%,

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well then the money multiplier,

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money multiplier...

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and we've the math in other videos,

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it would go from one over 12.5%,

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it would go from eight
to one over 10%, to 10.

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So the existing reserves,

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instead of having an eight
times multiplier on 'em,

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you would have a 10
times multiplier on 'em.

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And once again, that would have the effect

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of increasing the money supply.

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Now another tool that's
sometimes associated

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with Monetary Policy is
setting the discount rate.

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Now the discount window
at the Federal Reserve

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in the United States
isn't used in situations

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to affect Monetary Policy so much,

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as really being a mechanism of safety

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for our financial system.

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So if a bank is running out of reserves,

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and so they can still hold up
their commitments to folks,

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they can go to the discount
window of the Federal Reserve

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and borrow money directly from the Fed.

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And the Federal Reserve
can set this discount rate,

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but it really becomes
operational during emergencies.

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When you hear about the Federal
Reserve setting the rate,

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they're really talking about
the Federal Funds rate.

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Federal Funds.

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And this is the rate at
which banks lend reserves

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to each other over night.

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And the banks are going to
be lending to each other

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at slightly different rates,

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but what the Federal Reserve,
the Central Bank will do

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is they'll set a target
Federal Funds rate.

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So what they will do is

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they will target a Federal Funds rate,

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and typically use Open Market Operations

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to make that target a reality.

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Now the last thing I
want you to appreciate

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in this discussion of Monetary Policy,

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the things that the Federal Reserve can do

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to increase or decrease the money supply,

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to decrease or increase
nominal interest rates

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is to think about how quickly
these things might happen

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and how quickly their effects might be.

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There's oftentimes a lag here.

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It might take a little time for
the Central Bank to realize,

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hey it looks like we're in
an inflationary situation.

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Maybe we got to decrease the
money supply a little bit.

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Maybe we gotta take a little bit

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of reserves out of the system.

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Or the other way around,

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to realize that they're in a recession.

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So there's usually a lag there.

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And then even once they act,

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they enact this Monetary Policy,

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it takes time for it to
fully impact the system.

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It takes time for the interest
rates to truly come down.

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And even more, once the
interest rates are down

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it might take time for people to realize

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that hey, maybe I wanna borrow now,

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and what would I use that money for?

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And for that that to
actually impact the economy.


Evolution of political parties in picking candidates and voter mobilization

WEBVTT
Kind: captions
Language: en

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- [Instructor] In the video
on linkage institutions,

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we talk a lot about political parties

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and the various roles that they play

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in the political system.

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In particular, we talk
about how they are involved

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in recruiting candidates.

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And as we will talk about in this video,

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we'll think about how candidates

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are actually chosen to
represent a political party.

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And we also talk about,

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in that video on linkage institutions,

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how political parties are
involved in voter mobilization,

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which is a fancy way of saying,

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hey getting people to vote,

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getting people energized
about the election,

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to actually get to the polls.

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Sometimes going as far as getting buses,

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transporting them to the polling stations.

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And campaign management.

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Campaign

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management.

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And one thing that is really
interesting to appreciate

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and it's really the focus of this video,

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is that both of these things
have evolved over time.

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So for example, George Washington,

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the first President of the United States,

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he was not affiliated with any party

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and our first two presidential elections

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had no party association.

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But as soon as we get
to the election of 1796,

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we start to see the
development of faction.

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You have Hamilton on one side,

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becomes head of the Federalist Party

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and on the other side,

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headed by Madison,

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you have the Democratic-Republican Party.

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Democratic- Republican.

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And there's a nice irony to this

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because it was exactly those two gentlemen

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that not too far before 1796,

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if we go to the late 1780s,

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and their attempt to get
the Constitution ratified

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in the Federalist Papers,

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they argue against faction.

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How faction can be bad for a government,

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for a nation.

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But they were the ones that
led the split into faction

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and the split into parties.

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And from that time for over 100 years,

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all the way until we
get to the early 1900s,

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early 1900s,

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you have some situations
where the party leadership

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might pick candidates

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and some situation where the
party members pick candidates

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and conventions.

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And so you have party leadership,

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leadership slash members

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who gets a hand pick.

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Hand pick candidates.

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So this part of the process

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was not so broadly democratic.

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Especially when we get to
the second half of the 1800s.

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You have very strong party leaders,

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often called party bosses.

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Who almost had the individual power

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to pick candidates to represent

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one party or another.

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But in the early 1900s,

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there was a movement to say

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hey, you know what?

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This is not so democratic

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to handpick the candidates

00:02:51.520 --> 00:02:53.200
that people have to choose from.

00:02:53.200 --> 00:02:54.930
And so this is when you start to have

00:02:54.930 --> 00:02:56.793
the direct primary system.

00:02:57.730 --> 00:03:00.690
Where to choose the candidates

00:03:00.690 --> 00:03:02.790
that represent one party or another,

00:03:02.790 --> 00:03:04.740
you will hold elections.

00:03:04.740 --> 00:03:07.510
And those elections
could be closed primaries

00:03:07.510 --> 00:03:09.640
where you have to be a
registered Republican

00:03:09.640 --> 00:03:11.870
to vote for who represents
Republican party.

00:03:11.870 --> 00:03:13.010
Or registered Democrat

00:03:13.010 --> 00:03:15.210
to see who represents
the Democratic party.

00:03:15.210 --> 00:03:17.110
But they also have open primaries

00:03:17.110 --> 00:03:19.520
where anyone could vote
in the Democratic primary

00:03:19.520 --> 00:03:22.630
or anyone could vote in
the Republican primary.

00:03:22.630 --> 00:03:25.260
And this is happening to this day.

00:03:25.260 --> 00:03:27.550
Now, this change that has happened

00:03:27.550 --> 00:03:29.530
over roughly the last 100 years,

00:03:29.530 --> 00:03:31.040
you could imagine this has changed

00:03:31.040 --> 00:03:33.180
the power dynamic between the parties

00:03:33.180 --> 00:03:34.230
and the candidates.

00:03:34.230 --> 00:03:36.920
For this first over 100 years,

00:03:36.920 --> 00:03:39.510
the party is where a lot of the power was.

00:03:39.510 --> 00:03:41.710
But once you start having
the direct primary,

00:03:41.710 --> 00:03:45.933
it becomes a lot more about
candidate centered campaigns.

00:03:46.830 --> 00:03:48.570
Where things become much more about

00:03:48.570 --> 00:03:51.300
the position and the
personality of the candidate

00:03:51.300 --> 00:03:53.720
than maybe as much about
the party platform.

00:03:53.720 --> 00:03:54.570
And because of that,

00:03:54.570 --> 00:03:55.750
it has become more common

00:03:55.750 --> 00:03:57.840
in the last 100 or so years

00:03:57.840 --> 00:03:59.900
where even if someone is
a registered Republican,

00:03:59.900 --> 00:04:01.210
they might vote the other way.

00:04:01.210 --> 00:04:02.900
Or if someone is a registered Democrat,

00:04:02.900 --> 00:04:04.150
they might vote the other way

00:04:04.150 --> 00:04:06.510
if a candidate is particularly appealing.

00:04:06.510 --> 00:04:09.330
For example, John F. Kennedy
was the Democratic candidate

00:04:09.330 --> 00:04:11.410
for President in 1960.

00:04:11.410 --> 00:04:14.550
But many Republican Irish
Catholics voted for him.

00:04:14.550 --> 00:04:16.440
Similarly, there's a group of folks

00:04:16.440 --> 00:04:18.330
known as the Reagan Democrats.

00:04:18.330 --> 00:04:20.630
Who are famous for despite
their party affiliation

00:04:20.630 --> 00:04:21.640
with the Democrats,

00:04:21.640 --> 00:04:24.030
voted for President Reagan.

00:04:24.030 --> 00:04:26.190
And that was all around this idea

00:04:26.190 --> 00:04:27.940
that it was more about the candidate,

00:04:27.940 --> 00:04:29.830
especially at the presidential level

00:04:29.830 --> 00:04:32.420
than it is about the party.

00:04:32.420 --> 00:04:34.930
Now just as how the
candidate picking process

00:04:34.930 --> 00:04:36.370
has evolved over time,

00:04:36.370 --> 00:04:38.037
so has the voter mobilization

00:04:38.037 --> 00:04:40.580
and the campaign management.

00:04:40.580 --> 00:04:41.930
In the early days,

00:04:41.930 --> 00:04:44.150
a lot of the voter mobilization,

00:04:44.150 --> 00:04:46.290
in fact, if we think about the late 1800s

00:04:46.290 --> 00:04:48.210
where you have this party boss structure,

00:04:48.210 --> 00:04:51.630
you had people sometimes
going so far as even

00:04:51.630 --> 00:04:54.600
giving people things
in order to go and vote

00:04:54.600 --> 00:04:55.830
for one candidate or another.

00:04:55.830 --> 00:04:58.020
Or exerting some type of pressure.

00:04:58.020 --> 00:04:59.090
The late 1800s,

00:04:59.090 --> 00:05:00.720
or the second half of the 1800s,

00:05:00.720 --> 00:05:02.540
especially in places like Chicago

00:05:02.540 --> 00:05:03.430
and New York

00:05:03.430 --> 00:05:05.360
were sometimes infamous for

00:05:05.360 --> 00:05:08.240
not, the necessarily cleanest elections.

00:05:08.240 --> 00:05:10.170
But as you get into the 20th century,

00:05:10.170 --> 00:05:12.120
especially the second
half of the 20th century,

00:05:12.120 --> 00:05:14.090
and now the 21st century,

00:05:14.090 --> 00:05:15.300
things have become much,

00:05:15.300 --> 00:05:17.150
much more sophisticated.

00:05:17.150 --> 00:05:20.740
So if we go to the 20th century,

00:05:20.740 --> 00:05:23.323
you have significant use of mass media,

00:05:24.200 --> 00:05:26.170
mass media.

00:05:26.170 --> 00:05:28.910
And as you go into TV and newspaper,

00:05:28.910 --> 00:05:30.940
radio, and newspaper
has always been a factor

00:05:30.940 --> 00:05:32.160
in political elections

00:05:32.160 --> 00:05:33.820
going all the way back to the founding

00:05:33.820 --> 00:05:34.820
of the United States.

00:05:34.820 --> 00:05:37.180
And then as you go into the 21st century,

00:05:37.180 --> 00:05:38.810
things have gotten a lot more targeted.

00:05:38.810 --> 00:05:41.030
Obviously you can have email campaigns.

00:05:41.030 --> 00:05:43.240
You can start to leverage social media.

00:05:43.240 --> 00:05:45.320
And the 21st century in particular,

00:05:45.320 --> 00:05:47.640
things like email
campaigns and social media

00:05:47.640 --> 00:05:52.640
has allowed for very
specific targeting to voters.

00:05:52.740 --> 00:05:54.920
What do I mean by targeting?

00:05:54.920 --> 00:05:58.390
Well, let's say you really
care about economic issues

00:05:58.390 --> 00:06:01.320
while your cousin who lives across town

00:06:01.320 --> 00:06:03.030
really cares about social issues.

00:06:03.030 --> 00:06:03.960
The same candidate,

00:06:03.960 --> 00:06:06.090
instead of sending both
of you the same email,

00:06:06.090 --> 00:06:07.720
might send you a targeted message

00:06:07.720 --> 00:06:09.750
that speaks to what you care about.

00:06:09.750 --> 00:06:12.050
And this has actually become
very, very sophisticated

00:06:12.050 --> 00:06:14.000
in the last few years.

00:06:14.000 --> 00:06:14.980
I'll leave you there.

00:06:14.980 --> 00:06:16.280
But the big takeaway here

00:06:16.280 --> 00:06:18.630
is political parties have been around

00:06:18.630 --> 00:06:21.450
for a while in the United States.

00:06:21.450 --> 00:06:23.490
But they have been evolving.

00:06:23.490 --> 00:06:24.323
In this video,

00:06:24.323 --> 00:06:26.920
I'm not even talking
about how their platforms

00:06:26.920 --> 00:06:27.753
have evolved.

00:06:27.753 --> 00:06:29.710
And how their associations have evolved.

00:06:29.710 --> 00:06:31.700
But this is talking about
how they have evolved

00:06:31.700 --> 00:06:33.100
in terms of picking candidates.

00:06:33.100 --> 00:06:35.340
And how that has changed
the nature of campaigns.

00:06:35.340 --> 00:06:38.240
And also, how primarily
through the changes

00:06:38.240 --> 00:06:40.440
in culture and the changes in technology,

00:06:40.440 --> 00:06:41.990
how they can go about mobilizing

00:06:41.990 --> 00:06:45.143
and managing campaigns has also changed.


Linkage institutions and political parties

WEBVTT
Kind: captions
Language: en

00:00:00.230 --> 00:00:01.310
- [Instructor] In many videos,

00:00:01.310 --> 00:00:04.473
we have talked about the
makeup of government,

00:00:04.473 --> 00:00:06.970
either the federal or the state level.

00:00:06.970 --> 00:00:09.318
We've talked about branches of government.

00:00:09.318 --> 00:00:11.860
We've talked about checks and balances.

00:00:11.860 --> 00:00:13.950
What we're gonna talk about in this video

00:00:13.950 --> 00:00:17.370
is how people interface
with the government,

00:00:17.370 --> 00:00:18.540
and in particular,

00:00:18.540 --> 00:00:20.320
what are the channels that allow them

00:00:20.320 --> 00:00:22.360
to communicate their preferences?

00:00:22.360 --> 00:00:23.960
So this is the government here.

00:00:23.960 --> 00:00:26.220
And of course the government
is made up of people

00:00:26.220 --> 00:00:27.720
in the various branches.

00:00:27.720 --> 00:00:31.580
But let's say this is
all of us as citizens

00:00:33.040 --> 00:00:34.050
right over here.

00:00:34.050 --> 00:00:36.620
Now, we're always interfacing
with the government,

00:00:36.620 --> 00:00:38.750
or we're always interfacing with something

00:00:38.750 --> 00:00:40.750
that the government does.

00:00:40.750 --> 00:00:41.720
When we pay our taxes,

00:00:41.720 --> 00:00:43.050
we are interfacing with the government.

00:00:43.050 --> 00:00:43.950
When we try to,

00:00:43.950 --> 00:00:45.360
when we renew our passport,

00:00:45.360 --> 00:00:47.174
we are interfacing with the government.

00:00:47.174 --> 00:00:49.140
But what are the ways

00:00:49.140 --> 00:00:51.397
that we can communicate our preferences?

00:00:51.397 --> 00:00:55.123
Well, one very obvious
way is through elections.

00:00:56.040 --> 00:00:57.560
Obviously we can vote someone in,

00:00:57.560 --> 00:00:58.820
we can vote someone out.

00:00:58.820 --> 00:01:00.030
We can tell the government,

00:01:00.030 --> 00:01:01.411
are we happy with what they've been doing

00:01:01.411 --> 00:01:02.860
or are we not?

00:01:02.860 --> 00:01:04.450
What issues are important to us

00:01:04.450 --> 00:01:06.310
and which issues are not?

00:01:06.310 --> 00:01:08.920
Another institution that's considered

00:01:08.920 --> 00:01:11.230
a way to link the citizens

00:01:11.230 --> 00:01:14.878
or the people of a country with
its government is the media.

00:01:14.878 --> 00:01:17.230
Is the media.

00:01:17.230 --> 00:01:19.340
And I'll actually draw
a two-way arrow here,

00:01:19.340 --> 00:01:21.100
because it's a way for the government

00:01:21.100 --> 00:01:22.590
to communicate with everyone else,

00:01:22.590 --> 00:01:27.410
and it's also a way for views
to be heard and amplified,

00:01:27.410 --> 00:01:29.260
which the government might take note of.

00:01:29.260 --> 00:01:30.770
And these things would
influence each other.

00:01:30.770 --> 00:01:35.010
Obviously the media is capable
of influencing elections.

00:01:35.010 --> 00:01:37.790
Now, another way is interest groups.

00:01:37.790 --> 00:01:40.595
Another thing that we have
talked about in previous videos.

00:01:40.595 --> 00:01:42.300
So this is interest groups.

00:01:42.300 --> 00:01:45.140
And it could actually be
a two-way arrow where...

00:01:45.140 --> 00:01:45.973
Let me write this down.

00:01:45.973 --> 00:01:48.020
Interest groups.

00:01:48.020 --> 00:01:50.950
And we could be talking
about groups like AARP,

00:01:50.950 --> 00:01:53.530
the NAACP, or the NRA.

00:01:53.530 --> 00:01:55.040
People could be members of that

00:01:55.040 --> 00:01:56.600
or contribute to that interest group,

00:01:56.600 --> 00:01:58.860
and they are going to
lobby the government,

00:01:58.860 --> 00:02:01.120
they're going to try
to influence elections,

00:02:01.120 --> 00:02:03.260
they'll oftentimes
participate in the media,

00:02:03.260 --> 00:02:05.910
and interest groups are
also going the other way,

00:02:05.910 --> 00:02:08.125
where they're trying to get their members

00:02:08.125 --> 00:02:10.190
to go in one way or another,

00:02:10.190 --> 00:02:12.450
to adopt views of the interest group

00:02:12.450 --> 00:02:13.980
or maybe influence elections

00:02:13.980 --> 00:02:16.270
in ways that the interest
group might like.

00:02:16.270 --> 00:02:18.878
The fourth major channel for the citizenry

00:02:18.878 --> 00:02:22.980
to have this connection
with the government

00:02:22.980 --> 00:02:24.963
is through political parties.

00:02:25.830 --> 00:02:29.370
Political parties.

00:02:29.370 --> 00:02:31.700
And these four different ways

00:02:31.700 --> 00:02:33.680
of connecting the government with people,

00:02:33.680 --> 00:02:36.230
ways for the people to
communicate their preferences

00:02:36.230 --> 00:02:37.340
to the government,

00:02:37.340 --> 00:02:40.440
these are often listed
in government classes,

00:02:40.440 --> 00:02:44.170
and collectively, they're
known as linkage institutions.

00:02:44.170 --> 00:02:46.940
Linkage institutions.

00:02:46.940 --> 00:02:49.130
And they're called that
because they link people

00:02:49.130 --> 00:02:50.587
with their government.

00:02:50.587 --> 00:02:53.446
But what I'm gonna focus on
in this video in particular

00:02:53.446 --> 00:02:55.770
are political parties

00:02:55.770 --> 00:02:57.550
and the roles that they play.

00:02:57.550 --> 00:02:59.750
And we're all familiar
with political parties

00:02:59.750 --> 00:03:00.880
in the United States.

00:03:00.880 --> 00:03:04.330
The two major political
parties are the Democrats

00:03:04.330 --> 00:03:06.100
and the Republicans.

00:03:06.100 --> 00:03:07.980
But what do they fundamentally do?

00:03:07.980 --> 00:03:12.067
How do they play this role
as linkage institutions?

00:03:12.067 --> 00:03:14.880
Well, the parties will
have their platforms,

00:03:14.880 --> 00:03:16.420
so each of your political parties

00:03:16.420 --> 00:03:18.050
will have a party platform.

00:03:18.050 --> 00:03:20.350
And I encourage you to do a web search

00:03:20.350 --> 00:03:21.940
for the party platform,

00:03:21.940 --> 00:03:23.250
the Democratic platform

00:03:23.250 --> 00:03:25.130
or the Republican platform.

00:03:25.130 --> 00:03:27.030
It's really interesting to read,

00:03:27.030 --> 00:03:30.040
especially when you see
how 180 degree opposite

00:03:30.040 --> 00:03:31.240
the two different groups can have

00:03:31.240 --> 00:03:33.520
on some very similar issues.

00:03:33.520 --> 00:03:34.580
But it's a way of saying,

00:03:34.580 --> 00:03:36.170
what do they believe in?

00:03:36.170 --> 00:03:38.850
And once they articulate this platform,

00:03:38.850 --> 00:03:40.770
it can have multiple effects.

00:03:40.770 --> 00:03:43.430
It can influence the members of the party,

00:03:43.430 --> 00:03:46.970
because common citizens
indeed do become affiliated

00:03:46.970 --> 00:03:48.510
with various parties.

00:03:48.510 --> 00:03:51.410
But it could also
influence the politicians

00:03:51.410 --> 00:03:55.580
that are members of that
party in government.

00:03:55.580 --> 00:03:57.910
So it can affect both of those.

00:03:57.910 --> 00:03:58.743
Related to this idea

00:03:58.743 --> 00:04:02.470
of a party platform influencing citizens

00:04:02.470 --> 00:04:06.003
is this idea of voter
mobilization and education.

00:04:08.320 --> 00:04:09.940
With an upcoming election,

00:04:09.940 --> 00:04:11.410
they'll go to people who are either

00:04:11.410 --> 00:04:12.760
already members of the party,

00:04:12.760 --> 00:04:13.900
who affiliate with a party

00:04:13.900 --> 00:04:15.600
or might be sympathetic to a party,

00:04:15.600 --> 00:04:16.610
and say, look,

00:04:16.610 --> 00:04:19.660
here are the big issues that
are going to be affected

00:04:19.660 --> 00:04:21.340
by this upcoming election.

00:04:21.340 --> 00:04:22.600
Don't you care about it?

00:04:22.600 --> 00:04:24.840
If you vote for the other person,

00:04:24.840 --> 00:04:27.040
these things are going to go against you.

00:04:27.040 --> 00:04:31.010
Let's educate you on
our view of what is good

00:04:31.010 --> 00:04:32.810
for the local government,

00:04:32.810 --> 00:04:33.950
what is good for the state,

00:04:33.950 --> 00:04:35.600
what is good for the country.

00:04:35.600 --> 00:04:38.483
Political parties also
do candidate recruitment.

00:04:41.160 --> 00:04:43.450
A purist view of parties is, look,

00:04:43.450 --> 00:04:45.820
they care about changing the agenda

00:04:45.820 --> 00:04:47.220
or preserving an agenda,

00:04:47.220 --> 00:04:48.720
and so it's really important for them

00:04:48.720 --> 00:04:50.930
to field candidates that are capable

00:04:50.930 --> 00:04:52.920
of representing that agenda

00:04:52.920 --> 00:04:54.360
and capable of winning.

00:04:54.360 --> 00:04:55.420
If they don't do that,

00:04:55.420 --> 00:04:57.850
the political parties will
eventually become irrelevant

00:04:57.850 --> 00:05:00.970
because if they don't have
actual people who win elections

00:05:00.970 --> 00:05:01.803
and get into government,

00:05:01.803 --> 00:05:04.130
well, they'll also probably
start losing followers,

00:05:04.130 --> 00:05:06.280
because people don't like
to be part of a party

00:05:06.280 --> 00:05:08.450
that really does not have much influence.

00:05:08.450 --> 00:05:11.050
And so political parties
are always going out there

00:05:11.050 --> 00:05:12.000
and saying, okay,

00:05:12.000 --> 00:05:14.430
the opposition party has
a candidate like this.

00:05:14.430 --> 00:05:16.220
Here are the big issues on the table.

00:05:16.220 --> 00:05:18.170
Let's see if we can get a candidate

00:05:18.170 --> 00:05:20.950
that can really take
advantage of the circumstances

00:05:20.950 --> 00:05:21.960
in that region

00:05:21.960 --> 00:05:23.610
and has a high chance of winning

00:05:23.610 --> 00:05:25.810
while at the same time really representing

00:05:25.810 --> 00:05:27.525
what the party believes in.

00:05:27.525 --> 00:05:30.460
A fourth thing that parties will do,

00:05:30.460 --> 00:05:32.810
and this is related to
candidate recruitment,

00:05:32.810 --> 00:05:34.213
is campaign management,

00:05:35.430 --> 00:05:38.030
where you will have professional
political operatives

00:05:38.030 --> 00:05:39.530
associated with political parties,

00:05:39.530 --> 00:05:40.499
and they'll go from,

00:05:40.499 --> 00:05:42.770
they might be involved even
in the candidate recruitment,

00:05:42.770 --> 00:05:44.170
but once they get those candidates,

00:05:44.170 --> 00:05:46.159
they'll say, hey, we're
gonna help you win.

00:05:46.159 --> 00:05:49.190
Now, a fifth major function
of political parties,

00:05:49.190 --> 00:05:50.179
at least in the United States,

00:05:50.179 --> 00:05:52.930
just as these arrows
from the party platform

00:05:52.930 --> 00:05:54.290
to the general electorate,

00:05:54.290 --> 00:05:55.430
this is really,

00:05:55.430 --> 00:05:57.726
this right over here really
is that voter mobilization

00:05:57.726 --> 00:05:59.660
and that voter education.

00:05:59.660 --> 00:06:00.744
This arrow right over here,

00:06:00.744 --> 00:06:05.130
where the party platform is
influencing the government

00:06:05.130 --> 00:06:06.810
as it operates,

00:06:06.810 --> 00:06:08.840
a lot of this happens
through the committee

00:06:08.840 --> 00:06:11.533
and party leadership
system in legislatures.

00:06:12.950 --> 00:06:15.190
You have roles like majority party leader,

00:06:15.190 --> 00:06:16.550
majority party whip,

00:06:16.550 --> 00:06:17.880
minority party leader,

00:06:17.880 --> 00:06:19.740
and a lot of what they are doing

00:06:19.740 --> 00:06:22.120
is trying to take that party platform,

00:06:22.120 --> 00:06:23.442
what the party wants done,

00:06:23.442 --> 00:06:26.150
and make sure that all of
these folks in government,

00:06:26.150 --> 00:06:27.070
who not, who,

00:06:27.070 --> 00:06:28.340
just like the citizenry,

00:06:28.340 --> 00:06:30.780
don't always believe the exact same thing.

00:06:30.780 --> 00:06:32.880
They might be representing
very different regions.

00:06:32.880 --> 00:06:34.670
They might have different personal views.

00:06:34.670 --> 00:06:38.080
But to try to bring them in
line with the party platform.

00:06:38.080 --> 00:06:41.490
And the idea is that if
they unify around things

00:06:41.490 --> 00:06:42.740
and have a united front,

00:06:42.740 --> 00:06:44.770
that they're going to have more influence.

00:06:44.770 --> 00:06:45.603
Now, of course,

00:06:45.603 --> 00:06:47.070
that can sometimes go the other way,

00:06:47.070 --> 00:06:49.420
where both major parties are doing that,

00:06:49.420 --> 00:06:50.620
where it's all or nothing,

00:06:50.620 --> 00:06:52.350
you can get to a situation of gridlock,

00:06:52.350 --> 00:06:54.520
which we've talked about in other videos.

00:06:54.520 --> 00:06:55.587
But the big takeaway here,

00:06:55.587 --> 00:06:59.320
the common classification
for the institutions

00:06:59.320 --> 00:07:01.760
that link the people to the government,

00:07:01.760 --> 00:07:03.160
linkage institutions,

00:07:03.160 --> 00:07:06.170
that allow individuals to
communicate their preferences

00:07:06.170 --> 00:07:07.750
to policy-makers,

00:07:07.750 --> 00:07:10.820
are elections, the media, interest groups,

00:07:10.820 --> 00:07:12.090
and political parties.

00:07:12.090 --> 00:07:13.820
And political parties in particular.

00:07:13.820 --> 00:07:14.780
They have a platform.

00:07:14.780 --> 00:07:16.000
What do they represent?

00:07:16.000 --> 00:07:18.060
They mobilize and educate voters.

00:07:18.060 --> 00:07:20.870
They recruit candidates
and manage their campaigns.

00:07:20.870 --> 00:07:22.580
And then once those candidates win,

00:07:22.580 --> 00:07:24.583
they have this leadership structure

00:07:24.583 --> 00:07:26.484
that tries to get them to be aligned,

00:07:26.484 --> 00:07:29.883
especially around that party platform.


Voter turnout

WEBVTT
Kind: captions
Language: en

00:00:00.550 --> 00:00:02.350
- [Instructor] What we're going
to talk about in this video

00:00:02.350 --> 00:00:04.530
is Voter Turnout.

00:00:04.530 --> 00:00:06.670
Which is a way of thinking about, well,

00:00:06.670 --> 00:00:10.360
how many of the people who
could vote actually do vote?

00:00:10.360 --> 00:00:12.930
It's often expressed as a
number, as a percentage,

00:00:12.930 --> 00:00:17.580
where you have the number
who vote, number who vote,

00:00:17.580 --> 00:00:19.470
over the number of eligible voters.

00:00:19.470 --> 00:00:24.110
Number who could vote, who could vote.

00:00:24.110 --> 00:00:27.710
And this percentage
varies pretty dramatically

00:00:27.710 --> 00:00:31.270
from region to region, amongst
various demographic groups,

00:00:31.270 --> 00:00:33.120
we'll talk about that in a few minutes,

00:00:33.120 --> 00:00:34.760
and especially if you think about,

00:00:34.760 --> 00:00:38.510
even sometimes year to year
and from country to country.

00:00:38.510 --> 00:00:40.710
There's some countries
that have mandatory voting,

00:00:40.710 --> 00:00:42.150
where this number is a lot higher,

00:00:42.150 --> 00:00:43.840
other countries, for various reasons,

00:00:43.840 --> 00:00:45.650
this number could be lot lower.

00:00:45.650 --> 00:00:47.260
And one thing for you to think about

00:00:47.260 --> 00:00:48.510
if you're already of voting age,

00:00:48.510 --> 00:00:49.990
you might have already thought this,

00:00:49.990 --> 00:00:52.410
or if you're not voting
yet, you will soon,

00:00:52.410 --> 00:00:54.410
what would drive you to vote,

00:00:54.410 --> 00:00:55.760
or what would drive you to not vote?

00:00:55.760 --> 00:00:58.170
Stay home, or somehow
keep you from engaging

00:00:58.170 --> 00:01:00.610
in this political process.

00:01:00.610 --> 00:01:04.220
Well one thing that you'll
often hear folks say is

00:01:04.220 --> 00:01:06.150
does my vote matter?

00:01:06.150 --> 00:01:10.330
Does my vote matter?

00:01:10.330 --> 00:01:13.170
And the typical response that
you would get if you say that

00:01:13.170 --> 00:01:14.540
is well if everyone thought that,

00:01:14.540 --> 00:01:17.490
then democracy really won't function,

00:01:17.490 --> 00:01:19.400
so yes, your vote does matter.

00:01:19.400 --> 00:01:21.210
So that's the high-level
way of thinking about it,

00:01:21.210 --> 00:01:24.240
but everyone thinks about
this to a certain degree.

00:01:24.240 --> 00:01:27.870
And this idea of thinking
about whether your vote matters

00:01:27.870 --> 00:01:29.730
a fancy way of describing that

00:01:29.730 --> 00:01:32.950
is you're thinking about
your Political Efficacy.

00:01:32.950 --> 00:01:35.823
Political efficacy.

00:01:36.772 --> 00:01:38.222
Fancy political science term,

00:01:39.463 --> 00:01:40.450
but it's really just this idea of

00:01:41.492 --> 00:01:43.923
what's my belief about how
politically effective I can be

00:01:43.923 --> 00:01:45.860
when I vote.

00:01:45.860 --> 00:01:49.100
If I am in a battleground
State, say Florida,

00:01:49.100 --> 00:01:51.370
where even Presidential Elections

00:01:51.370 --> 00:01:53.730
have turned on a few hundreds of votes,

00:01:53.730 --> 00:01:55.250
in Florida, you might say, hey,

00:01:55.250 --> 00:01:57.140
I have high political efficacy.

00:01:57.140 --> 00:01:58.970
My vote does matter there.

00:01:58.970 --> 00:02:01.120
But some folks who live in a State

00:02:01.120 --> 00:02:04.180
that may be strongly leaning
towards one party or another

00:02:04.180 --> 00:02:05.650
during a Presidential Election,

00:02:05.650 --> 00:02:09.030
say a California, that
tends to go to a Democrat,

00:02:09.030 --> 00:02:11.720
or say a Texas, that tends
to go to a Republican,

00:02:11.720 --> 00:02:13.080
regardless of which party you are,

00:02:13.080 --> 00:02:14.400
you'd say, well if I'm just one more

00:02:14.400 --> 00:02:16.990
Republican vote in Texas,
does my vote matter?

00:02:16.990 --> 00:02:19.800
If I'm one more Democratic
vote in California,

00:02:19.800 --> 00:02:21.120
does my vote matter?

00:02:21.120 --> 00:02:23.330
I would encourage you in both
cases, your vote does matter.

00:02:23.330 --> 00:02:24.672
If everyone believed that,

00:02:24.672 --> 00:02:27.920
then our democracy does not function.

00:02:27.920 --> 00:02:31.200
Now a related idea to political efficacy

00:02:31.200 --> 00:02:36.061
is this idea of just
how engaged are people?

00:02:36.061 --> 00:02:38.061
So I'll call that engagement.

00:02:38.061 --> 00:02:39.850
And this might be, well
how much do they care?

00:02:39.850 --> 00:02:42.050
So beyond does my vote matter,

00:02:42.050 --> 00:02:44.950
there's a notion of do I care?

00:02:44.950 --> 00:02:46.790
There are certain elections

00:02:46.790 --> 00:02:49.610
where you might really like one candidate

00:02:49.610 --> 00:02:52.070
or might really dislike another candidate.

00:02:52.070 --> 00:02:54.910
You might think, hey, there's
some big issues on the table

00:02:54.910 --> 00:02:57.200
that rally affect my life.

00:02:57.200 --> 00:02:59.680
So I might be more engaged.

00:02:59.680 --> 00:03:01.990
Or frankly, the various candidates,

00:03:01.990 --> 00:03:05.190
or the various political parties
or community organizations

00:03:05.190 --> 00:03:08.410
might just be better at
engaging the population.

00:03:08.410 --> 00:03:09.810
Now a third dimension

00:03:09.810 --> 00:03:12.790
beyond whether people
believe their vote matters

00:03:12.790 --> 00:03:16.070
or how engaged they are in
the issues or the candidates

00:03:16.070 --> 00:03:19.070
is the structure around voting itself.

00:03:19.070 --> 00:03:22.080
What State Laws are there around voting,

00:03:22.080 --> 00:03:26.090
and how easy or how hard is it to vote?

00:03:26.090 --> 00:03:28.868
So, for example, if there's
a big window of time

00:03:28.868 --> 00:03:30.280
where people can vote,

00:03:30.280 --> 00:03:32.820
and if the polling places
are really accessible,

00:03:32.820 --> 00:03:35.160
especially if they're
available on say a holiday,

00:03:35.160 --> 00:03:38.600
then it might be easier for
people to actually go to vote.

00:03:38.600 --> 00:03:41.050
But on the other hand, if
they aren't that accessible,

00:03:41.050 --> 00:03:43.270
or if it's on a day where a lot
of folks might need to work,

00:03:43.270 --> 00:03:45.290
or certain demographics
might need to work,

00:03:45.290 --> 00:03:48.160
well they might be less
likely to turn out.

00:03:48.160 --> 00:03:50.760
You also have laws
around absentee ballots,

00:03:50.760 --> 00:03:52.730
or people being able
to vote ahead of time.

00:03:52.730 --> 00:03:54.870
The easier it is logistically to vote,

00:03:54.870 --> 00:03:56.270
the more accessible it is,

00:03:56.270 --> 00:03:58.340
you're gonna get a higher turnout.

00:03:58.340 --> 00:04:01.660
Now political scientists
don't just study voter turnout

00:04:01.660 --> 00:04:04.080
to understand the past.

00:04:04.080 --> 00:04:05.050
They look at the past

00:04:05.050 --> 00:04:07.030
to try and make predictions
about the future.

00:04:07.030 --> 00:04:08.740
The next Congressional Election,

00:04:08.740 --> 00:04:10.113
the next Presidential Election,

00:04:10.113 --> 00:04:13.240
if they're trying to figure
out which way it might go,

00:04:13.240 --> 00:04:16.070
you can't just survey
people alone and say,

00:04:16.070 --> 00:04:18.790
well are you gonna vote for
this candidate or that candidate

00:04:18.790 --> 00:04:19.670
because you also have to think about

00:04:19.670 --> 00:04:21.350
how likely are they to vote.

00:04:21.350 --> 00:04:24.570
And that likelihood could
be based on various factors.

00:04:24.570 --> 00:04:25.920
It might be based on their age,

00:04:25.920 --> 00:04:27.120
it might be based on their race,

00:04:27.120 --> 00:04:29.080
it might be based on
their education level.

00:04:29.080 --> 00:04:30.500
And to appreciate that,

00:04:30.500 --> 00:04:33.680
let's start taking a look at some data.

00:04:33.680 --> 00:04:34.900
This chart right over here

00:04:34.900 --> 00:04:37.010
shows voter turnout by sex and age

00:04:37.010 --> 00:04:40.640
in the 2008 US Presidential Election,

00:04:40.640 --> 00:04:44.230
where the blue bars are males,
and the red bars are females.

00:04:44.230 --> 00:04:47.090
And then you can see the
different age groups.

00:04:47.090 --> 00:04:48.090
And so pause this video.

00:04:48.090 --> 00:04:49.560
It's just fun to look at these things.

00:04:49.560 --> 00:04:51.853
What take-aways are there here?

00:04:53.210 --> 00:04:55.350
Well, you can see if you look at

00:04:55.350 --> 00:04:59.460
all of the eligible voters,
total, 18 years and over,

00:04:59.460 --> 00:05:02.660
that women had a higher
voter turn-out than men.

00:05:02.660 --> 00:05:07.660
60.4% of eligible women
vote, only 55.7% of men.

00:05:07.720 --> 00:05:09.600
Think about why that might be.

00:05:09.600 --> 00:05:11.130
What beliefs might women have

00:05:11.130 --> 00:05:15.080
around their own political
efficacy relative to men?

00:05:15.080 --> 00:05:16.440
Maybe they're more engaged,

00:05:16.440 --> 00:05:17.850
maybe there's issues on the table

00:05:17.850 --> 00:05:19.940
that they care more about.

00:05:19.940 --> 00:05:22.020
And then if you look by age group,

00:05:22.020 --> 00:05:24.430
that trend tends to be true.

00:05:24.430 --> 00:05:27.420
It's most pronounced at
the younger age groups,

00:05:27.420 --> 00:05:29.210
but then things get more and more equal

00:05:29.210 --> 00:05:31.160
as we go to the older age groups.

00:05:31.160 --> 00:05:33.220
The only place where
that trend breaks down

00:05:33.220 --> 00:05:35.470
is in 75 years and over.

00:05:35.470 --> 00:05:37.299
And then you also have the general trend

00:05:37.299 --> 00:05:41.090
that older folks are more likely to vote.

00:05:41.090 --> 00:05:43.600
Once again, why is that?

00:05:43.600 --> 00:05:45.810
Here's another interesting chart.

00:05:45.810 --> 00:05:48.590
This is voter turnout by
educational attainment,

00:05:48.590 --> 00:05:52.190
for the same US
Presidential Election, 2008.

00:05:52.190 --> 00:05:56.540
So you can see that on average,
across all education levels,

00:05:56.540 --> 00:06:00.780
you have this voter turnout around 58.2%,

00:06:00.780 --> 00:06:02.950
but the more educated people get,

00:06:02.950 --> 00:06:05.590
the more they're likely, or
at least in that election,

00:06:05.590 --> 00:06:08.630
the more likely they
were to actually vote.

00:06:08.630 --> 00:06:11.720
The more educated people are,
they might feel more engaged,

00:06:11.720 --> 00:06:14.720
they might have a better belief
that their vote is effective

00:06:14.720 --> 00:06:17.590
so they have a belief
around political efficacy.

00:06:17.590 --> 00:06:22.110
This is voter turnout in the
2008 US Presidential Election

00:06:22.110 --> 00:06:24.210
by race and ethnicity.

00:06:24.210 --> 00:06:27.550
And so here you see that in that election,

00:06:27.550 --> 00:06:32.550
White voters had 64.8%
turnout, Black voters 60.8%,

00:06:32.910 --> 00:06:35.500
and you can see Asian and Hispanic voters

00:06:35.500 --> 00:06:37.010
were much, much lower.

00:06:37.010 --> 00:06:39.040
What does this say about
political engagement,

00:06:39.040 --> 00:06:39.873
and what does it say

00:06:39.873 --> 00:06:42.770
about their beliefs
around political efficacy?

00:06:42.770 --> 00:06:44.960
And to see trends over time,

00:06:44.960 --> 00:06:48.380
I'm going to go to the
site of FairVote.org,

00:06:48.380 --> 00:06:51.010
which is a really great
non-partisan non-profit

00:06:51.010 --> 00:06:52.830
that is trying to think about

00:06:52.830 --> 00:06:55.610
how to we get a better democracy.

00:06:55.610 --> 00:06:57.570
So this diagram right over here

00:06:57.570 --> 00:07:01.900
shows voter turnout
rates from 1916 to 2016.

00:07:01.900 --> 00:07:04.130
And there's two different lines here.

00:07:04.130 --> 00:07:06.260
The top one is in Presidential Elections,

00:07:06.260 --> 00:07:08.580
this is the 2016 Presidential Election,

00:07:08.580 --> 00:07:10.200
and this bottom line right over here

00:07:10.200 --> 00:07:11.700
is the Mid-Term elections.

00:07:11.700 --> 00:07:14.410
So this is where there isn't
someone running for president.

00:07:14.410 --> 00:07:18.360
Why do you think that
there's such a big gap here?

00:07:18.360 --> 00:07:20.310
That pretty consistently,

00:07:20.310 --> 00:07:22.610
you have a much higher voter turnout

00:07:22.610 --> 00:07:24.430
in this, depending on
what year you look at,

00:07:24.430 --> 00:07:28.810
but say in 2016, you
have a 60% voter turnout,

00:07:28.810 --> 00:07:31.560
while in the Mid-Term Election of 2014,

00:07:31.560 --> 00:07:33.110
you didn't even break 40%.

00:07:33.110 --> 00:07:35.940
You had little under 36% voter turnout.

00:07:35.940 --> 00:07:38.683
Why do you think you have this big gap?

00:07:39.690 --> 00:07:41.620
Well you could probably
turn to these ideas

00:07:41.620 --> 00:07:44.220
of political efficacy and engagement.

00:07:44.220 --> 00:07:46.860
One thing that people talk
about around Congressional Seats

00:07:46.860 --> 00:07:49.810
is that there tends to not be
a lot of turnover around it.

00:07:49.810 --> 00:07:51.240
In other videos, we've talked about

00:07:51.240 --> 00:07:54.910
how the districts might be
shaped to benefit incumbents,

00:07:54.910 --> 00:07:57.420
the entire process might
be benefiting incumbents,

00:07:57.420 --> 00:07:58.330
so people might say, hey,

00:07:58.330 --> 00:08:00.690
I have a very low political efficacy here.

00:08:00.690 --> 00:08:03.060
Most Congresspeople
tend to stay in office,

00:08:03.060 --> 00:08:06.493
so maybe that's why they
don't really go out to vote,

00:08:06.493 --> 00:08:09.300
and there might be an
engagement thing going on,

00:08:09.300 --> 00:08:10.930
that on Presidential years,

00:08:10.930 --> 00:08:14.100
where also Congresspeople
are up for re-election,

00:08:14.100 --> 00:08:15.320
or up for election,

00:08:15.320 --> 00:08:16.610
the reason why people go out to vote

00:08:16.610 --> 00:08:17.800
is that Presidential Elections

00:08:17.800 --> 00:08:19.620
are these really big dramatic things,

00:08:19.620 --> 00:08:20.800
they take over the press,

00:08:20.800 --> 00:08:22.730
they take over everyone's attention.

00:08:22.730 --> 00:08:24.460
Now another interesting thing
to think about is the trend.

00:08:24.460 --> 00:08:26.940
Why, say, in Presidential Elections,

00:08:26.940 --> 00:08:28.740
actually in Presidential
and in Mid-Term Elections,

00:08:28.740 --> 00:08:33.740
do you have such high
engagement in the 1960s,

00:08:33.970 --> 00:08:38.500
relative to, say, the 1980s and 1990s,

00:08:38.500 --> 00:08:40.400
where things got pretty low?

00:08:40.400 --> 00:08:42.393
One argument could be
that the 1960s was a time

00:08:42.393 --> 00:08:44.810
of very high political engagement.

00:08:44.810 --> 00:08:46.550
You had the Vietnam War going on,

00:08:46.550 --> 00:08:48.630
you had the Civil Rights Movement.

00:08:48.630 --> 00:08:52.330
Now if we scroll down on
FairVote right over here,

00:08:52.330 --> 00:08:56.690
we can see voter turnout in
the 2016 elections by State.

00:08:56.690 --> 00:09:01.020
And the deeper the purple
here, the higher the turnout.

00:09:01.020 --> 00:09:03.560
And so what patterns do you see here?

00:09:03.560 --> 00:09:04.650
And I'll give you a hint.

00:09:04.650 --> 00:09:07.020
Think about which States
are battleground States.

00:09:07.020 --> 00:09:09.280
The ones that could flip either way,

00:09:09.280 --> 00:09:11.090
or the ones that could
have flipped either way

00:09:11.090 --> 00:09:12.693
in the 2016 election.

00:09:13.710 --> 00:09:15.250
Well you can see the deeper purple

00:09:15.250 --> 00:09:19.579
are on States like Florida,
or in States like Ohio,

00:09:19.579 --> 00:09:23.250
or Wisconsin and (mumbles), Michigan.

00:09:23.250 --> 00:09:26.230
These are indeed battleground States.

00:09:26.230 --> 00:09:28.240
So you can imagine folks in those States

00:09:28.240 --> 00:09:31.253
believed that they had
higher political efficacy.

00:09:32.610 --> 00:09:36.020
Now in the 2014 elections,
you don't see it as dramatic.

00:09:36.020 --> 00:09:38.130
This is a Mid-Term election year.

00:09:38.130 --> 00:09:39.460
So people are thinking a lot less

00:09:39.460 --> 00:09:42.340
about the Electoral College
and Presidential Elections,

00:09:42.340 --> 00:09:43.930
so it isn't as all or nothing

00:09:43.930 --> 00:09:45.340
as they are in the Electoral College

00:09:45.340 --> 00:09:46.570
in the Presidential Elections,

00:09:46.570 --> 00:09:48.210
so you don't see it as pronounced.

00:09:48.210 --> 00:09:50.350
But if you go back to 2012,

00:09:50.350 --> 00:09:52.660
which was a Presidential Election year,

00:09:52.660 --> 00:09:54.620
you see the same pattern again.

00:09:54.620 --> 00:09:57.740
That the battleground
States are a deeper color.

00:09:57.740 --> 00:09:59.190
So I will leave you there.

00:09:59.190 --> 00:10:02.300
You should vote, that's just
my public service message,

00:10:02.300 --> 00:10:04.050
but it's interesting to think about

00:10:04.050 --> 00:10:07.153
why, in general, voter
turnout might change.


Models of voting behavior

WEBVTT
Kind: captions
Language: en

00:00:00.140 --> 00:00:00.973
- What we're going to do

00:00:00.973 --> 00:00:05.630
in this video is start to
think about voting behavior,

00:00:05.630 --> 00:00:06.760
and in particular,

00:00:06.760 --> 00:00:09.470
we're going to start
classifying motivations

00:00:09.470 --> 00:00:13.040
for why someone votes for
a particular candidate,

00:00:13.040 --> 00:00:14.990
and I'm going to introduce some terms

00:00:14.990 --> 00:00:17.960
that will impress your
political science friends,

00:00:17.960 --> 00:00:20.440
but you'll see that they map two things

00:00:20.440 --> 00:00:22.580
that we see every day or
even behaviors that we see

00:00:22.580 --> 00:00:25.550
in ourselves in a pretty intuitive way.

00:00:25.550 --> 00:00:28.810
So one pretty clear reason
why someone might vote

00:00:28.810 --> 00:00:31.660
for one candidate or another is

00:00:31.660 --> 00:00:33.360
because of their political party,

00:00:33.360 --> 00:00:37.970
and so this would be referred
to as party-line voting.

00:00:37.970 --> 00:00:40.250
Party-line voting.

00:00:40.250 --> 00:00:43.010
So if your family has
always been a Republican,

00:00:43.010 --> 00:00:44.100
and you're a Republican,

00:00:44.100 --> 00:00:47.200
and you just always support
the Republican candidate,

00:00:47.200 --> 00:00:50.760
that would be party-line voting.

00:00:50.760 --> 00:00:52.770
Now, another behavior

00:00:52.770 --> 00:00:56.910
that political scientists will
often talk about is the idea

00:00:56.910 --> 00:00:58.483
of rational choice.

00:00:59.320 --> 00:01:02.460
Rational choice,

00:01:02.460 --> 00:01:05.360
and this is the idea that
someone would choose to vote

00:01:05.360 --> 00:01:08.220
for one candidate or another
based on a perception

00:01:08.220 --> 00:01:12.210
of which candidate is going
to benefit them the most,

00:01:12.210 --> 00:01:15.350
which one would it be rational
for their own wellbeing.

00:01:15.350 --> 00:01:18.527
So for example, if you
said, "Hey, you know what?

00:01:18.527 --> 00:01:20.817
"I really care about
the corporate tax rate.

00:01:20.817 --> 00:01:22.487
"I'm the CEO of a corporation.

00:01:22.487 --> 00:01:24.767
"If my corporate tax rate were to go down,

00:01:24.767 --> 00:01:27.287
"then I would be able to have
a more thriving business,

00:01:27.287 --> 00:01:30.357
"and I think one candidate
is going to do better for me

00:01:30.357 --> 00:01:31.857
"on the corporate tax rate,

00:01:31.857 --> 00:01:33.880
"and I'm gonna vote for
them because of that,"

00:01:33.880 --> 00:01:37.680
that would be your rational
choice, your model,

00:01:37.680 --> 00:01:39.360
what's driving your voting behaviors,

00:01:39.360 --> 00:01:41.540
what's gonna benefit me.

00:01:41.540 --> 00:01:44.010
Now, another classification

00:01:44.010 --> 00:01:47.740
that you will hear talked
about is retrospective voting.

00:01:47.740 --> 00:01:49.333
Retrospective,

00:01:50.660 --> 00:01:52.740
and this is the idea that,

00:01:52.740 --> 00:01:54.740
hey, I'm just gonna vote for someone

00:01:54.740 --> 00:01:56.810
if it seems like they've
been doing a good job,

00:01:56.810 --> 00:01:59.120
or if it seems like
things have been improving

00:01:59.120 --> 00:02:00.220
under their watch.

00:02:00.220 --> 00:02:01.730
You're looking in retrospect,

00:02:01.730 --> 00:02:04.487
and this will often be
for incumbents, and say,

00:02:04.487 --> 00:02:06.467
"Hey, look, yeah, the last
term was pretty good with them,

00:02:06.467 --> 00:02:08.950
"so I'm gonna vote for them again."

00:02:08.950 --> 00:02:11.960
Now, the last classification
we will introduce

00:02:11.960 --> 00:02:14.970
in this video is the opposite
of retrospective voting,

00:02:14.970 --> 00:02:18.270
and this is looking into the
future, prospective voting.

00:02:18.270 --> 00:02:22.000
Prospective voting,

00:02:22.000 --> 00:02:24.587
and here, you might look
at one candidate and say,

00:02:24.587 --> 00:02:27.847
"Look, I think that they will
be better for the country

00:02:27.847 --> 00:02:30.540
"over the next four years."

00:02:30.540 --> 00:02:31.750
You're not even necessarily thinking

00:02:31.750 --> 00:02:33.410
about your own personal benefit.

00:02:33.410 --> 00:02:35.130
You're thinking about
the country as a whole,

00:02:35.130 --> 00:02:36.280
but you're looking forward.

00:02:36.280 --> 00:02:38.820
You're looking prospectively
and thinking about, hey,

00:02:38.820 --> 00:02:40.500
candidate A I think is
gonna do a better job,

00:02:40.500 --> 00:02:42.740
so I'm gonna vote for her.

00:02:42.740 --> 00:02:45.270
So with these classifications
out of the way,

00:02:45.270 --> 00:02:47.310
let's look at some statements
that you might hear

00:02:47.310 --> 00:02:50.160
from folks when they think
about who they are voting for.

00:02:51.130 --> 00:02:53.387
So here, it says,

00:02:53.387 --> 00:02:54.987
"The economy has been growing

00:02:54.987 --> 00:02:58.460
"under Clinton so he has my vote."

00:02:58.460 --> 00:02:59.610
So pause this video,

00:02:59.610 --> 00:03:03.403
and how would you classify
this motivation for voting?

00:03:05.170 --> 00:03:07.760
Well, here, the person, the voter,

00:03:07.760 --> 00:03:11.640
is talking about the
economy in the recent past.

00:03:11.640 --> 00:03:15.880
So this right over here
is retrospective voting.

00:03:15.880 --> 00:03:17.240
So I'll draw a line right over there.

00:03:17.240 --> 00:03:18.970
That is retrospective voting.

00:03:18.970 --> 00:03:20.280
Clinton seems to have
been doing a good job,

00:03:20.280 --> 00:03:22.585
where the economy's
been growing under him,

00:03:22.585 --> 00:03:26.143
so he has my vote.

00:03:27.460 --> 00:03:29.737
Now what about this statement?

00:03:29.737 --> 00:03:34.737
"I'm a lifelong Democrat
so Obama has my vote."

00:03:35.030 --> 00:03:35.863
Pause this video.

00:03:35.863 --> 00:03:38.083
What type of voting behavior is that?

00:03:39.800 --> 00:03:42.780
Well, here, the individual
is clearly motivated

00:03:42.780 --> 00:03:43.930
by their party line.

00:03:43.930 --> 00:03:46.890
They're not talking about
Obama being good for them,

00:03:46.890 --> 00:03:47.723
in particular.

00:03:47.723 --> 00:03:49.200
They're not talking about
what Obama's gonna do

00:03:49.200 --> 00:03:51.200
in the future or what he's
done in the recent past.

00:03:51.200 --> 00:03:52.330
They're just talking about his party

00:03:52.330 --> 00:03:55.360
and that being the motivation
for voting for him.

00:03:55.360 --> 00:03:59.040
So that would be party line voting.

00:03:59.040 --> 00:04:01.257
Now what about this statement?

00:04:01.257 --> 00:04:04.590
"Bush has ideas that will be
really good for this country

00:04:04.590 --> 00:04:06.160
so I'm going to vote for him."

00:04:06.160 --> 00:04:06.993
Pause this video.

00:04:06.993 --> 00:04:08.973
What type of voting behavior is that?

00:04:09.950 --> 00:04:13.040
Well, here, the voter's
thinking prospectively,

00:04:13.040 --> 00:04:15.870
thinking about, well, what
will Bush do for the country

00:04:15.870 --> 00:04:19.220
in the near future, ideas
that will be really good

00:04:19.220 --> 00:04:20.450
for this country?

00:04:20.450 --> 00:04:24.590
So that is prospective voting,

00:04:24.590 --> 00:04:28.410
and then one more example...

00:04:28.410 --> 00:04:30.827
So if someone were to say,

00:04:30.827 --> 00:04:33.237
"I think Mitt Romney will lower my taxes

00:04:33.237 --> 00:04:36.080
"so I'm going to vote for
him," what would that be?

00:04:36.080 --> 00:04:37.180
Pause the video again.

00:04:38.240 --> 00:04:40.220
Well, we have one choice left here,

00:04:40.220 --> 00:04:43.000
and that is indeed rational choice.

00:04:43.000 --> 00:04:47.260
This voter is voting based on
what is going to benefit them.

00:04:47.260 --> 00:04:48.870
Mitt Romney's gonna lower their taxes,

00:04:48.870 --> 00:04:50.490
so they're gonna vote for them,

00:04:50.490 --> 00:04:51.820
and to be clear,

00:04:51.820 --> 00:04:54.460
it's not that everyone's
behavior falls clearly

00:04:54.460 --> 00:04:56.250
into one of these categories.

00:04:56.250 --> 00:04:58.650
It oftentimes will be a
mix of these categories.

00:04:58.650 --> 00:05:00.727
In fact, oftentimes someone might say,

00:05:00.727 --> 00:05:03.477
"Hey, I like Obama 'cause he's a Democrat,

00:05:03.477 --> 00:05:06.180
"and I think he's going
to be good for me,"

00:05:06.180 --> 00:05:07.950
and things might've been good under him,

00:05:07.950 --> 00:05:10.100
or the perception is that
things are good under him,

00:05:10.100 --> 00:05:11.300
and they might believe

00:05:11.300 --> 00:05:13.290
that it's gonna be good going forward.

00:05:13.290 --> 00:05:17.003
Many voters will be motivated
by a combination of these.


Demand curve for money in the money market

WEBVTT
Kind: captions
Language: en

00:00:00.620 --> 00:00:02.410
- [Instructor] What we're
going to do in this video

00:00:02.410 --> 00:00:04.700
is talk a lot about money.

00:00:04.700 --> 00:00:05.780
And in particular,

00:00:05.780 --> 00:00:08.870
we're gonna talk about
the market for money.

00:00:08.870 --> 00:00:11.450
And this might seem a
little bit counterintuitive,

00:00:11.450 --> 00:00:12.320
because we're used to thinking

00:00:12.320 --> 00:00:14.690
about the market in other things,

00:00:14.690 --> 00:00:17.290
and we use money as a
way to think about price,

00:00:17.290 --> 00:00:19.970
we use money as a way to
facilitate transactions.

00:00:19.970 --> 00:00:22.690
But now, the market is money itself.

00:00:22.690 --> 00:00:24.150
So the first question is,

00:00:24.150 --> 00:00:27.630
how do we somehow come
up with a cost of money?

00:00:27.630 --> 00:00:28.780
And to help us with that,

00:00:28.780 --> 00:00:30.760
I'll give you a little bit
of a thought experiment.

00:00:30.760 --> 00:00:33.560
Let's say that we had a
very, very simple world

00:00:33.560 --> 00:00:35.430
where you had two options.

00:00:35.430 --> 00:00:37.950
You could have your cash money.

00:00:37.950 --> 00:00:41.480
You could have a hundred
dollars in cash, just like that.

00:00:41.480 --> 00:00:45.030
Or, you could lend that hundred
dollars to the government,

00:00:45.030 --> 00:00:46.610
and the government would pay you back,

00:00:46.610 --> 00:00:49.550
in a month, 101 dollars.

00:00:49.550 --> 00:00:53.210
So your other option,
we'll call that a bond,

00:00:53.210 --> 00:00:55.090
a bond, which is really,

00:00:55.090 --> 00:00:56.800
you're lending in this situation,

00:00:56.800 --> 00:00:58.840
you're lending this
money to the government.

00:00:58.840 --> 00:01:00.440
Let's assume that it is risk-free,

00:01:00.440 --> 00:01:02.670
that the government is good for the money.

00:01:02.670 --> 00:01:03.730
You can also have bonds

00:01:03.730 --> 00:01:05.780
where you're lending to other entities,

00:01:05.780 --> 00:01:08.090
like states, or to corporations.

00:01:08.090 --> 00:01:10.750
But let's say that this is
a federal government bond,

00:01:10.750 --> 00:01:12.840
and in one month,

00:01:12.840 --> 00:01:15.160
it costs a hundred dollars.

00:01:15.160 --> 00:01:17.990
It costs 100 dollars.

00:01:17.990 --> 00:01:21.483
And in one month, in one month,

00:01:22.390 --> 00:01:24.530
the government will pay back...

00:01:24.530 --> 00:01:29.333
Government pays back 101 dollars.

00:01:31.380 --> 00:01:33.640
So my question to you is,

00:01:33.640 --> 00:01:37.190
if you decide, instead
of buying this bond,

00:01:37.190 --> 00:01:39.450
and then having the
government pay you back

00:01:39.450 --> 00:01:40.920
in a month for 101 dollars.

00:01:40.920 --> 00:01:42.240
Instead of that, if you decide,

00:01:42.240 --> 00:01:44.400
'Hey, you know what,
that sounds interesting,

00:01:44.400 --> 00:01:47.410
'but I just like the feel of cash.'

00:01:47.410 --> 00:01:50.563
What is the opportunity
cost of holding the cash?

00:01:52.170 --> 00:01:54.020
Pause the video and think about that.

00:01:55.330 --> 00:01:57.760
Well, if you decide to hold this cash

00:01:57.760 --> 00:02:00.060
instead of buying this government bond,

00:02:00.060 --> 00:02:02.950
instead of lending it to the
government for that month,

00:02:02.950 --> 00:02:05.380
you are foregoing one dollar.

00:02:05.380 --> 00:02:07.280
So your opportunity cost right over here,

00:02:07.280 --> 00:02:12.280
you could view it as one
dollar over the month.

00:02:12.470 --> 00:02:13.550
Or, if you think about it

00:02:13.550 --> 00:02:15.560
in terms of how much money this is,

00:02:15.560 --> 00:02:18.980
you have a one-percent opportunity cost.

00:02:18.980 --> 00:02:20.900
Opportunity cost.

00:02:23.000 --> 00:02:24.940
And as we are about to see,

00:02:24.940 --> 00:02:27.410
we think about the opportunity cost

00:02:27.410 --> 00:02:30.200
of holding the money as its cost

00:02:30.200 --> 00:02:32.300
in the money market.

00:02:32.300 --> 00:02:34.520
So let me draw some axes here,

00:02:34.520 --> 00:02:38.440
to start thinking about this money market.

00:02:38.440 --> 00:02:39.440
Alright?

00:02:39.440 --> 00:02:41.510
So let's call this vertical axis

00:02:41.510 --> 00:02:44.367
the nominal interest rate.

00:02:44.367 --> 00:02:49.367
Nominal interest rate.

00:02:50.050 --> 00:02:53.830
Sometimes you'll see
NIR, it's abbreviated.

00:02:53.830 --> 00:02:54.720
But we'll just write it out,

00:02:54.720 --> 00:02:57.020
the nominal interest rate in that axis.

00:02:57.020 --> 00:03:00.160
And the reason I'm focusing
on the nominal interest rate

00:03:00.160 --> 00:03:02.440
is, we don't know, in this situation,

00:03:02.440 --> 00:03:03.760
what inflation is.

00:03:03.760 --> 00:03:05.870
We don't know how to calculate
the real interest rate

00:03:05.870 --> 00:03:06.770
in this situation,

00:03:06.770 --> 00:03:08.060
and that's what people look at

00:03:08.060 --> 00:03:09.360
when they're making these decisions.

00:03:09.360 --> 00:03:12.160
People aren't constantly
calculating the real interest rate

00:03:12.160 --> 00:03:13.910
because they know
exactly what inflation is

00:03:13.910 --> 00:03:15.320
in exactly that moment.

00:03:15.320 --> 00:03:16.210
They can just see,

00:03:16.210 --> 00:03:18.850
'Hey, I could either keep this
hundred dollars in my pocket,

00:03:18.850 --> 00:03:20.523
'or I could lend it to the government

00:03:20.523 --> 00:03:23.590
'and a month later get 101 dollars.'

00:03:23.590 --> 00:03:25.290
So we're gonna have the
nominal interest rate

00:03:25.290 --> 00:03:27.130
on this axis, right over here.

00:03:27.130 --> 00:03:30.310
And then in the horizontal axis,

00:03:30.310 --> 00:03:33.680
I am going to have the quantity of money.

00:03:33.680 --> 00:03:38.010
Quantity of money.

00:03:38.010 --> 00:03:39.680
And there is multiple ways

00:03:39.680 --> 00:03:42.580
of thinking about which
measure of money supply,

00:03:42.580 --> 00:03:45.110
and we're gonna think about
that in future videos,

00:03:45.110 --> 00:03:46.700
but we'll get to that in a second.

00:03:46.700 --> 00:03:48.040
The first thing I wanna do

00:03:48.040 --> 00:03:53.040
is construct a demand curve for money.

00:03:53.710 --> 00:03:55.470
So let me ask you a question.

00:03:55.470 --> 00:03:58.990
If nominal interest rates are really high,

00:03:58.990 --> 00:04:01.790
so instead of getting 101
dollars back after a month,

00:04:01.790 --> 00:04:03.740
if you were to get, I'll
say something extreme,

00:04:03.740 --> 00:04:07.579
if you were to get 200
dollars back in a month,

00:04:07.579 --> 00:04:10.270
would you want to keep a lot of money?

00:04:10.270 --> 00:04:11.103
Or would you say,

00:04:11.103 --> 00:04:13.907
'Hey, no, I would rather lend
that money to the government.'

00:04:14.840 --> 00:04:17.300
Well, yes, common sense would tell you,

00:04:17.300 --> 00:04:20.710
is if the nominal interest
rate is quite high,

00:04:20.710 --> 00:04:25.140
then people will perhaps choose
to forego holding the money,

00:04:25.140 --> 00:04:28.610
and so the quantity of
money might be lower.

00:04:28.610 --> 00:04:32.200
So we might be in a situation like this.

00:04:32.200 --> 00:04:33.660
High nominal interest rate,

00:04:33.660 --> 00:04:36.380
hey, that's a high-opportunity
cost from holding this cash.

00:04:36.380 --> 00:04:38.080
I might wanna lend it to the government,

00:04:38.080 --> 00:04:40.020
or to somebody else.

00:04:40.020 --> 00:04:43.250
Now, what if the nominal
interest rate were really low.

00:04:43.250 --> 00:04:44.250
Let's say the government says,

00:04:44.250 --> 00:04:46.880
'Hey, you let me borrow a
hundred dollars right now,

00:04:46.880 --> 00:04:49.213
'in a month I will give
you a hundred dollars

00:04:49.213 --> 00:04:51.260
'and a tenth of a penny.'

00:04:51.260 --> 00:04:52.093
Well then you're like,

00:04:52.093 --> 00:04:53.260
'Gee, that doesn't make a lot of sense.

00:04:53.260 --> 00:04:56.510
'I would really like to
keep my hundred dollars.

00:04:56.510 --> 00:04:57.790
'I might need it,

00:04:57.790 --> 00:04:59.980
'I might need to do some
transactions with it,

00:04:59.980 --> 00:05:02.477
'I might want it to be around

00:05:02.477 --> 00:05:05.573
'in case the ATM system
goes out, whatever.

00:05:05.573 --> 00:05:08.450
'You know, there's a hurricane,
whatever it might be.'

00:05:08.450 --> 00:05:10.790
And so at a low nominal interest rate,

00:05:10.790 --> 00:05:13.100
it makes sense that
people would wanna hold,

00:05:13.100 --> 00:05:14.930
or more likely to hold their cash.

00:05:14.930 --> 00:05:17.810
And so you would have
higher quantity of money.

00:05:17.810 --> 00:05:21.400
And so that explains
why economists assume,

00:05:21.400 --> 00:05:23.710
often abbreviated as MD,

00:05:23.710 --> 00:05:25.620
so this is the demand curve for money,

00:05:25.620 --> 00:05:27.810
is downward sloping.

00:05:27.810 --> 00:05:29.730
And if we wanted to get a
little bit more technical,

00:05:29.730 --> 00:05:33.380
some terms that you might
see in an economics class,

00:05:33.380 --> 00:05:36.190
the famous economist John Maynard Keynes

00:05:36.190 --> 00:05:38.450
came up with three particular motives

00:05:38.450 --> 00:05:40.430
for this downward-sloping curve,

00:05:40.430 --> 00:05:42.380
some of which I've already talked about.

00:05:42.380 --> 00:05:45.100
The first he calls the
transactions motive.

00:05:45.100 --> 00:05:46.693
Transactions.

00:05:47.940 --> 00:05:51.490
And that's the idea that
one of the primary reasons

00:05:51.490 --> 00:05:52.710
you would wanna keep cash is,

00:05:52.710 --> 00:05:53.660
well, you might need to use it

00:05:53.660 --> 00:05:55.310
if you wanna go buy a candy bar,

00:05:55.310 --> 00:05:57.600
or a buy a pet iguana,

00:05:57.600 --> 00:05:59.060
that you want that money around.

00:05:59.060 --> 00:06:00.520
If you have it lent to the government

00:06:00.520 --> 00:06:02.570
and then all of a sudden
you see your dream iguana,

00:06:02.570 --> 00:06:05.120
then you have to wait a
month in order to do it.

00:06:05.120 --> 00:06:07.430
So that would be your transactions motive.

00:06:07.430 --> 00:06:09.770
A reason, a motivation to hold money.

00:06:09.770 --> 00:06:11.250
But once again, the reason why we have

00:06:11.250 --> 00:06:12.510
this downward-sloping curve is,

00:06:12.510 --> 00:06:15.150
if nominal interest rates are really high,

00:06:15.150 --> 00:06:16.690
if the government is willing to pay you

00:06:16.690 --> 00:06:18.690
a lot back in a month, then you might say,

00:06:18.690 --> 00:06:20.470
'You know what, I'm
willing to take the risk.

00:06:20.470 --> 00:06:22.140
'Even if I see that dream iguana,

00:06:22.140 --> 00:06:24.150
'if I lend the money
to the government now,

00:06:24.150 --> 00:06:26.750
'in a month, I might be
able to buy two iguanas,

00:06:26.750 --> 00:06:28.920
'even if they aren't
quite my dream iguana.'

00:06:28.920 --> 00:06:32.820
And likewise, if nominal
interest rates go really down,

00:06:32.820 --> 00:06:33.653
you could say, 'Well you know what,

00:06:33.653 --> 00:06:34.904
'it's not worth it for me to risk

00:06:34.904 --> 00:06:38.380
'not being able to buy that
perfect iguana when it shows up,

00:06:38.380 --> 00:06:40.340
'so I'm not going to lend
it to the government.'

00:06:40.340 --> 00:06:43.250
And so the overall quantity of money,

00:06:43.250 --> 00:06:46.840
more people are going to
keep cash in their pockets.

00:06:46.840 --> 00:06:48.870
Now another motive that Keynes talks about

00:06:48.870 --> 00:06:50.763
is the precautionary motive.

00:06:51.910 --> 00:06:53.100
And this is the idea

00:06:53.100 --> 00:06:55.500
that you might wanna just keep cash around

00:06:55.500 --> 00:06:57.360
in case there's an emergency.

00:06:57.360 --> 00:06:59.530
Let's say the lights go
out, there's an earthquake,

00:06:59.530 --> 00:07:02.090
there's a hurricane,
the ATM system goes out.

00:07:02.090 --> 00:07:04.510
Maybe there's a banking
holiday for some reason,

00:07:04.510 --> 00:07:08.470
and you're going to need some
of that cash for transactions.

00:07:08.470 --> 00:07:10.280
But once again, it's more precautionary

00:07:10.280 --> 00:07:11.820
for that rainy day.

00:07:11.820 --> 00:07:13.930
For that bad situation.

00:07:13.930 --> 00:07:17.330
And once again, if nominal
interest rates are high,

00:07:17.330 --> 00:07:18.270
then you might say, 'Well yeah,

00:07:18.270 --> 00:07:19.770
'I wanna be cautious but boy,

00:07:19.770 --> 00:07:22.150
'I could get a lot back
if I lend that money.'

00:07:22.150 --> 00:07:23.590
But if your nominal
interest rates are low,

00:07:23.590 --> 00:07:24.640
you're like, 'You know, it's not worth it,

00:07:24.640 --> 00:07:25.940
'I'd rather keep some more money.'

00:07:25.940 --> 00:07:27.170
And a lot of people do this,

00:07:27.170 --> 00:07:29.500
and so that's why, in
general, in that economy,

00:07:29.500 --> 00:07:31.720
you're going to have a
high quantity of money.

00:07:31.720 --> 00:07:34.130
Now the last motive
that Keynes talked about

00:07:34.130 --> 00:07:36.283
is the speculative motive.

00:07:37.200 --> 00:07:39.650
And speculation in general is this idea

00:07:39.650 --> 00:07:41.630
of buying something, or selling something,

00:07:41.630 --> 00:07:43.010
or waiting to buy something

00:07:43.010 --> 00:07:45.540
based on some speculation you have

00:07:45.540 --> 00:07:47.860
about whether the price
will go up or down.

00:07:47.860 --> 00:07:49.580
And so, for example,

00:07:49.580 --> 00:07:51.410
you might say, 'Hey, if
I wait a couple of days,

00:07:51.410 --> 00:07:52.460
'or if I might wait a week,

00:07:52.460 --> 00:07:55.090
'the government might give
me an even better deal.

00:07:55.090 --> 00:07:56.870
'So let me hold onto this.'

00:07:56.870 --> 00:07:59.710
And in aggregate, when
interest rates are high,

00:07:59.710 --> 00:08:01.390
nominal interest rates are high,

00:08:01.390 --> 00:08:04.890
people might be willing to
forego the ability to speculate.

00:08:04.890 --> 00:08:07.480
And when interest rates are low,

00:08:07.480 --> 00:08:08.410
they might say, 'You know what,

00:08:08.410 --> 00:08:10.990
'I'm just gonna keep my cash for now,

00:08:10.990 --> 00:08:12.480
'because there's not a lot to be gained

00:08:12.480 --> 00:08:14.237
'by lending that money.'


Equilibrium nominal interest rates in the money market

WEBVTT
Kind: captions
Language: en

00:00:00.130 --> 00:00:02.410
- [Instructor] So we've spent
a lot of time justifying

00:00:02.410 --> 00:00:07.040
why we have this downward-sloping
demand curve for money.

00:00:07.040 --> 00:00:09.390
But you're probably asking,
well, this is a market, what,

00:00:09.390 --> 00:00:10.927
we didn't think about
an equilibrium point.

00:00:10.927 --> 00:00:14.150
And to do that, we need to
think about the supply of money.

00:00:14.150 --> 00:00:15.420
And in previous videos,

00:00:15.420 --> 00:00:17.390
we've started thinking
about the supply of money,

00:00:17.390 --> 00:00:19.380
and we'll think more in future videos

00:00:19.380 --> 00:00:21.600
about different monetary policies.

00:00:21.600 --> 00:00:22.920
But in a classical model,

00:00:22.920 --> 00:00:27.490
we assume a perfectly
inelastic supply of money.

00:00:27.490 --> 00:00:29.880
So we draw it as a vertical line,

00:00:29.880 --> 00:00:32.500
which is another way of saying
that the supply of money

00:00:32.500 --> 00:00:35.910
is not impacted by the
nominal interest rate.

00:00:35.910 --> 00:00:38.420
So this is the supply of money.

00:00:38.420 --> 00:00:40.430
I'll call that money supply one.

00:00:40.430 --> 00:00:42.370
Where it intersects the quantity of money,

00:00:42.370 --> 00:00:45.940
I'll just call that M
sub one right over here.

00:00:45.940 --> 00:00:48.210
And so this point where it intersects

00:00:48.210 --> 00:00:51.770
is the equilibrium point
in our money market.

00:00:51.770 --> 00:00:55.440
The equilibrium nominal
interest rate right over here,

00:00:55.440 --> 00:00:57.950
we could call R one.

00:00:57.950 --> 00:01:02.390
This would be the opportunity
cost for holding money.

00:01:02.390 --> 00:01:04.100
Now I have to give a
little bit of a disclaimer.

00:01:04.100 --> 00:01:05.490
This is a classical model here,

00:01:05.490 --> 00:01:07.130
and we'll talk more about
it in future videos.

00:01:07.130 --> 00:01:09.330
And most introductory economics class

00:01:09.330 --> 00:01:10.890
talk about this classical model

00:01:10.890 --> 00:01:14.850
where the central bank might
set the supply of money,

00:01:14.850 --> 00:01:16.600
and that doesn't change according

00:01:16.600 --> 00:01:17.950
to the nominal interest rate.

00:01:17.950 --> 00:01:20.400
And then the nominal
interest rate gets set

00:01:20.400 --> 00:01:22.360
essentially by this equilibrium point.

00:01:22.360 --> 00:01:24.090
Now, in the world that we live in,

00:01:24.090 --> 00:01:25.820
it actually goes the other way around.

00:01:25.820 --> 00:01:29.640
Central banks actually target
a nominal interest rate.

00:01:29.640 --> 00:01:30.980
And if the central bank is able

00:01:30.980 --> 00:01:32.870
to achieve that target interest rate,

00:01:32.870 --> 00:01:35.930
well, that's going to impact
the actual quantity of money.

00:01:35.930 --> 00:01:38.170
So keep that little disclaimer
in the back of your mind.

00:01:38.170 --> 00:01:40.700
But in an introductory economics class,

00:01:40.700 --> 00:01:42.620
we assume this world.

00:01:42.620 --> 00:01:45.020
So now that we have this neat little model

00:01:45.020 --> 00:01:46.630
for our money market,

00:01:46.630 --> 00:01:50.250
let's think about what would
happen in different situations.

00:01:50.250 --> 00:01:52.830
Let's think about a situation
where, for whatever reason,

00:01:52.830 --> 00:01:57.010
people lose confidence
in the electrical grid.

00:01:57.010 --> 00:02:00.830
What would happen to the
demand curve for money?

00:02:00.830 --> 00:02:03.340
And let's call this the MD sub one.

00:02:03.340 --> 00:02:05.760
Pause this video, and think about it.

00:02:05.760 --> 00:02:09.120
Well, if people lose trust
in the electrical grid,

00:02:09.120 --> 00:02:10.760
then this precautionary motive

00:02:10.760 --> 00:02:12.700
for holding money becomes stronger.

00:02:12.700 --> 00:02:16.040
Regardless of what the opportunity
cost is of holding money,

00:02:16.040 --> 00:02:18.020
people would want to
hold more of it because,

00:02:18.020 --> 00:02:19.550
like, hey, you know, I
don't know if I'll be able

00:02:19.550 --> 00:02:21.350
to access money if the
lights go out again.

00:02:21.350 --> 00:02:22.660
I'm not gonna be able to go to an ATM,

00:02:22.660 --> 00:02:23.850
or the banks are gonna close.

00:02:23.850 --> 00:02:27.830
And so at any nominal
interest rate, I would

00:02:27.830 --> 00:02:29.550
or, and in aggregate, people

00:02:29.550 --> 00:02:31.290
are going to want to hold more money.

00:02:31.290 --> 00:02:36.280
And so that would shift the
demand curve for money to

00:02:36.280 --> 00:02:38.140
the right.

00:02:38.140 --> 00:02:40.860
I could've drawn it a little
less hairy, but there you go.

00:02:40.860 --> 00:02:43.990
That would be MD sub two.

00:02:43.990 --> 00:02:45.890
We have this shift to the right.

00:02:45.890 --> 00:02:47.300
And then if that happened,

00:02:47.300 --> 00:02:50.480
if you had this demand for money increase,

00:02:50.480 --> 00:02:52.080
well, then what happens

00:02:52.080 --> 00:02:55.830
to the actual equilibrium
nominal interest rate?

00:02:55.830 --> 00:02:57.210
If you look at this point right over here,

00:02:57.210 --> 00:03:00.640
assuming that the quantity
of money has not changed,

00:03:00.640 --> 00:03:04.010
you have a new equilibrium interest rate,

00:03:04.010 --> 00:03:05.310
nominal interest rate.

00:03:05.310 --> 00:03:07.370
It has gone up,

00:03:07.370 --> 00:03:09.210
and that makes sense.

00:03:09.210 --> 00:03:11.793
If more people want to hold money,

00:03:13.215 --> 00:03:15.510
in order to get people
to part with that money,

00:03:15.510 --> 00:03:17.240
you have to offer them more.

00:03:17.240 --> 00:03:21.170
The opportunity cost of holding
that money has to go up.

00:03:21.170 --> 00:03:23.090
And you could imagine
the reverse scenario.

00:03:23.090 --> 00:03:25.870
If, for some reason, people
thought it's a lot less likely

00:03:25.870 --> 00:03:28.010
that the lights are gonna go
out, or they said, you know,

00:03:28.010 --> 00:03:30.770
I don't need as much cash
around for transactions

00:03:30.770 --> 00:03:32.520
or I'm not really into speculation,

00:03:32.520 --> 00:03:34.030
well, then the demand curve for money

00:03:34.030 --> 00:03:35.230
would shift to the left.

00:03:35.230 --> 00:03:38.030
And in that situation,
you would have a decrease

00:03:38.030 --> 00:03:41.350
in the equilibrium nominal interest rate.

00:03:41.350 --> 00:03:42.800
I will leave you there.

00:03:42.800 --> 00:03:45.130
Always keep these models
with a grain of salt.

00:03:45.130 --> 00:03:48.270
They're simplifications of the
real world, especially here,

00:03:48.270 --> 00:03:51.270
where we're assuming a perfectly
inelastic supply of money,

00:03:51.270 --> 00:03:53.470
which actually isn't the
case in the real world.

00:03:53.470 --> 00:03:55.320
But we can go with this for just,

00:03:55.320 --> 00:03:58.273
for the purposes of starting
to study the money market.


Calculating a confidence interval for the difference of proportions

WEBVTT
Kind: captions
Language: en

00:00:00.200 --> 00:00:02.330
- [Instructor] Duncan is
investigating if residence

00:00:02.330 --> 00:00:05.570
of a city support the
construction of a new high school.

00:00:05.570 --> 00:00:08.090
He's curious about the
difference of opinion

00:00:08.090 --> 00:00:11.670
between residence in the north
and south parts of the city.

00:00:11.670 --> 00:00:15.080
He obtained separate
random samples of voters

00:00:15.080 --> 00:00:18.190
from each region, here are the results.

00:00:18.190 --> 00:00:21.540
So let's see, in the
north 54 out of the 120

00:00:21.540 --> 00:00:24.140
said they want the school,
66 said they didn't.

00:00:24.140 --> 00:00:26.330
In the south 77 said
they wanted the school,

00:00:26.330 --> 00:00:28.300
63 said they didn't.

00:00:28.300 --> 00:00:30.810
Duncan wants to use these
results to construct

00:00:30.810 --> 00:00:34.300
a 90% confidence interval to estimate

00:00:34.300 --> 00:00:36.540
the difference in the
proportion of residence

00:00:36.540 --> 00:00:40.160
in these regions who support
the construction project.

00:00:40.160 --> 00:00:43.270
P sub S minus P sub N.

00:00:43.270 --> 00:00:45.740
So these are the true
parameters for the difference

00:00:45.740 --> 00:00:47.630
between these two populations.

00:00:47.630 --> 00:00:50.100
Assume that all of the
conditions for inference

00:00:50.100 --> 00:00:51.610
have been met.

00:00:51.610 --> 00:00:53.710
Alright, which of the
following is a correct

00:00:53.710 --> 00:00:57.020
90% confidence interval
based on Duncan's sample?

00:00:57.020 --> 00:00:59.870
So pause this video and see
if you can figure that out

00:00:59.870 --> 00:01:01.700
and you will need a calculator

00:01:01.700 --> 00:01:02.890
and depending on your calculator

00:01:02.890 --> 00:01:04.683
you might need a Z table as well.

00:01:06.040 --> 00:01:08.510
In a previous video we introduced the idea

00:01:08.510 --> 00:01:11.100
of a two sample Z interval
and we talked about

00:01:11.100 --> 00:01:12.440
the conditions for inference.

00:01:12.440 --> 00:01:14.890
Lucky for us here they say the conditions

00:01:14.890 --> 00:01:16.360
for inference have been met.

00:01:16.360 --> 00:01:18.100
So we can go straight to calculating

00:01:18.100 --> 00:01:19.220
the confidence interval.

00:01:19.220 --> 00:01:22.060
And that confidence
interval is going to be

00:01:22.060 --> 00:01:24.088
the difference between
the sample proportions,

00:01:24.088 --> 00:01:29.010
so P sub S hat, so the sample
proportion in the south

00:01:29.010 --> 00:01:32.650
minus the sample proportion in the north,

00:01:32.650 --> 00:01:36.200
it's gonna be that
difference plus or minus

00:01:36.200 --> 00:01:40.870
our critical value, Z
star, times our estimate

00:01:40.870 --> 00:01:43.960
of the standard deviation
of the sampling distribution

00:01:43.960 --> 00:01:46.510
of the difference between
the sample proportions.

00:01:46.510 --> 00:01:49.270
And that is going to be our estimate

00:01:49.270 --> 00:01:54.270
is going to be P hat sub S times one minus

00:01:54.580 --> 00:01:59.580
P hat sub S, all of that over
the sample size in the south

00:02:02.140 --> 00:02:07.140
plus P hat sub N times
one minus P hat sub N,

00:02:08.410 --> 00:02:12.883
all of that over the
sample size in the north.

00:02:13.740 --> 00:02:16.580
Okay, so our sample
proportion in the south,

00:02:16.580 --> 00:02:19.470
I'll later use a calculator
to get a decimal value,

00:02:19.470 --> 00:02:22.000
but this is going to be in the south

00:02:22.000 --> 00:02:24.010
we have 77 out of 140 support it.

00:02:24.010 --> 00:02:28.110
So this is going to be 77 out of 140.

00:02:28.110 --> 00:02:33.110
In the north this is
going to be 54 out of 120,

00:02:33.450 --> 00:02:36.380
54 out of 120.

00:02:36.380 --> 00:02:38.653
What is my critical Z value?

00:02:38.653 --> 00:02:41.220
Well here I'm gonna have
to either use a calculator

00:02:41.220 --> 00:02:42.370
or a Z table.

00:02:42.370 --> 00:02:45.250
Remember, we have a 90%
confidence interval.

00:02:45.250 --> 00:02:48.060
And so, let me see, I'll
draw it right over here.

00:02:48.060 --> 00:02:51.150
If this is a normal distribution

00:02:51.150 --> 00:02:53.410
and you wanna have a
90% confidence interval

00:02:53.410 --> 00:02:55.659
that means you're containing 90%

00:02:55.659 --> 00:03:00.060
of the distribution which
means each of these tails

00:03:00.060 --> 00:03:01.980
well combined they would have 10%,

00:03:01.980 --> 00:03:06.440
but each of them would have
5% of the distribution.

00:03:08.190 --> 00:03:10.809
And so I'm gonna look at a Z table

00:03:10.809 --> 00:03:14.160
that figures out how
many standard deviations

00:03:14.160 --> 00:03:16.330
below the mean do I need to be

00:03:16.330 --> 00:03:20.800
in order to get 5% right over here?

00:03:20.800 --> 00:03:22.430
And then that's going to tell me,

00:03:22.430 --> 00:03:24.630
well if I'm that far below or above

00:03:24.630 --> 00:03:26.670
that's gonna be my critical Z value.

00:03:26.670 --> 00:03:28.713
So let me get that Z table out.

00:03:30.000 --> 00:03:33.240
So I care about 5% and
I'm using this in a bit

00:03:33.240 --> 00:03:37.133
of a reverse direction, but let's see, 5%.

00:03:38.918 --> 00:03:41.730
So this a little over
5%, I'm getting closer

00:03:41.730 --> 00:03:45.940
to 5%, even closer to 5%, now
we've gotten right below 5%.

00:03:45.940 --> 00:03:49.210
So we're gonna be in
between this and this.

00:03:49.210 --> 00:03:50.580
I could just split the difference

00:03:50.580 --> 00:03:55.453
and I could just say,
1.6, let's just say 1.645

00:03:57.660 --> 00:03:59.680
to go right in between.

00:03:59.680 --> 00:04:04.680
So this is going to be
approximately equal to 1.645.

00:04:04.990 --> 00:04:09.030
And then let's see, we
know what P hat sub S is,

00:04:09.030 --> 00:04:10.810
we know what P hat sub N is.

00:04:10.810 --> 00:04:14.580
In the south our sample size is 140

00:04:14.580 --> 00:04:19.250
and in the north our sample size is 120.

00:04:19.250 --> 00:04:21.230
And so now I just have to type all of this

00:04:21.230 --> 00:04:23.310
into the calculator, which
is gonna get a little hairy,

00:04:23.310 --> 00:04:25.530
but we will do it together.

00:04:25.530 --> 00:04:27.300
For the sake of time we'll accelerate

00:04:27.300 --> 00:04:28.790
this typing into the calculator.

00:04:28.790 --> 00:04:32.320
But I'm gonna start with
calculating the upper bound

00:04:32.320 --> 00:04:34.443
and then we'll calculate the lower bound.

00:04:36.460 --> 00:04:38.610
And then I think I've
closed all my parentheses

00:04:38.610 --> 00:04:41.030
and so I think we're ready
to get the upper bound

00:04:41.030 --> 00:04:46.030
is going to be equal to
0.218 or approximately 0.202.

00:04:48.550 --> 00:04:49.950
So we can immediately look at our choices

00:04:49.950 --> 00:04:51.890
and see where is at the upper bound.

00:04:51.890 --> 00:04:56.680
And so this one is looking
pretty good, 0.202,

00:04:56.680 --> 00:04:58.320
but let's get the lower bound now.

00:04:58.320 --> 00:05:01.040
So I got my calculator back,
instead of retyping everything

00:05:01.040 --> 00:05:02.290
I'm just gonna put a minus here.

00:05:02.290 --> 00:05:05.310
So I go to second, and just
so you see what I'm doing,

00:05:05.310 --> 00:05:08.610
second entry, I see the entry back

00:05:08.610 --> 00:05:12.610
and then I can just
change, I can just change

00:05:12.610 --> 00:05:17.610
the part where right before the radical.

00:05:17.716 --> 00:05:21.830
So we are going to, alright,
so this just needs to be

00:05:21.830 --> 00:05:26.830
a minus, click enter,
and there you have it.

00:05:26.850 --> 00:05:31.850
Our lower bound is negative 0.002.

00:05:33.830 --> 00:05:36.970
And that is indeed this
choice right over here.

00:05:36.970 --> 00:05:40.543
So there we go, we have picked our choice.