Title: 1st and 2nd Lectures, STV4346B: Introduction to Comparative Political Economy: Approaches, theory an
11st and 2nd Lectures, STV4346B Introduction
to Comparative Political Economy Approaches,
theory and methodology(some of the slides will
probably be skipped in class and used in seminars
1 and 2)
- Carl Henrik Knutsen, Department of Political
Science, UiO - 10/11 and 13/11-2008
2Politics and the economy
3Topics for the course
- Methodology and theory
- Different traditions of political economy
- Basic rational choice/microeconomics other
theoretical approaches - Statistical techniques/econometrics
- Substance, general
- Allocation of resources states and markets.
Positive and normative issues. The interaction
among Politicians, bureaucrats, voters,
consumers and producers. - The economic factors that influence regime change
and regime stability (mainly democracy) - The economic effects of political institutions
- Substance, specific (with geographic focus)
- Varieties of capitalism, fiscal policy, economic
voting - Industrial policy, land reform, the effects of
inequality - Neo-patrimonialism, corruption, natural resources
4Practical advice
- Read through everything once, quickly
- ..Then selective reading
- Read all abstracts at least four times
- Know thy lecture notes
- Systematize the readings into a broader framework
- Dont get bogged down in details. Focus on
concepts, general arguments (theoretical) and
general empirical findings.
5The exam
- Approximately
- 25 Short questions Concepts, sketch out theory
quickly, empirical findings - 25 Short essay Related to 2-3 concrete
contributions from reading list. - 50 Long essay (choice between two alternatives)
6Political economy
- Empirical interrelations between economy and
politics? We need theoretical and methodological
frameworks that are able to deal with such
interrelations Political economy. - Political economy different meanings for
different groups of academics and different
traditions. - My view They are not as incompatible as they
might look. Dont pick your favorite! Choice of
framework depends on research question and focus.
7Thematical and methodological definitions of
political economy
- Methodological definitions
- Study of politics with the tools of an economist
(political economics) - Study of economics with the tools of a political
scientist, focus on power etc, qualitative
methodology. - Thematical definition (favored in this course)
- Political economy is the study of the
interrelations between political institutions and
processes and economic structures and processes. - No restrictions on methodology or theoretical
approach in this course we will be eclectic. - The definition is very general! Specifications
will be made at the topic level
8Definitions continued
- COMPARATIVE political economy comparative
studies of political-economic interrelations. - Differences in political institutions?
Differences in economic effects. - Differences in economic structures? Different
effects on politics. - Focus on the national level.
- Even though we are here operating with a broad
definition of political economy, we need to know
the various definitions and political economic
theories in the literature to not be confused
when reading.
9State-centered political economy (CL 8)
- Key point of departure Other political economy
approaches have underappreciated the importance
of the state. - State as independent actor or (at least) state
structures matter for political and economic
outcomes. - States are not only vehicles for social
interests. - Sharp separation state and private sphere/society
(including economic actors). Politics conducted
mainly within state-structures. - States as actors States interests. Some go
even further states assumed to follow national
interests (whatever this means). - Metaphysical description or analytical
simplification? My view States are not actors
metaphysically, but we can model the state as an
actor in some instances for analytical
simplification.
10State autonomy
- State autonomy is the key concept in much of this
literature. - State autonomy refers to the ability of the
state to define and pursue an agenda not defined
for it solely by private interests (CL181) - Ability to pursue own agenda and not be trumped
by societal pressures, private interests when
formulating public policy. - Contrast with CLs Utilitarian and Marxist
approaches. - Specifications If we do not buy that the state
is an independent actor, how do we think of state
autonomy? - State officials and bureaucrats as autonomous?
But why do these not act in private interest? - Rules, regulations and norms matter. These are
created through the years and are results of long
processes. Norms and rules can be intentionally
created by private actors, but not always. Often
gradual modification of rules and norms, and
strong inertia in institutional structures. - For analytical purposes therefore, we can often
(but certainly not always!) take the rules and
norms as given. Contrast with endogenous
institutions and regulation. - Degrees of state autonomy rather than either-or.
- Determinants of state autonomy power
concentration, checks and balances, structure of
bureaucracy, nature of social interest groups.
11The State, a special organization
- Monopoly of force within defined boundaries
(Weber) - Ability to make binding decisions on issues which
private actors cannot (laws and regulation) - Ability to tax
- Implementor of policy
12Some approaches in CL (read quickly through
184-196)
- Statism and national interest (Krasner)
- States define (and act upon) national interest
- Transformational view of state (Skocpol among
others) - Differences in states organizational structure
impacts policy outcomes even when initiative from
private sphere - State affects private agendas and make-up of
social groups - State as historical specific organizational
structure
13Rational choice
- A theory of human action
- Optimal choice under constraints
- Preferences are exogenously given
- Predictable irrationality from behavioral
economics - Beliefs/understanding of probabilities, some
systematic biases - Loss aversion, reference points
- Time preferences and hyperbolic discounting
- Reciprocity rather than self-interest?
- Bounded rationality (Simon)
14Rational choice
- A deceptively simple sentence that summarizes
the theory of rational choice When faced with
several courses of action, people usually do what
they believe is likely to have the best overall
outcome (Elster, 198922) - 1) Thin and 2) instrumental rationality
- Ad 1) No initial requirements on what type of
goals that should be pursued. - Ad 2) Actions are chosen because of intended
consequences. Actions are not valued because of
themselves (contrast with Kant)
15Przeworski (ch 1)
- Decentralized and centralized allocation
mechanisms final allocation results from
decisions by many agents vs allocation depends on
one decision. Examples - Decentralized Grab all you can, market exchange
- Centralized Dictators allocation, voting,
lottery - Does the allocation mechanism result in an
equilibrium outcome (no one has incentive to
deviate). Descriptive question. - Does the allocation result in a Pareto Optimal
outcome? Normative criterion. - Is the allocation equitable? Normative criterion.
16Przeworski contd
- State vs market as a too crude dichotomy. More
fruitful questions What are the properties of an
allocation mechanism? How are states and markets
organized? - Always some role for government. Enforcement
institutions must underpin markets. - Political economic game
- 1) Political actors reveal preferences for
policies through menu of actions (votes, bribes,
threats etc) - 2) State maximizes its objectives (whatever this
is), given beliefs of economic actors actions, by
setting policy - 3)Economic actors max utility (and profit) in
markets, given the specific policy chosen - Political economic equilibrium
- Set of policies by state and political and
economic actions by voters/producers/consumers so
that no one would act different given beliefs and
actions of others.
17A political economic game of voting and taxation
18Political economics (Ch6 in CL)
- The Robbins-definition of economics The study
of human behavior as a relationship between ends
and scarce means..? Opens up for studying other
aspects of human life than production and
consumption of goods - Preferences, beliefs and constraints
- Individually rational behavior? Efficiency (or
collective rationality)? - Not necessarily Depends on interaction structure
- Holds in perfect markets (invisible hand)
- Does not hold for example in prisoners dilemma
games or voting in some instances
19Normative political economics
- Normative Analysis of desirable properties of
the political system - Condorcets paradox
- Vote on alternatives pairwise A gtBgtCgtA
- Transitive individual preferences but no
transitivity in collective preferences (desired
property)
20Arrows impossibility theorem
- These are incompatible
- Non-dictatorship
- Unrestricted domain
- Independence of irrelevant alternatives
- Pareto Efficiency
- All voting methods are flawed. Individual
preferences do not add up to consistent social
preference ordering. What is the will of the
people? - Ways out of the impossibility theorem
- Single-peaked preferences or other restrictions
on preferences - Agenda control (institutional structure imposed
on decision procedure) - logrolling
21Positive political economics
- Two examples in CL Mancur Olsons Logic of
Collective Action and Anthony Downs An
Economic Theory of Democracy. - Downs (1957) Foreword Downs assume that
political parties and voters act rationally in
the pursuit of certain clearly specified goals
it is this assumption in fact, that gives his
theory its explanatory power - Starting point for numerous models on party and
voter behavior
22Assumptions A Downsian game
- Democracy
- Two parties/candidates
- Goal for parties Maximize political support
(votes)? control government. Policy only as a
mean for politicians. - Goal for voters Policy (as close as possible to
ideal point) - Policy is unidimensional on a scale from 0
(left-wing) to 1 (right wing) - Voters vote on party that are closest to their
ideological preference. They are distributed
uniformly on the interval 0,1 - Party who wins majority forms government
- Rational and self-interested voters and parties.
No uncertainty in the baseline model. - Party cannot deviate from proposed policy once
elected.
23Downsian game continued
- Strategy sets for two candidates/parties, S1S2
0,1 - Choose policy (strategy) within this strategy
set denoted s1 and s2 - If s2gts1 ? all voters to right of (s1s2)/2 votes
for 2 - Example
- 2 chooses policy 0.7, 1 chooses 0.6. All voters
to the right of 0.65 votes for 2?1 wins. - Can this be a proper solution to the game? No!
This is not a Nash Equilibrium - Player 2 is not playing best response to 0.6.
Will win majority if plays for example 0.59 - But then 1 will not play a best response.. Can
for example choose 0.58 - (s1,s2) (0.5 , 0.5) is the only Nash
equilibrium both strategies are best responses
to other. (50 probability of winning when tie).
Nobody wants to unilaterally deviate. - In equilibrium Both parties propose the same
policy. Policy convergence!
24What does Downs tell us? Remember that a model is
a model.
- The model can be extended to incorporate
uncertainty about positions of the voters, and we
can assume that parties are motivated by pushing
a specific policy. If so, the convergence result
does not necessarily hold. - If interested See my homepage for a presentation
of Games in the Normal Form for extended models
where there is uncertainty and where politicians
care about policy (and not number of votes) - Simplest possible political economic model of
voting and does not describe real-world politics
precisely. BUT Captures central political
mechanism Why did Obama talk more about tax cuts
and killing Bin Laden in general election than in
primaries? But What was McCain thinking when
going to the right in the general election?
25Preference requirements and utility functions,
rational choice
- Preference requirements
- Actors must be able to rank different outcomes.
gt, lt or . (Complete preferences) - If agtb and bgtc ? agtc (Transitivity)
- Utility functions U(x), ordinal level of
measurement - Note that preferences are exogenous and given.
- Cost functions C(x).
- First-and second order derivatives. U(x)gt0,
C(x)gt0, U(x)lt0 and C(x)gt or lt 0 (depends
on production-technology) - Optimization (minimize or maximize)
Differentiate and set equal to zero.
26Example A single market, partial equilibrium
- One good x. Price for good x is p.
- Demand side of the market Consumers will buy
until U(x)p because - Max U(x)-px ? U(x)-p0?U(x)p
- Supply side of the market Assume C(x), the
marginal cost, is increasing in x (C(x)gt0).
Producers will supply until C(x)p. Because
profits p is given by - ?(x) px c(x) ? ?(x) 0 ?pc(x)
- Market equilibrium The price clears the market.
Assume one consumer and one producer, both take
prices as given. They will both adjust their
demand and supply so that U(x)p and C(x)p?
U(x)C(x) - In equilibrium Marginal utility of consumption
equals marginal cost of production
27The choice between two goods (Knutsen, 2008a)
- Max U( x1, x2)
- Subject to the constraint p1 x1 p2 x2 m,
where m is income - U( x1, x2) U( x1, m/p2 - p1/p2x1)
- Optimum condition U(x1) U(x2)- p1/p2 0
- ? U(x1) /U(x2) p1/p2
- Marginal rate of substitution is equal to
relative prices in optimum - It can be shown that also marginal rate of
transformation (relative cost of producing two
goods on the margin) is equal to relative price
ratio Prices carry information about opportunity
costs - ? In equilibrium Marginal rate of substitution
is equal to marginal rate of transformation. - Prices enable consumers and producers to adjust
so that relative production costs equal relative
subjective evaluation of goods.
28Graphical sketch of general equilibriumEquilibriu
m relative prices and equilibrium production and
consumption of X1 and X2
29Normative criteria for efficiency Pareto
optimality
- A movement from one allocation to another that
can make at least one individual better off
without making any other individual worse off is
called a Pareto improvement. - An allocation is Pareto optimal when no further
Pareto improvements can be made that is, when no
one can be made better off without anyone else
being made worse off. - First welfare theorem Market equilibrium is
Pareto optimal (given a set of conditions) - Second welfare theorem Any Pareto optimal
allocation can be supported by a market
equilibrium (given set of conditions including
cost-free redistributions)
30When does the first welfare theorem break down?
- Increasing returns to scale
- Market power
- Externalities
- Public goods
- Imperfect information
- Transaction costs
- Missing markets
- Property rights are non-existent or poorly
enforced
31Monopoly
- Market power? Ability to influence prices
- When prices are not taken for given? 1st welfare
theorem breaks down - Why monopoly/oligpoly?
- Increasing returns to scale the role of fixed
costs (innovation, investment, advertising etc), - Regulation
- differentiated products
- The monopolys profit-maximizing equation
- ?(x) p(x)x c(x) ? ?(x) p(x)x p(x)
c(x)0 - ?p(x)x p(x) c(x)
- The monopoly sets x lower than the social
optimum (given by c(x)p). - Intuition Monopoly reduces supply to keep prices
high
32Externalities (actions with unintended
consequences on other actors)
- Externalities from consumption and production.
- Both positive and negative externalities
- Actor does not take ext. into account when making
decisions? Does not provide the socially optimal
amount of consumption/production in free market - Examples
33Public goods
- 1) Non-rivalry One actors consumption does not
reduce the utility of another from consuming. - 2)Non-excludability Not possible to stop other
actors from consuming. - 1)? inefficiency in market because of positive
externality (does not take into account other
actors benefits from providing good) - 2)?Free rider problem. Even if would like to have
the public good, hope that others will provide
and free-ride. In free market, no one has
incentive to supply. - Przeworski defines public goods only according to
1). I prefer to call non-rival but excludable
goods for club goods. Public goods are defined as
non-rival and non-excludable - Note that excludability and rivalry are
continuous dimensions? Degrees of public goods.
34Neo-classical political economy
- Role for government and politics when markets
fail/market equilibrium is not Pareto-optimal - How can government correct the workings of the
market? - Example 1 Negative externalities? Taxation so
that the actor bears the full cost (own cost
externality)? will act so that optimum is
realized - Example 2 Assymetric information Provide
regulation, issue standards etc so that f.ex
consumers can identify quality of a product in
the market - Example 3 Public goods Tax and provide correct
amount of public good. - Example 4 Increasing returns to scale and
natural monopoly Regulate price - The states role of securing property rights to
ensure voluntary exchange.
35Some criticisms of NCPE
- Keynes (1936) and inherent rigidities of the
market. Slow adjustment towards equilibrium and
the benefits of activist macroeconomic policy. - Schumpeter (1942) Dynamic efficiency is not
ensured by a statically efficient market (profit
goes towards zero). Monopoly/oligopoly surpluses
and incentives for innovation. Innovation ? Long
run economic growth. - The utilitarian underpinnings. Other important
normative concepts than efficiency/PO
distribution and justice.
36Uncertainty
- Uncertainty General lack of knowledge about
outcomes. Unproblematic for markets if
uncertainty is symmetric (and actors are risk
neutral). - Instead of maximizing utility Maximize expected
utility! - Von Neumann-Morgenstern utility functions
- EU(p) p1u1 p2u2pnun
- We can take into account that actors are not risk
neutral. - Risk aversion, two outcomes
- u(px1(1-p)x2)gtpu(x1)(1-p)u(x2)
u(50)gt0.5u(0)0.5u(100) - Means that a risk averse actor would rather take
the expected value for certain, rather than
gamble between two extremes.
37Asymmetric information
- Markets in trouble when there is asymmetric
information. Note that governments also would
have trouble with asymmetric information. How to
make actors reveal their private knowledge is a
general phenomenon. However, governments might
have other means to deal with such problems - 1) Private information about actions, effort
- 2) Private information about quality, type
- 1) can lead to so-called moral hazard problems
- 2) can lead to so-called adverse selection
problems
38Some concepts
- Moral hazard Incentives to act otherwise than
agreed upon in contract, due to private
information about own actions. - Adverse selection The tendency of an agent (or a
good) of a particular type to self-select into a
contract in a way not desired by the other
contracting party, due to private information
about own type (quality). - A contractual relation can be modeled as a
principal-agent relationship. Principal wants a
job to be done and agent is assigned to do the
job
39Principal-agent theory
- Principal wants to maximize profits/utility, and
so does agent. - Principal moves first, and can post contract as
ultimatum to agent. - When full information
- Principal can design contract so that agent is
pushed down to reservation utility (indifferent
between accepting and rejecting contract). - Can also choose to accept only good types of
agents, or design different contracts to good and
bad types. - When private info
- Agent can shirk (moral hazard) to obtain a higher
utility, to the despair of the principal. - Agents can also pretend to be other types than
they actually are to achieve a higher utility
(adverse selection). - Example voter-politician as principal-agent.
40Some solutions for the principal
- When moral hazard? Design contracts that make
agents stake holder in the outcome. - For example let agent have some of the surplus
(part of profit instead of pure wage contract), - or threaten to punish if moral hazard is
detected/strongly suspected - When adverse selection Design different
contracts that make agents self-select into
different contracts - Impose costs on bad agent or reward good agent
for revealing information about type
41Some comments from Evans (Ch2)
- Getting the prices right as an insufficient
approach to development - Neoclassical economics and focus static
efficiency What about transformation and dynamic
efficiency? - Gerschenkron and late developers
- States role in amassing capital.
- Hirschman and late developers
- States role in inducing entrepeneurship
- The role state institutions for economic
development. Structure of state and state-society
relations matter. - But rejection of naïve statism.
42Some comments on markets..
- Market/economic sphere is embedded in society
(Polanyi). - Norms and exchange. Granovetter and the
non-existence of informalized market exchanges.
Trust as crucial to non-contractual exchange. - Repeated exchanges between actors that know each
other, rather than anonymous one-shot exchanges - Transaction costs (Williamson/Coase) In some
instances, hierarchies reduce transaction costs
related to exchange when compared to markets. - ?Internalization of exchanges within firms and
other organizations.
43Evans contd
- The neo-utilitarian depiction of state failure
- Politicians and bureaucrats as self-interested
agents and not as altruistic and omniscient
welfare maximizers. Can the people (principal)
ensure that the agents (buer and pol) act in
their best interest? - Capture of state by interest groups
- Rent seeking Wasteful use of resources to
redistribute gains/affect policy to own benefit - Collective action problems
- Implications The nightwatchman state? Does the
conclusion follow from the premise of state
failures? (I dont think so..) - Weber Bureaucracy and capitalism together How
does the state operate and how does it regulate
and interact with the economy. Not how much state!
44Evans contd why need other approaches than
neo-utilitarianism
- Differences in state structures and state society
relations matter for the selection and the
effectiveness of policies. - Context contingencies and comparative approach
necessary. Need to draw on concrete historical,
case-based knowledge - Methodological individualism at the root of
failure to understand states. - Weber and the structure and norms of the
idealized bureaucracy? Bureaucrats do not follow
private agendas (more on this next lecture) - Differences bureaucratic structures? Diff
development
45Evans contd
- Institutionalist revisions of neo-utilitarian
model - Institutions as rules of the game. Creates
incentives for economic actors and are thus
crucial for economic outcomes. - Douglass North (property rights, institutions and
transaction costs, endogenous institutions and
functionalism) - Comparative institutional variation
- Migdal and strong vs weak state (state vs society
in zero-sum game). - Social power of local elites? Local, traditional
elites related to rural interests often opposing
industrial transformation. - The transformative role of the stat Strong
states transform economy and are not objects for
rent seeking
46Pierson
- The notion of path dependence is generally used
to support a few key claims - Specific patterns of timing and sequence matter
- starting from similar conditions, a wide range of
social outcomes may be possible - large consequences may result from relatively
"small" or contingent events - particular courses of action, once introduced,
can be virtually impossible to reverse - and consequently, political development is often
punctuated by critical moments or junctures that
shape the basic contours of social life
47Pierson
- Path dependence related to increasing returns
Self-reinforcing or positive feedback processes - Other broader def History matters. Event at
t0 affects events at t1. - Switching costs or reversal costs increase as
time passes - Particular importance Formal institutional
arrangements that are costly to alter once
initiated and historically entrenched.
Inflexibility. - Potential path inefficiency
- A funny example QWERTY keyboards (David).
- Not so funny Dysfunctional institutional
arrangements like neo-patrimonial political
arrangements that are hard to break up, but
clearly economically inefficient.
48Technology and increasing returns
- Four features that generate increasing
return-structures - Large fixed costs
- Learning effects
- Coordination effects
- Adaptive expectations
- Direct analogies to politics, institutions
Institutions are - a) costly to generate,
- b) require learning as you go along (learning by
doing) from different actors, - c) interaction between actors within rule-based
framework depend on coordination - d) actions depend on beliefs about what others do
49Pierson contd
- Read Piersons interpretation of North
- Institutional complementarity (see also Hall and
Soskice) complementary organizational forms and
institutions? A source of increasing returns - North interdependent web of an institutional
matrix
50Politics and increasing returns (A)
- Four aspects of political life that make it
conducive to increasing returns - 1) Central role of collective action
- (coordination and adaptive expectations plus
difficulty of changing politics individually) - 2) high density of institutions
- (legal constraints on behavior)
- 3) political authority and asymmetries of power
- (use initial position to entrench position and
increase power even more) - 4) intrinsic complexity and opacity
- (where are the prices? Multiplicity of political
issues and goals of actors, long lags and complex
causal chains)
51Politics and increasing returns (B)
- Three aspects of politics that make it more
susceptible to increasing returns than economic
processes - 1) weakness of competition and learning enhancing
mechanisms - (self correction possible, but difficult due to
opacity of politics) - 2) short time horizons of political actors
- (switching costs up front!)
- 3) status quo bias built into political
institutions - (constitutions as example, credible commitment
devices, political consensus and uncertainty when
change)
52Pierson page 263 Effects of increasing returns
on politics
- 1. Multiple equilibria. Under a set of initial
conditions conducive to increasing returns, a
number of outcomes-perhaps a wide range-are
generally possible. - 2. Contingency. Relatively small events, if they
occur at the right moment, can have large and
enduring consequences. - 3. A critical role for timing and sequencing. In
increasing returns processes, when an event
occurs may be crucial. Because earlier parts of a
sequence matter much more than later parts, an
event that happens "too late" may have no effect,
although it might have been of great consequence
if the timing had been different. - 4. Inertia. Once an increasing returns process is
established, positive feedback may lead to a
single equilibrium. This equilibrium will in turn
be resistant to change.
53Some implications
- Historical causes ? Implications for analysis
- The role of time
- Problems with functionalist explanations
(institutions are not necessarily efficient) - Problem with the approach How to test hypotheses
from path dependent arguments?
54Statistics/econometrics
- OLS
- Pooled Cross Section - Time Series (OLS with
Panel Corrected Standard Errors as example) - Panel Data
- Fixed Effects
- (Random Effects)
- Instrumental Variable Analysis/2SLS
- Matching
55Repetition of multivariate regression/OLS
- Remember interpretation of coefficient Average
increase in Y when X increases one unit and all
other variables are held constant. - OLS as best linear unbiased estimator (BLUE) when
certain conditions are satisfied - The underlying relationship is linear
- No autocorrelation
- No heteroskedasticity
- No omitted variables (important Omitted variable
bias!) - No endogeneity (y affects x)
- No measurement error in x
- See Knutsen 2008b for full list
56What to do when we have a panel data structure?
- Panel units assumed to be countries here, but can
be regions, individuals, firms etc. - If no country specific effects, and we want to
use both intra-national variation (over time) and
variation between countries OLS with PCSE. - Interpretation Just as OLS!
- But takes into account heteroskedasticity
between panels, contemporraneous correlation
(between panels), and autocorrelation (within
panels). These adjustments are crucial when using
panel data.
57Panel data Fixed Effects
- What if there are country specific effects?
- Control for these effects by using dummies for
all countries? Fixed Effects - Only intra-national variation is used
- Strict technique. Reduces omitted variable bias,
but also reduces the amount of information used
for inference
582SLS
- Main application endogenous independent
variables - Intuition Use only exogenous part of variation
in X. - Must find at least one instrument
- Instrument should be correlated with X, but not
directly linked with Y. Instrument should be as
highly correlated with X as possible. - Method
- First run OLS regression with X as dependent
variable and instrument(-s) and all control
variables as independent - Then take the predicted value of X from the first
regression rather than the actual X and use in
the second (original) regression. - 2SLS is consistent, and does not run into the
endogeneity bias problems of OLS - The major problem with 2SLS is that it yields
large standard errors (particularly when low
correlation between instrument and X)? difficult
to find significant results.
59Matching
- Non-parametric Does not need to assume anything
about the functional form of relationship. - Treatment and control variables
- Find (one or more) most similar units to use as
matches for each unit. - Similarity calculated on the basis of control
variables. BUT Unit and match must differ on the
treatment variable (dichotomous) - Find treatment effect for each comparison
(difference in Y between unit and match) - Calculate average treatment effect