Political Economy of Institutions and Decisions – serie

Continuing his groundbreaking analysis of economic structures, Douglass North develops an analytical framework for explaining the ways in which institutions and institutional change affect the performance of economies, both at a given time and over time. Institutions exist, he argues, due to the uncertainties involved in human interaction; they are the constraints devised to structure that interaction. Yet, institutions vary widely in their consequences for economic performance; some economies develop institutions that produce growth and development, while others develop institutions that produce stagnation. North first explores the nature of institutions and explains the role of transaction and production costs in their development. The second part of the book deals with institutional change. Institutions create the incentive structure in an economy, and organisations will be created to take advantage of the opportunities provided within a given institutional framework. North argues that the kinds of skills and knowledge fostered by the structure of an economy will shape the direction of change and gradually alter the institutional framework. He then explains how institutional development may lead to a path-dependent pattern of development. In the final part of the book, North explains the implications of this analysis for economic theory and economic history. He indicates how institutional analysis must be incorporated into neo-classical theory and explores the potential for the construction of a dynamic theory of long-term economic change. Douglass C. North is Director of the Center of Political Economy and Professor of Economics and History at Washington University in St. Louis. He is a past president of the Economic History Association and Western Economics Association and a Fellow, American Academy of Arts and Sciences. He has written over sixty articles for a variety of journals and is the author of The Rise of the Western World: A New Economic History (CUP, 1973, with R.P. Thomas) and Structure and Change in Economic History (Norton, 1981). Professor North is included in Great Economists Since Keynes edited by M. Blaug (CUP, 1988 paperback ed.)

This book models the emergence of the state, and the forces that shape it. State creation is bound to protection needs. A specialized protector-ruler is efficient, but is also self-seeking. Individuals will install a ruler only after they create a mechanism to control him. Among the offshoots of the organized protection are legal system and decision-making procedures that include voting. The initial 'state of nature' may gradually evolve into a rule-of-law state. The state endows individuals with rights by delineating what it will protect. Enforcement, however, is never perfect. People use third parties such as firms to enforce agreements. As commodities become standardized, scale economies increase. In order to exploit the economies of within-state enforcement, the state will expand the contact enforcement territory by treaty or by conquest. The force may explain the creation of rule-of-law empires.

The Supreme Court's reapportionment decisions, beginning with Baker v. Carr in 1962, had far more than jurisprudential consequences. They sparked a massive wave of extraordinary redistricting in the mid-1960s. Both state legislative and congressional districts were redrawn more comprehensively - by far - than at any previous time in America's history. Moreover, they changed what would happen at law should a state government fail to enact a new districting plan when one was legally required. This book provides a detailed analysis of how judicial partisanship affected redistricting outcomes in the 1960s, arguing that the reapportionment revolution led indirectly to three fundamental changes in the nature of congressional elections: the abrupt eradication of a 6% pro-Republican bias in the translation of congressional votes into seats outside the south; the abrupt increase in the apparent advantage of incumbents; and the abrupt alteration of the two parties' success in congressional recruitment and elections.

This 2001 book explains why African countries have remained mired in a disastrous economic crisis since the late 1970s. It shows that dynamics internal to African state structures largely explain this failure to overcome economic difficulties rather than external pressures on these same structures as is often argued. Far from being prevented from undertaking reforms by societal interest and pressure groups, clientelism within the state elite, ideological factors and low state capacity have resulted in some limited reform, but much prevarication and manipulation of the reform process, by governments which do not really believe that reform will be effective, which often oppose reforms because they would undercut the patronage and rent-seeking practices which undergird political authority, and which lack the administrative and technical capacity to implement much reform. Over time, state decay has increased.

The Efficient Secret is an analysis of the institutional changes in parliamentary government in nineteenth-century England, concentrating on the years between the first and third Reform Acts. Professor Gary W. Cox employs a rational choice model to analyze the problems of voter choice and to examine the emergence of party loyalty in the electorate, the development of cabinet government, and their legislative consequences. The introductory chapters provide the historical setting for this study and briefly survey nineteenth-century political and economic events. Professor Cox then focuses on the increases in party voting in Parliament and in the electorate. To support his argument concerning these parallel developments, he uses statistical evidence drawn from poll books and newspapers.

This book examines monetary policy by focusing on how the President and the Senate influence monetary policy by appointing Federal Reserve members. It attempts to answer three questions about the appointment process and its effects. First, do politicians influence monetary policy through Federal Reserve appointments? Second, who influences the process - the President alone or both the President and the Senate? Third, what explains the structure of the Federal Reserve appointment process? The test models show that the President alone, both the President and Senate, or neither, may influence monetary policy with Federal Reserve appointments. The structure of the process reflects political battles between the Democrats and Republicans regarding the centralization of authority to set monetary policy within the Federal Reserve System. The study extends the analysis to the European Central Bank and shows that the Federal Reserve process is more representative of society than the European Central Bank process.

When Majorities Fail is a study of institutional failure in Russia's first democratic legislature. Inadequate rules and a chaotic party system combined to make it nearly impossible to pass a coherent legislative program, including a new constitution. The internal instability in Russia's parliament is known as cycling, one of the most important theoretical concepts in formal study of legislatures. There are few recorded cases of cycling in politically important settings. This book documents the presence of cyclical majorities in Russian Parliament with comprehensive case and statistical analysis, and demonstrates how the failure to adopt a new constitution led to the confrontation between parliament and president in the fall of 1993. Earlier research has shown that the design of a legislative institution is crucial in preventing cycling. The author shows how the institutional design of the parliament failed, underscoring the importance of institutional design in a democratic transition.

In this 1989 book Charles Stewart analyses the development of the budgetary process in the House of Representatives between 1865 and 1921. The period began with the creation of the House Appropriations Committee and ended with the passage of the Budgetary Accounting Act. Attempts at change were closely related to societal and economic, but also to institutional, developments during this period. Both the electoral system and the national party system, as well as war and other economic crises, impacted upon the budgetary process.

Ideology and Strategy is an analysis of issues in Swedish parliamentary history over the past 100 years. Leif Lewin has chosen eight issues and scrutinized them using traditional analysis and, importantly, game-theoretic reasoning. For each, he presents the outcome and its history and the strategic behaviour of the actors. He gives special attention to the strategy used by the potential loser. The first chapter presents the methodology to be employed in the analysis and introduces concepts and strategies such as voter's paradox, prisoners' dilemma, the Condorcet method, logrolling and others. The final chapter includes a review of the concept of politics as rational action. Lewin's analysis begins with the tariff dispute of the 1880s and ranges from suffrage reform, parliamentary government, the crisis programme of the 1930s, economic planning, the pension system, nuclear energy, to employee investment funds. Ideology and Strategy blends history, substantive issues and potential analysis, and is an important contribution to rational choice theory.

Using institutional economics, Professors Alston and Ferrie show how paternalism in Southern agriculture helped shape the growth of the American welfare state in the hundred years following the Civil War. It was an integral part of agricultural contracts prior to mechanization. Paternalism involved the exchange of 'good and faithful' labour services for a variety of in-kind services, most notably protection from physical violence. The Southern landed elite valued paternalism because it reduced monitoring costs and turnover. Workers valued paternalism because of the lack of civil rights. In order to maintain the value of paternalism to their workers, the agricultural interests needed to prevent meddling from the federal government, which they accomplished through their disproportionate political power. Only the advent of mechanization and complementary technology in the late 1950s and early 1960s finally reduced the desire of Southern agricultural interests to fight the expansion of federal welfare programmes.

The 1980s and 1990s have seen several authoritarian governments voluntarily cede power to constitutionally elected democratic governments. John Londregan uses Chile as a case study of this phenomenon, exploring what sorts of guarantees are required for those who are ceding power and how those guarantees later work out in practice. He constructs an analytical model of a democratic transition and provides a new statistical technique for analysing legislative votes, based upon a detailed empirical analysis of Chile's legislative politics. Legislative Institutions and Ideology in Chile extends existing spatial models of policy preferences by incorporating a valence component to policy choices. The valence component enables an agenda setter, in Chile the democratically elected president, to overcome veto players' objections to reform. Londregan specifically also uses Senate committee voting records to study the impact of human rights concessions on the political debate.

This book explores the political process by which property rights are defined and enforced in two traditional states in colonial Ghana. The case studies within the book ask how colonial institutions transformed indigenous political and economic life; and how colonization and decolonization affected prospects for future economic development and stability in Africa. The introductory chapter outlines a theory of the transformation of property rights systems. The remaining empirical chapters refine this theory through a detailed analysis of the transformation of property rights within an African context. These chapters draw explicitly on rational choice theories to analyse indigenous actors' attempts to redefine and enforce property rights to land by 'reinventing' the traditions of their respective communities. These theories help to understand why property rights systems across Africa remain fluid and insecure.

Employing a rational-choice approach, Professor Ramseyer studies the impact of Japanese law on economic growth in Japan. Toward that end, the author investigates the way law governed various markets and the way that people negotiated contracts within those markets. For much of the period at stake, the Japanese government was an oligarchy rather than a democracy; the judges operated a civil rather than common law regime; the economy grew modestly but erratically; and social customs changed rapidly and radically. As a result, this study applies an economic logic, but to markets in a vastly different world, in a different historical period, and with a different political regime and legal system. Findings reveal that the legal system generally promoted mutually advantageous deals, and that people generally negotiated in ways that shrewdly promoted their private best interests. Whether in the markets for indentured servants, prostitutes, or marriage partners, Odd Markets in Japanese History reports little evidence of either age- or gender- related exploitation.

This book develops new theory about the link between debt and democracy and applies it to a classic historical comparison: Great Britain in the eighteenth century which had strong representative institutions and sound public finance vs. ancient regime France, which had neither. The book argues that whether representative institutions improve commitment depends on the opportunities for government creditors to form new coalitions with other social groups, more likely to occur when a society is divided across multiple political cleavages. It then presents historical evidence to show that improved access to finance in Great Britain after 1688 had as much to do with the development of the Whig Party as with constitutional changes. In France, it is suggested that the balance of partisan forces made it unlikely that an early adoption of 'English-style' institutions would have improved credibility.

Rationalizing Parliament examines how institutional arrangements in the French Constitution shape the bargaining strategies of political parties. The book investigates the decision by French cities to include in the Constitution legislative procedures aimed to 'rationalize' the policy-making role of parliament and analyses the impact of these procedures on policy outcomes, cabinet stability and political accountability. Drawing on diverse methodological approaches, including formal models, multivariate statistics, historical analysis and qualitative case studies, Professor Huber contributes to general theoretical debates about the endogenous choice of institutions, and about the exogenous impact of institutional arrangements on political decision-making. Through its use of theories developed in the American politics literature, the study reveals important similarities between legislative politics in the United States and in parliamentary systems and shortcomings in conventional interpretations of French institutional arrangements.

In The Fruits of Revolution Jean-Laurent Rosenthal investigates two central questions in French economic history: To what extent did institutions hold back agricultural development under the Old Regime, and did reforms carried out during the French Revolution significantly improve the structure of property rights in agriculture? Both questions have been the subject of much debate. Historians have touched on them in a number of local studies, yet usually they have been more concerned with community conflict than with economic development. Economists generally have researched the performance of the French economy without paying much attention to the impact of institutions on specific areas of the economy. This book attempts to utilize the best of both approaches: It focuses on broad questions of economic change, yet it is based on detailed archival investigations of the impact of property rights on water control.

In a world where capital moves freely across national borders, developing countries have increasingly been subjected to devastating financial crises caused by the sudden withdrawal of foreign capital. How do such crises come about? This book focuses on a novel causal path: that of miscommunication. By examining the determinants of Asia's financial crisis of 1997-8, it demonstrates why developing democracies are exceptionally vulnerable to breakdowns in communication between financial officials and the chief executive and outlines the disastrous consequences of such breakdowns. The book offers a framework for predicting where chief executives are most likely to be ill informed about critical economic variables. It also considers those situations in which politicians are dependent on financial officials whom they cannot completely trust or in which multiple veto players damage the flow of information.

Endogenous election timing allows leaders to schedule elections 'when the time is right'. The author proposes and tests an informational theory of endogenous election timing that explains when leaders call for elections and the consequences of their decisions. In particular, he argues that, if all else is equal, leaders announce elections when they anticipate a decline in their future performance. As a consequence, early elections signal a leader's lack of confidence in future outcomes. The earlier elections occur, relative to expectations, the stronger the signal of demise. Using data on British parliaments since 1945, the author tests hypotheses related to timing of elections, electoral support and subsequent economic performance. Leaders who call elections early (relative to expectations) experience a decline in their popular support relative to pre-announcement levels, experience worse post-electoral performance, and have shorter campaigns.

Constitutional courts have emerged as central institutions in many advanced democracies. This book investigates the sources and the limits of judicial authority, focusing on the central role of public support for judicial independence. The empirical sections of the book illustrate the theoretical argument in an in-depth study of the German Federal Constitutional Court, including statistical analysis of judicial decisions, case studies, and interviews with judges and legislators. The book's major finding is that the interests of governing majorities, prevailing public opinion, and the transparency of the political environment exert a powerful influence on judicial decisions. Judges are influenced not only by jurisprudential considerations and their policy preferences, but also by strategic concerns. By highlighting this dimension of constitutional review, the book challenges the contention that high court justices are largely unconstrained actors as well as the notion that constitutional courts lack democratic legitimacy.

This book investigates the causes and consequences of congressional attacks on the US Supreme Court, arguing that the extent of public support for judicial independence constitutes the practical limit of judicial independence. First, the book presents a historical overview of Court-curbing proposals in Congress. Then, building on interviews with Supreme Court justices, members of Congress, and judicial and legislative staffers, the book theorizes that congressional attacks are driven by public discontent with the Court. From this theoretical model, predictions are derived about the decision to engage in Court-curbing and judicial responsiveness to Court-curbing activity in Congress. The Limits of Judicial Independence draws on illustrative archival evidence, systematic analysis of an original dataset of Court-curbing proposals introduced in Congress from 1877 onward and judicial decisions.

Governing requires choices, and hence trade-offs between conflicting goals or criteria. This book asserts that legitimate governance requires explanations for such trade-offs and then demonstrates that such explanations can always be found, though not for every possible choice. In so doing, John W. Patty and Elizabeth Maggie Penn use the tools of social choice theory to provide a new and discriminating theory of legitimacy. In contrast with both earlier critics and defenders of social choice theory, Patty and Penn argue that the classic impossibility theorems of Arrow, Gibbard, and Satterthwaite are inescapably relevant to, and indeed justify, democratic institutions. Specifically, these institutions exist to do more than simply make policy - through their procedures and proceedings, these institutions make sense of the trade-offs required when controversial policy decisions must be made.

This book develops a general model of public policymaking, focusing on the difficulties of securing intertemporal exchanges among politicians. By using this model the authors are able to derive a series of empirical propositions about the conditions under which policies are likely to be volatile, rigid, or high quality. In addition, the authors combine the tools of game theory with Williamson's transaction cost theory, North's institutional arguments, and contract theory, to provide a general theory of public policymaking in a comparative political economy setting. They also undertake a detailed study of Argentina, using statistical analyses on newly developed data to complement their nuanced account of institutions, rules, incentives and outcomes. Drawing on this research the book explores the reasons for Argentina's seeming inability to design and implement high quality public policies over a sustained period of time.

Originally published in 1997, The Political Economy of Property Rights reports on comparative research into the transformation of property rights in post-communist countries and China. Two important theoretical questions unify the contributions: what aspects of political systems give credibility to systems of property rights? What can be learned from the transformation of property rights in post-communist countries about the large-scale change of economic institutions? The contributors consider the credibility of property rights as arising from the strategic interaction of political and economic actors, and they apply this perspective and test its implications using a variety of qualitative and quantitative methods. Overall, the volume demonstrates the value of coordinated cross-national research by area specialists sharing a common focus on questions of political economy.

Between the passage of the Bubble Act in 1720 and the sweeping reforms of the General Incorporation Act of 1844, the legal framework of business organization in England remained remarkably stagnant despite the profound economic and structural changes wrought by the Industrial Revolution. Originally published in 2000, this book analyzes why this discrepancy occurred, especially when other nations of that time, whose economies were far less developed, were evolving more permissive laws of business organization. Employing extensive primary source archival material, Ron Harris shows how the institutional development of major forms of business organization - the business corporation, the partnership, the trust, the unincorporated joint-stock company - evolved and how English law finally took account of these developments.

Governing requires choices, and hence trade-offs between conflicting goals or criteria. This book asserts that legitimate governance requires explanations for such trade-offs and then demonstrates that such explanations can always be found, though not for every possible choice. In so doing, John W. Patty and Elizabeth Maggie Penn use the tools of social choice theory to provide a new and discriminating theory of legitimacy. In contrast with both earlier critics and defenders of social choice theory, Patty and Penn argue that the classic impossibility theorems of Arrow, Gibbard, and Satterthwaite are inescapably relevant to, and indeed justify, democratic institutions. Specifically, these institutions exist to do more than simply make policy - through their procedures and proceedings, these institutions make sense of the trade-offs required when controversial policy decisions must be made.

How did today's rich states first establish modern fiscal systems? To answer this question, Political Transformations and Public Finances by Mark Dincecco examines the evolution of political regimes and public finances in Europe over the long term. The book argues that the emergence of efficient fiscal institutions was the result of two fundamental political transformations that resolved long-standing problems of fiscal fragmentation and absolutism. States gained tax force through fiscal centralization and restricted ruler power through parliamentary limits, which enabled them to gather large tax revenues and channel funds toward public services with positive economic benefits. Using a novel combination of descriptive, case study and statistical methods, the book pursues this argument through a systematic investigation of a new panel database that spans eleven countries and four centuries. The book's findings are significant for our understanding of economic history and have important consequences for current policy debates.

This book investigates the causes and consequences of congressional attacks on the US Supreme Court, arguing that the extent of public support for judicial independence constitutes the practical limit of judicial independence. First, the book presents a historical overview of Court-curbing proposals in Congress. Then, building on interviews with Supreme Court justices, members of Congress, and judicial and legislative staffers, the book theorizes that congressional attacks are driven by public discontent with the Court. From this theoretical model, predictions are derived about the decision to engage in Court-curbing and judicial responsiveness to Court-curbing activity in Congress. The Limits of Judicial Independence draws on illustrative archival evidence, systematic analysis of an original dataset of Court-curbing proposals introduced in Congress from 1877 onward and judicial decisions.

First published in 1987, Congress: Structure and Policy is a review of congressional research from an institutional perspective. The selections blend theoretical material found in the fields of discussion theory, political economy, social choice and game theory, with classics on such standard topics as elections and campaigning, controlling the bureaucracy and oversight, norms of behaviour, committees and committee assignments reform, budgeting, presidential influence, and the party and its leadership. Together, these readings present an institutional theory of Congress. They are integrated in order to address both the short-run issue of how congressional institutions shape policy and the long-run question of why congressional organization has evolved the way it has. In their introductions to the chapters, the editors, Professors McCubbins and Sullivan, not only address the themes of the individual readings but place the chapters in the larger context of the political economy.

Ideology and Strategy is an analysis of issues in Swedish parliamentary history over the past 100 years. Leif Lewin has chosen eight issues and scrutinized them using traditional analysis and, importantly, game-theoretic reasoning. For each, he presents the outcome and its history and the strategic behaviour of the actors. He gives special attention to the strategy used by the potential loser. The first chapter presents the methodology to be employed in the analysis and introduces concepts and strategies such as voter's paradox, prisoners' dilemma, the Condorcet method, logrolling and others. The final chapter includes a review of the concept of politics as rational action. Lewin's analysis begins with the tariff dispute of the 1880s and ranges from suffrage reform, parliamentary government, the crisis programme of the 1930s, economic planning, the pension system, nuclear energy, to employee investment funds. Ideology and Strategy blends history, substantive issues and potential analysis, and is an important contribution to rational choice theory.