the economic organization of legislatures and how it affects congressional voting congress confronts two major organizational problems that affect the behavior of legislators party leaders and groups doing business with congressional committees the costly nature of monitoring and the absence of explicit mechanisms for upholding agreements the problem of monitoring implies that party leaders will have a difficult time influencing decisions made in decision making arenas where the actions of legislators are less visible as in congressional committees while legislators can evade leadership monitoring of their actions within committees once an issue leaves a committee the costs of monitoring decline and leadership influence increases the absence of mechanisms for assuring that legislators keep their bargains means that groups will place an emphasis on dealing with reliable legislators those who can be counted upon to uphold their end of a bargain thus party leaders are more effective in influencing floor voting because of their better ability to monitor legislator behavior however obligations to important interest groups will be more immune to leadership influence because of the incentives for committee members to adhere to their bargains

academic earmarks and the returns to lobbying abstract in this paper we estimate the returns to lobbying by universities to motivate our empirical work we develop a simple theoretical model of university lobbying for academic earmarks our statistical analysis shows that universities represented by a house appropriations committee hac or senate appropriations committee sac member spend less money on lobbying than those that are not represented in addition using instrumental variables estimations we show that universities without hac or sac representation may receive some benefit to lobbying for earmarks although in many estimations this benefit is not statistically different from zero however for universities with hac or sac representation a 10 percent increase in lobbying yields an additional 2 8 percent or 3 5 percent increase in earmarks respectively this suggests that there are large returns to lobbying for academic earmarks if a university is represented by a member of one the hac or sac but little or no return if not

a search model of money and circulating private debt with applications to monetary policy a search theoretic model is used to examine the coexistence of money and circulating private debt money is still valued even though there coexists credit which circulates among agents and dominates in the rate of return when there coexist multiple equilibria the equilibrium with credit pareto dominates the one without credit if money supply is not extremely plentiful this article also provides some predictions about the effects of monetary policies a policy of open market operations whereby government discounts less for second hand debt decreases the value of money credit and interest rate prevailing in the market this policy can also improve welfare by making credit trade feasible when the only equilibrium entails no credit without intervention

severing the electoral connection shirking in the contemporary congress studies of representation focusing on legislative shirking tend to offer an interesting tension when the opportunity presents itself it seems that exiting members do not change their votinq behavior ideological shirking but do reduce their effort level by voting less participatory shirking our analysis avoids the pitfalls of prior studies by defining a simple quasi experimental research design contrasting those certain that they are seeking reelection with those sure that they are departing the house for the102nd 103rd and 104th congresses 1991 1996 we measure changes in ideology and participation using all roll call votes in the last six months of election years controlling for possible member selection effects and short term influences and show that legislators are disposed toward ideological and participatory shirking while selection effects are unimportant thus we reconcile results seemingly at odds and suggest that policies affecting member turnover such as term limits can interfere with representation a fundamental issue concerning political representation is the extent to which the necessity of reelection constrains officeholders if incumbents plan to retire thus freeing themselves of their electoral shackles or if they pursue higher office and face a distinct constituency will they behave differently or do members continue to behave in the same manner even in the absence of an electoral connection to the districts they represent answers to such questions have important implications for how we understand and model the representative process additionally they have ramifications for the likely impact of public policy choices that affect member turnover rates such as the imposition of term limits on the political system a primary means of drawing inferences regarding shirking which we simply define as legislator behavior that differs from what would be observed given perfect monitoring and effective punishment by constituents is to determine if politicians change their behavior when electoral discipline is removed most notably scholars examine members actions during their last period in office on the grounds that those voluntarily departing can behave according to a distinct set of preferences even if they run afoul of their districts or of their electoral coalitions empirical results on final period behavior are voluminous and sometimes contradictory bender and lott 1996 nevertheless two general inferences seem to have gathered support first there is little evidence for shirking in terms of vote choice ideological shirking while as we will discuss shortly there are a variety of potential explanations for such nonfindings one intuitive and frequently offered reason is that they reflect member specific selection effects this implies that

search bargaining money and prices the goal of this paper is to extend existing search theoretic models of fiat money which until now have assumed that the price level is exogenous by explicitly incorporating bilateral bargaining this allows us to determine the price level endogenously and leads to additional insights concerning the role of money for example we find that monetary equilibria are generally inefficient in the sense that output and prices differ from the solution to a social planner s problem although the difference can become small as the discount rate or search friction vanishes we also find that there exist nonstationary inflationary equilibria

inside and outside money as alternative media of exchange we study a random matching model of money in which a subset of people called bankers have known histories and the rest called nonbankers have unknown histories earlier we showed that if there are no outside assets then an optimal arrangement has bankers issuing objects banknotes that are used in trades involving nonbankers here the same model is used to compare such exclusive use of inside money to the exclusive use of outside money we show that the set of implementable outcomes using outside money is a strict subset of the set using inside money

the effects of logrolling on congressional voting the theoretical public choice literature suggests that vote trading is an important determinant of congressional voting behavior yet empirical voting models do not allow for vote trading these models recognize that observed ideology may influence legislative behavior but do not correct for unobserved ideology this study devises new tests for logrolling and ideology the empirical model controls for logroll agreements and unobserved ideological interest via the correlation of unobserved variables the results reflect the presence of vote trading coalitions on some votes but not on others the results cast doubt on the importance of personal ideological interests of legislators copyright 1992 by american economic association

does external funding of academic research crowd out institutional support abstract nonprofit organizations receive revenues from a variety of sources the amount of support provided by each source is often dependent on the level supplied by the other s empirical evidence regarding crowding out among alternative sources of revenue in nonprofit organizations is mixed but most studies find that an increase in funding from one of the sources tends to decrease contributions from the other s this paper investigates the relationship between internal and external funding of academic research i find evidence that there is not crowding out in this case instead additional funding from each of these sources enhances the amount provided by the other over time this is consistent with the hypothesis that external sponsors wish to allocate funding to those universities that do the highest quality research and that funding from either source provides information about quality the results of this study also imply that a one time change in funding from one source has a multiplier effect on subsequent levels of both sources the potential for feedback effects is usually ignored in studies of this type meaning that the total impact of funding changes may often be understated this suggests that relatively small decreases in academic research funding can have a larger than anticipated effect that may persist for many years the presence of feedback effects also indicates that existing models of nonprofit behavior which are primarily static need to be modified to incorporate a dynamic structure

money and credit redux do we need both money and credit in models with explicit roles for payment instruments we show the answer is no if credit is easy money is useless if credit is tight money can be essential but then credit is irrelevant and changes in debt limits are neutral real balances respond endogenously to leave total liquidity constant this is true for exogenous or endogenous policy and debt limits secured or unsecured credit and fairly general preferences and pricing mechanisms while we also show how to overturn some results the benchmark model suggests credit conditions matter less than some people think

distributive politics and the allocation of federal grants understanding the dynamics of policy distribution requires an appreciation of federal grant programs that have achieved a prominent place in nearly all areas of domestic policy the theoretical literature on distributive politics however focuses almost exclusively on a centralized top down view of policy distribution by examining the role of presidents legislators and bureaucrats scholars have ignored participants who have become key actors in the distribution of federal expenditures the recipient jurisdictions this analysis of the allocation patterns under six federal programs shows that local governments exert important influences on the distribution of federal grants and that the distributional patterns and their determinants vary over time the analysis also points out the importance of disaggregation by focusing on programs and recipient jurisdictions as opposed to total federal expenditures and regions states or congressional districts

another example of a credit system that co exists with money we study an economy in which exchange occurs pairwise there is no commitment and anonymous agents choose between random monetary trade or deterministic credit trade to accomplish the latter agents can exploit a costly technology that allows limited record keeping and enforcement an equilibrium with money and credit is shown to exist if the cost of using the technology is sufficiently small anonymity record keeping and enforcement limitations also permit some incidence of default in equilibrium

the effects of congressional appropriation committee membership on the distribution of federal research funding to universities i introduction in 1994 members of the republican party pledged to seek legislation to impose term limits on members of congress this pledge stemmed from the popular belief that senior members of congress tend to promote personal interests or are more influenced by lobbying efforts that may not be representative of their constituents today term limits continue to be discussed but have not been enacted instead many members have focused their energies toward minimizing the time spent on any particular committee of congress believing that tenure on a committee is a more serious concern than simple tenure in congress implicit in these concerns is the issue whether as incumbent politicians plan to retire they will behave differently and if so whether tenure on a congressional committee exacerbates this behavior this article explores the role of membership on the appropriations committee on the distribution of federal research funding to universities specifically it explores whether funding is diverted to these universities because politicians use their position on a committee to promote personal or constituent interests previous research on shirking compares the voting records of politicians on certain issues with demographic and economic characteristics of the politicians constituents this article explores the issue of shirking differently i explore how membership on congressional appropriations committees affects the distribution of federal research funding to universities i look at two types of relationships between the members and the universities first i consider the relationship between members and the universities that are located in the members districts states in the case of senators second i examine the relationship between members and their undergraduate alma mater i use district representa tion to proxy favoritism that reflects a politician s constituents given that in most instances an alma mater affiliation is not the same as district representation i use alma mater affiliation to proxy favoritism that reflects the politician s personal interests federal research funding accounts for more than 60 of research funding received by research universities previous research has shown a positive impact of federal funding on research outcomes see adams and griliches 1998 arora and gambardella 1997 connolly 1997 payne and siow 2002 and payne 2001 except for payne and siow 2002 however these articles do not consider that political diversion of funds may promote or detract from research productivity as with any other federal program this article concentrates on the impact of membership on the house and senate appropriations committees because they wield the greatest power in the allocation of funding 1 using a panel data set spanning 26 years i explore how changes in the composition of the appropriations committees affects the distribution of research funding after controlling for the heterogeneity that exists across different universities the results suggest that both district representation and alma mater affiliation matter thus there is evidence of shirking for personal interests and evidence of members representing their constituents with respect to the representation of one s constituents the strongest results suggest that public universities benefit from representation on both the senate and house committees private universities however only benefit from representation in the senate with respect to alma mater affiliations the results suggest again that public universities benefit from representation on both the senate and house committees private universities also benefit from representation on both the senate and house committees the results also suggest that the tenure of the member on the committee matters as does whether the member is a part of the majority party in power in the congressional chamber

bureaucrats legislators and the size of government some recent theories have blamed the growth of government on budget maximizing bureaucrats who are assumedly capable of imposing their most preferred budget output combination on legislatures subject to cost and demand constraints however theoretical examination of the range of bargaining outcomes that might occur between bureau and legislature shows that budget maximizing behavior does not necessarily lead to super optimal levels of production nor do the suggested reforms of competition and privatization necessarily improve the situation in this bargaining model the central determinants of governmental growth are not budget maximizing bureaucrats but the legislature s decisions regarding mode of oversight and form of internal organization

the budget process and the size of the budget the new congressional budget process provides members of congress with a new set of institutional mechanisms for making budget decisions this article addresses the question of whether or under what conditions rigid application of the new budget process modeled as first selection of the size of the budget and second its division produces smaller budgets than a piecemeal appropriations process in which the size of the budget is determined residually the theoretical result is that the new process sometimes results in relatively large budgets a testable implication of the theory is that given a choice of how stringently the budget process is to be employed members of congress jointly consider preferences and the expected outcomes under available institutional arrangements and select the arrangement usually a rule that yields the most favorable outcome empirical results from the budget process in the house from 1980 to 1983 are generally supportive of the theoretically derived hypothesis of rational choice of institutional arrangements

the impact of tenure on the flow of federal benefits to smsa s the seniority system in congress insures that committee assignments and chairmanships are distributed on the basis of house members tenure this system supposedly means that congressional influence increases with the number of times a member of congress is reelected however research on the impact of tenure on the distribution of federal aid across states has not produced convincing proof that a positive relationship between tenure and aid exists crain and tollison 1977 undertook the first study of the impact of tenure and they concluded that tenure has a positive effect on the share of total federal aid going to states indeed crain and tollison found evidence of diminishing returns to additional years of house service however green and munley 1981 quickly disputed the crain tollison findings suggesting that after adjusting for state population which affects

time series evidence on shirking in the u s house of representatives this paper presents time series evidence on the voting behavior of members of the u s house of representatives from 1975 to 1990 the empirical results indicate that voting behavior of individual congressmen is remarkably stable over time we find no evidence of economically significant last term effects on voting behavior nor are there important effects of legislative tenure on voting patterns the most significant deviations in voting behavior occur for congressmen who failed to win their reelection bid suggesting that sizable deviations from previous policy positions may result in swift retribution by constituents in the district

the governance and performance of universities evidence from europe and the us we test the hypothesis that universities are more productive when they are both more autonomous and face more competition using survey data we construct indices of university autonomy and competition for both europe and the united states we show that there are strong positive correlations between these indices and multiple measures of university output to obtain causal evidence we investigate exogenous shocks to us universities expenditures over three decades these shocks arise through the political appointment process which we use to generate instrumental variables we find that an exogenous increase in a university s expenditure generates more output measured by either patents or publications if the university is more autonomous and faces more competition exploiting variation over time in the stakes of competitions for us federal research grants we also find that universities generate more output for a given expenditure when research competitions are high stakes we draw lessons arguing that european universities could benefit from a combination of greater autonomy and greater accountability greater accountability might come through increased reliance on competitive grants enhanced competition for students and faculty promoted by reforms that increase mobility and yardstick competitions which often take the form of assessment exercises philippe aghion mathias dewatripont caroline hoxby andreu mas colell and andre sapir

the effects of a money financed fiscal stimulus abstract i analyze the effects of a money financed fiscal stimulus and compare them with those resulting from a conventional debt financed stimulus i study the effects of both a tax cut and an increase in government purchases with and without a binding zero lower bound zlb on the nominal interest rate when the zlb is not binding a money financed fiscal stimulus is shown to have much larger multipliers than a debt financed fiscal stimulus that difference in effectiveness persists but is much smaller under a binding zlb nominal rigidities are shown to play a major role in shaping those effects

human capital committee power and legislative outcomes this paper presents a model in which legislators use informational asymmetries to engage in rent seeking behavior previous work in the informational and distributive traditions could not explain deviations from the median preference without reference to committee power integration of these forces demonstrated that legislative outcomes need not correspond to the median preference regardless of the extent to which committee power is present in a legislature while deviations from the median preference are consistent with committee power recent empirical evidence suggests that observed deviations in congress are in fact caused by human capital differentials rather than committee power

bicameral sequence theory and state legislative evidence theory voting sequence is a strategic variable between bicameral chambers decisions by chambers to acquire costly information affect the payoffs chambers receive from sequencing choices thus it is also a strategic variable between bicameral chambers hypotheses 1 because of incentives to take advantage of one chamber s informational expertise when chambers share relatively homogeneous policy preferences house chambers in legislatures dominated by a single party will initiate adopted legislation in greater proportion relative to legislatures that are not dominated by a single party 2 a cost advantage in acquiring information grows with an increasing disparity in the number of legislators between bicameral chambers lower information acquisition costs in the larger bicameral chamber account for a persistent first mover advantage for that chamber methods hypotheses are derived from a game theoretic model in which informational endowments are endogenously chosen by bicameral chambers and in which voting sequence is endogenously determined implications of the model are tested with an original data set developed from the session laws of thirty three state legislatures results under specified conditions bicameral chambers sequence themselves to take advantage of one chamber s informational expertise under other conditions bicameral chambers will not take advantage of a chamber s informational expertise the main theoretical results conclude 1 that one party legislatures take greater advantage of informational expertise relative to divided party legislatures 2 that senators have an incentive to specialize in more risky policy environments relative to house members and 3 that there is an informational basis for house chambers to initiate more adopted legislation than senate chambers the empirical results are consistent with hypothesis 1 the results are consistent with hypothesis 2 although an alternative noncontradictory theory might also account for the result

legislative voting and the economic theory of politics empirical studies of legislative voting have multiplied since the mid 1970s early work 13 distinguished two modes of representation delegates who vote as voters want and trustees who use their own judgment more recently researchers have considered only delegates claiming that legislators who use their own ideology are shirking following principal agent theory representatives are conceived as conduits through which citizens transmit and express interests empirical work on this question however has found that the legislator s ideology explains more variation in vote choices than is explained by measures of constituent interest the seeming contradiction has led some 9 10 17 to reject the economic theory of legislator behavior as erroneous the truth is that no such theory has ever been fairly stated much less tested estimating equations have been ad hoc and the usual approach to measuring ideology has imposed correlation between the equation error and an explanatory variable 8 in both cases the result is

intermediaries and payments instruments abstract we study an economy in which intermediaries have incentives to issue circulating liabilities as part of an equilibrium we show that with arbitrarily small transactions costs only the liabilities of intermediaries will circulate and not those of other private sector agents therefore our model connects intermediation activity with the issuance of payments media a connection that has not been made in earlier literature we use our model to suggest a resolution of the banknote underissue puzzle of cagan in d carson ed banking and monetary studies richard d irwin publishing homewood il 1963

incomplete record keeping and optimal payment arrangements abstract we study a random matching absence of double coincidence environment in which people cannot precommit and in which there are two imperfect ways to keep track of what other people have done in the past money and a public record of all past actions that is updated with an average lag we study how the magnitude of that lag affects the allocations that are optimal from among allocations that are stationary and feasible and that satisfy incentive constraints which arise from the absence of commitment and the imperfect ways of keeping track of what others have done in the past journal of economic literature classification numbers e40 c73 d82

money and prices a model of search and bargaining abstract this paper makes commodities divisible and incorporates bargaining into the search theoretic model of money to determine the purchasing power of money or price it is shown that two monetary equilibria always coexist where fiat money is universally accepted the two equilibria differ in price output welfare and the velocity of money sunspot monetary equilibria exist in which money is universally accepted in all states of the economy multiplicity has novel implications on the effectiveness of currency substitution and exchange market intervention journal of economic literature classification numbers c78 e40

congressional committees and the political economy of federal outlays the literature on the organization of the united states congress has been dominated by distributive and informational theory one important source of disagreement between these two theories is their characterization of whether individual legislators can engage in pork barrel activities here we provide evidence which indicates that the pork barrel is alive and well in the contemporary united states congress we focus on whether members of power and constituency committees can direct disproportionate federal expenditures to their districts finding strong and systematic evidence of pork barrel activities by committee members provides empirical support for distributive theories of legislative organization

data breaches and identity theft abstract an environment is analyzed in which agents join clubs payment networks in order to facilitate trade the networks compile personal identifying data pid so as to match transactors to transactions histories technological limitations cause the networks data management practices to impact each other s incidence and costs of identity theft too much data collection and too little security arise in equilibrium with noncooperative networks compared to the efficient allocation a number of potential remedies are analyzed 1 reallocations of data breach costs 2 mandated security levels and 3 mandated limits on the amount of data collected

optimal monetary policy at the zero interest rate bound what should a central bank do when faced with a weak aggregate demand even after reducing the short term nominal interest rate to zero to address this question we solve a central bank s intertemporal loss minimization problem in which the non negativity constraint on nominal interest rates is explicitly considered we find that the optimal path is characterized by policy inertia in the sense that a zero interest rate policy should be continued for a while even after the natural rate of interest returns to a positive level by making such a commitment the central bank is able to achieve higher expected inflation lower long term nominal interest rates and a weaker domestic currency in the adverse periods when the natural rate of interest significantly deviates from a steady state level

a theory of competition among pressure groups for political influence this paper presents a theory of competition among pressure groups for political influence political equilibrium depends on the efficiency of each group in producing pressure the effect of additional pressure on their influence the number of persons in different groups and the deadweight cost of taxes and subsidies an increase in deadweight costs discourages pressure by subsidized groups and encourages pressure by taxpayers this analysis unifies the view that governments correct market failures with the view that they favor the politically powerful both are produced by the competition for political favors

credit and money in a search model with divisible commodities this paper examines the competition between money and credit in a search model with divisible commodities it is shown that fiat money can be valuable even though it yields a lower rate of return than the coexisting credit the competition between money and credit increases efficiency the monetary equilibrium with credit pareto dominates the monetary equilibrium without credit whenever the two coexist when a credit is repaid with money the competition also bounds the purchasing power of money from below by that of credit and so eliminates the weak inefficient monetary equilibrium found in previous search models with numerical examples three different monetary equilibria are ranked and the properties of the interest rate are examined

money is memory abstract this paper examines the sets of feasible allocations in a large class of economic environments in which commitment is impossible following myerson 8 the standard definition of feasibility is adapted to take account of the lack of commitment the environments feature either memory or money memory is defined as knowledge on the part of an agent of the full histories of all agents with whom he has had direct or indirect contact in the past money is defined as an object that does not enter utility or production functions and is available in fixed supply the main proposition is that any allocation that is feasible in an environment with money is also feasible in the same environment with memory depending on the environment the converse may or may not be true hence from a technological point of view money is equivalent to a primitive form of memory journal of economic literature classification numbers e40 c73 d82

liquidity a new monetarist perspective this essay surveys the new monetarist approach to liquidity work in this literature strives for empirical and policy relevance plus rigorous foundations questions include what is liquidity is money essential in achieving desirable outcomes which objects can or should serve in this capacity when can asset prices differ from fundamentals what are the functions of commitment and collateral in credit markets how does money interact with credit and intermediation what can and should monetary policy do the research summarized emphasizes the micro structure of frictional transactions and studies how institutions like monetary exchange credit arrangements or intermediation facilitate the exchange process

private and public circulating liabilities abstract legal and technological changes have made private banknote issue or its electronic equivalent possible we construct a model where private liabilities circulate either by themselves or alongside outside money we provide results on existence and multiplicity of equilibria and characterize dynamics near steady states our results support friedman in that circulating private liabilities are associated with endogenous volatility but implementing friedman s advice the government should ban private currency substitutes causes significant inefficiency the proposal of hayek that the government should leave currency creation to the market also is often constrained suboptimal both public and private circulating liabilities are required for optimality journal of economic literature classification numbers e3 e4 e5

on the mis measurement of legislator ideology and shirking in this paper we show that current statistical measures of legislator s shirking are implicitly based on the electoral concept of a unique majority rule equilibrium point in the policy space where elections are contested we note that such equilibria do not exist generically and present statistical results showing that cross sectional regressions where legislators voting indices are predicted by district average demograhic and economic data are mis specified we also discuss a weaker equilibrium construct the uncovered set and present statistical evidence showing that differences in voting behavior between senators from the same state are positively related to the heterogeneity of the electorate we argue that current evidence alleged to show shirking by senators is equally consistent with senators who perfectly represent an idiosyncratic constituency that cannot be represented by district average data

limited commitment money and credit abstract this paper studies limited commitment and adverse selection in an economy in which private liabilities inside money can be used as instruments of intertemporal trade the results suggest that in conjunction with adverse selection the limited commitment problem may affect the behavior of intrinsically higher quality debtors more severely than lower quality ones nonetheless a credit economy may function better when both problems are present than under limited commitment alone adding a fixed amount of money eases frictions associated with the credit market journal of economic literature classification numbers d8 e0 e5

the impact of federal spending on house election outcomes while it is widely believed by academics politicians and the popular press that incumbent members of congress are rewarded by the electorate for bringing federal dollars to their district the empirical evidence supporting that claim is extremely weak one explanation for the failure to uncover the expected relationship between federal spending and election outcomes is that incumbents who expect to have difficulty being reelected are likely to exert greater effort in obtaining federal outlays since it is generally impossible to adequately measure this effort the estimated impact of spending is biased downward because of an omitted variable bias we address this estimation problem using instrumental variables for each house district we use spending outside the district but inside the state containing the district as an instrument for spending in the district federal spending is affected by a large number of actors e g governors senators mayors and other house members in the state delegation