co production of frugal innovation case of low cost reverse osmosis water filters in india abstract the increased role of market actors in the provision of drinking water has implied a greater salience to issues of affordability with its emphasis of increasing affordability without compromising on quality the idea of frugal innovation holds out particular promise in resource constrained environments in this paper we study the case of low cost household water filters using reverse osmosis ro technology in the indian city of ahmedabad using mixed methods we find the citizen to be an active participant a co producer in the frugal innovation process that allows small scale local entrepreneurs to customize their products and services to the needs and price expectations of their customers this co production process that has been facilitated by the proximity of the user with the local entrepreneur has not only reduced private costs borne by users but also been as successful as their more expensive counterparts in meeting the diverse needs of end users further we find that the context facilitating such service co production is characterized by institutional co production with actions of both the state and citizen creating the demand for innovation around more affordable private solutions while there is much to celebrate in the value created by the frugal innovation we believe the implications of the contested and unregulated water filter technology suggest reasons for caution

on the efficiency of law a public choice perspective economists have not yet developed a comprehensive theoretical framework incorporating transaction cost economics within a public choice perspective for predicting when there will be an efficiency problem with the law transaction cost reasoning and the rent seeking insight have not been applied systematically in a dynamic institutional context to evaluate when the law will be used to increase or not minimize problems of bounded rationality and opportunism this paper takes a first step at identifying and remedying this deficiency the paper first provides a critical review of relevant theoretical contributions made by becker 1983 1985 posner 1977 priest 1977 rubin 1977 1982 williamson 1975 1985 and others we then show how analysis of the efficiency of law can be synthesized into a broader whole by incorporating transaction cost economics more fully into existing understanding of rentseeking in the political realm thus within the public choice paradigm this paper develops a deeper transaction cost analysis of the efficiency of law building on prior research by the authors crew and rowley 1988a 1988b twight 1983 1988 the paper identifies variables that position legal rules on a spectrum that ranges from those that are predominantly transaction cost

schumacher meets schumpeter appropriate technology below the radar innovation and technological change play an important role in poverty reduction through their contribution to growth their use of factors of production their environmental spillovers the social relations associated with production and the characteristics of the products which they produce it was only after the 1960s that these linkages were identified with the recognition that much of global technological progress was directed to meet the needs of the global rich and was best suited to operation in high income environments the development and diffusion of appropriate technologies was an agenda largely pursued by the not for profit appropriate technology movement however with the global diffusion of innovative capabilities and the rapid rise of incomes of the very poor the second bottom billion innovation for the poor and innovation appropriate for production in low wage and poor infrastructure environments has increasingly become an arena for profitable production the very large size of china and india coupled with their growing technological capabilities and the rapid growth of low incomes makes it likely that they will become the dominant sources of innovation for the poor

the role of market forces in assuring contractual performance the conditions under which transactors can use the market repeat purchase mechanism of contract enforcement are examined increased price is shown to be a means of assuring contractual performance a necessary and sufficient condition for performance is the existence of price sufficiently above salvageable production costs so that the nonperforming firm loses a discounted steam of rents on future sales which is greater than the wealth increase from nonperformance this will generally imply a market price greater than the perfectly competitive price and rationalize investments in firm specific assets advertising investments thereby become a positive indicator of likely performance

sulfur dioxide control by electric utilities what are the gains from trade title iv of the 1990 clean air act amendments caaa established a market for transferable sulfur dioxide so2 emission allowances among electric utilities this market offers firms facing high marginal abatement costs the opportunity to purchase the right to emit so2 from firms with lower costs and this is expected to yield cost savings compared to a command and control approach to environmental regulation this paper uses econometrically estimated marginal abatement cost functions for power plants affected by title iv of the caaa to evaluate the performance of the so2 allowance market specifically we investigate whether the much heralded fall in the cost of abating so2 compared to original estimates can be attributed to allowance trading we demonstrate that for plants that use low sulfur coal to reduce so2 emissions technical change and the fall in prices of low sulfur coal have lowered marginal abatement cost curves by over 50 percent since 1985 the flexibility to take advantage of these chan

savings and loan and finance industry pac contributions to incumbent members of the house banking committee this paper examines the relationship between campaign contributions from savings and loan and finance industry pacs and membership on the house banking committee the distinguishing features of this paper are that we focus on campaign contributions at an industry level and we use regression analysis to determine whether membership on the house banking committee the committee with oversight responsibility for the savings and loan industry influences the level of contributions received by an individual legislator we find that members of the house banking committee do receive significantly greater contributions from the savings and loan and finance pacs than do other members of congress and that being chairman of the house banking committee also pays a dividend

capital budgets borrowing rules and state capital spending abstract this paper compares the level and composition of government spending in u s states that maintain separate budgets for capital and operating expenditures with that in states that employ unified budgets it also investigates the effects of pay as you go financing rules for capital projects the empirical findings suggest that states with separate capital budgets spend more on public capital projects than comparable states with unified budgets there is no evidence that the presence or absence of a capital budget affects the level of non capital spending pay as you go requirements for financing capital projects are associated with lower levels of both capital and non capital spending

installed base and compatibility innovation product preannouncements and predation a good is often more valuable to any user the more others use compatible goods the authors show that this effect may inhibit innovation if an installed base exists and transition to a new standard must be gradual early adopters bear a disproportionate share of transient incompatibility costs this can produce excess inertia the installed base however is stranded if the new standard is adopted this may create excess momentum these dynamic effects have strategic implications temporary price cutting can permanently prevent entry and product preannouncements can be critical in innovation these strategic actions have ambiguous welfare effects

attack defence and contagion in networks sanjeev goyal acknowledges support from a keynes fellowship cambridge inet institute and european research area complexity net resilience and interaction of networks in ecology and economics adrien vigier acknowledges support from a gates cambridge fellowship as well as a core fellowship from universite catholique de louvain

micro targeting and polarization abstract this paper connects the rise in polarization to changes in media technology which allow for higher precision in the advertising strategy of candidates candidates place ads in media outlets whose audiences differ in ideology and size we develop the concept of media centrality which takes into account differences in the media network and in ideology media centrality leads to a simple characterization of both the optimal targeting strategy and policy we show that generally a more fragmented media landscape leads to an increase in polarization

capture and ideology in the economic theory of politics the economic theory of regulation long ago put public interest theories of politics to rest these theories have correctly been viewed as normative wishings rather than explanations of real world phenomena they have been replaced by models of political behavior that are consistent with the rest of microeconomics anthony downs 1957 james buchanan and gordon tullock 1965 george stigler 1971 sam peltzman 1976 recently however debate has arisen over whether some version of a public interest theory of regulation will have to be readmitted to our thinking about actions and results in the political arena what is at issue is the empirical importance of the altruistic publicly interested goals of rational actors in determining legislative and regulatory outcomes james kau and paul rubin 1979 kalt 1981 peltzman 1982 this study assesses the nature and significance of publicly interested objectives in a particular instance of economic policymaking u s senate voting on coal strip mining regulations the existence of such objectives is of course no contradiction of the economic view of human behavior kenneth arrow 1972 gary becker 1974 and may well be rooted in genetic biological history becker 1976 jack hirshleifer 1978 generally however individuals altruistic publicly interested goals have been given little attention this reflects the judgment that such goals are so empirically unimportant as to allow the use of occam s razor in positive models or well founded apprehensions that these goals are unusually difficult to identify measure and analyze notwithstanding the latter problem we find that approaches which confine themselves to a view of political actors as narrowly egocentric maximizers explain and predict legislative outcomes poorly the tracking and dissecting of the determinants of voting on coal strip mining policy suggest that the economic theory of politics has been prematurely closed to a broader conception of political behavior

the competitive effects of resale price maintenance the competitive effects of resale price maintenance rpm are theoretically diverse rpm can cause allocation distortions or promote productive efficiencies in the distribution process moreover extant cross sectional empirical evidence is incapable of distinguishing among the potentially disparate effects of rpm this paper conducts hypothesis tests of the alternative theories of rpm the empirical framework relates estimates of the effects of rpm for a cross section of observations to necessary conditions of the alternative models this analysis indicates that rpm is used both to foster cartels and promote efficiencies in the distribution process this result is consistent with the growing body of case study analysis that suggests that rpm is used for a variety of reasons this result also questions the current per se illegal status of rpm in the antitrust laws evidence is also provided concerning the strategic interaction between manufacturers and dealers in the distribution process and the use of financial data in analyzing propositions in industrial organization

imperfectly mobile households and durable local public goods does the capitalization mechanism work abstract a complication in the decision making of local governments is that a community s residents may move before the future benefits associated with current tax and expenditure policies are fully realized it has been argued that the capitalization of these benefits into current property values can induce local governments to behave efficiently this paper drops two assumptions behind the capitalization hypothesis perfect labor mobility and the absence of uncertainty about the future benefits it is shown that these benefits may be overcapitalized or undercapitalized depending on a critical aspect of the uncertainty consequently there is underinvestment in some projects but overinvestment in others

integrating behavioral choice into epidemiological models of aids increased hiv risk creates incentives for people with low sexual activity to reduce their activity but may make high activity people fatalistic leading them to reduce their activity only slightly or actually increase it if high activity people reduce their activity by a smaller proportion than low activity people the composition of the pool of available partners will worsen creating positive feedbacks and possibly multiple steady states early public health efforts may allow societies to reach more favorable steady states excerpt

reputation and imperfect information abstract a common observation in the informal literature of economics and elsewhere is that is multistage games players may seek early in the game to acquire a reputation for being tough or benevolent or something else but this phenomenon is not observed in some formal game theoretic analyses of finite games such as selten s finitely repeated chain store game or in the finitely repeated prisoners dilemma we reexamine selten s model adding to it a small amount of imperfect or incomplete information about players payoffs and we find that this addition is sufficient to give rise to the reputation effect that one intuitively expects

politics and the rescue of insolvent savings and loans before 1989 the results presented in this paper are consistent with those predicted by public choice economists who believe that regulatory agencies represent the interests of their controlling congressional committees membership on committees is not random congressmen seek committee assignments where they can represent the interests of their constituency congressmen from states where financial institutions are significant will seek membership on their respective banking committees once on those committees congressmen will seek to protect and promote their own constituency in the case of the savings and loan industry insolvent savings and loans received benefits from staying in operation these savings and loans gained another chance to gamble for resurrection being shut down or placed in a management consignment program did not give this option the results presented in our paper indicate that participation in one of the rescue programs is not random savings and loans in states with political power representation on the senate banking committee are less likely to be resolved

deficits and inflation an open economy model of the united states the deficit debate is a recurring theme in academic and political circles the controversy is over the effect of deficits on inflation and interest rates the existing body of empirical evidence does not resolve the controversy this paper focuses on the inflationary impact of deficits the model used is derived from a comprehensive is lm analysis which incorporates a foreign trade sector and a general price adoptive expectation adjustment mechanism we test the model using time series data for the united states from our results we conclude that nia deficits have no significant bearing on the rate of inflation

sectoral patterns of technical change towards a taxonomy and a theory abstract the purpose of the paper is to describe and explain sectoral patterns of technical change as revealed by data on about 2000 significant innovations in britain since 1945 most technological knowledge turns out not to be information that is generally applicable and easily reproducible but specific to firms and applications cumulative in development and varied amongst sectors in source and direction innovating firms principally in electronics and chemicals are relatively big and they develop innovations over a wide range of specific product groups within their principal sector but relatively few outside firms principally in mechanical and instrument engineering are relatively small and specialised and they exist in symbiosis with large firms in scale intensive sectors like metal manufacture and vehicles who make a significant contribution to their own process technology in textile firms on the other hand most process innovations come from suppliers these characteristics and variations can be classified in a three part taxonomy based on firms 1 supplier dominated 2 production intensive 3 science based they can be explained by sources of technology requirements of users and possibilities for appropriation this explanation has implications for our understanding of the sources and directions of technical change firms diversification behaviour the dynamic relationship between technology and industrial structure and the formation of technological skills and advantages at the level of the firm the region and the country

monopolistic competition as a foundation for keynesian macroeconomic models a general equilibrium macroeconomic model based on monopolistic competition is presented the model exhibits a traditional multiplier in the short run but due to free entry the multiplier disappears in the long run by construction all agents are fully rational the keynesian results are a consequence of the assumption of monopolistic competition which creates a divergence between optimal private behavior and optimal social behavior

bureaucratic discretion or congressional control regulatory policymaking by the federal trade commission this paper extends stigler and peltzman s approach to regulation by incorporating a legislature the model yields comparative statics results and hence testable implications the paper then tests between two opposing approaches about regulatory agency behavior the first assumes agencies operate independently of the legislature and hence exercise discretion the second assumes that congress controls agency decisions the recent behavior of the federal trade commission provides the empirical setting substantial evidence is found for the specific predictions of the model including the hypothesis of systematic congressional influence over ftc decisions

the industrial organization of congress or why legislatures like firms are not organized as markets this paper provides a theory of legislative institutions that parallels the theory of the firm and the theory of contractual institutions like market institutions legislative institutions reflect two key components the goals or preferences of individuals here representatives seeking reelection and the relevant transactions costs we present three conclusions first we show how the legislative institutions enforce bargains among legislators second we explain why given the peculiar form of bargaining problems found in legislatures specific forms of nonmarket exchange prove superior to market exchange third our approach shows how the committee system limits the types of coalitions that may form on a particular issue

the developing world is poorer than we thought but no less successful in the fight against poverty a new data set on national poverty lines is combined with new price data and almost 700 household surveys to estimate absolute poverty measures for the developing world we find that 25 of the population lived in poverty in 2005 as judged by what poverty typically means in the world s poorest countries this is higher than past estimates substantial overall progress is still indicated the corresponding poverty rate was 52 in 1981 but progress was very uneven across regions the trends over time and regional profile are robust to various changes in methodology though precise counts are more sensitive

network security and contagion abstract we develop a theoretical model of security investments in a network of interconnected agents network connections introduce the possibility of cascading failures due to an exogenous or endogenous attack depending on the profile of security investments by the agents we provide a tractable decomposition of individual payoffs into an own effect and an externality which also enables us to characterize individual investment incentives recursively by considering the network with one agent removed at a time using this decomposition we provide characterization of equilibrium and socially optimal investment levels as a function of the structure of the network highlighting the role of a new set of network centrality measures in shaping the levels of equilibrium and optimal investments when the attack location is endogenized by assuming that the attacker chooses a probability distribution over the location of the attack in order to maximize damage similar forces still operate but now because greater investment by an agent shifts the attack to other parts of the network the equilibrium may involve too much investment relative to the social optimum

the new economics of organization over the last ten years or so an important new approach to the study of organizations has emerged within economics it is perhaps best characterized by three elements a contractual perspective on organizational relationships a theoretical focus on hierarchical control and formal analysis via principal agent models this paper provides political scientists with an overview of the new economics of organization and explores its implications for the study of public bureaucracy so far positive political theory has not contributed much to our understanding of public bureaucracy in part this is due to the unsympathetic treatment that rational modeling and most other modes of quantitative analysis have long received from students of public administration the other side of the coin however is that positive theorists have not made much of an effort to develop theories of bureaucracy their concerns have centered around two basic mechanisms of social choice voting and markets and they have devoted little systematic attention to a third mechanism that is clearly important for understanding how societies and other aggregates make collective decisions this third and relatively unexplored mechanism is hierarchy movement toward a positive theory of hierarchies would fill a serious gap in the social choice literature while at the same time making a theoretical contribution that strikes to the essence of public bureaucracy indeed of all organizations in fact significant steps toward a positive theory of hierarchies have very recently been taken but by economists not political scientists in small numbers of course economists made contributions to the study of public bureaucracy some time ago with the pioneering works of downs 1967 tullock 1965 and niskanen 1971 but this new wave of theoretical work is different it is already a large complex body of literature that is the focus of innovation and excitement among a growing number of economists and it reflects an unusual degree of theoretical coherence and cumulative effort work in this tradition tends to receive orientation from a distinctive economic approach to the analysis of organizations an approach perhaps best characterized by three elements a contractual perspective on organizational relationships a focus on hierarchical control and formal analysis via principal agent models this approach has emerged from recent attempts to move beyond the neoclassical theory of the firm which assumes away all organizational considerations to a theory of economic organizations that can explain why firms corporations and other enterprises behave as they do propo

individual security contagion and network design sanjeev goyal and diego cerdeiro were supported by european research area complexity net http www complexitynet eu through grant resilience and interaction of networks in ecology and economics resinee diego cerdeiro acknowledges financial support from queens college and the cambridge overseas trust marcin dziubinski was supported by the strategic resilience of networks project realized within the homing plus programme of the foundation for polish science co financed by the european union from the regional development fund within operational programme innovative economy grants for innovation sanjeev goyal acknowledges financial support from a keynes fellowship and the cambridge inet institute

subordination of american capital abstract to economists agency problems present challenges that can be resolved through optimal contracting or incentive mechanisms to politicians agency problems represent entitlements to be allocated among favored constituencies corporate management constitutes a powerful constituency independent of the interests of workers local communities and other corporate stakeholders the political process has for politically rational but economically dabatable reasons systematically subordinated investors desire to resolve agency problems to managers desire to be protected from capital market discipline politically explicit modes of analysis thus complement traditional tools of finance theory and improve our ability to explain capital market structure and behavior

the political economy of benefits and costs a neoclassical approach to distributive politics this essay offers a rational political explanation for the notorious inefficiency of pork barrel projects with an optimization model of legislative behavior and legislative institutions the model emphasizes the economically arbitrary from a welfare point of view importance of the geographic incidence of benefits and costs owing to the geographic basis for political representation we explore the implications of a legislator s objective function and derive conditions under which a representative legislature will select an omnibus of projects each of which exceeds the efficient scale

a dynamic theory of public spending taxation and debt this paper presents a dynamic political economy theory of public spending taxation and debt policy choices are made by a legislature consisting of representatives elected by geographically defined districts the legislature can raise revenues via a distortionary income tax and by borrowing these revenues can be used tofinance a national public good and district specific transfers interpreted as pork barrel spending the value of the public good is stochastic reflecting shocks such as wars or natural disasters in equilibrium policy making cycles between two distinct regimes business as usual in which legislators bargain over the allocation of pork and responsible policy making in which policies maximize the collective good transitions between the two regimes are brought about by shocks in the value of the public good in the long run equilibrium tax rates are too high and too volatile public good provision is too low and debt levels are too high in some environments a balanced budget requirement can improve citizen welfare

the congressional bureaucratic system a principal agent perspective with applications to the sec this paper provides the theoretical perspective and empirical support for congressional dominance of agency decisions my thesis is twofold first because much of the previous evidence on this question is not evidence at all many scholars intuition and conclusions are based on a logically flawed foundation second i have provided here and in previous work a look at a variety of different agencies and in each case have shown how the events can plausibly be interpreted as involving congress agency problems within the congressional bureaucratic system are real and substantial just as they are within corporations however as in the latter institutional forms develop within the congressional system to partially if not wholly mitigate these problems the logical perspective together with the evidence provide a strong case against the agency dominance hypothesis as typified by the early sections of niskanen 1971 and wilson 1980

procedural choice in majoritarian organizations a puzzling feature of self governing organizations is persistent majority support for restrictive seemingly nonmajoritarian procedures e g chairs and committees this article provides a theory of self enforcing majoritarian commitment to restrictive procedures we ask 1 why majorities consent to restrictive procedures in the first place 2 why restrictive procedures survive challenges thereafter and 3 with what policy consequences in the model a risk averse majority allocates procedural rights to increase procedural efficiency i e reduce the procedural uncertainty of free for all bargaining an equilibrium procedure is generally asymmetric and restrictive generating nonmajoritarian policy bias still a majority may persist in endorsing it so as to avoid amplifying procedural and policy uncertainty

a political theory of regulation with some observations on railway abandonments one of the main themes of partisan dispute in the recent past and doubtless in the foreseeable future is whether or not the value of detailed governmental regulation of the economy exceeds the cost this is exactly the kind of dispute that might be resolved by raising it from the level of mere partisan interest to the level of economic and political science unfortunately however it has not been raised because we do not have the necessary intellectual apparatus namely a theory about the motivation for the operation of and the consequences of regulation as a result most of the discussion consists of biased ad hoc explanations of particular cases with little effort to formulate and test alternative generalizations we have therefore nothing but unresolved and unresolvable disputes about a more or less random collection of stories and some contradictory recipes about cause and effect

the economics of online crime this paper will focus on online crime which has taken off as a serious industry since about 2004 until then much of the online nuisance came from amateur hackers who defaced websites and wrote malicious software in pursuit of bragging rights but now criminal networks have emerged online black markets in which the bad guys trade with each other with criminals taking on specialized roles just as in adam smith s pin factory specialization has led to impressive productivity gains even though the subject is now bank card pins rather than metal ones someone who can collect bank card and pin data electronic banking passwords and the information needed to apply for credit in someone else s name can sell these data online to anonymous brokers the brokers in turn sell the credentials to specialist cashiers who steal and then launder the money we will examine the data on online crime discuss the collective action aspects of the problem demonstrate how agile attackers shift across national borders as earlier targets wise up to their tactics describe ways to improve law enforcement coordination and we explore how defenders incentives affect the outcomes

war and conflict in economics theories applications and recent trends we review the main economic models of war and conflict these models vary in details but their implications are qualitatively consistent highlighting key commonalities across a variety of conflict settings recent empirical literature employing both laboratory and field data in many cases confirms the basic implications of conflict theory however this literature also presents important challenges to the way economists traditionally model conflict we finish our review by suggesting ways to address these challenges

public debts and fiscal politics how to decide the phenomenal growth in our public deficits over the past twenty years is a matter of public and professional concern see symposium 1989 while this concern may indeed be well founded particularly given current deficit levels public deficits are not always bad certainly in times of deep recessions short term deficit financing can stimulate aggregate demand increase national income and reduce unemployment in a keynesian fashion see richard startz 1989 second long term deficit financing may be needed to sustain a long term path of optimal consumption see peter diamond 1965 third public deficits including pay as yougo social security can offer welfare gains for significant subsets of consumers who have been liquidity constrained r glenn hubbard and kenneth judd 1986 who have been unable to purchase indexed private annuities alan blinder 1988 or who have been unable to sufficiently diversify their investment portfolios away from human capital robert merton 1983 finally robert barro 1979 has argued that public deficits may be an important policy instrument to insure intertemporal welfare maximization when public expenditures are stochastic and public taxes are economically inefficient taxes can be smoothed to reduce the lifetime excess burden of public financing the concern today is not that we have deficits but rather that we may be overdoing a good thing if this is the issue then we need to ask why and what can be done about it this is my agenda here i the political economy of recent deficits

the effectiveness of institutional borrowing restrictions empirical evidence from spanish municipalities the need for restrictions on borrowing by subnational governments is a generally accepted notion that is justified both by public choice theory and by the fact that such restrictions are in force in the majority of decentralized countries furthermore recent breaches of the stability and growth pact of the european union have led to the introduction of legislative tools aimed at balancing the budget at all levels of government have come to the forefront of interest in european public finance research this paper is concerned with the financial situation and debt level of spanish municipalities from 1988 to 2000 we have two main objectives the first is to assess the value of mandatory limitations on municipal borrowing and past trends in the borrowing policies adopted by spanish local authorities the second is to develop an econometric model using panel data stratified by population size to measure indebtedness in spanish municipalities these measures enable us to formulate a series of hypotheses to explain municipal borrowing practices which are then tested empirically the evidence thus obtained appears to support the effectiveness of institutional borrowing restrictions to introduce some financial discipline in the borrowing policies adopted by local governments in spain

networks and systemic risk in the financial system the complex web of exposures and interlinkages across the financial system highlights the relevance of network analysis in understanding systemic risk and guiding the design of financial regulation this paper discusses how network models and those based on epidemiological approaches in particular offer a compelling description of the structure of real world financial systems and shed light on different contagion mechanisms seen during the global financial crisis we also review how these insights may inform macroprudential risk assessment and policy in the areas of stress testing the financial system and the regulation of systemically important institutions the role of non bank financial intermediation and social networks in shaping financial system risk is also briefly considered

transaction cost economics and cross national patterns of industrial conflict a comparative institutional analysis at the core of a capitalist system is an implied coalition between labor and capital built upon a system of exchange and compromise without capital the material condition upon which labor s interests are realized would be impossible likewise without labor s consent to exchange wages for future investment capital could not procure the profits and savings necessary for its reproduction and transformation organizing stable and cost efficient class coalitions has long been recognized as not merely an economic priority but a political challenge yet some democracies have met this challenge more successfully than others for the student of comparative political economy an enduring question remains why the present study is an attempt to provide an answer that complements and integrates the more common macroand microanalytic studies of industrial conflict it is argued here that a useful approach is to explicate some of the major microeconomic dynamics that condition exchanges between labor and capital and to demonstrate how institutional devices designed to accommodate political representation and conflict resolution facilitate or impede the process of class compromise by employing the logic of transaction cost economics the analysis highlights the comparative institutional elements fundamental to economizing on the costs of exchange shaping consensus within a political economy s industrial relations system the resulting transaction cost efficiency model of industrial conflict specifies the ex ante cost factors price margin of transaction and the institutional control of bounded rationality and the ex post cost factors legislative polarized pluralism executive hegemony and the frequency of general elections central to the process of building and sustaining class coalitions the model is tested on data drawn from 19 democracies covering the years 1965 83 use of simulation models reveals the relative trade offs associated with different patterns of ex ante and ex post cost structures

deep transitions emergence acceleration stabilization and directionality abstract industrial society has not only led to high levels of wealth and welfare in the western world but also to increasing global ecological degradation and social inequality the socio technical systems that underlay contemporary societies have substantially contributed to these outcomes this paper proposes that these socio technical systems are an expression of a limited number of meta rules that for the past 250 years have driven innovation and hence system evolution in a particular direction thereby constituting the first deep transition meeting the cumulative social and ecological consequences of the overall direction of the first deep transition would require a radical change not only in socio technical systems but also in the meta rules driving their evolution the second deep transition this paper develops a new theoretical framework that aims to explain the emergence acceleration stabilization and directionality of deep transitions it does so through the synthesis of two literatures that have attempted to explain large scale and long term socio technical change the multi level perspective mlp on socio technical transitions and techno economic paradigm tep framework

a strategic model of social and economic networks we study the stability and efficiency of social and economic networks when self interested individuals can form or sever links first for two stylized models we characterize the stable and efficient networks there does not always exist a stable network that is efficient next we show that this tension persists generally to assure that there exists a stable network that is efficient one is forced to allocate resources to nodes that are not responsible for any of the production we characterize one such allocation rule the equal split rule and another rule that arises naturally from bargaining of the players

financial networks and contagion we study cascades of failures in a network of interdependent financial organizations how discontinuous changes in asset values e g defaults and shutdowns trigger further failures and how this depends on network structure integration greater dependence on counterparties and diversification more counterparties per organization have different nonmonotonic effects on the extent of cascades diversification connects the network initially permitting cascades to travel but as it increases further organizations are better insured against one another s failures integration also faces trade offs increased dependence on other organizations versus less sensitivity to own investments finally we illustrate the model with data on european debt cross holdings jel d85 f15 f34 f36 f65 g15 g32 g33 g38 globalization brings with it increased financial interdependencies among many kinds of organizations governments central banks investment banks firms etc that hold each other s shares debts and other obligations such interdependencies can lead to cascading defaults and failures which are often avoided through massive bailouts of institutions deemed too big to fail recent examples include the us government s interventions in aig fannie mae freddie mac and general motors and the european commission s interventions in greece and spain although such bailouts circumvent the widespread failures that were more prevalent in the nineteenth and early twentieth centuries they emphasize the need to study the risks created by a network of interdependencies understanding these risks is crucial to designing incentives and regulatory responses which defuse cascades before they are imminent in this paper we develop a general model that produces new insights regarding financial contagions and cascades of failures among organizations linked through a network of financial interdependencies organizations values depend on each other e g through cross holdings of shares debt or other liabilities if an

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

the contractual nature of the firm for their helpful comments i am grateful to armen a alchian yoram barzel keith leffler john s mcgee and dean worcester 1 ronald h coase the nature of the firm 4 economica 386 1937 the paper however was written several years earlier see note 3 infra 2 the social sciences citation index provides the following information breaking down the period of 1966 80 into three five year periods the total citations of coase s firm paper for each subperiod are 1966 70 17 citations 1971 75 47 citations and 1976 80 105 citations

how to organize crime in criminal organizations diffusing information widely throughout the organization might lead to greater internal efficiency in particular since these organizations are self sustaining through enhancing trust however this may come at the cost of leaving the organization more vulnerable to external threats such as law enforcement we consider the implications of this trade off and characterize the optimal information structure rationalizing both hierarchical structures and organization in cells then we focus on the role of the external authority characterize optimal detection strategies and discuss the implications of different forms of enforcement on the internal structure of the organization and policy finally we discuss a number of applications and extensions in this paper we study the interplay between trust within an illegal organization and its vulnerability to the authorities illegal organizations function more effectively when the people who constitute them trust each other we argue that information sharing is an important factor in building internal trust and cohesion but that can leave the organization vulnerable understanding how this trade off affects an organization s information structure and productivity can allow us to assess detection policies designed to destabilize such organizations since 9 11 the u s congress has passed a 400 billion annual budget for the war on terror new domestic institutions have been created or enhanced among many others the counterterrorism section at the u s department of justice s criminal division international intelligence cooperation has been strengthened and new protocols and controversial legal tools such as the patriot act have been developed however these new agencies and institutions face the same basic questions that have challenged the prosecutors fighting organized crime in italy south america and eastern asia as well as authorities fighting terrorism all over the world now and in the past how can we learn about the internal structure of criminal organizations how should we go about investigating a criminal organization in order to break its internal cohesion how does a criminal organization react to investigation policies we highlight the fact that simply understanding the information links within an organization gives us insight into addressing these questions the anecdotal evidence suggests that there is a wide heterogeneity across the information structures of different criminal organizations the most credited theory about the mafia developed in the early 1990 s has identified the so called cupola as the highest level of the organization supposedly consisting of agents who hold large amounts of information about the organization itself and carry out the enforcement needed for the organization to function 2 these crucial agents are shielded from the authorities since they are typically not directly involved in criminal activities this theory suggests a centralized information and enforcement structure 1 previous drafts have circulated under the titles power and organizational structure under an external threat

legislators and interest groups how unorganized interests get represented this paper derives a supply price for public policy using a constrained maximization model in the model three sets of agents each have preferences over outcomes organized interest groups offer campaign contributions to improve their own wealth voters offer votes to obtain outcomes closer to their most preferred outcomes and legislators seek both campaign contributions and votes to obtain reelection a given legislator s supply price for policy is shown to depend on the productivity of his effort as determined by committee assignments priority and ability and by the preferences of his unorganized constituency in the home district two extreme assumptions about the effectiveness of campaign spending in eliciting votes are used to illustrate the comparative statics properties of the model the prediction of the model is that interest groups will in general seek out legislators whose voters are indifferent to the policy the interest group seeks thus voters who do have preferences over policy are in effect represented even though they are not organized

centralized vote trading this paper presents a model of centralized vote trading in a legislature in this model legislators trade only with party leaders who set prices at which they will buy needed vote changes and sell promises to pass or defeat particular bills each legislator trades away votes on bills of little concern to him and of high concern to leaders and purchases promises from the leaders to pass or defeat particular bills of high concern to the legislator relative to the price the leguslator must pay

a contest success function for networks abstract this paper models conflict as a contest within a network of friendships and enmities we assume that each player is either in a friendly or in an antagonistic relation with every other player and players compete for winning by exerting costly efforts we axiomatically characterize a success function which determines the win probability of each player given the efforts and the network of relations in an extension we allow for varying intensities of friendships and enmities this framework allows for the study of strategic incentives and friendship formation under conflict as well as the application of stability concepts of network theory to contests

interest group competition and the organization of congress theory and evidence from financial services political action committees we develop a positive theory of how interest group competition shapes the organization of congress and use it to explain campaign contribution patterns in financial services since interest groups cannot enforce fee for service contracts with legislators legislators have an incentive to create specialized standing committees which foster repeated dealing between interests and committee members the resulting reputational equilibrium supports high contributions and high legislative effort for the interests contribution patterns by competing interests in the congressional battle over whether banks can enter new businesses support the theory which also has implications for term limits and campaign reform

earning through learning in legislatures this inquiry applies gary becker s theoretical notions of general and specific training to the experiential learning that occurs within political institutions in particular the u s congress in the process we isolate economic facets of these legislative experiences that influence the rental value of human capital derived from congressional training we identify four factors that structure legislators post elective wages pre congressional salary year of entry tenure and variables closely related to general training in congress specifically assignment to powerful legislative committees acquisition of broad skill packages investment in expanding skill set proficiencies and to a lesser extent life cycle driven declines in such investments