decision maker preferences for international legal cooperation why do some decision makers prefer big multilateral agreements while others prefer cooperation in small clubs does enforcement encourage or deter institutional cooperation we use experiments drawn from behavioral economics and cognitive psychology along with a substantive survey focused on international trade to illustrate how two behavioral traits patience and strategic reasoning of individuals who play key roles in negotiating and ratifying an international treaty shape their preferences for how treaties are designed and whether they are ratified patient subjects were more likely to prefer treaties with larger numbers of countries and larger long term benefits as were subjects with the skill to anticipate how others will respond over multiple iterations of strategic games the presence of an enforcement mechanism increased subjects willingness to ratify treaties however strategic reasoning had double the effect of adding enforcement to a trade agreement more strategic subjects were particularly likely to favor ratifying the agreement we report these results for a sample of 509 university students and also show how similar patterns are revealed in a unique sample of ninety two actual us policy elites under some conditions certain types of university student convenience samples can be useful for revealing elite dominated policy preferences different types of people in the same situation may prefer to approach decision making tasks and reason through trade offs in materially different ways

the structure of multi period employment contracts with incomplete insurance markets this paper examines the structure of multi period employment contracts in an economy with identical workers when only incomplete insurance is provided against job related contingencies the incompleteness of insurance markets stems from an asymmetry of information between the worker and the insurer in this situation the employment contract will provide implicit insurance by paying workers less than their marginal product during some periods and more during others the paper explores how the characteristics of such contracts are altered by increases in uncertainty worker risk aversion hiring costs and the amount of specific and general training provided a sequel to this paper examines the efficiency properties of such contracts this abstract was borrowed from another version of this item

wage profiles and imperfect capital markets a positive analysis this paper examines the structure of long term employment contracts when labor is mobile and risk averse employers are unable to monitor workers outside job offers workers cannot borrow against future income and workers productivity is increasing in the length of service with the long term employer workers are then liquidity constrained and the contract trades off consumption smoothing against efficiency in turnover in contrast to previous papers which have examined this problem this paper provides a continuous time formulation that permits a detailed characterization of the properties of the wage profile

on the indeterminacy of capital accumulation paths abstract in neoclassical optimal growth models the stability of the accumulation paths depends on the discount parameter we prove that for discount factors small enough the policy function which describes an optimal path can be of any type the result is achieved using the notion of concavity we adopt a constructive approach given any twice differentiable map we show how to construct an optimal growth problem which produces that map as the optimal policy function a consequence is that chaos can appear in these models we also provide bounds on the values of the discount parameter for which indeterminacy is possible

voting over economic plans we review and provide motivation for a one sector model of economic growth in which decisions about capital accumulation are made by a political process if it is possible to commit for at least three periods into the future then for any feasible consumption plan there is a perturbation that is majority preferred to it furthermore plans that minimize the maximum vote that can be obtained against them yield a political business cycle if it is impossible to commit voters select the optimal consumption plan for the median voter

candidate reputations and the incumbency effect abstract a major shortcoming of the classical median voter model is that its central prediction convergence of platforms to the median voter s ideal is seldom observed one reason is that the classical model neglects the importance of voter expectations as a determinant of votes here we associate voters expectations about candidates with past as well as current candidate pronouncements and assume that incumbents whose actions are consistent with their reputations are perceived as less risky than challengers in equilibrium candidates choose distinct platforms typically neither adopts the median voter s ideal point either candidate may win depending on how well the incumbent s reputation reflects current voter tastes and how relatively risky the electorate perceives the challenger to be

political motivations and electoral competition equilibrium analysis and experimental evidence we study both theoretically and experimentally the complete set of nash equilibria of a classical one dimensional majority rule election game with two candidates who might be interested in power as well as in ideology but not necessarily in the same way apart from obtaining the well known median voter result and the two sided policy differentiation outcome the paper uncovers the existence of two new equilibrium configurations called one sided and probabilistic policy differentiation respectively our analysis shows how these equilibrium configurations depend on the relative interests in power resp ideology and the uncertainty about voters preferences the theoretical predictions are supported by the data collected from a series of laboratory experiments as we observe convergence to the nash equilibrium values at the aggregate as well as the individual levels in all treatments and the comparative statics effects across treatments are as predicted by the theory

women don t run election aversion and candidate entry to study gender differences in candidate emergence we conduct a laboratory experiment in which we control the incentives potential candidates face manipulate features of the electoral environment and measure beliefs and preferences we find that men and women are equally likely to volunteer when the representative is chosen randomly but that women are less likely to become candidates when the representative is chosen by an election this difference does not arise from disparities in abilities risk aversion or beliefs but rather from the specific competitive and strategic context of campaigns and elections thus we find evidence that women are election averse whereas men are not election aversion persists with variations in the electoral environment disappearing only when campaigns are both costless and completely truthful

explaining patterns of candidate competition in congressional elections the low probability of defeating incumbent members of congress deters potentially strong rivals from challenging them yet almost all incumbents are challenged usually by opponents who lack previous experience in office and run underfinanced ineffectual campaigns but if strong challengers are deterred from challenging incumbents why are not weak challengers who have even less chance of unseating an incumbent the model developed in this paper indicates that there is a simple reason why weak candidates choose to run against incumbents they do so in order to maximize their probability of getting elected to congress together with the findings of previous researchers the results of our analyses of congressional primary data from 1980 through 1984 provide strong support for the major hypotheses derived from our model

a life cycle consumption model with liquidity constraints theory and empirical results a structural consumption model incorporating endogenous liquidity constraints is fit to a cross section of 798 u s families liquidity constrained families are estimated to constitute 19 4 percent of the population sampled a group that accounts for 16 7 percent of consumption in the population sampled in sample simulations of the model suggest that a temporary tax has three to four times more impact on aggregate consumption than it would if liquidity constraints were not in effect copyright 1987 by the econometric society

macroeconomic policy in a two party system as a repeated game this paper considers the interaction of two parties with different objectives concerning inflation and unemployment and rational and forward looking wage setters if discretionary policies are followed an economic cycle related to the political cycle results in equilibrium this cycle is significantly different from the traditional political business cycle reputational mechanisms due to the repeated interaction of the two parties and the public or commitments to a common policy rule can improve upon the discretionary outcome by reducing or eliminating the magnitude of the economic fluctuations

spatial equilibrium with entry this paper examines spatial equilibrium in political competition when established parties choose their platforms competitively while rationally anticipating entry of a vote maximizing third party the resulting equilibrium is substantially different from the hotelling median equilibrium established parties are spatially separated and third parties will generally lose the election this provides one theoretical explanation for the stability of two party systems namely that non cooperative behavior between established parties can effectively prevent third parties from winning

a general equilibrium model of congressional voting in this paper we specify a model in which congressmen constituents and campaign contributors simultaneously decide on behavior constituents and contributors desire to influence the voting behavior of congressmen congressmen on the other hand want to be elected and vote accordingly we empirically test this model using roll call voting on eight bills dealing with economic regulation and find support for the model our results indicate that part of the voting behavior of congressmen may be explained by noneconomic factors we also find that unions and businesses as campaign contributors are sometimes influential unions are more often influential than is business ideological factors are also important in explaining voting

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

an explanation for why senators from the same state vote differently so frequently abstract this paper explains why rational well informed voters elect politicians with divergent platforms given well defined constituencies and the costliness of any individual politician creating transfers across all interest groups we show that different politicians from the same district can successfully represent vastly different constituencies and still have each politician producing the support maximizing level of transfers our explanation focuses on how obtaining wealth transfers reduces successful constituencies returns to obtaining additional transfers the evidence strongly rejects alternative explanations based upon the median voter and polarized policy preference approaches

political business cycles with endogenous election timing evidence from japan this paper empirically investigates the political business cycle hypothesis for japan taking into account the potential two way interaction that originates from the control within certain limitations by the government over election timing of japanese elections using a mixed qualitative and continuous variable simultaneous equation estimation procedure the authors cannot reject the traditional political business cycle manipulation hypothesis causation running from the timing of elections to real gnp growth they also find some limited support for the opportunistic hypothesis strong real gnp growth triggers elections copyright 1991 by mit press

the citizen candidate model an experimental analysis citizen candidate models represent a significant advance in the analysis of public choice they provide added realism to models of endogenous policy formation relate the number of candidates to the benefits and costs associated with electoral competition and support equilibria with differentiated candidate positions even with a multidimensional policy space in this paper experimental methods are utilized to test two of the model s equilibrium predictions the results support the prediction that an increase in the net benefits to winning an election increases the number of citizens entering electoral contests when the net benefits to winning an election are low the results support the prediction that the only candidate has the median preference further the results suggest that when net benefits are high two members of the electorate with preferences close to and symmetric about the median enter the election although convergence to this equilibrium takes time because entry is costly having multiple candidates lowers group payoffs and may be seen as inefficient

self enforcing contracts shirking and life cycle incentives he labor market is a rich and complicated place when a worker takes a job he expects to earn a wage but will also care about rates of wage growth fringe benefits levels of risk retirement practices pensions promotion and layoff rules seniority rights and grievance procedures in return the worker must give up some time but he is also asked to upgrade his skills train other workers provide effort and ideas and defer to authority in questions of how his time is spent great changes are occurring in the way labor market institutions such as these are modelled central to the new approach is the concept of a self enforcing implicit contract this is the latest in a series of variations on the ideas of azariadis 1975 baily 1974 and gordon 1974 and is one of the more exciting new developments in the theory of labor markets this essay will outline this approach and evaluate some of its accomplishments the ideas will be presented in the context of an incentive model that is of some independent interest the model was introduced by becker and stigler 1974 and was extended by lazear 1979 to account for wage growth and mandatory retirement in these papers the workers retire at a fixed age lending the name life cycle incentives to the approach more recently shapiro and stiglitz 1984 have used a version without a fixed retirement date to account for unemployment this version is often called the shirking model these models have generated some controversy but much of it can be resolved when the models are presented in the framework of self enforcing contracts in fact this simple incentive model can do even more it can provide a rationale for competitive hierarchies where firms place their workers in competition with

rational expectations in elections some experimental results based on a multidimensional model while our experimental results do not show convincingly the superiority of our model over alternative hypotheses these results do not reject the rational expectations approach to handling incomplete information in elections this is not to say of course that our model provides the most appropriate treatment of incomplete information since it relies primarily on one source of information polls certainly other data exist such as the historical record of the parties primary election outcomes and the coalitions observed at nominating conventions which voters might use for information on their choices what we hope our analysis has begun however is a more rigorous study of how citizens can interpret such data and the role played by the various media in supplying these data

incomplete information and ideological explanations of platform divergence one of the paradoxes of formal spatial voting models is the robustness of the theoretical result that candidates will converge toward centrists positions and the empirical observation of persistent policy divergence of candidates a solution is that candidates are ideological have policy preferences when candidates have policy preferences and incomplete information about voter preferences then platform divergence is theoretically predicted experimental tests of the ideological model are presented it is shown that platform divergence is significant when candidates are ideological and have incomplete information about voter preferences however candidate positions are more convergent on average than the theory predicts suggesting that subjects value winning independently of the expected payment

a cautious price adjustment mechanism chaotic behavior abstract it is well known that adjustment processes like tatonnement can show erratic dynamic behavior the prices can make big jumps and vary over a wide range a discrete tatonnement process in a simple two goods economy is studied with only one price adjusted it is shown that the interval in which the price varies can be restricted to a neighborhood of an equilibrium price with big jumps excluded if the relative price adjustment is restricted by a maximal rate of increase or decrease of the price within the interval any type of erratic dynamics remains possible

credibility and policy convergence in a two party system with rational voters the traditional approach to modeling political parties behavior based upon the contribution of anthony downs 1957 assumes that the parties unique objective is to win elections thus they maximize their popularity the crucial implication of this assumption for a two party system is that if the two parties have the same information about voters preferences full convergence of policies results from electoral competition this is the crucial implication of the median voter theorem more generally it may be argued that different parties are motivated differently because they represent different constituencies parties may not care only about winning elections per se but also about the quality of the policies resulting from an election in this case the candidates of the two parties view winning an election not only as a goal per se but also as a means of implementing a better policy for their respective constituencies this paper shows that electoral competitions imply dynamic inconsistency if the voters are modeled as rational and forwardlooking agents and parties do not care exclusively about being elected but also about which policy to implement once elected the dynamic inconsistency arises as follows the parties have an incentive to announce convergent platforms to increase their chances of election however if the elected party is not committed to its electoral platform it has an incentive to follow its most preferred policy rather than the policy announced in its platform if voters are rational they account for this incentive thus in general in a one shot electoral game the only timeconsistent equilibrium is one in which no convergence is possible the two parties follow their most preferred policies and the voters rationally expect this outcome full convergence of parties platforms results only as a limiting case when the parties are completely indifferent with respect to the quality of the policies resulting from the election thus these results differ from the existing literature on ideologically motivated politicians for instance donald wittman 1977 1983 randall calvert 1985 which implicitly assumes the possibility of binding commitments to electoral platforms complete or partial policy convergence can be the outcome of political competition if the interaction between the parties and the voters is modeled as an infinitely repeated game in fact if the candidates have concave objective functions the welfare maximizing policy rule implies a complete convergence of parties policies however this cooperative and agreed upon policy may or may not be sustainable as a subgame perfect equilibrium depending on parameter values in particular it depends on the discount rates of the two parties the degree of polarization of their preferences and the relative popu graduate school of industrial administration carnegie mellon university pittsburgh pa 15213 and national bureau of economic research cambridge ma 02138 this paper is based upon a chapter of my unpublished doctoral dissertation at harvard university i am greatly indebted to jeffrey sachs for directing my attention toward these issues and for many conversations i also wish to thank andrew abel dilip abreu olivier blanchard ramon caminal andrew caplin alex cukierman morris fiorina benjamin friedman herschel grossman howard rosenthal and the referees for very useful comments the responsibilitv af anv n mtnkieis af calrirp nfnlv mine the result of policy convergence in a two party system is more general than the median voter theorem for discussions of convergence results not at the median see john ledyard 1984 peter coughlin 1984 coughlin and shmuel nitzan 1981 melvin hinich 1977 for earlier work on spatial competition see richard mckelvey 1975 hinich ledyard and peter ordeshook 1972 1973 and the references quoted therein the present paper focuses on the result of convergence rather than on the median voter theorem per se

a downsian spatial model with party activism a unidimensional spatial model is proposed in this article although its formal structure parallels the spatial model of electoral competition this model examines the decisions of individuals as they choose whether or not to become activists in one of two political parties an individual calculus of participation is developed that is similar to the spatial interpretation of the calculus of voting this calculus is then generalized by examining conditions that may hold for aggregate activism probabilities and the relationship between the two forms is investigated some results are then presented which concern the distributions of activists in the two parties these results in general conform to the existence of party cleavages in which there are two stable equilibrium distributions of activists such that the two parties activists are relatively cohesive internally and relatively distinctive externally finally some suggestions are offered about how this model can be combined with the spatial model of candidate competition to provide a more complete model of elections

equilibrium political budget cycles political business cycle theories generally rely on nominal rigidities and voter myopia this paper offers an equilibrium theory that preserves some basic insights from earlier models though with significant refinements the political budget cycle emphasized here is in fiscal policy rather than output and inflation it arises via a multidimensional signal process one can consider the welfare implications of proposals to mitigate the cycle and the effects of altering the electoral structure copyright 1990 by american economic association

elections with limited information a fulfilled expectations model using contemporaneous poll and endorsement data as information sources a one dimensional model of two candidate elections under asymmetric information is theoretically developed and experimentally tested candidates do not know voter utility functions and most voters are uninformed about candidate policy positions a fulfilled expectations equilibrium is defined using poll and endorsement data as information sources it is proved that with any positive fraction of informed voters any equilibrium extracts all available information all participants voters and candidates alike act as if they were fully informed for fixed candidate strategies a dynamic is given for convergence to voter equilibrium and this process is shown to imply a bandwagon effect

the coexistence of stable equilibria under least squares learning abstract in this paper we consider firms that learn about market conditions by estimating the demand function using past market data we show that learning may lead to suboptimal outcomes even when the estimated demand function perfectly fits the observations used in the regression and firms thus perceive to have learned the demand function correctly we consider the salop model with three firms and two types of consumers that differ in their sensitivity to product differences firms do not know the demand structure and they apply least squares learning to learn the demand function in each period firms estimate a linear perceived demand function and they play the perceived best response to the previous period price of the other firms this learning rule can lead to three different outcomes a self sustaining equilibrium the nash equilibrium or an asymmetric learning equilibrium in this last equilibrium one firm underestimates the demand for low prices and it attracts consumers with high sensitivity only this type of equilibrium has not been found in the literature on least squares learning before both the nash equilibrium and the asymmetric learning equilibrium are locally stable therefore the model has coexisting stable equilibria

a robust rational route to randomness in a simple asset pricing model abstract we investigate asset pricing dynamics in an adaptive evolutionary asset pricing model with fundamentalists trend followers and a market maker agents can choose between a fundamentalist strategy at positive information cost or choose a trend following strategy for free price adjustment is proportional to the excess demand in the asset market agents asynchronously update their strategy according to realized net profits in the recent past as agents become more sensitive to differences in strategy performance the fundamental steady state becomes unstable and multiple steady states may arise as the traders sensitivity to differences in fitness increases a bifurcation route to chaos sets in due to homoclinic bifurcations of stable and unstable manifolds of the fundamental steady state

on the disequilibrium dynamics of sequential monetary economies the purpose of this paper is to study the dynamic behavior of a sequential monetary exchange economy transactions take place sequentially against non equilibrium prices there is quantity rationing and credit or cash are the only means of exchange agents have optimistic or pessimistic expectations about quantity constraints that represent their beliefs about future trading opportunities in the credit model the agents incur debts along the transition path towards equilibrium while in the cash in advance model convergence takes place without the occurrence of any debts or claims the credit mechanism is shown to act as a soft correction mechanism on credit fluctuations while the cash in advance constraint acts as a hard negative feedback effect driving the prices back towards a neighborhood of a monetary cash in advance equilibrium

is the political business cycle really dead a decade ago in this journal mccallum 26 proclaimed the theory of the political business cycle 30 25 17 to be dominated by the emergence of the rational expectations literature 23 24 34 clearly the two theories are inconsistent when a strong view of rational expectations sees governments unable to manipulate real variables to create booms in election years since then new developments in macroeconomics have occasioned serious doubts as to whether the strong version of rational expectations is supported by the data 28 2 1 31 12 furthermore new advances in the political business cycle literature 36 4 have attempted to reconciliate the two theories by emphasizing that expectation errors may result from the presence of party dependent policy reaction functions and uncertainty about election outcomes the purpose of this paper is to step back and reconsider whether or not the empirical evidence presented by mccallum favoring rational expectations for the u s was really that strong and could be generalized to other countries here the u k given that the rational expectations hypothesis has been rejected at least in the strong mccallum and sargent version 26 34 it

the politics of public aid to private industry the role of policy networks firms lobby for subsidies along geographic sector or factor lines and as a result receive subsidies with a local sectoral or factorwide scope this article investigates what determines the line of cleavage and thereby the scope of the subsidy the factor mobility hypothesis according to which an economic prior the degree of factor mobility determines the geometry of lobbying coalitions misses the fact that factor mobility is as much the product of policy and policymaking as it is its determinant this article argues instead that politicians maximize their chances of staying in power through the deliberate use of subsidies to structure the political debate and embed factor owners into stable policy networks individual factor owners in turn join these policy networks to lobby for monopoly rents capable of insuring them against adverse economic competition the model yields two testable hypotheses first right governments favor subsidies to capital whereas left governments favor subsidies to lab

rational ignorance rational voter expectations and public policy a discrete informational foundation for fiscal illusion this paper demonstrates that rational ignorance properly defined allows the possibility that fiscal illusion affects policies in a democracy the implications of rational ignorance are examined in a setting where voters are assumed to completely understand the fiscal environment and make perfect use of any information that they possess in this setting it is demonstrated that ignorance may be rational manipulated and generate biased expectations over fiscal parameters

why did the incumbency advantage in u s house elections grow theory a simple rational entry argument suggests that the value of incumbency consists not just of a direct effect reflecting the value of resources such as staff attached to legislative office but also of an indirect effect reflecting the fact that stronger challengers are less likely to contest incumbent held seats the indirect effect is the product of a scare off effect the ability of incumbents to scare off high quality challengers and a quality effect reflecting how much electoral advantage a party accrues when it has an experienced rather than an inexperienced candidate hypothesis the growth of the overall incumbency advantage was driven principally by increases in the quality effect methods we use a simple two equation model estimated by ordinary least squares regression to analyze u s house election data from 1948 to 1990 results most of the increase in the incumbency advantage at least down to 1980 came through increases in the quality effect i e the advantage to the incumbent party of having a low quality challenger this suggests that the task for those wishing to explain the growth in the vote denominated incumbency advantage is to explain why the quality effect grew it also suggests that resource based explanations of the growth in the incumbency advantage cannot provide a full explanation

statistical dynamics and walras law abstract much interest has been shown on identifying the chaotic behavior generated from t tonnement process recently the aim of this article is to direct the research in exploring its statistical dynamical properties two typical types of ergodic t tonnement processes restricted t tonnement and unrestricted t tonnement have been studied their long run statistical characteristics such as time average of price excess demand and inflation rate are discussed in theory and by computer simulations

wage employment contracts this paper studies the efficient agreements about the dependence of workers earnings on employment when the employment level is controlled by firms the firms superior information about profitability conditions is responsible for this form of contract governance under plausible assumptions such agreements will cause employment to diverge from efficiency as a byproduct of their attempt to mitigate risk it is shown that if leisure is a normal good and firms are risk neutral employment is always above the efficient level such a one period implicit contracting model cannot therefore be used to explain unemployment as a rational byproduct of risk sharing between workers and a risk neutral firm under conditions of asymmetric information

stability and complex dynamics in a discrete tâtonnement model abstract in this paper we study the dynamics of discrete price adjustment processes we show that gross substitutability leads to a kind of stability of the process it guarantees that all prices converge to some bounded region that contains the unique equilibrium price the dynamics inside this region is by no means trivial we demonstrate that as the speed of adjustment increases the process undergoes several bifurcations and the dynamics may become quite complex our approach differs from other literature on t tonnement processes in that our systems are not necessarily one dimensional

a discrete and symmetric price adjustment process on the simplex abstract we study the t tonnement process in an exchange economy with three commodities and three agents we argue that for the multiplicative t tonnement process the simplex is a natural normalization rule we analyse the influence of symmetry in preferences and endowments on the dynamics of the t tonnement process depending on this symmetry there are different bifurcation routes to chaos in particular coexisting attractors may emerge when the symmetric equilibrium price vector becomes unstable this coexistence of attractors is robust in the sense that it also exists for close by asymmetric t tonnement processes

labor contracts with voluntary quits this paper considers labor contracts between the risk neutral firm and risk averse workers with heterogeneous outside opportunities alternative wages which become known to the worker after a costly on the job search in the case of a deterministic alternative wage self selection over a menu of contract wages would achieve the first best contract if the alternative wages are stochastic the second best contract emerges as a trade off between productive efficiency and risk sharing workers who voluntarily search are fewer and workers who search are less likely to quit if the search effort is not monitored even fewer workers search

interest groups campaign contributions and probabilistic voting this essay develops a simple model to analyze the impact of campaign contributions on electoral policy decisions of candidates for office interest groups here are firms that select contributions under the assumption that candidates policies and opposing groups donations remain unaltered candidates however recognize that their policy choices affect contributions campaign contributions are used by candidates to affect policy oriented voters perceptions of candidates positions in this framework the introduction of campaign contributions may affect candidates electoral policies and if they do then they benefit surely exactly one of the two interest groups

statistical dynamics and economics abstract it is shown in this paper how complex economic dynamics can be characterized using the statistical or distributional theory of dynamical systems the basic concepts of the latter are summarized then applications to supply and demand adjustments in competitive markets aggregate business fluctuations and economic growth in the very long run are briefly reviewed

candidate uncertainty mental models and complexity some experimental results since the work of downs 1957 spatial models of elections have been a mainstay of research in political science and public choice despite the plethora of theoretical and empirical research involving spatial models researchers have not considered in great detail the complexity of the decision task that a candidate confronts two facets of a candidate s decision process are investigated here using a set of laboratory experiments where subjects face a fixed incumbent in a two dimensional policy space first we analyze the effect that the complexity of the electoral landscape has on the ability of the subject to defeat the incumbent second we analyze the impact that a subject s mental model which we infer from a pre experiment questionnaire has on her performance the experimental results suggest that the complexity of a candidate s decision task and her perception of the task may be important factors in electoral competition

partisan cycles in congressional elections and the macroeconomy in the postwar united states the president s party has always done worse in the midterm congressional elections than in the previous congressional election republican administrations exhibit below average and democratic administrations above average economic growth in the first half of each term whereas in the latter halves the two see equal growth our rational expectations model is consistent with these two regularities in presidential elections voters choose between two polarized candidates they then use midterm elections to counterbalance the president s policies by strengthening the opposition in congress since presidents of different parties are associated with different policies our model predicts a spurious correlation between the state of the economy and elections our predictions contrast with those of retrospective voting models in which voters reward the incumbent if the economy is doing well before the election our model performs empirically at least as well as and often better than alternative models

the american political economy macroeconomics and electoral politics here is the most comprehensive and authoritative work to date on relationships between the economy and politics in the years from eisenhower through reagan extending and deepening his earlier work which had major impact in both political science and economics hibbs traces the patterns in and sources of postwar growth unemployment and inflation he identifies which groups win and lose from inflations and recessions he also shows how voters perceptions and reactions to economic events affect the electoral fortunes of political parties and presidents hibbs s analyses demonstrate that political officials in a democratic society ignore the economic interests and demands of their constituents at their peril because episodes of prosperity and austerity frequently have critical influence on voters behavior at the polls the consequences of eisenhower s last recession of ford s unwillingness to stimulate the economy of carter s stalled recovery were electorally fatal whereas johnson s nixon s and reagan s successes in presiding over rising employment and real incomes helped win elections the book develops a major theory of macroeconomic policy action that explains why priority is given to growth unemployment inflation and income distribution shifts with changes in partisan control of the white house the analysis shows how such policy priorities conform to the underlying economic interests and preferences of the governing party s core political supporters throughout the study hibbs is careful to take account of domestic institutional arrangements and international economic events that constrain domestic policy effectiveness and influence domestic economic outcomes hibbs s interdisciplinary approach yields more rigorous and more persuasive characterizations of the american political economy than either purely economic apolitical analyses or purely partisan politicized accounts his book provides a useful benchmark for the advocacy of new policies for the 1990s a handy volume for politicians and their staffs as well as for students and teachers of politics and economics

efficiency wage models of unemployment keynesian economists hold it to be self evident that business cycles are characterized by involuntary unemployment but construction of a model of the cycle with involuntary unemployment faces the obvious difficulty of explaining why the labor market does not clear involuntarily unemployed people by definition want to work at less than the going wage rate why don t firms cut wages thereby increasing profits

retrospective voting an experimental study this essay reports on some experiments designed to study two candidate electoral competition when voters are retrospective voters the experiments consist of a sequence of elections in which subjects play the part of both voters and candidates in each election the incumbent adopts a policy position in a one dimensional policy space and voters are paid on the basis of single peaked utility function over that space for the position adopted by the incumbent neither voters nor candidates are informed of the voter utility functions and the only information received by the voter is the payoff he has received from the present and previous incumbent administrations despite the severely limited information of candidates and voters we find that generally candidates converge toward the median voter ideal point

the long run benefits of chaos to oligopolistic firms abstract conventional economic beliefs that equilibrium is better than disequilibrium and stability is better than fluctuation are challenged with a heterogeneous oligopolistic model that consists of a naive firm and a group of sophisticated firms the naive firm is assumed to adopt a simple cobweb strategy while the sophisticate firms who command all market information form a collusion and best respond the naive firm s current action when the market equilibrium is unstable the naive firm is able to turn an explosively diverging market into a bounded but chaotic one by adopting simultaneously a cautious adjustment strategy that is limiting the growth rate of output there exists an upper bound such that as long as the growth rate does not exceed this bound the average profits made by all oligopolistic firms are higher than their respective equilibrium profits moreover the average economic surplus can also be higher than the equilibrium surplus in this sense chaos is beneficial not only to all oligopolistic firms but also to the economy as a whole

district complexity as an advantage in congressional elections scholars of congressional elections have argued that an increase in constituent diversity increases the level of electoral competition following models of boundedly rational candidates we argue that there is strong reason to believe that the opposite is true as the complexity of the electoral landscape increases challengers will have a more difficult time locating an optimal platform when facing an experienced incumbent using data from the 2000 national annenberg election study we construct a novel measure of district complexity for u s house districts and test whether the entry of quality challengers and the incumbent s share of the two party vote are affected by the complexity of the electoral landscape we find strong support for the hypothesis that complexity benefits incumbents for both indicators of electoral competition which stands in contrast to most of the existing literature on diversity and incumbent performance

classroom games candidate convergence this article details an experiment that is easily run in the classroom it demonstrates how two candidate elections quickly converge to an equilibrium it points out that the equilibrium is centered on the median voter finally it illustrates what happens when preferences or institutions change material associated with conducting the experiment is provided as is supplemental material for classroom instruction a critical part of teaching political economy is getting students to understand the link between voter preferences candidate position taking and vote aggregation rules while in the abstract it is easy to understand that candidates will often converge to the median voter the ease with which candidates respond is not often grasped this exercise mimics multiple elections with candidates holding no information about the distribution of voter preferences parallels are also drawn to one dimensional spatial location models the median voter model is one of the basic building blocks for political economy the model assumes that voters have single peaked preferences over a single policy dimension this means that each voter has a single preferred position that can be mapped onto the policy dimension and the voter s utility decreases as a function of distance from that preferred position candidates seek election by proposing a policy position that will be implemented if elected voters then compare the utility they get from the policy position proposed by each candidate in a two candidate model the median voter s position is in equilibrium and candidates converge to the equilibrium the simplicity of the model and its unique equilibrium allows those teaching various aspects of political economy to quickly cut through the complexity of political elections this classroom experiment has three goals the first is to demonstrate that competitive elections quickly drive candidates to adopt winning positions second the exercise points to the stability of an equilibrium this is especially useful for students who feel that an equilibrium is a fuzzy concept with little explanatory power in this exercise candidates who deviate from the equilibrium are quickly punished third the exercise introduces a feature common to many political systems redistricting this can be thought of as a change in the preferences of some voters simple changes in student

dynamic responsiveness in the u s senate id evelop a theory of dynamic responsiveness that suggests that parties that win elections choose candidates who are more extreme and parties that lose elections choose candidates who are more moderate moreover the size of past victories matters close elections yield little change but landslides yield large rc hanges in the candidates offered by both parties i test this theory by analyzing the relationship between republican vote share in u s senate elections and the ideology of candidates offered in the subsequent election the results show that republican democratic victories in past elections yield candidates wh oa re more less conservative in subsequent elections and the effect is proportional to the margin of victory this suggests that parties or candidates pay attention to past election returns one major implication is that parties may remain polarized in spite of their responsiveness to the median voter

multiple equilibria and chaos in a discrete tâtonnement process the purpose of this note is to demonstrate a sufficient condition for a discrete t tonnement process to lead to chaos in a general equilibrium model with multiple commodities the result indicates that as the speed of price adjustment increases the discrete t tonnement process is complex in a general equilibrium economy in which there are multiple equilibria

a partisanship theory of fiscal and monetary regimes this paper indicates that income redistribution motivated by the distributive ideals of liberal political p arties create unanticipated disincentives for productive effort thi s suggests that newly elected liberal parties are likely to engage in monetary surprises in order to compensate for the adverse effects of these disincentives on real income estimated reaction from function s support these predictions a measure of income redistribution the change in the ratio of the social expenditures of government to gnp has a positive significant effect on money growth in addition when the presidency changes from conservative to liberal there is a posit ive and significant increase on money growth copyright 1987 by ohio state university press

labor turnover wage structures and moral hazard the inefficiency of competitive markets a multiperiod general equilibrium model of the labor market is developed in which risk averse workers are faced with job related uncertainty and labor turnover is costly if a worker is unlucky and suffers a bad job match he quits and joins another firm hoping that he will like its work environment more because the quality of a job match is unobservable workers cannot insure against the risk of a bad match the firm provides implicit insurance against job dissatisfaction typically by paying workers more than their net marginal products in their early years with the firm and less subsequently since the probabilities of the insured against events the quit rates over time are affected by the amount of such insurance provided this implicit insurance is characterized by moral hazard individuals quit when in the absence of insurance they would not the equilibrium contract balances out efficiency in risk bearing with efficiency in turnover incentives we show that the equilibrium contract is not con

primaries and candidate polarization behavioral theory and experimental evidence do primary elections cause candidates to take extreme polarized positions standard equilibrium analysis predicts full convergence to the median voter s position with complete information but behavioral game theory predicts divergence when players are policy motivated and have out of equilibrium beliefs theoretically i show that primary elections can cause greater extremism or moderation depending on the beliefs candidates and voters have about their opponents in a controlled incentivized experiment i find that candidates diverge substantially and that primaries have little effect on average positions voters employ a strategy that weeds out candidates who are either too moderate or too extreme which enhances ideological purity without increasing divergence the analysis highlights the importance of behavioral assumptions in understanding the effects of electoral institutions