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

why democracies produce efficient results by applying the standard tools of microeconomic analysis i argue that democratic markets work as well as economic markets in particular i show that previous work has greatly exaggerated the existence of principal agent and informational problems in electoral markets and has drawn incorrect conclusions

competition in political and economic markets do anomalies play an important role in explaining economic and political choices are political decisions more prone to anomalies irrationality and inefficiency than economic decisions in their integration of results derived from experimental psychology and applied political economy frey and eichenberger 1990 argue that social scientists ought to answer these questions in the affirmative after examining a large body of choice data frey and eichenberger conclude that individuals deviate from the axioms of rational choice in their view the resultant anomalies in individual behavior are unaffected by the aggregation which occurs in the economic marketplace they conclude that political decision making systems correct no larger a proportion of these anomalies than are corrected by the economic market in many institutional settings outlined in their paper decision making systems can be expected to magnify individuals deviations from rational behavior system wide irrational behavior will then produce less frequent trading and a less efficient allocation of resources in this note we examine two components of frey and eichenberger s argument first we reconsider their evidence for irrational behavior in light of a larger body of experimental data which includes choices made in market settings second we argue that competition in political markets will tend to eliminate aggregate anomalies just as it does in economic markets experimental economists often generate data which distinguish between choices individuals indicate in unstructured environments and transactions individuals consummate in markets initial statements regarding choices are often inconsistent with subsequent trading behavior these data indicate that the economist s maximization paradigm based on tenets of rational choice is

does political reform increase wealth or why the difference between the chicago and virginia schools is really an elasticity question this paper shows that contrary to becker work there is no innate tendency for political competition to reduce the total cost of government wealth transfers simple examples demonstrate how the effects of government policies on total wealth boil down to the elasticities of the marginal support and opposition curves disagreements between the chicago and virginia schools of political economy can be understood as a disagreement about these elasticities the broader implications for this argument in terms of the efficiency of the common law are also discussed

the disparity between willingness to accept and willingness to pay measures of value psychologists have long argued that people are much more averse to a loss than attracted to an equivalent gain this behavior termed loss aversion has been formalized by kahneman and tversky 1979 in their reformulation of expected utility theory prospect theory in prospect theory the utility function is replaced by a value function that evaluates changes in income from the current level increases in income are weighted by a relatively small marginal utility decreases in income are weighted by a much larger marginal utility in effect the value function implies that a kink in the relationship between utility and income occurs at the initial income or reference point and that the slope of the utility function for losses in income is steeper than it is for gains in a recent paper knetsch and sinden 1984 report a series of experiments that demonstrate the existence of a large disparity between willingness to accept wta and willingness to pay wtp measures of value they argue that the psychological theory of loss aversion explains this difference economic theory would suggest that individuals who exhibit a large disparity between wta and wtp are perhaps underperceiving the value of gains or overperceiving the value of losses are behaving in an irrational manner and will consequently achieve a lower level of well being than if they behaved in a true utility maximizing manner this would in contrast to loss aversion usually imply near equal values for wta and wtp see willig 1976 further documentation of a larger than expected disparity between wta and wtp has been obtained in surveys asking for the value of a variety of public goods for example cummings brookshire and schulze 1986 document six

a spatial model of legislative voting with perceptual error this paper presents a unidimensional spatial model of voting in which members of congress vote based on an imprecise perception of roll call alternatives the model is applied to the senate roll call votes of 1977 to estimate the ideal points of the senators and to examine the role of a liberal conservative dimension in describing votes on economic issues relative to social issues in light of the spatial model the paper argues that standard models of roll call voting are not based on a theory of choice and hence that it is difficult to interpret their results alternatives to standard models based on the spatial model are developed and are used to analyze the role of ideology in deciding a specific economic issue coal strip mining

toward a public choice theory of monopoly regulation its many dimensions from the perspective of market economics this new thrust was consolidated in 1976 by s peltzman who developed a formal market model in which regulations were viewed as commodities brokered via political markets in response to bids and counter bids by those who stood to gain or to lose from specific regulation outcomes the subsequent contribution by becker 1983 added insights and institutional flesh to the stigler peltzman embryo confirming regulation as an integral component of mainstream market economics an important implication of such contributions especially those from the chicago perspective is that regulation for the most part confirms resource efficiency within market process that political markets in the absence of entry barriers are just as effective as are competitive commodity markets in achieving economic efficiency defined within a comparative institutions framework nowhere is this complacency more apparent than in the conclusion drawn by becker 1983 from a detailed formal analysis of competition among pressure groups for political influence

endogenizing the median voter public choice goes to school this paper investigates implications of the relationship between voter self selection and the behavior of politicians voter self selection arises in elections because only a portion of eligible voters actually vote it is likely to be more pronounced whenever the implied net benefits from a given electoral choice are disproportionately distributed across voters public choice theory predicts that incumbent officials will manipulate this self election pursuant to the maximization of their personal objective functions this paper provides evidence from school bond elections that politicians influence voter self selection via manipulation of election parameters

the failure of government sponsored cartels and development of federal farm policy even today most important enduring monopolies or near monopolies in the united states rest upon government policies the government s support is responsible for fixing agricultural prices above competitive levels for the exclusive franchises of public utilities and radio and tv channels for the single postal service the list goes on and on george j stigler 1993 399 i introduction it is often believed that the coercive power of government can overcome the negotiation and enforcement problems that plague private cartels 1 this claim is made in standard microeconomics text books such as hirshleifer s 1984 262 and it is an integral part of the economic theory of regulation stigler 1971 posner 1974 regulation can have the same effect as a successful cartel it raises prices above competitive levels indeed posner 1974 344 46 argues that it may be less costly for industries with large numbers of firms to obtain supportive government regulation than to privately form a carte 2 by capturing regulatory agencies industry can use the state for its own purposes 3 although broadly correct the view that government sponsorship is an effective mechanism for the successful formation of cartels neglects the costs of organizing the industry into an effective lobby group and the costs that politicians face as they attempt to define and enforce total output levels and individual quotas especially in those cases where the industry is large and heterogeneous and hence most needing of government assistance are these costs likely to be significant under these circumstances the industry will lack a consensus on total production targets and firm quotas where the cuts must be large in order to reach price setting goals quota definition and enforcement will be controversial and political opposition will be intense these conditions provide incentives for politicians to modify cartel goals and to seek alternative ways of raising industry prices and incomes accordingly classic government sponsored cartels may not emerge even though the industry has sought state intervention to augment private collective action this point is supported by research in other settings where private negotiations among heterogeneous parties to address common pool problems have failed the usual problem is disagreement over the distribution of costs and benefits and the parties often turn to the state for a solution yet as johnson and libecap 1982 have shown for fisheries and libecap and wiggins 19851 for oil field unitization the distributional problems encountered in private contracting spill over to the political arena causing delays and modifications of regulations in the case of fisheries regulatory authorities adopt policies that maintain status quo rankings of heterogeneous fishermen and expand the stock through fish hatcheries for instance and politically controversial quotas to reduce harvest typically are not introduced until the fishery is seriously depleted in the case of oil field unitization politicians also are unable to resolve conflicts over the definition of unit shares or quotas the same issue that blocks private agreement as a result government imposed unitization generally does not occur until late in the life of the field after many of the common pool losses have already been inflicted even then the unitization rules leave many margins for dissipation uncontrolled 4 this paper argues that the organization costs facing a heterogeneous industry and the political costs facing politicians in responding to its demands for regulation must be given more attention to explain the actual policies that emerge and to predict when agency capture and government sponsored cartel formation will be successful the argument is illustrated by examining the development of new deal agricultural regulation where initial cartel efforts were gradually modified in response to the political opposition of certain farm groups

international institutions and economic sanctions economic sanctions have long occupied the attention of both scholars and policy makers despite the widespread use of sanctions many observers have concluded that the inherent problems associated with imposing sanctions involving multiple senders substantially limit their effectiveness this article reviews two books that analyze the factors that influence cooperation among senders of multilateral sanctions these books indicate that international institutions can do much to promote cooperation of this sort however this essay argues that the extent to which international institutions facilitate cooperation among senders of sanctions is likely to depend on the domestic politics of members the type of institution being used for this purpose the nature of the strategy being pursued and the distribution of power among members although these books make significant contributions to our understanding of the factors that promote cooperation among senders of multilateral sanctions they examine the factors that promote the effectiveness of sanctions in only a peripheral manner one potential influence on the effectiveness of sanctions that are organized by an international institution however is the likelihood that the institution will be captured by member states or by interest groups within them additional research that investigates the conditions under which international institutions are likely to be captured and the implications of institutional capture for their performance may therefore prove useful to scholars of international relations and economic statecraft

environmentalism democracy and pollution control this paper makes two empirical contributions to the literature based on predictions generated by a lobby group model first we investigate how environmental lobby groups affect the determination of environmental policy in rich and developing countries second we explore the interaction between democratic participation and political electoral competition the empirical findings suggest that environmental lobby groups tend to positively affect the stringency of environmental policy moreover political competition tends to raise policy stringency in particular where citizens participation in the democratic process is widespread

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

selection and influence interest groups and congressional voting on trade policy studies of the effects of interest groups on congressional roll call voting typically view party and ideology as competing factors and rely on a factoral model of interests or a sectoral model including only interest groups with a direct stake in the vote we depart from that strategy in several ways we define interest groups at the level of standard industrial classification two digit codes and observe the universe of interests for 1979 90 we use measures of geographically and nongeographically based economic interests to estimate the representative s party and ideology we also consider the factor endowments of individuals within a district to examine their impact on floor votes we then investigate the influence of these interests on members party affiliation and ideology as well as a pool of five floor votes on foreign trade using instrumental variables for party and ideology economic interests account for a substantial portion of the variance in all cases and models that also include other explanatory variables are highly accurate in estimating floor votes

pareto improvement and joint cash management optimisation for banks and cash in transit firms abstract improving the atm cash management techniques of banks has already received significant attention in the literature as a separate optimisation problem for banks and the independent firms that supply cash to automated teller machines this article concentrates instead on a further possibility of cost reduction optimising the cash management problem as one single problem doing so contractual prices between banks and the cash in transit firms can be in general modified allowing for further cost reduction relative to individual optimisations in order to show the pertinence of this procedure we have determined possible pareto improvement re contracting schemes based on a baumol type cash demand forecast for a hungarian commercial bank resulting in substantial cost reduction

recipient preferences and the design of government transfer programs most work on the marginal tax rates of government transfer programs has focused on their effect on labor supply it is commonly argued that taxpayers prefer low tax rates because they encourage work effort but dislike low tax rates because they raise the break even point and thereby dilute the ability of a given amount of spending to fight poverty no formal model has been worked out to predict how the tax rate will be set in the face of this trade off

implications for gaap from an analysis of positive research in accounting based on extant literature we review the positive theory of gaap the theory predicts that gaap s principal focus is on control performance measurement and stewardship and that verifiability and conservatism are critical features of a gaap shaped by market forces we recognize the advantage of using fair values in circumstances where these are based on observable prices in liquid secondary markets but caution against expanding fair values to financial reporting more generally we conclude that rather than converging u s gaap with ifrs competition between the fasb and the iasb would allow gaap to better respond to market forces

towards an understanding of the role of standard setters in standard setting abstract we investigate the effect of standard setters in standard setting we examine how certain professional and political characteristics of fasb members and sec commissioners predict the accounting reliability and relevance of proposed standards notably we find fasb members with backgrounds in financial services are more likely to propose standards that decrease reliability and increase relevance partly due to their tendency to propose fair value methods we find opposite results for fasb members affiliated with the democratic party although only when excluding financial services background as an independent variable jackknife procedures show that results are robust to omitting any individual standard setter

extending the economic theory of regulation to the form of policy the mutually beneficial connection between industries and the governments that regulate them is the subject of a large literature led by stigler 1971 what has not been studied is how firms choose their desired policies from the set including entry barriers price floors subsidies and demand stimulation we take as given that government and incumbents from the supply and demand for regulation and explore the choice of political product

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

group utility in the micro motivation of collective action the case of membership in the aarp abstract the fundamental assumption of human rationality in neo classical economic analysis is the maximization of individual utility as economic analyses are being widely used in political science under the broad rubric of public choice one cannot escape the logical inconsistency between theory and reality arising from the free rider problem in the preference for collective goods recent literature argues that a way out of this dilemma is to recognize the existence of motivations other than self interest this paper demonstrates the need to enlarge the assumption of economic rationality by explicitly taking into account the factors of group utility with the help of survey data on the preference for membership in the american association of retired people aarp this study adds to the mounting empirical evidence for the fact that for a proper understanding of collective action the existence of a collective identity should be recognized

demand for environmental goods evidence from voting patterns on california initiatives this article studies voting behavior on 16 environmental ballot propositions in california in order to characterize the demand for environmental goods the environment is found to be a normal good for people with mean incomes but some environmental goods are inferior for those with high incomes at least when supplied collectively an important price of environmental goods is reduced income in the construction farming forestry and manufacturing industries income and price can explain most of the variation in voting there is little need to introduce preference variables such as political ideology

china s food economy to the twenty first century supply demand and trade this paper accounts for the structural changes now taking place in china and suggests that china is not likely to become either an enormous importer or exporter of grain ultimately though china s grain balances will depend on decisions made by chinese policymakers rather than natural resource constraints p v this abstract was borrowed from another version of this item

the statistical analysis of roll call data modern studies of legislative behavior focus upon the relationship among the policy preferences of legislators institutional arrangements and legislative outcomes in spatial models of legislatures policies are represented geometrically as points in a low dimensional euclidean space each legislator has a most preferred policy or ideal point in this space and his or her utility for a policy declines with the distance of the policy from his or her ideal point see davis hinich and ordeshook 1970 for an early survey the primary use of roll call data the recorded votes of deliberative bodies 1 is the estimation of ideal points the appeal and importance of ideal point estimation arises in two ways first ideal point estimates let us describe legislators and legislatures the distribution of ideal points estimates reveals how cleavages between legislators reflect partisan affiliation or region or become more polarized over time e g mccarty poole and rosenthal 2001 roll call data serve similar purposes for interest groups such as americans for democratic action the national taxpayers union and the sierra club to produce ratings of legislators along different policy dimensions second estimates from roll call analysis can be used to test theories of legislative behavior for instance roll call analysis has been used in studies of the u s congress both contemporary and

ideological conviction and persuasion in the rent seeking society abstract the paper develops a model of rent seeking in a democratic political context where voting as well as rent seeking matters in this context the paper demonstrates that voter ideology is a constraint on the rent seeking game as well as a possible avenue of rent seeking in a setting where there are both rent seeking and ideological interest groups rent seekers can free ride on the efforts of ideologues which tends to reduce rent seeking effort in a setting where complementary economic and ideological interest groups coordinate their efforts both rent seeking and ideological conflict tend to increase

feeding and fueling china in the 21st century abstract this paper addresses the questions to what extent will china become a significant net importer of food and fuel in the foreseeable future and what will be the impact of that import demand growth on international markets it first summarizes what standard trade and development economics and the experiences of other asian economies suggest we should expect of china and then examines china s experience to date before turning to some forecasts for the next decade or so our review suggests that before long china will become a significant net importer of both food and fuels especially petroleum contrary to chinese fears however becoming more interdependent with the rest of the world need not be threatening and it may even offer more supply security for china in the long run

causes of u s farm commodity programs this paper i s an attempt to explain variations by commodity in producer protection afforded by farm price support programs since the1930s particularly emphasized are theideas that these programs are essentially income redistributional measures and that given political forces the programs are attempts to redistribute efficiently variables associated with the cost to producers of generating political pressure and the social cost deadweight losses of redistribution are both found to be empirically important copyright 1987 by university of chicago press

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

a roll call analysis of the endangered species act amendments public choice economics view legislative process as a transaction in the political market interest groups demand regulation in their favor and lobby lawmakers the lawmakers analyze an assortment of factors and supply legislation to the winning group thereby maximizing their rent from the political market this article examines endangered species act esa amendments from a public choice perspective congressional voting on the esa amendments are assessed using a model based on political incentive and ideology the results show that the lawmakers voting behavior is correlated with their party affiliation ideology and several characteristics of their home state such as number of endangered species proportion of urban population contribution of the natural resources and construction sectors in gross state product and geographical location copyright 2001 oxford university press

shirking representation and congressional behavior voting on the 1983 amendments to the social security act our central goals at the outset of the paper were three 1 to report on the relative significance of a sophisticated measure of constituent economic interest and a commonly used variable ada score that purports to measure the personal ideology of the candidate 2 demonstrate that the constituent economic interest variable should be adjusted to account for the fact thatvoters not citizens are the only effective principals in influencing a legislator s voting activities and 3 call into question on both theoretical and empirical grounds the claim that legislators shirk their responsibilities to voters by voting their own ideological preferences in order to evaluate our efforts consider table 5 for a large majority 15 of the 18 relevant runs the ideological variable is significant our measure of constituent economic interests does not eliminate the explanatory power of the ideological voting variable but this does not indicate shirking as opposed to shirking we may observe ideological voting because 1 it provides brand name capital 2 it represents the ideological preferences of the constituents or 3 it acts as a measure of median voter economic preferences further ada scores do not allow us to differentiate between these competing explanations for 11 of the 18 models one of the economic variables accounts for a significant portion of the variance in the dependent variables the results derived from our measure of constituent economic interests contradict most findings of the lasi school and raise questions about the validity of the empirical characterization of constituent interests in that research a breakdown of the results by chamber indicates that significant differences in the degree of ideological voting between the house and senate may exist this is important in that most research has focused only on the senate where ideological voting is more prevalent for the house table 5 reveals the constituent economic interest variable isalways significant and in fully one half of the relevant regressions it is theonly significant variable knocking ada out of the race as noted earlier the insignificance of ada is some indication of the absence of ideological shirking though its significance may indicate only measurement error voter ideology or reputational capital in the senate the results are more evenly split though it is clear that the adjusted for reelection constituency economic interest variable is an improvement ada is significant in all 12 senate regressions and the respective economic variables are significant in 5 or just under half this side by side comparison is provocative though it remains to be tested in detail but our preliminary conclusions can be stated as follows first as peltzman 1984 suggested a better specification of economic interest and constituency representation reduces though it does not eliminate the role of the ada variable in the senate second we find evidence that ideological shirking if it exists is much smaller in the house in fact from an institutional perspective it can be argued that economic interests are dominant since house districts are smaller and more homogeneous further the shorter terms for house members may make them more directly accountable to voters and smaller groups of voters may force a lesser reliance on pure ideological campaigning and require a more personal presentation of self

how should china feed itself since the publication of brown s book enormous interest in the issue has been generated among policymakers and scholars around the world this surge in interest coincided with the sharp rises in world food prices in the year to june 1996 following on from harvest shortfalls in several grain producing regions around the world with the slowing of grain output growth since the mid 1980s chinese policymakers have been particularly concerned about food security brown s dire prediction has aggravated their concern

the political economy of state level welfare benefits several new relationships ware indicated by this study first the percentage of adults with a college degree seems to increase welfare spending as noted above this does not necessarily imply that this group is particularly altruistic overall higher afdc levels could be encouraged by a politically productive minority in this group second the percentage black in the population is a better predictor of afdc levels than is the percentage of black afdc recipients that is discrimination against blacks via lower afdc levels is more closely related to the relative size of the black community than the relative size of the black welfare population the results suggest similar discrimination against hispanics in regard to afdc levels the percentage catholic increases afdc levels this does not necessarily imply that catholics have a higher preference for welfare spending than non catholics although this may be the case it may reflect the effect of pressure from catholic interest groups since catholics are the largest religious group in most states they may be better able to support political pressure groups that demand more generous welfare programs union pressures may contribute to higher levels of welfare benefits this is more likely to be the case when unemployment levels are particularly high the relative size of the poverty population is not significantly related to benefit levels the greater cost to taxpayers of increasing benefit levels when the poverty group is large seems to offset the rent seeking efforts of a larger recipient group finally jurisdiction size play a significant role in determining benefit levels with larger states providing more generous benefits in general the results suggest that the influence of rent seeking recipients is not a dominant factor in explaining afdc benefit levels this result is not surprising given the lack of political influence of this particular recipient group it is likely that rent seeking behavior is more important among more politically active groups such as social security recipients and public employees the influence of altruistic motives in affecting aid levels is more subtle than has been suggested in many past studies income was not found to be an important direct determinant of afdc levels the presence of altruistic motives coupled with the ability to effectuate these desires politically seems to be the key to explaining this type of transfer

the growth of government in the united states an economic historian s perspective abstract this paper first outlines the salient features of the growth of government in american history secondly it offers a neoclassical explanation of that history in which increasing specialization and division of labor brought on by the scientific technological revolution of the nineteenth century drastically altered the demand for and supply of government finally it argues that institutions matter and describes the way the particular structure of governments was important in the timing and pace of its growth

party competition in a heterogeneous electorate the role of dominant issue voters this paper provides a theoretical model of party competition in a heterogeneous electorate the latter consists of numerous groups of dominant issue voters who base their voting decision primarily on one issue of the political agenda parties follow a lexicographic objective function aiming to gain power at minimum programmatic concessions the emerging pattern of movement in policy platforms is fundamentally different to the concept of convergence proposed by the spatial theory of voting rather than the centre of the scale of policy preference its extreme ends occupied by dominant issue voters attract the policy platforms the difference in policy platforms is not reduced the conclusions are found to be compatible with some major empirical findings of the manifesto research group

environmental regulation whose self interests are being protected special interest can explain why environmental policy limits economic activity in areas where air quality is above minumum standards locational competition among region helped create a policy that raised factor mobility cost from slower to faster growing regions analysis of votes shows greater support for this policy was received from northern urban constituencies and the greatest opposition came from the south and the west pollution abatement costs per unit of output are higher in areas with higher not lower air quality

trade policy biotechnology and grain self sufficiency in china abstract over the past 20 years the growth of china s agricultural economy has been extraordinary however it seems unlikely that china will maintain self sufficiency in grains by 2005 without substantial intervention we develop a cge model to assess the options available to chinese policy makers we compare the welfare effects of import tariffs and domestic support and explore the potential of biotechnology as a means to achieve self sufficiency through improvements in agricultural productivity our results indicate that the price interventions that would be required to maintain china s desired self sufficiency ratios are considerable and are unlikely to be compatible with wto accession the productivity improvements required are also significant and likely beyond the current potential of biotechnology

the ideological component of senate voting different principles or different principals evidence exists on both sides of the question of whether or not legislator specific ideologically driven shirking of constituent interest occurs in this paper we use a well known model of such shirking by senators as our point of departure and add measures of inter state constituent interests the role of campaign contributions and hence the importance of whether or not senators are up for reelection we find some evidence that the model provides a stronger explanation for senators up for reelection than for those who are not and that campaign contributions help determine voting decisions by these legislators finally accounting for inter state constituent interests shirking is not a significant variable in the voting decisions of senators facing reelection thus it appears that the reelection interests of some senators have been mistaken for ideologically driven shirking

beyond the median voter preferences district heterogeneity and political representation despite the centrality of the median voter prediction in political economy models overwhelming empirical evidence shows that legislators regularly take positions that diverge significantly from the preferences of the median voter in their districts however all these empirical studies to date lack the necessary data to directly measure the preferences of the median voter we utilize a unique data set consisting of individual level voting data that allows us to construct direct measures of voter preferences we find that legislators are most constrained by the preferences of the median voter in homogeneous districts

do voters affect or elect policies evidence from the u s house there are two fundamentally different views of the role of elections in policy formation in one view voters can affect candidates policy choices competition for votes induces politicians to move toward the center in this view elections have the effect of bringing about some degree of policy compromise in the alternative view voters merely elect policies politicians cannot make credible promises to moderate their policies and elections are merely a means to decide which one of two opposing policy views will be implemented we assess which of these contrasting perspectives is more empirically relevant for the u s house focusing on elections decided by a narrow margin allows us to generate quasi experimental estimates of the impact of a randomized change in electoral strength on subsequent representatives roll call voting records we find that voters merely elect policies the degree of electoral strength has no effect on a legislator s voting behavior for example a large exogenous increase in electoral strength for the democratic party in a district does not result in shifting both parties nominees to the left politicians inability to credibly commit to a compromise appears to dominate any competition induced convergence in policy

modeling of financial supply chain the research work on supply chain management has primarily focused on the study of materials flow and very little work has been done on the study of upstream flow of money in this paper we study the flow of money in a supply chain from the viewpoint of a supply chain partner who receives money from the downstream partners and makes payments to the upstream partners the objective is to schedule all payments within the constraints of the receipt of the money a penalty is to be paid if payments are not made within the specified time any unused money in a given period can be invested to earn an interest the problem is computationally complex and non intuitive because of its dynamic nature the incoming and outgoing monetary flows never stop and are sometimes unpredictable for tractability purposes we first develop an integer programming model to represent the static problem where monetary in flows and out flows are known before hand we demonstrate that even the static problem is np complete first we develop a heuristic to solve this static problem next the insights derived from the static problem analysis are used to develop two heuristics to solve the various level of dynamism of the problem the performances of all these heuristics are measured and presented

legislator voting and shirking a critical review of the literature we set out to critically review the progress in answering two related questions what determines how legislators vote and how can shirking by legislators be measured in the first category the hypothesis that legislators shirk in order to indulge their personal ideological preferences has led researchers astray the theoretical underpinning is shaky on two counts first legislators who indulge their preferences at the expense of their constituents preferences put themselves at a competitive electoral disadvantage second the original two stage procedure used to measure ideological shirking is severely flawed among many other problems the residual measure of shirking implicitly assumes that the median voter is the relevant constituent principal for the legislator agent

the influence on congress by the thrift industry abstract the investigation of the influential role of the thrift industry on congress as demonstrated by voting behavior on regulatory policy changes in the eighties is the focus of this study specifically we search for the degree to which the inadequately capitalized component of the thrift industry has captured the house of representatives we examine the influence on congress by the thrift industry using the votes by the house of representatives associated with three different legislative acts the garn st germain act the competitive equality banking act and the financial institutions reform recovery and enforcement act addressing the thrift crisis using a multi chotomous voting model we identify traditional public choice variables that could influence the probability of voting for legislation to capture the variation of the thrifts interests we consider a series of financial variables motivated by the thrift literature of failure prediction models these variables allow us to investigate the influences from the health of the congressional district s thrifts their asset composition characteristics and their reliance on regulatory forbearance

the textile bill of 1985 the determinants of congressional voting patterns the following tables show the results of the probit analysis for the senate and the house a table including results for different combinations of the independent variables is included in an unpublished appendix available from the authors upon request the results of the probit analysis for the senate are shown in table 1 all the variables except exp had the expected signs however the results indicate that the two other employment variables and party affiliation are the only factors which we can say with confidence influenced a senator s decision to vote for or against this bill the coefficients reported and labeled der of prob measure the derivative of the probability of a yes vote evaluated at the means of the independent variables in question thus for example the coefficient for unemp in the top line of table 1 should be interpreted as indicating that a one percentage point increase in a state s unemployment rate will cause a 5 89 increase in the probability that the senator will vote for the bill the result for dr the party of the senator shows that in general democrats are more apt to vote for protectionist policies than are republicans this is consistant with president reagan s negative stand on the bill and his threat to veto it should it pass the amendment in question passed the senate on 24 october 1985 by a vote of 54 for to 42 against but the bill it was attached to has been postponed indefinitely the house bill which was passed on 10 october 1985 by a vote of 262 for to 159 against was vetoed by reagan on 17 december 1985 the results of the probit analysis for the house of representatives are shown in table 2 state employment data was used for the house as opposed to data for each voting district this was done for three reasons first employment data is usually reported by state or by county since counties are often divided by congressional district boundaries much personal judgement would be necessary to assign employment figures second the most recent county industry employment data is from 1981 while the data used in this analysis is from 1984 third we feel that in general logrolling is prevalent among a state s representatives for this bill the representatives from twenty six states voted as a block and in all but six states one third or less of that state s representatives voted contrary to the majority all of the probabilities are significant at the 05 confidence level representative s voting patterns are influenced by all of the included factors when unionization is added to the equation its coefficient is very small and negative although it is significant at the 05 confidence level one would expect more significance here since there are more degrees of freedom for the house analysis than for that of the senate when the data from the house and senate are pooled the results are similar to those of the house alone the null hypothesis that the data cannot be pooled was tested using a statistic with eight degrees of freedom 9 721 meaning that the null hypothesis is rejected as in the senate the state unemployment rate and the percent employed in textiles are important influences on the representative s vote and democrats in the house are more likely to vote for protectionist bills than republicans however unlike the senate the percent of a representative s campaign contributions that are donated by industry special interest groups has a significant effect on voting patterns although the point estimates for the magnitudes of the influence are very similar in both cases seventy four percent of the house received campaign contributions from these special interest groups while only 54 of the senate received contributions from these same sources this is probably because only one third of the senate was up for reelection during the time period considered while the entire house was in the process of campaigning for reelection exports also play a role in influencing the probability of a yes vote reducing this probability as employment in export industries increases but the magnitude of the coefficient is only 11 of that for textile employment the significance of this variable in the house is probably due to fear of retaliation expressed by both democrats and republicans this variable was not significant in the senate model most likely because the senate version excluded from the 1 import quota growth rate many countries who might have retaliated representatives appear to respond to a wider variety of constituent interests than do senators while senators voting patterns are only significantly influenced by their political affiliation their state s unemployment rate and the importance of textiles to their state the voting behavior of representatives is influenced by these factors as well as the importance of exports to their state and campaign contributions by textile special interest groups these results affirm the validity of the approach used by baldwin and coughlin they differ from baldwin who finds exports are not a significant influence on the house and from coughlin who does not include export employment as an explanitory variable or analyze the differences in voting patterns between the house and the senate

self interest altruism and health risk reduction an economic analysis of voting behavior while classical economic theory suggests that the demand for private goods is motivated by economic self interest a growing body of literature suggests that the demand for public goods is driven both by self interest and by altruistic motives the political arena has been a major testing ground for this hypothesis recently a number of studies have tried to empirically isolate and determine the importance of economic versus ideological factors in explaining political choices by representatives kau and rubin 1979 peltzman 1984 kalt and zupan 1984 while congressional voting records have provided a rich source of data for empirical analysis a consensus opinion on the importance of self interest versus altruism has not been reached and remains controversial altruistic motivations have also been

political shirking opponent quality and electoral support several recent papers in the public choice literaturesuggest that legislators shirk or vote in a mannercontrary to constituent interest this paper exploresthe relationship between senatorial shirking andelectoral consequences i model political shirking opponent quality and election outcomes assimultaneous and find significant evidence of arelationship between shirking over the senatorial termand electoral outcomes however i find that voterspunish recent shirking much more than they punishearly term shirking and that senators apparently actconsistently with this relationship

a game theoretic approach to cash management the cash management function is a general designation for two distinct corporate activities cash flow acceleration and liquidity account allocation the former problem concerns procedures for speeding cash collections from customers and slowing cash disbursements to suppliers so as to optimize the firm s use of cash the latter problem on the other hand takes the firm s cash flow as given and determines the minimum cash balance the excess to be held in the form of marketable securities although a well developed literature exists for the liquidity account allocation problem e g baumol 1952 tobin 1956 miller and orr 1966 eppen and fama 1968 analysis of the cash flow acceleration problem has been less extensive some papers examine techniques for speeding cash collections such as lock box systems e g kraus janssen and mcadams 1970 while others explore methods for slowing cash disbursements such as remote disbursement systems e g gitman forrester and forrester 1976 but no one has investigated the interaction of the two this is a serious deficiency because as a practical matter firms simultaneously utilize both types of procedures so that the cash management efforts of other firms tend to counteract each firm s own efforts an inherently

government manipulation of constitutional level transaction costs a general theory of transaction cost augmentation and the growth of government transaction costs are pivotal to the ongoing political choice of where to draw the line between the private sector and the public sector contrary to the dominant paradigm politically important transaction costs are actively manipulated in the public sector by those who perceive potential personal gain from such action over time transaction cost changes so created by government decision makers may fundamentally redefine the role and scope of government to analyze the role of transaction costs in the growth or decline of government it is essential to distinguish transaction costs that are unavoidable realworld constraints from those that are contrived in the sense that they are created by government officials use or extension of their existing authority once discretionary power is vested in the government its officials have both the capacity and the incentive to restructure the transaction costs constraining the revision ofgovernrnental authority this restructuring of transaction costs may take two forms 1 altering people s perceptions of the costs and benefits of governmental authority in a given sphere an information cost problem 1 2 altering the cost of acting upon one s perceptions of the costs and benefits of collectivization in order to procure revision of the scope of governmental authority 2

coalitions in congressional voting scholars of congress generally agree on four points concerning roll call votes first roll call votes are important to members of congress who care about reelection public policies or both second members have neither sufficient resources nor incentives to acquire process and interpret information about the content and consequences of hundreds of roll call votes considered on the floor each year 1 third insufficient resources and incentives induce members to apply simple decision rules on most votes fourth a voting model should conform to the choices members make under uncertainty 2 the scholars however differ in their specification of the simple rules members adopt familiar specifications include voting decisions rooted in two or three party alignments one or more policy dimensions self interest or ideology and cue taking to varying degrees most command an intuitive appeal and empirical support clearly it is important to evaluate each model based on its a refutable implications or b performance relative to the competing models to test a unidimensional voting model in which members vote based on an imprecise perception of the issues involved 4 this paper adopts the first approach it seeks to refute a pair of comparative static implications of the model two reasons account for the adoption of approach a and not b first to the extent feasible a comparison of the unidimensional model with the competing voting models appears in poole and rosenthal 1985a 1985b second the likelihood ration test considered to be statistically unambiguous requires that competing models generate a nested set of hypotheses see amemiya 1981 unfortunately models of roll call voting with substantially different origins 5 seldom meet this requirement

non binding linked issues referenda analysis and an application non binding referenda petitions are an instrument of direct democracy that allows citizens to signal preferences to politicians outside the electoral cycle this paper provides a simple theoretical and empirical analysis of a particular form of non binding referenda so called linked issues petitions it analyzes the ability of issue linkage to increase participation levels above those of single issue petitions and applies the analytical insights to a controversial referendum held in austria in 2002 that linked issues of transboundary nuclear risk and eastern enlargement of the european union

separating economic from political influences on government decisions abstract the public interest theory is a poor predictor of government decisions relative to interest group theories but a sophisticated public interest theory is a more serious alternative to the former testing the sophisticated theory s predictions is problematic however when public interest is coincident with an interest group s interests a four step method is developed that disentangles public interest and interest group interests by separating economic from political incentives applying the method to the national forest service decisions about wilderness designations indicates whether interest groups were successful in influencing allocation decisions and whether allocation decisions were in the public interest

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

campaign war chests as a barrier to entry in congressional races i introduction issues surrounding the nature and degree of competition in political races have been examined extensively in both the economic and political science literature with most attention focused on the interplay between incumbent and challenger expenditures and electoral success this study extends our understanding of political competition by investigating the impact of an incumbent s war chest on a challenger s decision to mount a campaign 1 for this purpose a war chest is defined as a pool of unencumbered funds accumulated prior to the start of a campaign for elective office 2 sorauf 1988 182 has observed that early receipts even without early spending discourage competition in the primary and attractive challengers in the general election jacobson 1985 26 has argued the most effective strategy for keeping a seat in congress is to avoid serious opposition contemporary critics and reformers of campaign financing practices use such words as frighten intimidate and overpower to describe the role of an incumbent s war chest 3 despite this kind of attention little is actually known about the degree to which war chests diminish entry or reduce the quality of a challenge we present three alternative mechanisms to explain how an incumbent s war chest might deter entry each is based upon a war chest serving as a credible commitment to spend heavily if challenged specifically war chests may either represent excess capacity in financing a campaign or serve as a signal of non observable incumbent characteristics that define a formidable opponent aside from determining whether an incumbent is challenged a war chest might also affect the quality of the challenger for example potential candidates with prior political experience may be unwilling to risk their political capital on a long shot proposition to test for these effects on entry into house races a trichotomous logit model is estimated the choices are uncontested race contested by an ordinary challenger and contested by an experienced challenger although the empirical model is not sufficiently rich to fully distinguish among competing mechanisms the regression results are robust incumbent war chests negatively affect the likelihood of a contested race and the quality of the challenger ii war chests as a barrier to entry becker 1958 106 in comparing economic and political competition observed i n an ideal political democracy competition is free in the sense that no appreciable costs or artificial barriers prevent an individual from running for office in the theory of the firm entry occurs when the expected postentry stream of profits minus the cost of entry is positive analogously an individual will enter a political race when the expected gain from holding office is positive expected gain as defined by baron 1989 is a function of campaign costs the probability of winning and the personal valuation placed by the candidate on the office the first two determinants are partly endogenous depending upon the strategic interplay of the candidates the third aside from its direct effects indirectly affects the first two for example persons hungry for office may be committed to expending greater effort and funds on their campaigns thus increasing their probability of winning similarly as lott has emphasized nontransferable brand name capital would be another factor creating a commitment to aggressively pursue office thereby affecting campaign costs and the probability of winning 4 that some challengers are deterred however need not imply the existence of a political market failure in a contestability sense the lack of a viable challenger on the ballot does not imply a lack of competition good representation will discourage entry similarly the fact that some incumbents will aggressively seek re election frightening away potential challengers is not a sign that competition is lacking

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