legislative district configurations and fiscal policy in american states in accordance with the median voter theorem the median legislator is decisive in representative democracy if the preferences of the median legislator differ from the preferences of the median voter in the polity fiscal policy choices will predictably diverge from those favored by the median voter this paper seeks to identify the median district and therein the preferences driving the median legislator in american state legislatures using economic characteristics of constituents we find substantial differences between the median district and the statewide median as the income of the median district rises above the median income of the polity government expenditures increase in addition the degree to which income is skewed across legislative districts affects spending for redistribution programs finally we find that direct democracy procedures which allow the statewide median voter to check legislative decisions limit the impact of differences between the district and polity medians

electoral equilibria with entry some simulations the objective of this paper is to investigate by means of simulation the impact of third party entry on the spatial separation of candidates specifically we do real time simulations of palfrey s 1984 model of electoral equilibria with entry after relaxing some of its assumptions our finding that the threat of third party entry can induce virtually the same spatial separation of the major party candidates as entry with certainty is both a strong and interesting result

endogenous competence and a limit to the condorcet jury theorem the seminal contribution known as the condorcet jury theorem observes that under a specific set of conditions an increase in the size of a group tasked with making a binary decision guilty or innocent say leads to an improvement in the group s ability to make the correct choice an assumption that is not properly appreciated in the relevant literature is that the competency of the group members is assumed to be exogenous in numerous applications members of the group make investments to improve the accuracy of their decision making e g pre meeting efforts we consider the collective action problem that arises we show that if individual competence is endogenous then increases in the group size encourages free riding this trades off with the value of information aggregation thus the value of the larger group size is muted extensions illustrate that if committee members are allowed to exit not participate the equilibrium committee size is reduced additionally supermajority voting rules encourage investments and consequently individual competence

a nonequilibrium analysis of unanimity rule majority rule and pareto i introduction voting theory is important for understanding economics as well as politics international organizations vote on trade regulations legislatures vote on minimum wage and governments vote on the provision of public goods voting also affects industrial organization for instance limited partnerships may vote on the allocation of resources to various units and shareholders may vote on investment decisions carrera and richmond 1988 what voting rule best achieves pareto optimal outcomes in such cases in the absence of transactions costs it is widely believed that unanimity rule is the best voting rule for promoting pareto efficiency berggren 1996 buchanan and tullock 1962 mueller 2003 buchanan 1967 writes it is evident that unanimous consent is the political counterpart of the pareto criterion for optimality p 285 traditionally viewed unanimity rule guarantees more efficient outcomes than majority rule because unanimity rule only passes proposals that make everyone better off other voting rules like majority rule can pass proposals that make some individuals worse off one of the assumptions that is either explicit or implicit in the these studies is the assumption of rational proposals we define a proposal as rational if it helps maximize the proposer s utility at the end of the game in our analysis proposals are not rational instead they are generated either randomly or sincerely in a single dimensional voting model and evaluated by the pareto criterion or pareto optimality this produces two striking results with regard to pareto optimality first if proposal generation is random then majority rule is usually more likely to select a pareto optimal outcome than unanimity rule second if individuals propose their ideal points then majority rule always selects pareto optimal outcomes at least as well as unanimity rule considering all possible proposals as done in our random generation models has a long tradition in social choice literature arrow 1951 caplin and nalebuff 1988 niemi and weisberg 1968 riker 1982 sen 1979 it also has the advantage of modeling certain types of incomplete information modeling votes where bills are introduced for reasons other than making them pass see stewart 2001 pp 338 41 modeling exogenously generated proposals and for allowing mistakes by the proposer such foundational work should be of interest to those who relate unanimity rule to pareto principles in the study of public goods cornes and sandler 1996 lindahl 1967 political parties aldrich 1995 and legislative institutions colomer 2001 niou and ordeshook 1985 tsebelis 2002 to name a few ii previous studies perhaps the first in depth study of the relationship between unanimity rule and a pareto principle was buchanan and tullock s calculus of consent 1962 buchanan and tullock argued that if decision making costs were negligible unanimity rule would always be the most desirable k majority rule simply because it preserved the pareto principle p 88 although the exact pareto principle they had in mind is not entirely clear it seems that buchanan and tullock were arguing for the criteria of accepting a change from the status quo only if it lead to a pareto improvement otherwise the status quo should be preferred pp 92 93 sen 1979 p 25 1 mueller 2003 pp 138 and 140 41 further compared unanimity rule to majority rule and concluded that unanimity rule typically performs better in terms of the pareto criterion to illustrate his reasoning mueller describes a community voting on both the purchase of a new firehouse and the taxes needed to pay for it in a single bill if the decision was made under unanimity rule the distribution of taxes would be redefined until the firehouse benefited all otherwise the bill would not pass if the decision was made under majority rule a majority might distribute the taxes on a minority such that members of the majority would be net gainers and members of the minority would be net losers

redistributing income back to european community consumers and taxpayers through the common agricultural policy a multiple policy instrument generalization of gardner s surplus transformation curve analysis is applied to an empirical model of the ec wheat sector to compare welfare effects of policy change proposals a production quota support price combination is estimated as the most efficient means of making relatively small transfers from ec agriculture to consumers taxpayers a coresponsibility levy support price combination is estimated as the most efficient means of making larger transfers the importance of accounting for income transfer size distortions in related markets and the structure of markets when comparing welfare effects of policy change proposals is demonstrated

searching for equilibrium positions in a game of political competition with restrictions this paper considers a problem of political economy in which a nash equilibrium study is performed in a proposed game with restrictions where the two major parties in a country vary their position within a politically flexible framework to increase their number of voters the model as presented fits the reality of many countries moreover it avoids the uniqueness of equilibrium positions the problem is stated and solved from a geometric point of view

bargaining in legislatures bargaining in legislatures is conducted according to formal rules specifying who may make proposals and how they will be decided legislative outcomes depend on those rules and on the structure of the legislature although the social choice literature provides theories about voting equilibria it does not endogenize the formation of the agenda on which the voting is based and rarely takes into account the institutional structure found in legislatures in our theory members of the legislature act noncooperatively in choosing strategies to serve their own districts explicitly taking into account the strategies members adopt in response to the sequential nature of proposal making and voting the model permits the characterization of a legislative equilibrium reflecting the structure of the legislature and also allows consideration of the choice of elements of that structure in a context in which the standard institution free model of social choice theory yields no equilibrium

some neglected social costs of government spending in farm programs economic welfare analyses of farm programs typically assume that the direct social opportunity cost of subsidy payments is one dollar per dollar of government spending recent literature suggests that the marginal opportunity cost of a dollar of u s federal government spending is more likely to be in the range of 1 20 to 1 50 this implies that the net social costs of farm programs that involve government spending are significantly greater than the typical estimates in addition the normative efficiency ranking of alternative policies is sensitive to the marginal opportunity cost of government spending

the economics of coupled farm subsidies under costly and imperfect enforcement this study relaxes the assumption of perfect and costless policy enforcement found in traditional agricultural policy analysis and introduces enforcement costs and cheating into the economic analysis of output subsidies policy design and implementation is modeled in this paper as a sequential game between the regulator who decides on the level of intervention an enforcement agency that determines the level of policy enforcement and the farmer who makes the production and cheating decisions analytical results show that farmer compliance is not the natural outcome of self interest and complete deterrence of cheating is not economically efficient the analysis also shows that enforcement costs and cheating change the welfare effects of output subsidies the efficiency of the policy instrument in redistributing income the level of government intervention that transfers a given surplus to agricultural producers the socially optimal income redistribution and the social welfare from intervention

valence politics and equilibrium in spatial election models spatial models of two party or two candidatecompetition almost never have pure strategy nashequilibria when the issue space has more than onedimension this paper shows that the introduction ofvalence issues can create conditions where equilibriaexist even in a multidimensional setting we derivesufficient conditions for the existence of equilibria and characterize the spatial locations of twocompeting parties or candidates when such equilibriaexist the party with the advantage on the valencedimension will generally take a moderate position onthe positional issues we consider the implications ofthese results for public perceptions of the parties incumbency advantages and realigning elections

efficient income redistribution for a small country using optimal combined instruments abstract in this paper i improve gardner s surplus transformation curve framework by assuming that governments are able to vary many policy instruments simultaneously instead of only one i use my framework to find the combination of the currently used instruments which provides the most efficient income redistribution for the austrian bread grains market comparing the most efficient policy with the actual policy reveals that 464 10 6 austrian shillings were wasted i theoretically compare for a small country the transfer efficiency of every possible pair of the four major agricultural policy instruments floor price production quota co responsibility levy and deficiency payments without considering the marginal cost of public funds mcf deficiency payments cum quota equal to a fully decoupled direct income support is the most efficient policy succeeded by floor price cum quota and floor price cum deficiency payments if the mcf is taken into account the ranking crucially depends on the market parameters the transfer level and the value of the mcf for the austrian bread grains market i empirically demonstrate that given the present support level a fully decoupled direct income support redistributes income most efficiently as long as the mcf is lower than 1 17 beyond this value a floor price cum quota policy becomes more efficient a floor price cum deficiency payments policy is never superior to the floor price cum quota

nash equilibrium strategies in directional models of two candidate spatial competition the standard approach to two party political competition in a multi dimensional issue space models voters as voting for the alternative that is located closest to their own most preferred location another approach to understanding voter choice is based on preferred direction of change with respect to some specified neutral point e g an origin or status quo point

evaluating theories of bank runs with heterogeneity restrictions this paper empirically tests theories of bank runs we use a structural panel var to extract runs from deposit market data identification exploits cross sectional heterogeneity in deposit insurance we identify bank runs as adverse deposit market supply shocks hitting uninsured banks harder compared to insured conditional on a run we study the behavior of uninsured banks with bad and good fundamentals we find that both experience runs but deposit outflows at the former are more severe panic effects which affect all uninsured deposits alike irrespective of fundamentals dominate in the aggregate insured banks partially absorb the outflow of uninsured deposits

sophisticated sincerity voting over endogenous agendas the empirical findings on whether or not legislators vote strategically are mixed this is at least partly due to the fact that to establish any hypothesis on strategic voting legislators preferences need to be known and these are typically private data in this note it is shown that under complete information if decision making is by the amendment procedure and if the agenda is set endogenously then sophisticated strategic voting over the resulting agenda is observationally equivalent to sincere voting the voting strategies however are sophisticated this fact has direct implications for empirical work on sophisticated voting

domestic bank runs and speculative attacks on foreign currencies abstract the paper extends the international transmission of financial crisis literature by illustrating how a domestic bank run can cause a speculative attack on foreign currencies the idea is that when domestic banks invest abroad a domestic bank run will give way to a repatriation of foreign capital if the repatriation causes a depletion of the foreign central bank s foreign exchange reserves then the foreign currency will be devalued as such a devaluation will render domestic banks insolvent in the rational equilibrium domestic bank runs will 1 cause a speculative attack on the foreign currency and 2 be self justified

a bargaining model of collective choice we present a general model of legislative bargaining in which the status quo is an arbitrary point in a multidimensional policy space in contrast to other bargaining models the status quo is not assumed to be bad and delay may be pareto efficient we prove existence of stationary equilibria the possibility of equilibrium delay depends on four factors risk aversion of the legislators the dimensionality of the policy space the voting rule and the possibility of transfers across districts if legislators are risk averse if there is more than one policy dimension and if voting is by majority rule for example then delay will almost never occur in one dimension delay is possible if and only if the status quo lies in the core of the voting rule and then it is the only possible outcome this core selection result yields a game theoretic foundation for the well known median voter theorem our comparative statics analysis yield two noteworthy insights i if the status quo is close to the core t hen equilibrium policy outcomes will also be close to the core a moderate status quo produces moderate policy outcomes and ii if legislators are patient then equilibrium proposals will be close to the core legislative patience leads to policy moderation

interest rate targeting abstract the paper develops a model in which the monetary authority successfully targets the nominal interest rate while also holding down the forecast variance of the price level the latter objective pins down the extent of monetary accommodation to shifts in the demand for money and other shocks and thereby makes determinate the levels of money and prices at each date empirical evidence for the united states suggests that the model s predictions accord reasonably well with observed behavior for nominal interest rates growth rates of the monetary base and rates of inflation

voting for pareto optimality a multidimensional analysis we compare unanimity rule and majority rule in their abilities to produce pareto superior and pareto optimal alternatives in fixed number of rounds of voting using a two dimensional spatial voting model with random proposals sincere proposals and strategic proposals our findings show that for random or sincere proposals majority rule is at least as likely to select a pareto optimal outcome as unanimity rule for strategic proposals the subgame perfect equilibrium under unanimity rule is pareto optimal for other k majority rules the outcome is pareto optimal or very close to it for outcomes that are both pareto optimal and pareto superior unanimity rule outperforms majority rule

covering dominance and institution free properties of social change this paper shows that different institutional structures for aggregation of preferences under majority rule may generate social choices that are quite similar so that the actual social choice may be rather insensitive to the choice of institutional rules specifically in a multidimensional setting where all voters have strictly quasi concave preferences it is shown that the uncovered set contains the outcomes that would arise from equilibrium behavior under three different institutional settings the three institutional settings are two candidate competition in a large electorate cooperative behavior in small committees and sophisticated voting behavior in a legislative environment where the agenda is determined endogenously because of its apparent institution free properties the uncovered set may provide a useful generalization of the core when a core does not exist a general existence theorem for the uncovered set is proven and for the downsian case bounds for the uncovered set are computed these bounds show that the uncovered set is centered around a generalized median set whose size is a measure of the degree of symmetry of the voter ideal points

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

polarization politics and property rights links between inequality and growth most efforts to trace the effects of income inequality on growth have focused on redistribution however empirical investigation has not substantiated either the positive association of income inequality with redistribution or the negative association of redistribution with economic growth the authors analyze the effects of inequality in the broader context of social polarization they argue that social polarization whether rooted in income inequality or in ethnic tension makes large changes in current policies including those guaranteeing the security of contract and property rights more likely under a wide range of institutional arrangements the resulting uncertainties in the policy and contractual environment hinder growth they find strong empirical support for both parts of this argument the policy implications of their argument are quite distinct from those of arguments that inequality reduces growth by increasing pressures for redistribution if redistributive policies per se were to blame for the low growth resulting from inequality governments that seek to mitigate income inequality must inevitably confront a tradeoff between equity and growth if on the other hand the insecurity of property rights slows growth in unequal or otherwise polarized societies governments that commit over the long run to particular redistributive policies incur less risk of slowing economic growth fiscal redistribution that reduces inequality may actually increase growth by reducing the risks of political uncertainty

bank runs the deposit currency ratio and the interest rate abstract this paper provides a model of an economy with a banking system which is subject to bank runs the model is then used to explain the rise in short term interest rates during bank runs and the fall in the deposit currency ratio in anticipation of possible runs

uncovering evidence of conditional party government reassessing majority party influence in congress and state legislatures temporary american legislatures our use of a new analytic technique a grid search program for characterizing the uncovered set enables us to begin with a better model of legislative proceedings that abandons the simple one dimensional spatial models in favor of the more realistic two dimensional version our conclusions are based on the analysis of real world data rather than on arguments about the relative merits of different theoretic assumptions our analysis confirms that when legislators preferences are polarized outcomes will generally be closer to the majority party s wishes even if the majority party leadership does nothing to influence the legislative process this conclusion notwithstanding our analysis also shows that at the margin of the majority party s natural advantage agenda setting by the majority party remains a viable and efficacious strategy in the debate over party organizations in the american congress one side e g aldrich and rohde 1998 2001 argues that the majority party can influence the outcome of legislative proceedings through agenda control or the ability to determine which proposals are considered the other side e g krehbiel 1999 2000 argues that agenda control conveys no power and that the majority party s apparent influence

the calculus of consensus democracy rethinking patterns of democracy without veto players we present a theory of comparative political institutions based on the concept of consensus democracy and social choice theory unlike lijphart we argue that consensus democracy is not a special form of democracy characterized by mutual vetoes but rather the simplest form of democracy which we refer to as pr majority rule we construct a typology of political institutions based on differences with this simple model contra tsebelis s veto players approach our theory predicts that pr majority rule should be the most flexible form of democracy we test this with data on overall patterns of government spending and on welfare state reform

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

stability and centrality of legislative choice in the spatial context majority rule spatial voting games lacking a core still always present a near core outcome more commonly known as the copeland winner this is the alternative that defeats or ties the greatest number of alternatives in the space previous research has not tested the copeland winner as a solution concept for spatial voting games without a core lacking a way to calculate where the copeland winner was with an infinite number of alternatives we provide a straightforward algorithm to find the copeland winner and show that it corresponds well to experimental outcomes in an important set of experimental legislative voting games we also provide an intuitive motivation for why legislative outcomes in the spatial context may be expected to lie close to the copeland winner finally we show a connection between the copeland winner and the shapley value and provide a simple but powerful algorithm to calculate the copeland scores of all points in the space in terms of the modified power values of each of the voters and their locations in the space

cycle avoiding trajectories strategic agendas and the duality of memory and foresight an informal exposition this paper considers the notion of cycle avoiding trajectories in majority voting tournaments and shows that they underlie and guide several apparently disparate voting processes the set of alternatives that are maximal with respect to such trajectories constitutes a new solution set of considerable significance it may be dubbed the banks set in recognition of the important paper by banks 1985 that first made use of this set the purpose of this paper is to informally demonstrate that the banks set is a solution set of broad relevance for understanding group decision making in both cooperative and non cooperative settings and under both sincere and sophisticated voting in addition we show how sincere and sophisticated voting processes can be viewed as mirror images of one another embodying respectively dmemory and foresight we also show how to develop the idea of a sophisticated agenda one in which the choice of what alternatives to propose is itself a matter of strategic calculation

a model of farsighted voting i present a new method of interpreting voter preferences in settings where policy remains in effect until replaced by new legislation in such settings voters consider not only the utility they receive from a given policy today but also the utility they will receive from policies likely to replace that policy in the future the model can be used to characterize both long term preferences and distributions over policy outcomes in situations where policy is ongoing and voters are farsighted

the eec s wheat trade policies and international trade in differentiated products comment in a recent issue of the journal de gorter and meilke dgm make an important contribution to our understanding of the impact of the european community s ec wheat policy on world wheat trade they consider the often overlooked fact that the ec has simultaneously imported and exported large quantities of wheat they also distinguish between threshold and intervention prices and incorporate the differing national prices within the ec caused by the green currency system furthermore unlike most other studies dgm consider the fact that wheat is not a perfectly homogenous commodity the heterogeneity of wheat is crucial because ec wheat imports are primarily composed of high quality wheat from north america while ec exports are largely soft or low quality wheat varieties

least cost cheap food policies some implications of international food aid abstract many low income countries pursue cheap food policies in which consumers pay subsidized prices for bread rice and other staples this paper addresses the issue of why different governments select different food subsidy policies using multiple instruments rather than a simple across the board subsidy to provide consumers with access to cheap food it examines the optimal structure of cheap food policies in the context of a partial equilibrium model in which the country may be large in trade and is able to combine import subsidies or tariffs and output taxes or subsidies to transfer income to consumers through the market the model allows for a marginal opportunity cost of government revenues greater than one dollar in addition in the model food aid from overseas may be either given away to the consumer or given to the government for subsequent sale in the domestic market the results indicate that only by happenstance will a country choose to use a pure consumption subsidy or a pure import subsidy to transfer income to consumers in addition an increase in international food aid does not necessarily lead the government to reduce producer and consumer prices for a commodity

the grain sector of the european community policy formation price determination and implications for trade a coresponsibility levy was added to high domestic prices and export subsidies in the ec levels for policy instruments could result from negotiations which favor producers but are acceptable to the public higher domestic prices and levies but lower export subsidies would occur if levy exemptions cover domestic marketings if exemptions are excluded low domestic prices producer subsidies and export taxes would occur with exemptions improved farm income and treasury surpluses would be achieved without injury to the public exemptions might be excluded because producers are better off and public cost is about the same with either program but producer subsidies require expanded public financing export reductions would occur under either program given prevailing market conditions

partial market liberalization and the efficiency of policy reform the case of the european dairy sector this article analyzes the efficiency of partial market liberalization and policy reform with an application to the european dairy sector in a second best world partial moves toward market liberalization are not always efficiency improving we develop a general equilibrium model to investigate the efficiency implications of discrete changes in government policy the analysis covers price and quantity instruments used in both domestic and trade policy we derive simple conditions under which partial market liberalization is efficiency improving we apply the approach to agricultural policy reform in the european dairy sector and identify market liberalization scenarios that are not efficiency improving

an experimental study of the efficiency of unanimity rule and majority rule scholars traditionally claim that unanimity rule is more capable of producing pareto optimal outcomes than majority rule dougherty and edward public choice 151 3 655 678 2012 make the opposite claim assuming proposals are either random sincere or strategic we test these competing hypotheses in a two dimensional framework using laboratory experiments our primary results suggest 1 majority rule enters the pareto set more quickly than unanimity rule 2 majority rule leaves the pareto set at the same rate as unanimity rule and 3 majority rule is more likely to select a pareto optimal outcome than unanimity rule at the end of the game

judging agricultural policies a survey this survey provides a structured picture of 40 years of literature which uses welfare economic tools to judge agricultural policy challenges and developments of normative agricultural policy analysis are discussed in an easily accessible graphical framework it is shown how the literature has gone from examining a very small discrete set of simple policies to a much broader often continuous set of policies that combine policy instruments simultaneously the importance of the pareto criterion used to explore the limits of how government can affect welfare is revealed moreover given the importance of the objective of income redistribution in agricultural policy agricultural economists have often departed from the purely efficiency oriented tradition in economics it is shown that they have tried to incorporate equity considerations by either adding these criteria as constraints to the social welfare function or directly incorporating these criteria in the functional form of the social welfare function

the sources of financial crises pre and post fed evidence this paper investigates the generation and the propagation mechanism of currency demand and supply shocks before and after world war i the structural determinants of the variability of stock prices and interest rates and the changes introduced by the creation of the fed on the dynamics of the system it is shown that in the pre 1914 era external monetary shocks interacted with a seasonal demand for money to produce financial crises the fed helped to prevent crises by insulating the u s economy from external shocks a structural vector autoregressive model provides evidence for these claims copyright 1991 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

veto games spatial committees under unanimity rule there exists a large literature on two person bargaining games and distribution games or divide the dollar games under simple majority rule where in equilibrium a minimal winning coalition takes full advantage over everyone else here we extend the study to an n person veto game where players take turns proposing policies in an n dimensional policy space and everybody has a veto over changes in the status quo briefly we find a nash equilibrium where the initial proposer offers a policy in the intersection of the pareto optimal set and the pareto superior set that gives everyone their continuation values and punishments are never implemented comparing the equilibrium outcomes under two different agendas sequential recognition and random recognition we find that there are advantages generated by the order of proposal under the sequential recognition rule we also provide some conditions under which the players will prefer to rotate proposals rather than allow any specific policy to prevail indefinitely

banking currency stock market and debt crises in spain 1850 1995 abstractwhat type of crisis is generated when debt increases we extend the literature by framework by introducing currency and stock market crises in the analysis we apply our proposal to the case of spain since this is a country that has experienced a very important amount of financial crises from the nineteenth century onwards we find the same results as the previous literature for the determinants of banking and debt crises but substituting external and public debt with perpetual debt and where perpetual debt has a less important role than crises in the private sector moreover we find evidence in favour of the hypothesis that currency crises depend strongly and positively on financial centre crises and negatively and mildly on perpetual debt we justify the negative relalionship due to an inflation tax we also find evidence in favour of the hypothesis that stock market crises depend only positively and strongly on financial centre crises

formal versus informal legislative bargaining we study how the formality of a bargaining procedure affects its outcome we compare a formal baron ferejohn bargaining procedure to an informal procedure where players make and accept proposals in continuous time both constitute non cooperative games corresponding to the same bargaining problem a three player median voter setting with an external disagreement point this allows us to study formality in the presence and absence of a core and provides a natural explanation for the effects of preference polarization our results show that polarization hurts the median player and that formality matters the median player is significantly better off under informal bargaining

distributive politics and electoral competition abstract within the framework of pure redistribution dividing one unit of a homo geneous good among identical individuals the paper analyses the redistribution that arises from downsian two party electoral competition it appears that the strategic behavior of vote maximizing parties leads them to propose divisions which are not far from the egalitarian one journal of economic literature classification numbers c72 d63 d72

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

centripetal and centrifugal incentives in electoral systems this paper investigates how electoral laws affect the position taking incentives of parties and candidates it seeks to extend the finding presented in the classical median voter theorem to a wide class of electoral systems or to show the limits of such extension the factors examined are the district magnitude the electoral formula the number of votes each voter is allowed to cast whether voters can cumulate their votes and whether voters can partially abstain i suggest a crude division of electoral systems into those producing predominantly centripetal incentives and those producing predominantly centrifugal incentives among the factors found to produce centripetal incentives at least in noncumulative systems are the following increases in the number of votes per voter outlawry of partial abstention and decreases in the district magnitude in systems allowing the cumulation of votes matters are a bit different

rationalizing agricultural export subsidies export subsidies are an important form of agricultural policy especially for large traders such as the united states and the european community a number of small countries also use export subsidies in effect e g saudi arabian wheat or canadian dairy products in that the domestic price is set well above world levels and surplus production is dumped onto the world market a number of recent contributions to trade theory have argued that export subsidies can be welfare enhancing for the subsidizing country and by implication that the policy choice is consistent with the hypothesis that a benevolent government is pursuing pareto efficiency in the present paper we examine these arguments and present an alternative explanation of export subsidies utilizing the concept of efficient redistribution becker gardner 1983 in standard trade models arguments in favor of global export subsidies arise from failure to exploit market power in another good itoh and kiyono feenstra itoh and kiyono use a threegood model to show that subsidies on marginal goods defined as goods not exported at all or exported in small quantities can increase welfare in the subsidizing country a subsidy on marginal goods causes their production to increase and the supply of nonmarginal goods to decrease thereby raising the price of the nonmarginal goods and increasing the exporter s terms of trade feenstra also employs a threegood model and demonstrates that it is possible for the pattern of substitutability and complementarity across goods to allow subsidies to increase welfare the necessary condition is that the subsidized export be a stronger substitute for another exported good or a stronger complement for an imported good in the subsidizing country than abroad the export subsidy increases welfare by improving the terms of trade in the other imported or exported good the distortion in feenstra s model is the failure to exploit market power in the second or third market as an alternative to global export subsidies abbott paarlberg and sharples aps have examined targeted export subsidies and found that in some circumstances they can be welfare improving dutton later showed the aps result arises because they first constrain the export tax to the rest of the world to be zero so that it becomes theoretically possible for the best export tax to the targeted country to be negative the aps result hinges on differences in import demand elasticities and the exporting country s use of market power in order to price discrim

the value of formalism re examining external costs and decision costs with multiple groups several authors have examined the optimal k majority rule using a variety of criteria we formalize and extend the original argument laid out by buchanan and tullock the calculus of consent logical foundations of constitutional democracy 1962 using a decision theoretic analysis from the perspective of an individual voter unlike previous formalizations voters in our study are members of one or more groups this allows us to examine cases wherein different voters have starkly different interests furthermore voters in our study can err in their judgments of proposals allowing us to model potential irrationalities in the choice of an optimal k majority rule we consider both up or down votes on a single proposal as well as votes over a series of proposals we find that the optimal k majority rule depends on a number of parameters most notably the number of rounds needed to create a proposal that will pass group membership has almost no affect furthermore if two groups are at odds then the external cost function can actually rise over some range of k if voters err systematically in their judgment more inclusive k majority rules such as unanimity rule can fail to pass pareto preferred proposals our results should help advance a classic work in public choice

allocative efficiency of markets with zero intelligence traders market as a partial substitute for individual rationality we report market experiments in which human traders are replaced by zero intelligence programs that submit random bids and offers imposing a budget constraint i e not permitting traders to sell below their costs or buy above their values is sufficient to raise the allocative efficiency of these auctions close to 100 percent allocative efficiency of a double auction derives largely from its structure independent of traders motivation intelligence or learning adam smith s invisible hand may be more powerful than some may have thought it can generate aggregate rationality not only from individual rationality but also from individual irrationality

from senators to the president solve the lumber problem or else we use key events associated in the two decade long u s canada softwood lumber trade dispute to present the dynamic relationship between u s congress and the administration in the formation of international trade policy we find that the executive branch of the u s government responded quickly to several letters from a group of u s senators demanding a solution to the lumber problem a roll call analysis is used to identify factors influencing senators willingness to sign these letters and pressure the president on behalf of the u s lumber industry the results show that the economic importance of the lumber industry in a senator s home state is positively correlated with signatory on these letters and that the presence of a large housing industry in a state makes a senator less likely to sign these letters

do differences in presidential economic advisers matter using data on members on the council of economic advisors as well as us treasury secretaries and omb directors from 1952 through 2005 i investigate the effect of economic advisors educational and employment backgrounds on the time series performance of several policy variables ivy league advisors appear to raise non defense government spending although the size of the impact differs by president while voter preferences appear to matter for a wider variety of policy variables changes in federal regulation and marginal tax rates the share of ivy league advisors is at least as important as voter preferences in explaining non defense spending

financial panics the seasonality of the nominal interest rate and the founding of the fed after the founding of the fed in 1914 the frequency of financial panics and the size of the seasonal movements in nominal interest ratesboth declined substantially this paper establishes that the fed by carrying out the seasonal open market policy that eliminated the seasonal in nominal interest rates caused the decrease in the frequency of panics since seasonal movements are anticipated and financial panics are probably real events the results show that an anticipated monetary policy had real effects on the economy copyright 1986 by american economic association

were financial crises predictable this paper empirically investigates the nature of financial crises in the united states before 1914 it attempts to determine whether crises were statistically similar predictable and had a common generating mechanism using probit and hazard models and out of sample criteria it is shown there are variables that explain movements in the probability of crises and that the probability of crises is seasonal two crises were predictable but in the other six episodes every forecasting model examined failed these results suggest that financial crises were not all statistically alike and that their generation mechanisms differed copyright 1994 by ohio state university press

the eec s wheat price policies and international trade in differentiated products several features of the ec wheat market are analyzed including the imperfect substitutability between imports and domestic supplies the simultaneous import and export of wheat and the distinct impact of threshold versus intervention policy prices in theory the impact of ec price policies on wheat consumption and net trade are found to be indeterminate a priori empirical results show that intervention prices have a positive impact on ec net exports while increases in threshold import prices have decreased ec net wheat exports competing wheat exporters would prefer the ec to lower the intervention price to world levels but maintain threshold prices

political rents and voter information in search equilibrium abstract political parties committed to grab rents may run for election and even win if citizens are uninformed but how is the political equilibrium affected if citizens can mitigate this information problem through costly information search we propose a political equilibrium theory with endogenous information search and turnout we show that i the political equilibrium generates political uncertainty characterized by a distribution of rent policies i i the expectation of this rent distribution is inversely u shaped in the information search cost i i i turnout is lower and rents are higher the more proportional is the electoral system

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

do supermajority rules limit or enhance majority tyranny evidence from the us states 1960 1997 buchanan and tullock 1962 demonstrates that supermajority rules can reduce tyranny of majority problems in a democracy however recent theoretical work by dixit grossman and gul 2000 postulates that this static analysis of supermajority rules may be inadequate to explain political decisions in a dynamic setting in fact supermajority rules may increase the incidence of majority tyranny because of rotating political representation using data from us state legislatures we examine the effect of supermajority rules on different categories of government expenditures and tax revenues during the latter half of the 20th century we find supermajority rules have little effect on general government expenditures and tax revenues however supermajority rules are associated with lower public welfare transfers which supports the traditional analysis of the fiscal effects of supermajority rules