Political models of macroeconomic
            policy and fiscal reform
The author explains how recent
            developments in political economics improve our
            understanding of macroeconomic policy - especially the
            timing, design, and likelihood of stabilization's
            success through monetary and fiscal reform. The author
            reviews the literature on political business cycles and
            emphasizes several issues involving the relationship between
            the timing of elections and the timing of macroeconomic
            policies and outcomes. He also addresses how models can be
            useful in studying non-democratic systems. Two forces are
            crucial factors in both democratic and dictatorial systems,
            although they may manifest themselves differently: (1) the
            policymakers' incentive to retain power; and (2)
            society's polarization and the degree of social
            conflict. The author then analyzes why economic
            stabilization is delayed, even when it is obvious that
            sooner or later a stabilization program will have to be
            adopted. Some points made in the paper follow. Certain
            institutional characteristics make quick and successful
            stabilization more or less likely. The more unequal the
            distribution of stabilization's costs, the more likely
            that stabilization will be delayed. An increase in the cost
            of postponing stabilization reduces the delay. Political
            institutions that make it easier for small interest groups
            to veto legislation make delay more likely. If political and
            economic resources are unequally distributed, and it is
            obvious which group is stronger and has resources to wait
            longer, a war of attrition ends immediately, as there is no
            uncertainty about who will win it. Delay is more likely when
            information about who will bear the cost of delays is
            uncertain or unevenly distributed. Delay is also more likely
            when there is agreement about the need for fiscal change but
            a political stalemate about distribution - about how the
            burden of higher taxes or spending cuts should be allocated.
            Stabilization usually occurs when there is political
            consolidation. The burden of stabilization is sometimes
            unequal, with the politically weaker group (often the lower
            classes) bearing a larger burden (often regressive
            measures). If it is in the interest of the current
            government to do nothing for fear of failure because of
            government incompetence, the public may have no incentive to
            vote for the opposition because the opposition may also do
            nothing; the crucial factor here is how aware the government
            is of its own incompetence and thus its reasons for not
            attempting reform. Successful stabilization usually comes
            after several failed attempts, and the successful program is
            often very much like one that failed.