Recent research papers by Roger B. Myerson

CONSTITUTIONAL STRUCTURES FOR A STRONG DEMOCRACY (March 2009).
For democracy to prosper in Pakistan, structural reforms to strengthen democratic competition could be vital. This paper considers some suggested reforms, using ideas from economics of oligopolistic competition and game theory. Successful democracy is based on a flexible system of strong political parties and a plentiful supply of politicians who have good reputations for responsible democratic leadership. Unimpeded parliamentary responsibility for government helps develop strong parties. National parties should be able to nominate candidates in all elections, including local elections and tribal areas. For a flexible party system, members of the National Assembly should be free to form new parties, not restricted by sanctions against floor-crossing. With federalism, provincial and local democracy also reduce political entry barriers, as politicians can prove their qualifications for higher office by responsible service at lower levels of government. Electing responsible local councils by approval-voting open-list proportional representation can strengthen the local base of democratic leadership in all communities. In single-seat districts of provincial and national assemblies, the use of runoff elections would allow more flexible party competition. [notes] [shorter version focused on local democracy]

CAPITALIST INVESTMENT AND POLITICAL LIBERALIZATION (Dec 2008)
We consider a simple political-economic model where capitalist investment is constrained by the government's temptation to expropriate. Political liberalization can relax this constraint, increasing the government's revenue, but also increasing the ruler's political risks. We analyze the ruler's optimal liberalization, where our measure of political liberalization is the probability of the ruler being replaced if he tried to expropriate private investments. Poorer endowments can support a reputational equilibrium with more investment, even without liberalization. So we find a resources curse, where larger resource endowments can decrease investments and reduce the ruler's revenue. The ruler's incentive to liberalize can be greatest with intermediate resource endowments. Strong liberalization becomes optimal in cases where capital investments yield approximately constant returns for national output. Mobility of productive factors that complement capital can increase incentives to liberalize, but equilibrium prices may adjust so that liberal and authoritarian regimes co-exist. [notes]

FOUNDATIONS OF THE STATE IN THEORY AND PRACTICE: READING BREMER AND THE COUNTERINSURGENCY FIELD MANUAL (Oct 2007)
Abstract. Paul Bremer's book about Iraq and the US Army's Counterinsurgency Field Manual express theories about the foundations of the state. Bremer emphasizes the primary importance of a national constitution. The Field Manual emphasizes local security operations and effective governance to establish the government's legitimacy. From economic problems of agency, I argue that the foundations of the state depend critically on political leaders' reputations for rewarding and judging government officials. This perspective suggests that the chances for successful democracy are increased when there are more opportunities for different political leaders to develop reputations for responsible governance and effective use of patronage. [notes]
Related paper: A Field Manual for the Cradle of Civilization: Theory of Leadership and Lessons of Iraq (Sept 2008). [notes]

LEADERSHIP, TRUST, AND POWER: DYNAMIC MORAL HAZARD IN HIGH OFFICE (revised Apr 2008)
Abstract: We consider a model of governors serving a sovereign prince, who wants to deter them from corruption and rebellion. Governors must be penalized when they cause observable crises, but a governor's expected benefits must never go below the rebellion payoff, which itself is better than what any candidate could pay for the office. Governors can trust the prince's promises only up to a given credit bound. In the optimal incentive plan, compensation is deferred until the governor's credit reaches this bound. Each crisis reduces credit by a fixed penalty. When a governor's credit is less than one penalty from the rebellion payoff, the governor must be called to court for a trial in which the probability of dismissal is less than 1. Other governors must monitor the trial because the prince would prefer to dismiss and resell the office. A high credit bound benefits the prince ex ante, but in the long run it generates entrenched governors with large claims on the state. Low credit bounds can cause the prince to apply soft budget constraints, forgiving losses and tolerating corruption for low-credit governors. [notes].

FUNDAMENTAL THEORY OF INSTITUTIONS: a lecture in honor of Leo Hurwicz (revised Mar 2008)
Abstract: We follow Hurwicz in considering fundamental questions about social institutions. Hurwicz's concept of incentive compatibility may help clarify old debates about socialism, where such questions arose. Moral-hazard models show disadvantages of socialism, while adverse-selection models may delimit its advantages. We review Hurwicz's general theory of how institutions can be enforced in larger games, suggesting curb sets as an alternative enforcement theory that admits focal-point effects. Finally, we consider specific problems of leadership and trust in establishing sovereign political institutions, where high officials can be deterred from abuse of power only by promises of large future rewards, which a leader must be credibly committed to fulfill. (Presented at the 2006 North American summer meetings of the Econometric Society). [notes]

LEARNING FROM SCHELLING'S 'STRATEGY OF CONFLICT' (Aug 2007)
Abstract. Thomas Schelling's Strategy of Conflict (1960) is a masterpiece which should be recognized as one of the most important and influential books in social theory. This paper reviews some of the important ideas in Strategy of Conflict and considers some of the broader impact that this book has had on game theory, economics, and social theory. By his emphasis on the critical importance of information and commitment in strategic dynamics, Schelling played a vital role in stimulating the development of noncooperative game theory. More broadly, Schelling's analysis of games with multiple equilibria has redefined the scope of economics and its place in the social sciences.  [notes]

FORCE AND RESTRAINT IN STRATEGIC DETERRENCE: A GAME THEORIST'S PERSPECTIVE (July 2007)
Abstract. A successful deterrent strategy requires a balance between resolve and restraint, and this balance must be recognized and understood by adversaries. So for forceful actions to have their intended deterrent effect, they should be framed by a process of communication with potential adversaries that establishes mutually recognized limits and rules about when force will be used and when it will not be used. Simple game models are used to develop the basic logic of effective credible deterrent strategies. [notes]

FEDERALISM AND INCENTIVES FOR SUCCESS OF DEMOCRACY (revised Aug 2005)
Abstract: Success and failure of democracy are interpreted as different equilibria of a dynamic political game with costs of changing leadership and with incomplete information about politicians' virtue. Unitary democracy can be frustrated when voters do not replace corrupt leaders, because any new leader would probably also govern corruptly. But federal democracy cannot be consistently frustrated at both national and provincial levels, because provincial leaders who govern responsibly could build reputations to become contenders for higher national office. Similarly, democracy cannot be consistently frustrated in a democratization process that begins with decentralized provincial democracy and only later introduces nationally elected leadership. [notes]

FUNDAMENTALS OF SOCIAL CHOICE THEORY (Sept 1996).
Abstract:  This paper offers a short introduction to some of the fundamental results of social choice theory. Topices include: Nash implementability and the Muller-Satterthwaite impossibility theorem, anonymous and neutral social choice correspondences, two-party competition in tournaments, binary agendas and the top cycle, and median voter theorems. The paper begins with a simple example to illustrate the importance of multiple equilibria in game-theoretic models of political institutions.

DECISIVENESS OF CONTRIBUTORS' PERCEPTIONS IN ELECTIONS (Dec 1992)
coauthored with Rebecca Morton.
Abstract:  We consider a model of two-candidate elections where spending on campaign advertisements can directly influence voters' preferences, and contributors give the money for campaign spending in exchange for promised services if the candidate wins.  We find that the winner of the election depends crucially on the contributors' beliefs about who is likely to win, and the contribution market tends towards nonsymmetric equilibria in which one of the two candidates has no chance of winning.  If the voters are only weakly influenced by advertising or if permissible campaign spending is small, then the candidates choose policies close to the median voter's ideal point, but the contributors still determine the winner. Uncertainty about the Condorcet-winning point (or its nonexistence) can change these results and generate equilibria in which both candidates have substantial probabilities of winning.

Research notes:
  Schwartz lecture, Basel talk, ES 2009,
  rough notes for a short course on political economics from 7/2007 (and from 7/2005),
  2007 prize lecture and biography (at Nobelprize.org),
  talk at Harvard following Jeffrey Sachs 4/2008,
  Stony Brook talk on foundations of political institutions 7/2006,
  overview of political economics for a conference at Northwestern U. 5/2005,
  notes on virtual utility and interim bargaining,
  justice, institutions, multiple equilibria,
  bipolar multicandidate elections with corruption,
  comparison of electoral systems, incentives to cultivate favored minorities,
  an interview on game theory,
  political economics and the Weimar disaster,
  history of Nash equilibrium.

Research spreadsheets: pekingu.xls, crawfsob.xls, ybar.xls, oligarch.xls, prague.xls, desoto.xls, vcore.xls, prince.xls, caplib.xls

Also available here: a thesis on psycholinguistics of reading by Rosemarie F. Myerson.

All papers here are in Adobe PDF format.

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