uclogo.gif Economics 36102 [PPHA 47500]. Economic Models of Politics

Instructor: Roger Myerson

This is the course plan for Econ 361 from Winter 2006 [SEE ALSO NEW 2009 SYLLABUS]:

(See also reading lists from Winter2001 and Spring2001.). 

Survey papers and notes by the instructor:
"Analysis of democratic institutions: structure, conduct, and performance," J of Economic Perspectives 9(1):77-89 (1995).
"Economic analysis of political institutions," in D. Kreps and K. Wallis, Advances in Economic Theory and Econometrics 1:46-65 (Cambridge, 1997). [See also Bipolar Corruption notes.]
"Theoretical comparison of electoral systems," European Economic Review 43:671-697 (1999).
"Fundamentals of social choice theory" (1996).
Rough notes for a short course on political economics (2005) [computational models].

Recent books:
T. Persson and G. Tabellini, Political Economics (MIT, 2000).
G. Grossman and E. Helpman, Special Interest Politics (MIT, 2001).
T. Persson and G. Tabellini, Economic Effects of Constitutions (MIT, 2003).
A. Dixit, Lawlessness and Economics (Princeton, 2004).
D. Acemoglu and J. Robinson, Economic Origins of Dictatorship and Democracy (Cambridge, 2006).

Classics of comparative politics:
C. Friedrich, Constitutional Government and Democracy (Harper, 1937; 4th ed Ginn, 1968).
D. Rae, Political Consequences of Electoral Laws (Yale, 1967).
G. Cox, Efficient Secret (Cambridge, 1987).
A. Panebianco, Political Parties (Cambridge, 1988).
R. Taagepera and M. Shugart, Seats and Votes (Yale, 1989).
M. Laver and N. Schofield, Multiparty Government (Oxford, 1990).
M. Shugart and J. Carey, Presidents and Assemblies (Cambridge, 1992).
A. Lijphart, editor, Parliamentary versus Presidential Government (Oxford, 1992).
G. Sartori, Comparative Consitutional Engineering (NYU, 1996).
S. Finer, The History of Government (Oxford, 1997).
G. B. Powell, Elections as Instruments of Democracy (Yale, 2000).

Foundations of institutions:
T. Schelling, Strategy of Conflict, chapters 1-3, (Harvard, 1960).
R. Hardin, "Why a Constitution," in The Federalist Papers and the New Institutionalism, B. Grofman and D. Wittman eds., 100-119 (Agathon, 1989).
R. Calvert, "The Rational Choice Theory of Social Institutions: Cooperation, Coordination, and Communication," in Modern Political Economy, J. Banks and E. Hanushek eds, 216-267 (Cambridge, 1995).
R. Myerson, "Justice institutions and multiple equilibria," Chicago J of International Law 5:91-107 (2004) [notes].
R. Myerson, "The autocrat's credibility problem and foundations of the constitutional state," American Political Science Review 102:125-139 (2008).

Models of two-party competition and candidate entry
H. Hotelling, "Stability in competition," Economic J 39:41-57 (1929).
D. Black, "On the rationale of group decision making," J of Political Economy 56:23-34 (1948).
A. Downs, An Economic Model of Democracy (Harper and Row, 1957).
G. Kramer, "A dynamical model of political equilibrium," J of Economic Theory 16:310-334 (1977).
A. Meltzer and S. Richard, "A rational theory of the size of government," J of Political Economy 89:914-927 (1981).
P. Coughlin and S. Nitzan, "Electoral outcomes with probabilistic voting and Nash social welfare optima," J of Public Economics 15:113-121 (1981).
J. Ledyard, "Pure theory of two-candidate competition," Public Choice 44:7-41 (1984).
T. Palfrey and H. Rosenthal, "Voter participation and strategic uncertainty," American Political Science Review 79:62-78 (1985).
T. Feddersen, I. Sened, and S. Wright, "Rational voting and candidate entry under plurality rule," American J of Political Science 34:1005-1016 (1990).
T. Feddersen "A Voting Model implying Duverger's Law and Positive Turnout," American J of Political Science 36:938-962 (1992).
M. Osborne, "Spatial models of political competition under plurality rule," Canadian J of Economics 28:261-301 (1995).
A. Dixit and J. Londregan, "Determinants of success of special interests in redistributive politics," J of Politics 58:1132-1155 (1996)
M. Osborne and A. Slivinski, "A model of political competition with citizen-candidates," Quarterly J of Economics 111:65-96 (1996).
T. Besley and S. Coate, "An economic model of representative democracy," Quarterly J of Economics 112:85-114 (1997).
Persson and Tabellini (2000) chapters 3 and 5.

Comparison of electoral systems:
D. Rae, V. Hanby, J. Loosemore, "Thresholds of representation and thresholds of exclusion," Comparative Political Studies 3:479-488 (1971).
W. Riker, "The two-party system and Duverger's law," American Political Science Review 76:753-766 (1982).
G. Cox, "Electoral equilibrium under alternative voting institutions," American J of Political Science 31:82-108 (1987).
Taagepera and Shugart, Seats and Votes (1989).
G. Cox, "Centripital and centrifugal incentives in electoral systems," American J of Political Science 34:903-935 (1990).
A. Lijphart, "The political consequences of electoral laws, 1945-1985," American Political Science Review 84:481-496 (1990).
S. Reed, "Structure and behavior: extending Duverger's law to the Japanese case," British J of Political Science 20:335-356 (1990).
R. Myerson and R. Weber, "A theory of voting equilibria," American Political Science Review 87:102-114 (1993).
R. Myerson, "Effectiveness of electoral systems for reducing government corruption," Games and Economic Behavior 5:118-132 (1993a) [notes]
R. Myerson, "Incentives to cultivate favored minorities under alternative electoral systems," American Political Science Review 87:856-869 (1993b).
G. Cox, "Strategic voting equilibria under single non-transferable vote," American Political Science Review 88:608-621 (1994).
J. Carey and M. Shugart, "Incentives to cultivate a personal vote: a rank ordering of electoral formulas," Electoral Studies 14:417-439 (1995).
R. Myerson, "Theoretical comparison of electoral systems," European Economic Review 43:671-697 (1999).
T. Persson and G. Tabellini, "The size and scope of government," European Economic Review 43:699-735 (1999) [see also chapter 8 in their 2000 book].
D. Austen-Smith "Redistributing income under proportional representation," J of Political Economy 108:1235-1269 (2000).
R. Myerson, "Comparison of scoring rules in Poisson voting games," J of Economic Theory 103:219-251 (2001) [notes].
A. Lizzeri and N. Persico, "Provision of public goods under alternative electoral incentives," American Economic Review 91:225-245 (2001).
G.-M. Milesi-Ferretti, R. Perotti, and M. Rostagno, "Electoral systems and the composition of public spending ," Quarterly J of Economics 117:609-657 (2002).
R. Myerson, "Bipolar multicandidate elections with corruption" Scandinavian Journal of Economics 108:727-742 (2006).

Retrospective voting and agency
R. Barro, "Control of politicians," Public Choice 14:19-42 (1973).
W. Riker, Liberalism against Populism, chapter 1 (Freeman, 1982).
J. Ferejohn, "Incumbent performance and electoral control," Public Choice 50:5-26 (1986).
D. Austen-Smith and J. Banks, "Electoral accountability and incumbency," in P. Ordeshook, ed., Models of Strategic Choice in Politics (Michigan, 1989).
K. Rogoff, "Equilibrium Political Business Cycles", American Economic Review 80:21-36 (1990).
J. Banks and R. Sundaram, "Adverse selection and moral hazard in a repeated elections model," in W. Barnett, M. Hinich, and N. Schofield, eds., Political Economy (Cambridge, 1993).
T. Persson, G. Roland, and G. Tabellini, "Separation of powers and political accountability," Quarterly J of Economics 112:1163-1202 (1997).
J. Banks and R. Sundaram, "Optimal retention in agency problems," J of Economic Theory 82:293-323 (1998).
J. Fearon, "Electoral accountability and the control of politicians: selecting good types versus sanctioning poor performance," in Democracy, Accountability and Representation, A. Preszeworski, S. Stokes, and B. Manin eds (Cambridge, 1999), p. 55-97.
Persson and Tabellini (2000) chapters 4 and 9.
J.J Laffont, Incentives and Political Economy (Oxford, 2000).
T. Persson, G. Roland, and G. Tabellini, "Comparative politics and public finance," J of Political Economy 108:1121-1161 (2000).
J. Harrington, "Progressive ambition, electoral selection, and the creation of ideologues." Economics of Governance 1:13-24 (2000).

Legislative structure, agendas, and bargaining:
T. Romer and H. Rosenthal, "Political resource allocation, controlled agendas, and the status quo," Public Choice 33(4):27-43 (1978).
K. Shepsle, "Institutional arrangements and equilibrium in multi-dimensional voting models," American J of Political Science 23:27-59 (1979).
K. Shepsle and B. Weingast, "Structure induced equilibria and legislative choice," Public Choice 37:503-519 (1981).
V. Crawford and J. Sobel, "Strategic information transmission," Econometrica 50:1431-1451 (1982).
T. Gilligan and K. Krehbiel, "Collective decisionmaking and standing committees," J of Law Economics and Organization 3:287-335 (1987).
B. Weingast and W. Marshall, "Industrial organization of congress," J of Political Economy 96:132-163 (1988).
D. Austen-Smith and J. Banks, "Elections, coalitions, and legislative outcomes," American Political Science Review 82:405-422 (1988).
D. Baron and J. Ferejohn, "Bargaining in legislatures," American Political Science Review 83:1181-1206 (1989).
T. Gilligan and K. Krehbiel, "Asymmetric Information and Legislative Rules with a Heterogeneous Committee," American J of Political Science 33:459-490 (1989).
K. Shepsle and M. Laver, "Coalitions and cabinet government," American Political Science Review 81:873-890 (1990).
R. McKelvey and R. Riezman, "Seniority in legislatures," American Political Science Review 86:951-965 (1991).
T. Moe and M. Caldwell, "Institutional foundations of democratic government: a comparison of presidential and parliamentary systems," J of Institutional and Theoretical Economics 150:171-195 (1994).
J. Huber, "The vote of confidence procedure in parliamentary democracies," American Political Science Review 90(2):269-282 (1996).
V. Chari, L. Jones, and R. Marimon, "The economics of split voting in representative democracies," American Economic Review 87:957-976, (1997).
D. Diermeier and T. Feddersen, "Cohesion in legislatures and the vote of confidence procedure," American Political Science Review 92:611-621 (1998).
D. Diermeier and R. Myerson, "Bicameralism and its consequences for the internal organization of legislatures," American Economic Review 89:1182-1196 (1999).[pdf preprint]
A. Dixit, G. Grossman, and F. Gul, "A theory of political compromise," J of Political Economy 108:531-568 (2000).
Persson and Tabellini (2000) chapter 10.

Information and political action:
H. P. Young, "Condorcet's theory of voting," American Political Science Review 82 (1988), 1231-1244.
S. Lohmann, "Information aggregation through costly political action," American Economic Review 84:518-530 (1994).
D. Austen-Smith and J. Banks, "Information aggregation, rationality, and the Condorcet jury theorem," American Political Science Review 90:34-45 (1996).
T. Feddersen and W. Pesendorfer, "The Swing Voter's Curse," American Economic Review 86:408-424 (1996).
T. Feddersen and W. Pesendorfer, "Voting behavior and information aggregation in elections with private information," Econometrica 65:1029-1058 (1997).
R. Myerson, "Extended Poisson games and the Condorcet jury theorem," Games and Economic Behavior 25 (1998), 111-131
S. Lohmann, "Electoral incentives, political transparency, and the policy bias toward special interests," American Political Science Review 92 (1998).
R. Myerson, "Informational origins of political bias towards critical groups of voters," European Economic Review 43 (1999), 767-778.
T. Piketty, "The information aggregation approach to political institutions," European Economic Review 43:791-800 (1999).
T. Piketty, "Voting as communication," Review of Economic Studies 67:169-191 (2000).
E. Dekel and M. Piccione, "Sequential voting procedures in symmetric binary elections," J of Political Economy 108:34-55 (2000).
K Shotts, "A signaling model of repeated elections," Northwestern U paper (2000), to appear in Social Choice and Welfare.
R. Razin, "Signaling and electing motivations in a voting model with common values and responsive candidates," Econometrica 71:1083-1120 (2003).

Lobbying and special interests
M. Olson, Logic of Collective Action (Harvard U. Press, 1965).
V. Crawford and J. Sobel, "Strategic information transmission," Econometrica 50:579-594 (1982).
G. Becker, "A theory of competition among pressure groups for political influence," Quarterly J of Economics 98:371-400 (1983).
J. Snyder, "Campaign contributions as investment," J of Political Economy 98:1195-1227 (1990).
J. Snyder, "On buying legislatures," Economics and Politics 3:93-110 (1991).
R. Morton and C. Cameron, "Elections and the theory of campaign contributions," Economics and Politics 4:79-108 (1992).
D. Baron, "Electoral competition with informed and uninformed voters," American Political Science Review 88:33-47 (1994).
G. Grossman and E. Helpman,"Protection for sale," American Economic Review 84:833-850 (1994).
G. Grossman and E. Helpman, "Electoral competition and special interest politics," Review of Economic Studies 63:265-286 (1996).
A. Dixit, G. Grossman, and E. Helpman, "Common agency and coordination," J of Political Economy 105:752-769 (1997).
P. Goldberg and G. Maggi, "Protection for sale: an empirical investigation," Amer Econ Rev 89:1135-1155 (1999).
T. Groseclose and J. Snyder, "Buying supermajorities," American Political Science Review 90:303-315 (1996).
Persson and Tabellini (2000) chapters 6 and 7.
Grossman and Helpman, Special Interest Politics (2001).

Law and corruption:
P. Milgrom, D. North, and B. Weingast, "The role of institutions in the revival of trade: the law merchant, private judges, and Champagne fairs," Economics and Politics 2:1023 (1990).
A. Shleifer and R. Vishny, "Corruption," Quarterly J of Economics 108:599-617 (1993).
A. Shleifer, R. Vishny, and K. Murphy, "Why is rent-seeking so costly to growth?" American Economic Review 83.2:409-414 (1993).
H. Grossman and M. Kim "Swords or plowshares," J of Political Economy 103:1275-1288 (1995).
J. Fearon and D. Laitin, “Explaining interethnic cooperation,” American Political Science Review 90:715-735 (1996).
P. Bardhan, "Corruption and development: a review of issues," J of Economic Literature 35:1320-1346 (1997).
S. Rose-Ackerman, Corruption and Government (Cambridge, 1999).
K. Sonin, "Why the rich may favor poor protection of propertry rights," J of Comparative Economics 31:715-731 (2003).
K. Hoff and J. Stiglitz, "After the big bang: obstacles to the emergence of rule of law in post-communist societies" American Economic Review 94:753-763 (2004).
A. Dixit, Lawlessness and Economics (2004).

Local governments:
C. Tiebout, "A pure theory of local expenditures," J of Political Economy 64:416-424 (1956).
D. Epple and A. Zelenitz, "The implications of competition among jurisdictions: does Tiebout need politics?" J of Political Economy 89:1197-1217 (1981).
B. Weingast, "The economic role of political institutions: market-preserving federalism and economic growth," J of Law, Economics, and Organization   11:1-31 (1995).
T. Persson and G. Tabellini, "Federal fiscal constitutions: risk sharing and redistribution," J of Political Economy 104:979-1009 (1996).
A. Alesina and E. Spolaore, "On the number and size of nations," Quarterly J of Economics 112:1027-1056 (1997).
A. Dixit and J. Londregan, "Fiscal federalism and redistributive politics," J of Public Economics 67:153-180 (1998).
R. Myerson, "Federalism and incentives for success of democracy," Quarterly J of Political Science 1:3-23 (2006).

Conflict and the emergence of democratic institutions:
M. Olson, "Autocracy, democracy, and prosperity," pp 131-157 in Strategy and Choice, ed. by R. Zeckhauser, MIT Press (1991). (A similar paper is in APSR 87:567-576, 1993.)
A. Przeworski and F. Limongi, "Political regimes and economic growth", J of Economic Perspectives 7(3):51-69 (1993).
T. Persson and G. Tabellini, "Is inequality harmful for growth?" American Economic Review 84:600-621 (1994).
A. Alesina and D. Rodrik, "Distributive politics and economic growth", Quarterly J of Economics 109:465-490 (1994).
B. Weingast, "The political foundations of democracy and the rule of law," American Political Science Review 91:245-263 (1997).
D. Acemoglu and J. Robinson, "Why did the West extend the franchise? democracy, inequality and growth in historical perspective," Quarterly J of Economics 115:1167-1199 (2000).
M. Ellman and L. Wantchekon, "Electoral competition under the threat of political unrest," Quarterly J of Economics 115:499-531 (2000).
D. Acemoglu and J. Robinson, "A theory of political transitions," American Economic Review 91:938-963 (2001).
L. Wantchekon and Z. Neeman, "A theory of post-civil war democratization," J Theoretical Politics 14 (2002).
C. Boix, Democracy and Redistribution (Cambridge, 2003).
B. Bueno de Mesquita, A. Smith, R. Siverson, and J. Morrow, The Logic of Political Survival  (MIT, 2003), 104-126.
A. Lizzeri and N. Persico, "Why did the elites extend the suffrage?" Quarterly J of Economics 119:707-765 (2004).

Politics of deficits:
A. Alesina and G. Tabellini, "A positive theory of fiscal deficits and government debt," Review of Economic Studies 57:403-414 (1990).
A. Alesina and R. Perotti, "Political economy of budget deficits," IMF Staff papers 42:1-37 (1995).
J. Poterba and J von Hagen, Fiscal Rules and Fiscal Performance (Chicago, 1999).

Plan of class topics:

  1. Multiple equilibria and the foundations of institutions:
    • Culture, justice, and Schelling's focal-point effect (War-of-attrition model)
    • An impossibility theorem of social choice. (Muller-Satterthwaite thm. Condorcet cycle)
    • A model of a prince's moral hazard problems and constitutional constraints
  2. Binary voting:
    • Inhibiting potential challengers: the selectorate model
    • The bipartisan set
    • Median voter theorems
    • The probabilistic voting model and utilitarianism
    • Turnout with costly voting
    • Ledyard's model of costly voting and utilitarianism
    • The Condorcet jury theorem and the swing voter's curse
    • Common agency models of lobbying
  3. Multicandidate elections:
    • Diversity of candidates in symmetric equilibria of election games
    • Barriers to entry and nonsymmetric equilibria of election games
    • The M+1 law of single nontransferable vote
    • Citizen-candidate model: Besley-Coate
  4. Voting in legislatures:
    • Sophisticated solutions of binary agendas
    • Proposal power: Baron-Ferejohn, Diermeier-Feddersen
    • Informational lobbying (applications of Crawford-Sobel)
    • Groseclose-Snyder lobbying model and Diermeier-Myerson legislative organization model
    • AustenSmith-Banks model of elections and post-election coalitional bargaining
  5. Accountability and separation of powers:
    • Ferejohn's model of retrospective voting and accountability
    • Tiebout competition, asset mobility, and the curse of natural resources
    • Federalism and incentives for success of democracy
  6. Foundations of adjudication and protection of rights
    • Milgrom-North-Weingast model of judges
    • Fearon-Laitin model of clans