Optimal Central Banker Contracts and Common Agency

This paper considers the contracting approach to centralbanking in a simple common agency model. We suggest thatcentral banker contracts that do not consider the possibilityof more than one principal existing are incomplete contracts.Such incomplete contracts can be a poor form ofmonetary policy delegation under common agency. We develop amodel with two principals – society (government) and ageneric interest group, whose objective conflicts withsociety’s ex ante preferences by incorporating an inflationarybias. We determine when the government-offered orinterest-group-offered contract dominates the central banker’sdecision. The results largely depend on whether theinterest-group-offered contract is written in terms of outputor inflation.     

The Structuring of Political Cleavages in Post-Communist Societies: the Case of the Czech Republic and Slovakia

Although sharing institutions for over seventy years, and transition pathways from communism, the two successor states of the former Czechoslovakia have faced distinct challenges in state-building and divergent economic fortunes. The aim of this paper is to investigate the extent to which these differing social economic problems have influenced the ideological bases of party politics and mass electoral behaviour in the two societies. Using data from national samples of the population of each country conducted in the spring of 1994, our analysis points to the existence of distinct issue cleavages dominating party competition in the two states: in the Czech Republic, partisanship relates mainly to issues of distribution and attitudes towards the West; in Slovakia, by contrast, these issues are only secondarily important in shaping voters' choice of party, while the main focus concerns the ethnic rights of Hungarians. The distinctive nature of the issue bases to politics in the two countries suggests one reason for the greater degree of political conflict evident in Slovak politics since the split and, more generally, provides evidence of the role of social conditions in shaping new political systems.     

Fair-Play Obligations: A Critical Note on Free Riding

McDermott rejects the argument that an individual, in receiving benefits from a political community, thus incurs a 'fair-play obligation' to contribute to the provision of these benefits. While acknowledging that an individual receiving benefits without contributing is 'free riding' and that free riding may be morally wrong, McDermott denies that such moral lapses entail communities having any right to demand support. Not contributing may be morally objectionable, but individuals may still have a right not to contribute. However, both proponents and opponents of the fair-play obligation claim do not sufficiently differentiate between different forms of free riding. Arguments tend to be based on rights that may or may not be invoked when individuals free ride through consuming externalities. However, this form of free riding does not entail any reciprocal obligations. Yet it can plausibly be argued that when free riding occurs in the case of the production of public goods, then communities can demand support from individuals, and can have a right to do so.