Coase and Bertrand on lighthouses

Coase (Journal of Low and Economics 17(2):185–213, 1974) failed to appreciate that the construction and maintenance of nineteenth-century lighthouses were in part financed by British taxpayers. Bertrand (Cambridge Journal of Economics 30:389–402, 2006) rightly calls him to account. While agreeing with Bertrand’s conclusion, we dispute her reasoning and argue that lighthouses nevertheless could have been supplied by the private sector.     

Step return versus net reward in the voluntary provision of a threshold public good: An adversarial collaboration

This research concerns how costs and benefits affect the voluntary provision of threshold public goods. Cadsby and Maynes (J. Public Econ. 71:53–73, 1999) hypothesized that the difference between the value and cost of such a good, its net reward, influences the likelihood of provision. Croson and Marks (Exp. Econ. 2:239–259, 2000) focused on the ratio of group payoff to total cost, the step return. We find that step return is the best predictor overall, although net reward has some impact, negatively affecting the probability of provision with inexperienced participants and positively affecting it with experienced participants.     

Antitrust public choice(s)

Antitrust legislation and enforcement has over the last few decades been increasingly informed by ever more sophisticated analysis while—at the same time—evidence has continued to mount that the results of antitrust remedies fall far short of the promises held out under still prevalent ‘nirvana fallacy’ (Demsetz in Journal of Law and Economics 12(1):1–22, 1969) expectations. I draw upon a recent Supreme Court decision as well as the results of Young and Shughart’s (Public Choice, 2010. doi:10.1007/s11127_009-9531-y) novel approach to the analysis of antitrust enforcement activities to discuss the extent to which public choice theory is vital in solving the puzzle regarding the “unintended” effects of antitrust (public) choices.     

State aid programs for equalizing spending across local school districts: does the structure of the program matter, or only it’s size?

This paper provides interesting insights into an important causal mechanism underlying Murray, Evans and Schwab’s (Am. Econ. Rev. 88(4):789–812, 1998) finding that court mandated reforms result in less inequality in spending per pupil levels across rich and poor school districts within a state. Treating the choice of an education program’s structure as endogenous, following the analysis of Leyden (Public Finance/Finances Publiques 47:229–247, 1992; Public Choice 115(1–2):83–107, 2003), yields empirical results suggesting that court mandated reforms increase the likelihood that a program’s structure will include a price effect and that the inclusion of a price effect in turn results in a decrease in spending inequality.     

Taking alleged dictatorship more seriously: Rejoinder to Fried

Fried (in Public Choise, this issue, 2013) claims that Quesada (in Public Choise 130:395–400, 2007) is wrong in showing that the dictator in a dictatorial social welfare function does not necessarily enjoy absolute decision power. This reply revisits, and illustrates by means of an example, the framework where Quesada’s result is obtained. It is argued that Fried’s counterfactual analysis conducted to invalidate Quesada’s conclusion relies on untenable presumptions: (i) that the rules to identify the values of a social welfare function say something about how these values must have been obtained; and (ii) that counterfactual analysis can be conducted in an environment where causes and effects cannot be unequivocally established.     

Islam and democracy

Using the POLITY IV and Freedom House indices, Rowley and Smith (Public Choice 139(3–4):273, 2009) found that countries with Muslim majorities enjoy less freedom and are less democratic than countries in which Muslims are a minority. Because the POLITY IV and Freedom House indices have been criticized on several grounds, I?reinvestigate Rowley and Smith’s finding using the new Democracy-Dictatorship data from Cheibub et?al. (Public Choice 143(1–2):67, 2010). The empirical results confirm that countries with Muslim majorities are indeed less likely to be democratic.     

Law-and-economics: why Gordon Tullock prefers Napoleon Bonaparte over the Duke of Wellington; and why he may end up on St. Helena

Most scholars in the field of law-and-economics lean to the view that the common law is efficient. Tullock, however, argues that the common law is inefficient and suggests dramatic modifications to the American legal system, transforming it from a common law system to a civil code system and abandoning the adversarial proceedings in favor of an inquisitorial process. This essay summarizes and critically evaluates the thrusts of Tullock’s 1988 article and his 1997 book, which, together direct a full-frontal attack on the Anglo-Saxon common law system.     

Conceptualizing the Relationship Between Persuasion and Legitimacy: Official Framing in the Case of the Chinese Communist Party

In the debate on authoritarian resilience, the importance of persuasion to regime legitimacy has been widely acknowledged, yet a conceptual framework explaining the role of persuasion is still lacking. Against this backdrop, we argue that the framing perspective (Benford and Snow 1988) provides a useful basis for such a framework. Drawing on Beetham’s (1991) legitimacy model, we contend that the ruling elites in authoritarian regimes propagate official frames in a continuous effort to reproduce the belief of the populace in the elites’ leadership qualities and their determination to serve the common interest. In the empirical part of our paper we look at the case of China, where the Chinese Communist Party (CCP) has in recent years reemphasized persuasion as a means of reproducing legitimacy. We then apply our theory in an analysis of the conceptual shifts in the CCP’s frames and ideology, as propagated under its secretary general, Hu Jintao.     

The unanimity rule revisited: the case of revisions of hybrid constitutions

Unsolved issues of efficient public investment in stochastic-dynamic models of the economy are examined using results from incomplete markets general equilibrium theory. The analysis delivers two previously unarticulated findings. First, the equilibrium interest rate can be used to bound the socially optimal discount rate for a public investment. Second, a new non-market mechanism (CRM) that is welfare improving over alternatives in the Groves class is introduced. The second finding amends the well-known characterization theorem of Green and Laffont (Incentives in Public Decision-Making, North-Holland, New York, 1979) and identifies a new class of direct-revelation mechanisms for public goods provision in stochastic-dynamic settings.     

The relationship between corruption and income inequality in U.S. states: evidence from a panel cointegration and error correction model

We investigate the causality between corruption and income inequality within a multivariate framework using a panel data set of all 50 U.S. states over the period 1980 to 2004. The heterogeneous panel cointegration test by Pedroni (Oxf. Bull. Econ. Stat. 61:653–670, 1999; Econom. Theory 20:597–627, 2004) indicates that in the long run corruption and the unemployment rate have a positive and statistically significant impact on income inequality while a negative impact is found for real personal income per capita, education, and unionization rate. The Granger-causality results associated with a panel vector error correction model indicate both short-run and long-run bidirectional causality between corruption and income inequality.     

Social or political cleavages? A spatial analysis of?the?party system in post-authoritarian Chile

Lipset and Rokkan??s (Party system and voter alignments: cross national perspectives, Lipset and Rokkan eds., New York: Free Press, pp. 1?C64, 1967) sociological model of cleavages and the so-called ??freezing hypothesis?? dominate theorizing about party system formation. Torcal and Mainwaring (Br. J. Polit. Sci. 33:55?C84, 2003) show the relevance of a purely political cleavage for structuring the party system in the case of Chile, challenging the freezing hypothesis??s claims. They also dispute case-specific research that argues Chile??s party system still reflects a ??three-thirds?? division between Left, Right, and Center. Revisiting this debate, our study employs spatial maps of the party system. Such political-economy models are rare in studies of Latin American politics. The application here supports a democratic/authoritarian political cleavage in Chile.     

A decade of dissent: explaining the dissent voting behavior of Bank of England MPC members

We examine the dissent voting record of the Bank of England Monetary Policy Committee. Contrary to findings in the FOMC literature (for example Havrilesky and Schweitzer in The Political Economy of American Monetary Policy, pp. 197?C210, 1990; Chappell et al. in Q. J. Econ. 108(1):185?C218, 1993), the effects of members?? career backgrounds and the political channel of appointment on voting behavior are negligible, reflecting the distinct institutional constraints and incentives associated with UK monetary policy. Our findings also suggest that literature which characterizes voting behavior as being predominantly determined by members?? internal or external status is overly simplistic. This view is supported by econometric results appertaining to the introduction of member-specific fixed-effects, which account for possible unobserved heterogeneity.     

Does public sector efficiency matter? Revisiting the relation between fiscal size and economic growth in a world sample

This paper revisits the relationship between fiscal size and economic growth. Our work differs from the empirical growth literature because this relationship depends explicitly on the efficiency of the public sector. We use a sample of 64 countries, both developed and developing, in four five-year time periods between 1980 and 2000. Building on the work of Afonso et al. (Public Choice 123:321–347, 2005), we construct a measure of public sector efficiency in each country and each time period by calculating an output-to-input ratio. In addition, we get an estimate of technical efficiency of public spending for 52 countries from 1995 to 2000 by employing a stochastic frontier analysis. Using these two measures, we find evidence of a non-monotonic relation between fiscal size and economic growth that depends critically on the size-efficiency mix.     

The curious commentary on the citation practices of Avner Greif

Rowley’s (Public Choice 140:275–285, 2009) claim that I have “expropriated” (p. 276) intellectual property rights from Professor Landa by insufficiently citing her works is vacuous. It failed, among other faults, to recognize the substantive distinction between the lines of research pursued by Professor Landa and myself. Her analysis of trust is preferences-based while my analysis is beliefs-based. We talk about similar issues but what we say is very different.     

On the empirical relevance of Condorcet’s paradox

Condorcet’s paradox occurs when there is no alternative that beats every other alternative by majority. The paradox may pose real problems to democratic decision making such as decision deadlocks and democratic paralysis. However, its relevance has been discussed again and again since the celebrated works of Arrow (Social choice and individual values, 1963) and Black (The theory of committees and elections, 1958). The discussion varies from one extreme to the other: from very relevant to practically irrelevant. This paper tries to bring more clarity to the discussion by reviewing the literature on the empirical relevance of Condorcet’s paradox. Since a definition of the paradox for even numbers of voters and alternatives, and for weak voter preferences is missing in the literature, we first define the paradox clearly and simply. Then, three topics are investigated, namely domain conditions, culture and the likelihood of the paradox, and the empirical detection of the paradox. Domain conditions express regularities in voter-preference profiles that prevent the paradox. Frequent observations of these domain conditions would make Condorcet’s paradox empirically less important. Cultures define probability distributions over the set of voter preferences. Observation of cultures might be a first step to indicate the relevance of the paradox. The empirical detection of the paradox speaks for itself; we will try to identify the number of observations of the paradox so far. The overall conclusion is that the empirical relevance of Condorcet’s paradox is still unsettled.     

A correction to Potters and van Winden (1992)

This note amends the model of informational lobbying presented in Potters and van Winden (Public Choice 74:269–292, 1992). In the original article, the authors find that only separating and pooling equilibria exist when the cost of lobbying is intermediate and the policymaker’s prior favors the interest group’s preferred policy. However, we prove that a semi-separating equilibrium also exists under these conditions. Implications for lobbying behavior are discussed.     

Deregulation despite transitional gains

Acemoglu and Robinson (in The American Economic Review 90(2):126–130, 2000) argue that historically economic rents have been less of a barrier to regulatory reform and innovation than political rents. Contrary to this conclusion, I argue that the important margin of distinction for factors preventing deregulation is not whether rents are economic or political, but rather what alternative profit opportunities are available and how innovation has changed the entrepreneurial opportunity set. Using the example of medieval Cologne, I show that the transitional gains trap framework, as developed by Tullock (in The Bell Journal of Economics 6(2):671–678, 1975), applies in a static environment and can successfully prevent reform over long periods of time, but that neither political nor economic entrepreneurs will ignore an opportunity for increased profitability in the long run. In addition, the organization of the political unit to which the regulation applies can determine the persistence of said regulation.     

Agenda trees and sincere voting: a response to Schwartz

Schwartz (Public Choice 136:353–377, 2008) has identified a controversy within the voting theory literature pertaining to the representation of agenda structures and the consequent definition of sincere voting. This note responds to Schwartz’s remarks by arguing that the kind of agenda tree he uses does not adequately represent some common parliamentary agendas, and that consequently his definition of sincere voting cannot always be applied.     

Tolerance and growth: modeling the empirical relationship

We showed, in Berggren and Elinder (2012), that tolerance toward homosexuals is negatively and quite robustly related to economic growth. In a comment, Bornhoff and Lee (this issue) question this finding on model-specification grounds. By undertaking three changes, they purport to show that our main result does not hold. In this article, we demonstrate that one of these changes is inconsequential (replacing GDP per capita by its logarithm in controlling for conditional convergence) and argue that two of them are questionable. First, the removal of certain central control variable risks introducing omitted variable bias and inconsistent estimates. Second, regional dummy variables are added on arbitrary grounds. For example, by using regional dummy variables that are just as reasonable as the Baltic dummy used by Bornhoff and Lee, we find that significance for tolerance toward homosexuals reappears in our empirical model. In all, this implies that there are good grounds for considering the negative relationship between tolerance towards homosexuals and growth valid, Bornhoff and Lee??s claims notwithstanding.     

Inequity and risk aversion in sequential public good games

Behavioral hypotheses have recently been introduced into public-choice theory (Ostrom in American Political Science Review 92:1–22, 1998). Nevertheless, the individual intrinsic preferences which drive decisions in social dilemmas have not yet been empirically identified. This paper asks whether risk and inequity preferences are behind agents’ behavior in a sequential public good game. The experimental results show that risk aversion is negatively correlated with the contribution decision of first movers. Second movers who are averse to advantageous inequity free-ride less and reciprocate more than do others. Our results emphasize the importance of strategic uncertainty for the correct understanding of which preferences influence cooperation in social dilemmas.