The Influence of Knut Wicksell on Richard Musgrave and James Buchanan

The schools of thought that Richard Musgrave and James Buchanan represent in the field of public finance differ a great deal. Musgrave represents the insider-Harvard vision of socio-political reality while Buchanan represents the outsider-Chicago-Virginia-public choice vision. The foundation of different schools of thought by Musgrave and Buchanan is surprising insofar as both Musgraveand Buchanan call Knut Wicksell their intellectual father and claim their own work to stand in the Wicksellian tradition. In this paper, the influence of Wicksell on the works of Musgrave and Buchanan is traced out. The paper comes to the conclusion that it is Buchanan on whose work Wicksell had the strongerinfluence.     

Coalition Termination in Norway: Models and Cases

This article focuses on coalition termination in Norway and explores the questions: Which issues are severe enough to bring down a coalition government? To what extent are coalition crises caused by a complex bargaining environment? On the basis of a unified model for government solution, three cases are examined: the termination of Borten II in 1971, Willoch III in 1986, and Syse in 1990. The analysis demonstrates that the complexity of the bargaining environment is conditioned by the dimensionality of the party system. The stability of coalitions is restricted by the cleavage structure and the ideological diversity of the system, as parties are polarized along several conflict dimensions. Terminal issues are fundamentally related to the parties' position in the policy space. In order to preserve party identity and unity, political parties change from a cooperative to a competitive strategy when issues belonging to the “heartland” of the parties concerned become salient.     

Richard Musgrave,public finance,and public choice

Review Article

Richard Musgrave, public finance, and public choice     

Optimal procurement contracts under a binding budget constraint

The traditional literature on agency models predicts that, for zero liability contracts, it is optimal for the principal to pay for the information he cannot observe. However, this principle is not valid for a set of contracts mostly used by government agencies whose distinguishing feature is represented by a stringent budget constraint for the principal. This paper shows that in this environment the principal will either choose a structure exibiting pooling or a bargaining solution. The bargaining solution represents the analytical proof to the intuition of the difficulty in implementing procurement contracts stated by Laffont and Tirole (1993).     

Issue saliency,policy distances and coalition bargaining

This article addresses the problem of policy as a constraint for coalition bargaining. Two questions are posed: How fruitful are uni‐dimensional models for the analysis of coalition bargaining in multiparty systems? And how much do we gain by using a multidimensional approach? The questions are examined empirically by applying various sets of ten‐point issue scales. The Norwegian system is used as a case. The analysis indicates that a uni‐dimensional approach contributes notably to the understanding of coalition bargaining in the system. However, as the parties are divided along several traditional cleavages, considerable sophistication can be gained by adding more dimensions to the model.     

The political economy of inflation: Bargaining structure or central bank independence?

The causes of inflation are commonly analyzed as the function of either the organization of wage bargaining or the independence of the central bank. Although these explanations are widely treated as competing, recent evidence suggests that there may be merit to both arguments. This paper presents a game-theoretic model of wage bargaining and monetary policy-making that shows why the two institutional causes are not only complementary, but elements of a more encompassing logic. The empirical superiority of this synthesizing model is demonstrated by reanalyzing data used in Al-Marhubi and Willett (1995) and by presenting new evidence.     

Erratum: The Political Economy of Inflation: Bargaining Structure or Central Bank Independence?

The causes of inflation are commonly analyzed as the function of either the organization of wage bargaining or the independence of the central bank. Although these explanations are widely treated as competing, recent evidence suggests that there may be merit to both arguments. This paper presents a game-theoretic model of wage bargaining and monetary policy-making that shows why the two institutional causes are not only complementary, but elements of a more encompassing logic. The empirical superiority of this synthesizing model is demonstrated by reanalyzing data used in Al-Marhubi and Willett (1995) and by presenting new evidence.     

New Public Management and ‘Photocopy’ Bargaining in the Australian Public Service

The industrial relations policy of the Federal Coalition Government is to encourage industrial bargaining to occur at the enterprise or individual level, free from ‘outside’ influences. While it encourages devolved bargaining at the agency and individual level within the Public Service (Australian Public Service) this policy creates tensions with its role as a centralized policy maker, economic manager and employer of the APS workforce. It also conflicts with the APS' adoption of New Public Management. In practice, the government retains considerable centralised control over agency bargaining outcomes, which is a de facto method of pattern bargaining. By analysing the substantive outcomes from nine APS agency level certified agreements (hours of work, pay and leave entitlements), the article discusses whether this one size fits all' model is evidence of an appreciation that public sector industrial relations is separate and distinct from private sector industrial relations, or another example of duplicity in the federal coalition government's ideology driven approach to industrial relations.     

Dividing the Oils: Dynamic Bargaining as Policy Formation in the Nigerian Petroleum Industry

In academic studies of the interface between developing countries and large multinational oil corporations, scholars have noted that over time and through repeated interaction, the developing countries tend to negotiate better outcomes for themselves: they progress along a learning curve by incrementally improving their outcomes through bargaining and strategic interaction. This phenomenon can be demonstrated in a number of oil-rich developing countries. Nigeria's case, however, is more complex. During the two decades following its independence, the state successfully negotiated for more control over—made strides in the developing of the skills necessary to manage—its petroleum industry, as our model would predict. Then, in a puzzling late-1970s-to-mid-1980s change of course, the government abruptly gave back concessions, undermined local entrepreneurial endeavors, and repealed indigenization laws. This paper combines, in the analytic narrative tradition, the case study method with an extensive form game; it applies a dynamic bargaining model to Nigeria's historical experience, demonstrating that Nigeria improved its outcomes and ascended along the "bargaining learning curve," only to reverse policy and "unlearn," with serious consequences for the Nigerian population. Even so, the demonstration of both successful and improved outcomes in past negotiations give evidence that Nigeria could once again ascend its bargaining learning curve if the government were to re-commit to such a policy.     

The theory of economic regulation and public choice and the determinants of public sector bargaining legislation

In this study we used the theory of economic regulation and public choice to derive a model to explain the pattern of public sector bargaining laws among the states. We find this type of legislation is influenced by the following demand factors: (1) the extent of public sector union membership, which represents the interest group hypothesis, has a positive influence on pro-union legislation; (2) the extent of employer opposition to unions, as measured by unfair labor practice charges against employers in representation elections, has a negative effect on bargaining laws; (3) two taste variables — the salaries of public employees and the percent of nonwhite employment in the state — have a positive influence on these laws. A result which will be surprising to many people is that the extent of private sector union membership has no significant influence on the passage of public sector bargaining legislation.Our empirical analysis indicates that supply factors are also important in explaining the pattern of public employee bargaining laws across the state. We find that states are more likely to enact pro-union legislation under the following conditions: (1) constituents appear to hold pro-labor views as represented by their Congressmen's voting record; (2) neighboring states have passed mandatory bargaining laws; and (3) when competition is greater among the political parties.     

Verhandeln statt Argumentieren oder Verhandeln durch Argumentieren? Eine empirische Analyse auf der Basis der Sprechakttheorie

In a recent debate in German political science the terms ?bargaining and arguing“ have been construed as semantic opposites in the same dichotomous way as the terms ?strategic action and communicative action“ and ?game theory and discourse theory“. This paper rejects the notion of these dichotomies and presents a new theoretical approach to distinguish bargaining and arguing as modes of communicative resolution of conflicts. On the basis of speech act theory a method for the empirical analysis of bargaining and arguing processes is developed and demonstrated with an example of interest conflict resolution by mediation. Three conclusions can be drawn: First, in empirical processes of communicative conflict resolution, in almost all cases both arguing and bargaining will be present. Second, within the context of an interest conflict, arguing is not an alternative to bargaining, but a means for bargaining. Third, in the example in question a sequential structure could be observed: The resolution of disagreements over facts and values by arguing took place before the resolution of interest conflict by bargaining.     

Parliamentary procedure: principal forms and political effects

A standard conclusion of theorists who model bargaining as a non-cooperative game is that the party designated to make the first move—the formateur party—will determine the bargaining outcome. Most empirical studies of parliamentary coalition formation have paid surprisingly little attention to the formation process. In this paper we model government formation as a two-stage unordered discrete choice problem that better reflects this process. The first step involves the selection of a formateur party, and the second involves the choice of partners by the predicted formateur. We evaluate several hypotheses for the two stages, using a data set of all cabinets formed in the Western European countries from 1970 to 2006. In our analyses of formateur selection, we find that party size is clearly the dominant feature. In the second stage, we show that when predicting government composition it is fruitful to add information drawn from a first stage analysis.     

Modeling government behavior in collective bargaining: A test for self-interested bureaucrats

This paper tests for self-interested behavior by local-government bureaucrats engaged in collective bargaining with public employee unions. A theoretical model is developed that shows the effect of Niskanen-style bureaucratic self-interest in the two standard bargaining models: the demand-constrained model and the efficient-bargain model. These predictions are then tested using national cross-section data on unionized police, fire, and sanitation workers.We wish to thank the Institute for Government and Public Affairs at the University of Illinois for its support of this research. Also, we thank Larry Kahn, Fran Blau, and Pablo Spiller for useful comments. Errors, of course, are ours.     

Bargaining and Learning While Fighting

Much of the existing formal work on war models the decision to go to war as a game-ending, costly lottery. This article relaxes this assumption by treating war as a costly process during which the states run the risk of military collapse. The model also allows for uncertainty over either the cost of fighting or the distribution of power. The analysis makes four contributions to the growing costly-process literature: (i) the present model provides a more general treatment of the learning process that occurs when states are uncertain about the distribution of power, (ii) it explicitly compares the bargaining and learning processes for the two different sources of uncertainty, (iii) it suggests a way to empirically distinguish wars arising from these two sources, and (iv) it shows that the equilibrium dynamics of informational accounts of war may be quite sensitive to the underlying bargaining environment through which information is conveyed .     

Governments,trade unions and the macroeconomy: An expository analysis of the political business cycle

We have briefly reviewed the state of the art of research on the political business cycle in the context of a simple textbook model of the macroeconomy. It has been demonstrated that the government-generated political business cycle vanishes as expectations turn rational. Even then, however, non-inflationary policies apparently are time inconsistent. Hence, democracies seem to be stuck with some sort of inflationary bias.Countries with fairly centralized wage bargaining and strong labor unions have to deal with a second political source of instability in the macroeconomy: if the labor union's program contains political items such as equal educational opportunities for working class children, extended co-determination, a more equal distribution of wealth, and the like, they will prefer to see those parties in power who show the best prospects of implementing those items. So the trade union's wage bargaining strategies take into account how bargaining results influence the state of the economy and, hence, the reelection prospects of the ruling government — and they will do so in different ways, depending on whether the union prefers the government to the opposition party or vice versa.     

Vote trading: An experimental study

This essay reports the results of ninety 3-person and 5-person bargaining experiments using several alternative vote trading scenarios. These experiments are designed to test: (1) Riker and Brams' controversial hypothesis that vote trading can yield inferior outcomes as against the alternative hypothesis that vote trading induces ‘market-like’ efficiency in voting bodies; (2) the relative adequacy of several game theoretic solution concepts for vote trading games without a Condorcet winner (core); and, (3) the adequacy of the core itself. First, on the basis of eighteen experiments with binding commitments, we find some support for Riker and Brams' hypothesis: in nine trials, subjects first trade to a Pareto dominated outcome. In five of these trials, however, these outcomes are eventually displaced by Pareto efficient ones. Without binding commitments, however, we find little support for the ‘paradox of vote trading’ hypothesis. Specifically, while six of seven trials of a 3-person game yield ‘equitable’ outcomes, seventeen trials of several 5-person games without binding commitments strongly support the competitive solution as a cooperative game solution concept, and suggest that the V-set and M ₁ bargaining set are either redundant or useless. Seven trials each of six 5-person games with a condorcet winner (core), however, suggest that usual static solution concepts may be inadequate for treating games with any interesting degree of strategic complexity.     

The Turnover Trap: New Leaders, Reputation, and International Conflict

A formal model of crisis bargaining in the shadow of leadership turnover is analyzed where (1) successive leaders of the same state may differ in their resolve, (2) their resolve is private information, and (3) the probability of leadership turnover depends on bargaining behavior and conflict outcomes. The model provides novel answers to a number of questions about the relationship between an incumbent's time in office, the prospects of losing office, the anticipated behavior of future leaders, and the current probability of conflict. Taken together, these results add further weight to recent claims that leaders, not states, should be considered the fundamental units of analysis in international relations.     

Bargaining unexplained

Is there a bargaining equilibrium comparable to the equilibrium in the competitive economy? The claim in this paper is that there is not. Bargaining models with well-specified equilibria have been built upon a shared sense of what is fair, concessions in proportion to harm from failure to agree or an imposed bargaining procedure. The claim is that these models either come dangerously close to assuming what they seek to prove or define bargaining as something other than what it is commonly understood to be. We know that people strike bargains and that civilized life could not proceed otherwise, but something over and above pure self-interest is required for bargaining and compromise to take place.     

The Effects of Structures and Power on State Bargaining Strategies

When and why will states adopt more (or less) cooperative bargaining strategies? Standard answers to this question focus on the role of state power. Other scholars highlight socialization effects. I argue that in most international negotiations, the institutional bargaining structure will mitigate the effects of power and socialization, and drive state bargaining behavior. Factors highlighted by formal models of international bargaining should therefore best explain the variation in the strategies states adopt. I introduce empirical measures of these abstract concepts, and test their effects against those of power and socialization using an original dataset of state bargaining strategies in the European Union (EU). The results show that structural factors best explain variation in the EU states’ bargaining strategies. I conclude by highlighting the conditions under which these effects should explain state bargaining behavior in other international negotiations, and discuss the implications of this argument for the study of international bargaining.     

PLEA BARGAINING AS A GAME: AN EMPIRICAL ANALYSIS OF NEGOTIATED SENTENCING DECISIONS

Current studies of courtroom decisionmaking emphasize contextual variation and the interaction of large numbers of variables In explaining decision outcomes. However, theory suggests that courtroom decisions may be dominated by simple "rules of thumb" that allow decisionmakers to cope with scarcity of time and resources. Following this approach, a parslmonious model of plea bargaining as a two-person game is developed and hypotheses are derived. Data on negotiated sentences for burglary and robbery in three California counties serve to test the hypotheses. The findings confirm that prior criminal history is the dominant factor in determining the severity of negotiated sentences and that defendents with more extensive prior records have less incentive to plea bargalh. Identlfication of this decision rule for negotiated sentences contradlcts arguments for limiting plea bargaining that assume negotiations result in sentencing leniency across the board.