The political economy of fertility

This paper studies the political economy of fertility. Specifically, I argue that fertility may be a strategic choice for ethnic groups engaged in redistributive conflict. I first present a simple conflict model where high fertility is optimal for each ethnic group if and only if the economy’s ethnic diversity is high, institutions are weak, or both. I then test the model in a cross-national dataset. Consistent with the theory, I find that economies where the product of ethnic diversity and a measure of institutional weakness is high have increased fertility rates. I conclude that fertility may depend on political factors.     

The political economy of dissonance

Cognitive dissonance is defined as the psychological discomfort or annoyance that may exist when an individual's choice is not consistent with his values and beliefs. Dissonance may cause an individual to reconsider his values and beliefs, enter new choices with different parameters, respond to the constraints imposed, or change his individual preference function. This paper extends Festinger's (1957) theory of cognitive dissonance to the work of public choice theorists and seeks to explain the incentives of the iron triangle to foment and quell dissonance. Examples are provided for specific environmental and health and safety risks. Akerlof and Dickens (1983) used cognitive dissonance to justify public sector intervention as necessary to correct what they perceived as a market failure in the choice of safety equipment by workers in hazardeus industries. Unlike Akerlof and Dickens (1983), we argue that the concept of cognitive dissonance is applicable to the analysis of public sector decisions giving rise to government failure as well as private decisions involving possible market failure. This paper views the public sector as a market-like arrangement in which dissonance may be produced and exchanged like any other commodity. Cognitive dissonance provides a useful framework for examining individual choice and also expands our understanding of the unseen elements of rent-seeking.     

The political economy of targeting

One of the most widely used method of targeting is to reduce welfare benefits as income rises. Although the need for such targeting is clear enough, it also entails two important difficulties. Firstly, the prospect for the recipients of losing part of their benefits if they were to earn more can be a deterrent to work harder. Secondly, by reducing the number of recipients, targeting reduces the political support for taxation and redistribution. The purpose of this paper is to study the voting equilibrium of the degree of targeting and the level of taxation in an economy where labour supply is variable. The analysis reveals that targeting may be fatal for redistribution even though it rejects strictly less than the richest half of the population, and that it is not possible for a coalition of the extremes to form and reject the middle income group from the welfare system. Moreover, because targeting affects labour supply, we find that Pareto improvements are possible when targeting is either “too low” or “too high”. We also find that voting simultaneously over taxation and targeting is favourable to the poor in the sense that they can converge to their most-preferred policy by successively forming a majority coalition with the rich to increase targeting and with the middle to increase taxation.     

The political economy of sugar legislation

The findings of this paper are a rather straightforward account of the political economy of senatorial voting on the sugar program. In the spirit of Stigler and Peltzman's accounts of interest group activity, voting on sugar is indeed related to the concentration of economic interests in the Senators' states. States with high concentrations of sugar growers and processing tend to vote for the program, those with high concentration of users tend to vote against it. The emergence of corn syrup as a sugar substitute and its subsequent interests in the program further supports this perspective. These concentrated interests are associated with conditions ripe for overcoming the collective action problem and, we infer, use their organizations to influence senatorial behavior. The political variables suggest countervailing forces which can be interpreted, at least in part, as further examples of organized (here, politically organized) influences on the interests of Senators. Thus, while the model is one of opposing interests, those of producers and users tend to influence different Senators. The major group-interest trade-off, then, is between the pull of organized interests in the constituency with that of party organization at the national (or national institutional level), at least for those for whom the pull is in opposite directions.It is clear, then, that variables representing (concentrated) consumer interests as well as variables representing grower and processor interests as well as variables representing grower and processor interests are significant in determining voting patterns on sugar legislation in the Senate. This model, therefore, is not one in which one-sided organizational interests operate politically uncontested. That, even so, consumer interests are not powerful enough to prevent sugar programs from passing is clear at one level, due to the existence of the program over most of this period. The existing level of the transfers from consumers to producers and of deadweight losses must be reflective of the magnitude of their respective free rider problems. Yet voting on the program to renew or alter those benefits at any level clearly reflects these interests and their interplay.     

The political economy of project delay

Uncertainty about how long it will take to secure approval for large-scale economic projects presents difficulties for policy makers in all industrialized countries. This paper attempts to determine the factors that influence the time required to get public acceptance for energy projects in Japan. It suggests the importance of distributional factors and, hence, the need to examine: 1) the structure of the bargaining environment; 2) the ability of interest groups to sustain opposition to or support for projects; 3) bargaining strategies employed; 4) uncertainty about outcomes; and 5) changing expectations, in explaining why compensation mechanisms operate more effectively in resolving some social disputes than others. It concludes that an analysis of Japanese experience in this area can contribute to an understanding of other social controversies and that the approach has utility to policy makers involved in developing controversial projects.     

The political economy of IMF forecasts

We investigate the political economy of IMF forecasts with data for 157 countries (1999–2005). Generally, we find evidence of forecast bias in growth and inflation. Specifically, we find that countries voting with the United States in the UN General Assembly receive lower inflation forecasts as domestic elections approach. Countries with large loans outstanding from the IMF also receive lower inflation forecasts, suggesting that the IMF engages in “defensive forecasting.” Finally, countries with fixed exchange rate regimes receive lower inflation forecasts, suggesting the IMF desires to preserve stability as inflation can have detrimental effects under such an exchange rate regime.     

The political economy of class conflict

Texts reviewed:

C. Crouch (1977) Class Conflict and the Industrial Relations Crisis, Heinemann Educational Books.

F. Hirsch and J. H. Goldthorpe (eds) (1978) The Political Economy of Inflation, Martin Robertson.     

A political genealogy of political economy

If, at the end of the eighteenth century, political economy became the prevailing representation of economic phenomena, this was due to the fact that, better than other economic or political discourses, it constructed a political framework in which three forces could co-exist. These forces were those that all the authors of this century tried to articulate: the state, capitalism, and those who tried to protect themselves from their power.     

The political economy of smoking regulation and taxation

Although anti-smoking policies are on the political agenda in almost all developed countries, a general understanding of these policies is still lacking. Applying the majority voting model of Buchanan and Vanberg (Public Choice 57(2):101–113, 1988) to tobacco taxation and smoking regulation shows that different smoking policies are feasible, depending on the composition of the majority of voters with smokers and non-smokers: (1) internalization of spill-over costs with a mixed majority of smokers and non-smokers as well as (2) a combination of regulation and taxation with a non-smoker majority. Moreover, the influence of the tobacco industry is also discussed.     

Victimization,rent-seeking and just compensation

When should government compensate citizens for harm inflicted by public policy? In practice, all public policy is harmful to somebody, even when it is beneficial to society as a whole. The common view in the legal profession is that a fuzzy but serviceable line can be drawn between “taking” which should be compensated and the proper exercise of the “policy power” where no compensation is warranted. Recently this view has been challenged by some authors who argue that harm to victims of socially-advantageous public policy should never be compensated, and by others who argue that compensation is almost always warranted. The latter would go so far as to proscribe all redistribution of income as a “taking” from the well-to-do. This paper is a defense of the common view against both challenges. The key to the problem is the distinction between unalterable risk and the risk of victimization of citizens by the government, giving rise to rent-seeking and a general disorganization of society.     

The constitutional political economy of Gordon Tullock

This paper surveys Gordon Tullock’s contributions to constitutional political economy. His first major contribution was his joint project with James Buchanan on liberal constitutional design. The explicitly constitutional analysis of The Calculus was followed by a series of papers and books that focused on the use of resources in conflict, including Tullock’s contributions to the anarchy and rent-seeking literatures. Tullock also pioneered the rational choice-based analysis of dictatorships and the relative merits of alternative legal systems, topics that has been neglected until fairly recently by most scholars working in the CPE tradition.     

The political economy of the peace dividend

We develop a model of the peace dividend and use it to predict the fiscal consequences of a reduction in the demand for military spending. The model is based on the assumption that the political process responds to political demands and costs in a way that maximizes net political benefits. The predictions of our model on how a peace dividend will be allocated over nonmilitary spending, tax relief, and deficit reduction is tested against the experience of eight major wars in United States history.     

The political economy of central bank intervention

This paper analyzes an exchange rate policy game between a central bank and rational speculators under symmetric information. The central bank tries to counteract shocks to the exchange rate by means of sterilized intervention working through the expectations channel. Private speculators resist being fooled. They anticipate the interventions. An “intervention bias” results with an inefficiently high equilibrium volume of intervention which does not reduce the impact of shocks to the exchange rate. The model implies that the more independent the central bank the smaller and the more consistent the intervention efforts. An empirical illustration lends some support to the model.     

The political economy of hyperinflation in Venezuela

Public Choice - We study the Venezuelan hyperinflation as a political phenomenon with distributional and efficiency effects. The hyperinflation originated in publicly financed benefits for the...