A rent-seeking model of TELs

Tax and expenditure limits or TELs are constitutional or statutory constraints on the fiscal powers of government. Since the taxpayer revolt beginning in the late 1970s, TELs have been introduced in twenty-three states. In recent years a number of studies attempting to test the impact of TELs have found little evidence that TELs significantly reduced the growth of state government. In this study we challenge the implicit Leviathan model that underlies most of these studies, and offer an alternative rent-seeking model. Econometric tests provide support for this rentseeking model, and indicate that TELs have been significant in reducing the growth of state government, at least in the short run. “... the very principle of constitutional government requires it to be assumed, that political power will be abused to promote the particular purpose of the holder; not because it always is so, but because such is the natural tendency of things, to guard against which is the especial use of free institutions”     

Limited Liability in California 1928-31: It's the Lawyers

Only in 1931 was the California Corporate Code revised to providefor limited liability. In earlier work I found that this movehad no detectable effect on shareholder wealth. In this articleI examine the potential beneficiaries of this change with aneye toward finding out who wanted this change. Using this historicalexample we can shed light on a number of issues including: (1)the economic impact of limited liability; (2) the role of lawyers,especially lawyers of high prestige, in determining the law;and (3) the competition or lack thereof among states in designingtheir corporate codes.     

64% Majority rule in Ducal Venice: Voting for the Doge

A recent result of Caplin and Nalebuff (1988) demonstrates that, under certain conditions on individual preferences and their distribution across society, super-majority rule performs well as a social decision rule. If the required super-majority is chosen appropriately, the rule yields a unique winner and voter cycles cannot occur. The voting procedure for electing a Doge in medieval Venice, developed in 1268, employed a super-majority requirement agreeing with the Caplin and Nalebuff formula. We present a brief history of the Venetian political institutions, show how the rule was employed, and argue that it contributed to the remarkable centuries-long political stability of Venice.