Political deadlocks and distributional information: The value of the veil

Contractarian normative theory relies on the veil of ignorance construct to generate the political consensus required for its theories of justice. By eliminating distributional information, the veil is presumed to facilite consensus building by reducing conflict over the distributional effects of proposed constitutional rules or institutions. This paper explores the extent to which excessive distributional information might also impede the ordinary day-to-day decision making of democratic institutions. Our analysis suggests that distributive information makes political deadlocks under majority rule more likely. Statistical evidence suggests that the efficacy of the U.S. Congress has been reduced by the dramatic increase in distributional information made available to it over the past twenty five years.The authors would like to thank an anonymous referee and the participants of the Center for Study of Public Choice Luncheon Work Shop for helpful comments and suggestions. Helpful comments were also provided by Bruce Benson and Z.A. Spindler at the 1988 meeting of the Public Choice Society. We also wish to thank Jack Triplett for providing us with a pre-publication copy of the page proofs of his piece on computer price indices.     

Reviews

László Csaba, ed., Systemic Change and Stabilization in Eastern Europe. Aldershot, and Brookfield, NY: Dartmouth Publishing Co., 1991, x + 141 pp. £30.00.

Christopher T. Saunders, ed., Economics and Politics of Transition. New York: Macmillan Press, 1992, x + 419 pp., £50.00.

David Lane, Soviet Society under Perestroika, Completely revised edition. London and New York: Routledge, 1992, xvi + 441 pp., £15.99.

Judith B. Sedaitis & Jim Butterfield, eds, Perestroika from Below: Social Movements in The Soviet Union. Boulder, CO, San Francisco, CA, and Oxford: 1991, xii + 220 pp., $23.00 h/b.

Michael J. Sodaro, Moscow, Germany, and the West from Khrushchev to Gorbachev. London: I. B. Tauris, 1991, xiv + 423 pp., £29.95.

Örjan Sjöberg, Rural Change and Development in Albania. Boulder, CO, San Francisco, CA, and Oxford: Westview Press, 1991, xi + 199 pp., £21.95 p/b.

Anthony Kemp‐Welch, ed., The Ideas of Nikolai Bukharin. Oxford: Clarendon Press, 1992, 209 pp., £27.50.     

Introduction 15th annual conference of the european association of law and economics, utrecht, the netherlands, september 1998

This issue of the International Review of Law and Economics contains a selection of papers presented at the 15^th Annual Conference of the European Association of Law and Economics (EALE). It was the first time that the annual conference of the EALE was held in the Netherlands. It took place at Utrecht, in September 1998.Approximately 40 papers were presented at the conference. Many of these papers were submitted to this issue of the International Review of Law and Economics, and we were obliged to face the difficult task of selection. In this task we were helped by anonymous referees, who deserve much credit for their delicate task. The issue opens with the text of the invited lecture by Chief Judge Richard Posner on “Employment Discrimination: Age Discrimination and Sexual Harassment.” After this lecture, seven refereed papers are published. They cover a wide range of topics and include theoretical and empirical approaches.The first two articles are empirical studies. In their article “The Dynamics of Pretrial Negotiation in France: Is there a Deadline Effect in the French Legal System?,” Bruno Deffains and Myriam Doriat provide empirical evidence on pretrial negotiation in France with the primary goal being to determine whether there is a deadline effect. Theoretical and experimental studies generally show that in pretrial litigation most claims are settled just before the negotiation deadline, i.e., at the door of the court. Using data on civil law conflicts in France, the authors demonstrate that although the out-of-court settlement rate is relatively low, a deadline effect exists in the French legal system. The article complements the theoretical and experimental literature in the field of pretrial negotiation and provides additional insights into the functioning of the legal system.The article “Modeling Crime and the Law Enforcement System” by Frank van Tulder and Abraham van der Torre presents a macroeconomic model of the Dutch criminal justice system. The empirical estimations show that demographic, social, and economic factors and the results of the law enforcement system influence the number of crimes. It is found that a rise in the clear-up rate reduces the crime rate, whereas the average term of imprisonment has a negative impact on violence. A growth in the number of young men, divorced persons, unemployed, drug addicts, and motor vehicles—each per capita—and a rise in income inequalities have a boosting effect on one or more types of crime.The third article by Michael Faure and Paul Fenn is concerned with the costs and benefits of making liability for accidents retroactive, given the availability of liability insurance. The authors distinguish between the injurer’s perceived risk that the standard of care applied by the courts will differ from his chosen level of care, where this perceived risk is based on precedent or current practice, and the genuine uncertainty that the standard of care may change in the future as a result of unknown developments in the technology of care. While the injurer’s probability distribution over liability may be the same in each of these cases, he may be far less confident about the reliability of the probability distribution as a guide to choice in the latter case. In principle, the risk of liability arising from an unknown standard of care could be transferred to a liability insurer through the purchase of occurrence coverage. However, in addition to the usual source of difficulty for insurance markets as a result of information asymmetry, insurers also may have distaste for ambiguity. The authors show that this could in some circumstances lead to market failure in the provision of occurrence policies. These welfare losses from inefficient risk sharing as a consequence of retroactivity must, therefore, be set against the potential welfare gains from improved incentives for injurers to seek out information on care technology, as well as the concerns over distributive justice.In their article “Unitary States and Peripheral Regions: A Model of Heterogeneous Spatial Clubs” Jean-Michel Josselin and Alain Marciano develop an analytical framework for understanding the limits of constitutional unity. Their microeconomic model of unitary states deals with two kinds of heterogeneity. First, preference distance or physical distance account for decreasing net benefits from expansion. Second, heterogeneity may involve a discontinuity in the spatial pattern of preferences: “Peripheral behaviors” threaten unity. The authors integrate such behaviors into the model and draw some lessons as to the nature of an optimal constitutional area, discussing in particular the status of peripheral regions.The fifth article by Benito Arrunada, entitled “The Provision of Non-Audit Services by Auditors: Let the Market Evolve and Decide,” searches for and defines efficient regulation of the provision of non-audit services by auditors to their audit clients. From an examination of the particular problems posed by these services, it is concluded that they reduce total costs, increase technical competence, and stimulate more intense competition. Furthermore, they do not necessarily damage auditor independence or the quality of non-audit services. This assessment leads to recommending that legislative policy should aim at facilitating the development and use of the safeguards provided by the free action of market forces. Particular emphasis is placed on the role played by fee income diversification and the enhancement, through disclosure rules, of market incentives to diversify. A rule of mandatory disclosure of client diversification is examined to facilitate the task of the market with regard to achieving the optimal degree of auditor independence.In the next article, Antony Dnes applies the economic analysis of law to examine recent proposals in England and Wales for the reform of the law affecting financial settlement following divorce. Two specific measures have been proposed to reduce judicial discretion: a mathematical formula (such as a rebuttable presumption to divide equally the whole pool of assets during divorce) to be applied in the absence of agreement between the parties, or the enforcement of prenuptial agreements. The author concludes that these measures should be welfare improving but would need to be forward looking and applied to marriages, rather than divorces.The last article by Niva Elkin-Koren and Eli Salzberger provides a look at the changing world of law with the emergence of cyberspace from the perspective of the economic approach to law. The authors argue that the Chicago paradigm cannot be of much help to analyze law in and of cyberspace. While cyberspace reduces the traditional causes of monopolies, it introduces new types of monopolies that are the consequence of control over technologies rather than of price and demand curves. Second, the strict correlation between markets and states does not exist in cyberspace. The authors equally point at the weaknesses of transaction cost analysis. The Coaseian analysis assumes a given state of technology and overlooks the correlation and reciprocity between technological developments and legal rules. The authors consider neoinstitutional law and economics as the most suitable framework for examining the changing world of cyberspace, but they suggest some refinements. Cyberspace invites a reassessment of the borders between markets and hierarchies and poses special challenges to the paradigmatic assumption of rational behavior.     

Three Forms of Political Realism

In the recent study of international relations, political realism has, apparently, had as many supporters as detractors. Nonetheless, there seems to be a growing tendency to treat the categories of political realism as if they were passing the way of all flesh, destined to be replaced by system theory, transnationalism, Marxist structuralism, critical theory or whatever. One difficulty with this judgement is that political realism is not a single theoretical entity which can be refuted by single disconfirming instances. Nor is it an understanding of the subject rooted in the views of such well-known exponents of this school as Hans Morgenthau, Kenneth Thompson, Martin Wight, Sir Herbert Butterfield, E. H. Carr or Raymond Aron. On the contrary, political realism is a conception of politics which stretches back to the great Indian thinker Kautilya and in fact constitutes a many-mansioned tradition of thought about international relations. Three aspects of that tradition are examined in this essay: Common-sense Realism, Concessional Realism and neo-Aristotelian Realism. These reflections are only very tangentially related to the debates in the 1950s and 1960s concerning realism. This essay focuses, rather, on certain neglected features of contrasting philosophies of science. The article concludes, somewhat tentatively, that neo-Aristotelian Realism is coherent and cogent and superior in important respects to what scientific empiricism has to offer.     

L'évolution de la structure de gestion des affaires intergouvernementales au IMouveau-Brunswick: 1960–90

Sommaire: Les relations intergouvernementales du Nouveau-Brunswick ont-elles connu au cours des trois dernieres decennies des transformations de fond? Presque inexistant au debut des annees 1960, ce secteur de l'activite gouvernementale s'est developpe graduellement pour devenir, apres la victoire des Liberaux de Frank McKenna en 1987, un ministere a part entiere. Le present article se propose de decrire revolution et de determiner les principaux facteurs susceptibles d'expliquer l'absence de structures autonomes de gestion des affaires intergouvernementales de la province. Pourtant, les gouvernements Robichaud des annees 1960 et Hatfield des annees 1970 et 1980 ont souvent ete les initiateurs de projets de modernisation de l'activite gouvernementale. Comment expliquer alors qu'ils aient autant tarde a organiser la gestion des relations intergouvernementales? Ces decisions relevent-elles davantage de la societe neo-brunswickoise que de ses dirigeants politiques? En plus d'avoir consulte litterature et documentation sur le sujet, nous avons interroge plusieurs hauts fonctionnaires et hommes politiques des anciens et du present gouvernements. Un large consensus se degage parmi eux: la direction des relations intergouvernementales, etroitement controlee par les premiers ministres, leur Bureau et, a l'occasion, le Secretariat du Conseil des ministres, n'a pas souffert outre mesure de l'absence d'une bureaucratie plus structured. En depit de la recente creation du ministere des Affaires intergouvernementales, on constate que la gestion de ces affaires n'aurait pas beaucoup change pour autant. C'est toujours au Bureau du Premier ministre que sont prises les decisions cles en la matiere. Abstract: Did New Brunswick intergovernmental relations undergo fundamental changes over the last three decades? Virtually non-existent in the early 1960s, this government acrtivity sector developed gradually, emerging as a full-fledged ministry following the vitory of Frank McKenna's Liberals in 1987. The purpose of this article is to describe that change and to determine the main factors that could explain the lack of autonomous structures for managing the province's intergovernmental affairs. However, the Robichaud government in the 1960 and the hatfield government in the 1970s and 1980s often launched projects to modernize government activities. How should one therefore explain the fact that they were so late in organizing the management of intergovernmental relations? Do these decisions result more fron New Brunswick society than from its political leaders? In order to consult the relevant literture and documentation, we interviewed several high officials and politicians from current and past governments. Ther is a broad consensus among them: the management of intergovernmental relations, closely controlled by the premiers, their offices and, occasionally, the secretariat of cabinet, has not been particularly affected by the lack of a more structured bureaucracy. In spite of the recent creation of the Ministry of Intergovernmental Affairs, the management of those affairs would not appear to have changed a great deal. It is still within the premier's office that the key decisions in this field are made.