Notes - Chapter 7: Political Reform

What is government itself but the greatest of all reflections on human nature? If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary.

- James Madison, 1788.

James Madison. NPG, CC0, via Wikimedia Commons

There is a large literature in political science on the choice of constitutional arrangements, like electoral systems and forms of government, and their consequences within the political system. Classics in this literature include Powell (1989) and Powell (2000) who poses the choice between plurality and PR elections as a tradeoff between accountability and representation, Shugart and Carey (1992) who study the choice between presidential and parliamentary systems, while Cox (1997) discuss different features of electoral systems, while Myerson (1999) summarizes the theoretical literature on the consequences of different electoral rules. Lijphart (1977), Lijphart (1984) and Lijphart (1999) discuss democratic institutions in terms of their cohesive features - his notion of consociational democracy is similar to our concept of cohesiveness.

The study of policy choice in multiple dimensions as political equilibrium were hampered for a long time by negative results in the field of social choice, emanating from the non-existence results in Arrow (1951). Various ways around the Arrow paradox have since been followed in the literature. One is to specify the agenda-setting procedure with a view to real-world political arrangements as in the agenda-setting approach in Romer and Rosenthal (1979) and the legislative-bargaining approach in Hinich, Ledyard and Ordeshook (1972) and adapted to redistributive policymaking by Lindbeck and Weibull (1987). More recently, the citizen-candidate models of Besley and Coate (1997) and Osborne and Slivinsky (1996) solve the problem by restricting attention to ex-post optimal choices. Overviews of the resulting literatures can be found in Persson and Tabellini (2000) and Austen-Smith and Banks (2005).

A more recent literature in political economics has discussed the economic consequences of alternative constitutional arrangements. An accessible overview of this literature can be found in Persson and Tabellini (2004). Persson and Tabellini (2003) provides a broad empirical investigation of the economic consequences of constitutional arrangements for spending and other policies using cross country data. Besley and Case (2003) survey the empirical literature on the consequences of different political institutions at the U.S. subnational level, with an emphasis on institutional differences across states.

Another body of work has examined incentives to change political institutions. Brennan and Buchanan (1985) and Buchanan (1987) emphasize the role of constitutional rules to constrain incumbent discretion. Frey (1983) offers a parallel approach. Aghion and Bolton (2003) study the design of constitutions as the choice of an incomplete social contract, where society chooses political decision-making procedures behind a veil of ignorance. This analysis is extended by Aghion, Alesina and Trebbi (2004) who analyze the costs and benefits of insulating political leaders from changes in voters preferences or from aggregate shocks. Ticchi and Vindigni (2010) studies the endogenous choice of a constitution.

There is now a literature in political economics on the reasons behind extension of the franchise, beginning with the theoretical paper by Acemoglu and Robinson (2000) with supportive anecdotal evidence. More systematic evidence on the hypothesis from Western Europe is provided in Aidt and Jensen (2010). A classic paper on the consequences of the franchise extension on the amount of redistributive policies in U.S. states is Husted and Kenny (1997). Aidt and Jensen (2009b) study how the extensions of the franchise in Western Europe from the mid 19th century and onward affected levels of taxation and the size of government.

Acemoglu and Robinson (2005) studies the dynamics between autocracies and democracies in theory. Persson and Tabellini (2009) propose a theoretical and empirical model based on the idea of democratic capital. Boettke, Coyne and Leeson (2008) offer a general discussion of institutional stickiness based on cultural factors, motivated especially by the heterogeneous experiences of the former Eastern block countries. Political culture and its importance is also a theme in Hillman and Ursprung (2000). Moore (1966) is a classic reference emphasizing the economic and social structures which support democracies putting weight on the rise of the middle class. Boix (2003) and Przeworski, Alvarez, Cheibub and Limongi (2000) study the effects of democracy and discuss its sustainability more generally.

How political institutions lead to less corrupt behavior in government has been central theme in models of elections and political institutions. In general, such models must deal with the agency problem that arises between government and governed. Barro (1973) and Ferejohn (1986) are early contributions, while Persson, Roland and Tabellini (1997) extend the model to include separations of power between different policymakers. Besley (2006) offers an overview of political-agency models and emphasizes that a blend of incentive and selection effects need to be study in order to appreciate how accountability effects play out. Accountability models lead naturally to thinking about the role of the media in promoting good governance. This topic is studied by Besley and Prat (2006). Coyne and Leeson (2009) and Prat and Strømberg (2010) survey the emerging literature on media, politics and economic development.