Barry R. Weingast

Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England

The article studies the evolution of the constitutional arrangements in seventeenth-century England following the Glorious Revolution of 1688. It focuses on the relationship between institutions and the behavior of the government and interprets the institutional changes on the basis of the goals of the winners—secure property rights, protection of their wealth, and the elimination of confiscatory government. We argue that the new institutions allowed the government to commit credibly to upholding property rights. Their success was remarkable, as the evidence from capital markets shows.

The Political Economy of Benefits and Costs: A Neoclassical Approach to Distributive Politics

This essay offers a rational political explanation for the notorious inefficiency of pork barrel projects with an optimization model of legislative behavior and legislative institutions. The model emphasizes the (economically arbitrary, from a welfare point of view) importance of the geographic incidence of benefits and costs owing to the geographic basis for political representation. We explore the implications of a legislators objective function and derive conditions under which a representative legislature will select an omnibus of projects each of which exceeds the efficient scale.

Bureaucratic Discretion or Congressional Control? Regulatory Policymaking by the Federal Trade Commission

This paper extends Stigler and Peltzmans approach to regulation by incorporating a legislature. The model yields comparative statics results and hence testable implications. The paper then tests between two opposing approaches about regulatory agency behavior. The first assumes agencies operate independently of the legislature and hence exercise discretion; the second assumes that Congress controls agency decisions. The recent behavior of the Federal Trade Commission provides the empirical setting. Substantial evidence is found for the specific predictions of the model, including the hypothesis of systematic congressional influence over FTC decisions.

The Industrial Organization of Congress; or, Why Legislatures, Like Firms, Are Not Organized as Markets

This paper provides a theory of legislative institutions that parallels the theory of the firm and the theory of contractual institutions. Like market institutions, legislative institutions reflect two key components: the goals or preferences of individuals (here, representatives seeking reelection) and the relevant transactions costs. We present three conclusions. First, we show how the legislative institutions enforce bargains among legislators. Second, we explain why, given the peculiar form of bargaining problems found in legislatures, specific forms of nonmarket exchange prove superior to market exchange. Third, our approach shows how the committee system limits the types of coalitions that may form on a particular issue.

The Institutional Foundations of Committee Power

Legislative committees have fascinated scholars and reformers for more than a century. All acknowledge the central strategic position of committees in legislatures. The consensus, however, centers on empirical regularities and stylized facts, not on explanations. We seek to explain why committees are powerful. We formulate an institutionally rich rational-choice model of legislative politics in which the sequence of the legislative process is given special prominence. Committees, as agenda setters in their respective jurisdictions, are able to enforce many of their policy wishes not only because they originate bills but also because they get a second chance after their chamber has worked its will. This occurs at the conference stage in which the two chambers of a bicameral legislature resolve differences between versions of a bill. A theory of conference politics is offered and some evidence from recent Congresses is provided.

Structure-induced equilibrium and legislative choice

ConclusionProfessor Tullock has raised a central question in the confrontation between abstract models of PMR and majority rule as practiced in real institutions. We believe the decision making stability of real-world legislatures lies in the way these legislatures institutionalize majority rule. Logrolling, vote trading, coalition formation, and bargaining are red herrings in this argument. Rather, it is the restrictions on such legislative exchange that promote structure-induced equilibrium. Put differently, institutional arrangements place constraints on the completeness of the majority rule relation by restricting social comparisons.The framework developed here shows that an assumption implicit in the discussions of many majority rule theorists fails to hold. In part, the implicit rationale for focusing upon PMR was that results proved for this rule were presumed to hold forany institution based on PMR. In one sense this remains true, namely, that the majority rule win sets,W(x), are everywhere non-empty. In another sense, however, it is not true that all properties of institutions based upon majority rule are inherited from PMR. The theory outlined above shows that stability may not be as elusive as theorists of PMR have concluded.The concept of equilibrium developed in the last section incorporates the major features of prominent choice institutions as well as capturing the special cases in the literature cited in Section II. We now turn to a brief discussion of future work. We address the question that remains, in our opinion, the salient one in the study of institutions and their effect on policy choice, namely, understanding the factors governing the choice of one institutional arrangement over another.Throughout this paper, we have distinguished agreements that transform the rules from agreements (or vote-trades) that take place within a given set of rules. In principle, anything attainable under the former could also be attained under the latter if there were some form of mechanism to enforce vote-trades as contracts. Under such a rubric, complex legislative agreements in the form of contingent contracts achieve the desired result without resorting to the institutionalization of a rule. In practice, however, there are several problems with vote-trading agreements as contracts. First, the cost of writing these contracts is often quite high due to the number of potential contingencies for which provision must be made. Second, and more important, PMR lacks an enforcement mechanism. Individual parties to contracts in market settings have recourse to the courts. This provides protection beyond the assurance of good faith and brand names. No comparable institution exists within the legislature to supplement the natural though imperfect brand name phenomenon (i.e., that of ‘keeping ones word’ to preserve and enhance credibility for future trades).While the legislature could create a court or committee to monitor contracts and enforce agreements, alternatively, it could simply impose a rule binding upon everyone which insured the outcome sought. Of the two alternative institutions, the latter probably economizes on transaction costs, particularly for those situations that recur with some frequency. With a rule, a new contract need not be negotiated each time between new sets of players. Moreover, a contingency clause might easily be appended to a rule to cover cases where there is widespread agreement that it is inappropriate. For example, in the Congress a special majority may vote to suspend the rules (note that if only a simple majority were required, then this would be no different from PMR).This is the same rationale that underpins the Uniform Commercial Code and other areas of the law of contracts. To cover situations that occur quite regularly, certain standard procedures are written into the law and are automatically a part of any agreement or exchange. This significantly lowers transaction costs (contracts need not be negotiatedsui generis), and in those circumstances where the standard is inappropriate, the parties may simply contract around it. Similar results occur in most areas of the common law. For further discussion, see Posner (1976). In sum, logrolling solutions to the problem of forging agreements are unworkable because they lack enforcement mechanisms. Logrolling, then, cannot constitute an answer to the question, ‘Why so much stability?’This reasoning justifies our separation throughout the text of choices within a given institution and choices among institutions. This distinction is a natural one, dating back to Buchanan and TullocksThe Calculus of Consent. There they analyze separately the constitutional calculus of choice over voting rules and the behavior under a specific voting rule. If institutional rules are to constitute an answer to Tullocks stability question, then we must confront the manner in which those rules are chosen. There are very few theories about the choice of rules — exceptions include Buchanan and Tullock (1962), Buchanan (1975, 1979), and contributions in the property rights literature. Even in the absence of a theory, we may still worry that constitutional choice processes (the choice of rules) are vulnerable to the same instabilities found in PMR. We term this the ‘Riker Objection’ since this issue was recently posed by Riker (1980). If institutional constraints create equilibrium — that is, if transformations of a PMR institution into a non-PMR institution create a situation of equilibrium from one without an equilibrium — then preferences over outcomes lead naturally to aninduced set of preferences over institutional arrangements. In this sense, an individual prefers one institution over another if he prefers the equilibrium policy state of one over the equilibrium (or unpredictability) of the other. In the case of multiple equilibria, an individual prefers the institution that yields the highest expected utility given a probability distribution over equilibrium states (Plott, 1972).As long as preferences for policy states differ, then preferences over institutions with differing equilibrium states (distribution of equilibria) should also differ. The Riker Objection suggests that a simple extension of McKelveys Chaos Theorem predicts endless cycles here so long as PMR governs the choice over institutions. In this sense, the existence of institutions and their stability must remain, like policy choices under PMR, tenuous — what Riker calls ‘unstable constants.’ Nevertheless, empirically we observe institutions persisting for long periods; in light of the Riker Objection, Tullocks question applies at this level as well.We may make several observations that imply an attenuation of endless cycling at the institutional-choice level. First, typically, non-PMR rules govern the choice of new rules. Second, it is risky to attempt to change the status quo contrary to the interests of those currently in control. Since failure may lead to the imposition of sanctions, expected gains must be weighed against the certainty of these sanctions. While this does not rule out changes, it will reduce the number of attempts. This is surely the conclusion to be drawn from a reading of the history of the U.S. Congress. The comparison between choice in this setting and the McKelvey world, then, is not parallel since proposals are costless to make in the latter but not in the former. Finally, there often exists a well-defined status quo alternative. In the case of the social contract, the status quo is the Hobbesian state of nature. For the case of the U.S. Constitutional Convention, it was the Articles of Confederation (Riker, 1979). In these and similar settings, even though there may be no formal rule that the status quo must literally be voted last; this restriction nevertheless may hold de facto. Consequently, the constitutional outcome is either the status quo ante or an alteration that cannot be vetoed, i.e., an element in the ‘win set’ of the status quo. With these qualifications in mind, the effect of the Riker Objection is mitigated. Even at the constitutional level, then, restrictions on the ability of individuals to make proposals may induce equilibrium.

A Theory of Political Control and Agency Discretion

Focuses on the theory of political control and government agency discretion in the United States. Process of policy execution; Definition of agency discretion; Roles of players in determination of policy.

Uncovered Sets and Sophisticated Voting Outcomes with Implications for Agenda Institutions

In the last decade multidimensional voting models have become subtle and complex instruments for explicating social choices by majority rule. What has been learned from them is that little will be known about an institution based on majority rule if the focus is exclusively upon the majority preference relation between alternatives. Recent results in the theory of pure majority rule establish the generic character of majority preference cycles. Based on the theorems of McKelvey (1976, 1979), Cohen (1979), and Schofield (1978), the following assertions may be taken as characteristic of pure majority rule, given a modest diversity in individual preferences:

China's transition to markets market-preserving federalism, Chinese style

This paper studies the relationship between decentralization and the success of reform in China. We argue that a particular form of decentralization—called market-preserving federalism Chinese style—provides the critical foundations for market success. Chinas form of decentralization has served the critical purpose of creating markets at a time when political resistance to economic reform remained strong and when the durability of the reforms was important. Nonetheless, federalism, Chinese style, lacks some national public goods, and the new system needs to be institutionalized. We also highlight some parallels between the United States under the Articles of Confederation (1781-1787) and those of modern China.

Limited Access Orders in the Developing World: A New Approach to the Problems of Development

The upper-income, advanced industrial countries of the world today all have market economies with open competition, competitive multi-party democratic political systems, and a secure government monopoly over violence. Such open access orders, however, are not the only norm and equilibrium type of society. The middle and low-income developing countries today, like all countries before about 1800, can be understood as limited access orders that maintain their equilibrium in a fundamentally different way. In limited access orders, the state does not have a secure monopoly on violence, and society organizes itself to control violence among the elite factions. A common feature of limited access orders is that political elites divide up control of the economy, each getting some share of the rents. Since outbreaks of violence reduce the rents, the elite factions have incentives to be peaceable most of the time. Adequate stability of the rents and thus of the social order requires limiting access and competition-hence a social order with a fundamentally different logic than the open access order. This paper lays out such a framework and explores some of its implications for the problems of development today.