Fernando Toboso

Explaining the process of change taking place in legal rules and social norms: The cases of institutional economics and new institutional economics

This paper deals with the phenomenon of institutional change and has been conceived as an attempt to answer the following question: Can we retain theimage of institutional change contained in a theory when we replace a methodological foundation on which the theory was built by a different and alternative one? For an answer to be developed, special attention is paid to the contributions made by institutional economists (IE) and those made by transaction cost—new institutional economists (NIE). The question clearly shows that it is a paper on applied methodology rather than a survey on institutional change contributions. Because of that, its main purpose is not to increase our knowledge about the characteristics of real changes in legal rules and social norms, their causes, their processes, or their effects, though several examples are given of those institutionalist and new institutionalist contributions that analyze those changes. Our purpose is to investigate the way in which these two groups of economists approach the object of analysis already mentioned. Our conclusion will be that institutionalist and new institutionalist contributions are built on two different and mutually exclusive approaches because their respective methods of analysis (holism versus methodological individualism) are different and, above all, because they build their respective analyses on some concepts that are mutually exclusive (concepts showing power or nonvoluntary influences versus concepts showing voluntary transactions). Their analyses contain different and mutually exclusiveimages of the changes taking place in legal rules-formal institutions and social norms-informal institutions. Some comments about the limitations of the holist method of analysis are made in the paper.

THE ROLE THE STATIC MAXIMIZATION APPROACH PLAYS IN NEOCLASSICAL ANALYSES

This is an article on the methodology of economic thought. The critical assessment of the neoclassical research programme contained here basically comes from the contributions of J.M. Buchanan, Nobel prize winner in Economics 1986. These comments are aimed at pointing out the role that the static maximization approach plays in neoclassical analyses since L. Robbins and P. Samuelson’s influential contributions came about after World War II. Just to complement this basic purpose, I present in section 4 the alternative methodological foundations J.M. Buchanan proposes and uses to replace the static maximization approach when building public choice analyses and I sketch in section 5 several personal comments about some explanatory and prescriptive limitations both neoclassical and public choice analyses share. Except in rare and anomalous cases, neither neoclassical nor public choice analyses contain concepts making reference to the non-voluntary or power influences some individuals might exercise over others in their economic interactions. “In a brief treatment it is helpful to make bold charges against ideas or positions taken by leading figures. In this respect I propose to take on Lord Robbins as an adversary and to state, categorically, that his all too persuasive delineation of our subject field has served to retard, rather than to advance, scientific progress.” [Buchanan, J.M. (1964), p. 20.]

How Much Power to Tax do Regional Governments Enjoy in Spain Since the 1996 and 2001 Reforms

From 1979 to 1983, a new intermediate level of government was created in Spain. This article focuses on the financial aspects of political decentralization in Spain. How much power to tax do the new regional parliaments and executives enjoy? What other sources of income do they dispose of? Which rules have been settled for regulating their tax and non-tax sources of income? Has fiscal decentralization affected fiscal discipline? Are these governments now financially autonomous? These are the questions addressed. The article shows that, with the exception of the Basque Country and Navarre, regional governments were financed mainly through intergovernmental grants during the 1980s and 1990s. However, as a result of several recent reforms, their power to tax as well as their financial autonomy has increased substantially since the mid-1990s, mainly through their participation by law in the revenues of several central taxes (known as ceded taxes) upon which they also enjoy significant regulatory rights. As the ceded taxes mechanism is not a simple revenue-sharing formula in Spain, the article concludes that the Spanish model departs from both the more uniform and top-down German model and the more heterogeneous and competitive one characterizing the taxing rights of the States in US federalism.

Institutional Arrangements Matter for Both Efficiency and Distribution: Contributions and Challenges of the New Institutional Economics

Are scholars in the New Institutional Economics tradition systematically disregarding distributive aspects when approaching policy issues as was the case during the 1970s and 1980s? Do economic and political agents usually care about distribution too? To provide an answer to these questions is the basic purpose of this chapter. The analysis carried out demonstrates that not all NIE oriented scholars disregard distributive issues. Some contributions are examined as examples, mainly in the so-called political economy branch of NIE. By means of a well-known graphical tool, the chapter also emphasizes that all of us clearly care about distribution, not just about efficiency, when participating in market transactions as well as in collective political decisions. The analysis also reveals very persuasively how institutional reforms affect participants’ relative rights and capacities to act and bargain, not just the total amount of transaction costs experienced by them. Though unfamiliar to many new institutionalists, the author concludes that all this has been acknowledged by authors such as North, Eggertsson and Libecap.

Federalism, Proportionality, and Popular Will in US Presidential Elections: Did Colorado Have the Right Idea?

As is well known, the United States is a federal country composed of 50 states plus the District of Columbia, where the individual states and the country as a whole are each sovereign jurisdictions. This is reflected everywhere in its political-administrative structure, including the election of the US President, who is elected by the Electoral College and not directly by the people; an issue that provokes a confrontation between abolishers of the Electoral College and supporters of the current system each time a candidate not winning the most popular votes is elected President (last time in 2000 elections). Between both extremes, there are intermediate solutions that, while continuing to respect the spirit of a federal nation like the USA, enable proportionality to be incorporated into the process. This was, for example, the idea behind Amendment 36 to the Colorado Constitution (LCCGA, Analysis of the 2004 ballot proposals. Research Publication No. 527-1. Legislative Council of the Colorado General Assembly, Colorado, 2014). After studying the merits and drawbacks of the current system, this paper investigates what would have happened if Colorado proposal had been used nationwide in Presidential elections from 1828 to 2012. The chapter concludes that the Colorado idea might have made electoral colleges’ results closer to popular will, would have diminished the risk of electing a non-popular winning President and would have served to require a more balanced regional support to be elected. As counterpart, it would have encouraged the emerging of third minor candidates.

LOS IMPACTOS DISTRIBUTIVOS DE LAS REFORMAS INSTITUCIONALES

El objetivo aqui perseguido es doble. Por una parte, se pretende mostrar que la afirmacion de que los nuevos institucionalistas no prestan atencion a los aspectos distributivos puede ser refutada. Para ello se examinaran algunos trabajos de destacados autores en esta tradicion analitica. En segundo lugar, el trabajo acomete la revision y ampliacion de un instrumental grafico muy conocido y nada heterodoxo a fin de realizar un analisis sistematico y muy persuasivo de las principales vias por las que una reforma institucional provoca impactos distributivos, ademas de influir sobre el volumen total de los costos de transaccion que soportan los participantes en cada entorno institucional. Dicho analisis tambien permite resaltar que las reglas que unos agentes perciben como causantes de los costos de transaccion que ellos soportan son vistas por otros como los mecanismos que les pueden permitir, finalmente, obtener mejores resultados distributivos, al menos a corto plazo, incluso aunque hayan de incurrir en los habituales costos de transaccion asociados a toda negociacion. Aunque estas ideas resultan ciertamente ajenas al proceder investigador de muchos nuevos institucionalistas, no es asi en el caso de otros como North, Eggertsson, Libecap, Ostrom e incluso Williamson y Menard. Evidentemente, esta dimension distributiva suele ser objeto de gran preocupacion por parte de investigadores que trabajan en el marco de otras corrientes de analisis, pero el objetivo del trabajo no consiste en examinar esas otras aportaciones, sino en mostrar que estos aspectos estan ganando mas y mas espacio en el ambito de la nueva economia institucional.

Electoral Rules and Proportionality in Spain: Estimating the Impact of some Swedish Rules Through the 2011 Electoral Data

In democratic countries policy making is always framed by many procedures and rules. Some of these rules are particularly critical for allowing more or less proportionality in legislative chambers, though the behavior of political actors also matter. The rules used for technically converting votes into political representatives often exercise such an important role in western countries. In this chapter we provide an estimation of the impact upon proportionality between seats and votes that might have resulted in the 2011 Spanish general elections if some Swedish electoral rules had been applied, ceteris paribus. As we are aware that electoral reforms favouring proportionality may hinder the emergence of stable majorities our findings should therefore be considered only as a contribution for a deeper examination and informed discussion about the strengths and weaknesses of the current Spanish electoral system.

Sub-central Governments and Debt Crisis in Spain over the Period 2000–2011

This chapter studies the quantitative evolution of sub-central sovereign debt in Spain over the period 2000–2011 and compares it with the evolution of central debt. As an intense process of political and fiscal decentralization has taken place since the mid eighties, the paper examines whether this drive to decentralization has been paralleled by any fiscally undisciplined behavior on the part of Spanish sub-central governments over the period considered. Some key formal legal rules and informal behavioral norms present at sub-central politics in Spain are examined, including legal controls on borrowing by sub-central governments. The empirical analysis will be based on the internationally comparable public finance figures provided by sources such as the OECD, the Eurostat and the Bank of Spain. The paper concludes that economic performance seem to be the key factor for explaining the evolution of sub-central, as well as central, public debt before and after the world financial crash. The analysis shows that in terms of the Spanish GDP the debt burden generated by sub-central governments in Spain decreased over the 2000–2007 period. However, this debt has soared from 8.5 per cent of Spanish GDP in 2007 to 16.4 per cent in 2011, adding 85 thousand millions euros (about 106 billions US dollars) to the stock of total public debt in Spain in just four years. Central government added 267 thousand millions euros (about 334 billions US dollars).