Kenneth A. Shepsle

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.

Institutional Arrangements and Equilibrium in Multidimensional Voting Models

Nearly thirty years of research on social choice has produced a large body of theoretical results. The underlying structure of the models that have generated these results is highly atomistic and institutionally sparse. While attention has been devoted to the mechanisms by which individual revealed preferences are aggregated into a social choice, rarely are other aspects of institutional arrangements treated endogenously. In this paper institutional properties are given more prominence. In particular, I focus on three aspects of organization: (1) a division-of-labor arrangement called a committee system; (2) a specialization-of-labor system called a jurisdictional arrangement; and (3) a monitoring mechanism by which a parent organization constrains the autonomy of its subunits called an amendment control rule. The conceptual language has a legislative flavor but, in fact, the concepts are broadly applicable to diverse organizational forms. The principal thrust of this paper is a demonstration of the ways institutional arrangements may conspire with the preferences of individuals to produce structure-induced equilibrium.

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.

Perspectives on Positive Political Economy

This volume serves as an introduction to the field of positive political economy and the economic and political processes with which it is concerned. This new research tradition is distinct from both normative and historical approaches to political economy. Grounded in the rational-actor methodology of microeconomics, positive political economy is the study of rational decisions in a context of political and economic institutions. More analytical than traditional approaches, it is concerned with the derivation of principles and propositions against which real-world experience may be compared. Its focus is on empirical regularities, and its goal is theoretical explanation. The field has focused on three main areas of research: models of collective action, constraints on competitive market processes, and the analysis of transaction costs. Developments in all of these areas are covered in the book. The first part of the volume surveys the field, while the second part displays positive political economy at work, examining a variety of subjects. The final part contains essays by leading political economists on the theoretical foundations of the field.

The Strategy of Ambiguity: Uncertainty and Electoral Competition

In this paper problems of social choice in general, and political choice in particular, are considered in light of uncertainty. The space of social alternatives in this formulation includes not only pure social states, but lotteries or probability distributions over those states as well. In the context of candidate strategy selection in a spatial model of political choice, candidate strategy sets are represented by pure strategies—points in the space of alternatives—and ambiguous strategies—lotteries over those points. Questions about optimal strategy choice and the equilibrium properties of these choices are then entertained. Duncan Blacks theorem about the dominance of the median preference is generalized, and further contingencies in which the theorem is false are specified. The substantive foci of these results are: (1) the conditions in which seekers of political office will rationally choose to appear equivocal in their policy intentions; and (2) the role of institutional structure in defining equilibrium.

COALITIONS AND CABINET GOVERNMENT

The formal study of coalitions is active in Europe, whereas the formal study of political institutions preoccupies American scholars. We seek to integrate aspects of these two bodies of research. For nearly thirty years models of coalition government have focused more on coalition than on government. Thus, these theories are essentially extensions of the theory of voting in legislatures. Unlike passing a bill or “dividing a dollar,†however, forming a government is not the end of politics but the beginning. During the formation process, rational actors must entertain expectations of subsequent government behavior. We provide a model of rational expectations with an emphasis on the credibility of the policy promises of prospective government partners as determined by the allocation of portfolios in the new government. Portfolio allocation becomes the mechanism by which prospective coalitions make credible promises and so inform the expectations of rational agents in the coalition formation process.

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:

Political Solutions to Market Problems

For some, market failures serve as a rationale for public intervention. However, the fact that self-interested market behavior does not always produce felicitous social consequences is not sufficient reason to draw this conclusion. It is necessary to assess public performance under comparable conditions, and hence to analyze self-interested political behavior in the institutional structures of the public sector. Our approach emphasizes this institutional structure—warts and all—and thereby provides specific cautionary warnings about optimistic reliance on political institutions to improve upon market performance.

Democratic Committee Assignments in the House of Representatives: Strategic Aspects of a Social Choice Process *

This paper examines the committee assignment process for Democratic members of the House of Representatives. Unlike previous studies of committee assignments, this paper employs data on the requests for assignments submitted by members to the Committee on Committees. The theoretical perspective employed is one in which all the participants in the process are rational actors who have goals they want to achieve and who choose among alternative courses of action on the basis of which alternative is most likely to lead to the achievement of those goals. We argue that the allocation of committee assignments affects the goals of all the participants in the process, and thus we consider the choices of actors in the process in terms of their goals; specifically the goals of re-election, influence within the House, and good public policy. After first considering the process from the point of view of the member making requests, we show that the members requests are related to the type of district he represents, and that the number of requests he makes is related to such considerations as whether he is a freshman, whether he faces competition from a member from his state, and whether there is a vacancy from his state on his most preferred committee. The process is also considered from the point of view of the members making the assignments. Decisions on assignments are found to be affected by seniority (where success in getting requested committees is inversely related to seniority), margin of election (where members from marginal districts are more successful), and region (where southerners are less successful than members from other regions).