Economics and Information Theory

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Becoming a Critically Reflective Teacher

▪ Abstract Scholars have become acutely interested in how behavior driven by ideas rather than self-interest determines policy-making outcomes. This review examines the literature on this subject. It differentiates among the types of ideas that may affect policy making (i.e., cognitive paradigms, world views, norms, frames, and policy programs) and identifies some of the persistent difficulties associated with studying how ideas shape policy. In particular, studies often do a poor job pinpointing the causal mechanisms that link ideas to policy-making outcomes. More attention needs to be paid to articulating the causal processes through which ideas exert effects. Suggestions for future scholarship that might improve this situation are offered. These include identifying the actors who seek to influence policy making with their ideas, ascertaining the institutional conditions under which these actors have more or less influence, and understanding how political discourse affects the degree to which policy ide...

https://www.jstor.org/stable/pdfplus/3069233.pdf

Ideas, Politics, and Public Policy

This paper examines the emergence of local cooperative institutions--watershed partnerships-that resolve collective action problems involved in the management of natural resources. The political contracting approach to institutional supply suggests that watershed partnerships are more likely to emerge when potential benefits outweigh the transaction costs of developing and maintaining new institutions. We analyze the impact of social, political, economic, and ecological features of watersheds that affect benefits and transaction costs on the emergence of 958 watershed partnerships in the more than 2,100 watersheds in the United States. Our findings demonstrate that watershed partnerships are most likely to emerge in watersheds confronting severe pollution problems associated with agricultural and urban runoff, with low levels of command-and-control enforcement, and containing the resources to offset transaction costs.

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Watershed Partnerships and the Emergence of Collective Action Institutions

Institutional collective action (ICA) dilemmas arise from the division or partitioning of authority in which decisions by one government in one or more specific functional area impacts other governments and/or other functions. The focus on externalities of choice in fragmented systems integrates multiple research traditions into a conceptual system to understand and investigate collective dilemmas ubiquitous in contemporary governance arrangements. The mechanisms for mitigating ICA dilemmas are classified according to their scope and enforcement. Incentives to participate in a mechanism are hypothesized to favor mechanisms that provide the greatest gain for the least cost under different conditions of collaboration risk as determined by the nature of the underlying ICA problem, the compositions of affected jurisdictions, and institutional contexts. After reviewing empirical applications of the framework, an agenda to advance the theoretical and empirical development of the ICA approach is advanced.

https://onlinelibrary.wiley.com/doi/pdf/10.1111/psj.12023

The Institutional Collective Action Framework

Theory: According to transaction resource theory, constitutions are relational contracts that facilitate long-term relationships. Transaction resource theory identifies 1) three types of risk in cooperation: coordination, division, and defection; 2) contextual factors, such as increasing population size and heterogeneity, that hinder the ability of the primary parties to mitigate these risks; and 3) the ability of third-party governance to facilitate cooperation. Procedural safeguards in a constitution create incentives -- albeit at a cost -- that mitigate the risks of third-party governance in the relationship between a governor and the governed. In that relationship, the three risks take the form of instability, unresponsiveness, and inefficiency. The theory draws upon collective choice theory, bargaining theory, and the economics of information. Hypothesis: As contextual constraints increase the three risks of governance, constitutions are more likely to contain safeguards crafted to mitigate them: allocations of authority across the branches of government, as in the veto, safeguard against instability; electoral rules, as in district versus at-large elections, safeguard against unresponsiveness; and provisions for direct democracy, as in initiatives, referenda and recalls, safeguard against inefficiency. Method: Factor analysis, logistic and multiple linear regression are applied to a sample of 145 municipal charters in 1970 for cities with populations of at least 25,000 in 1960. Results: Factor analysis discriminates among procedural safeguards in municipal charters consistent with their predicted purposes in mitigating the three risks. Regression analysis reveals the interdependence of the safeguards and their heightened likelihood under conditions where contextual factors heighten the risks. Significant contextual factors include constraints on municipal competition under state laws and increasing population size and income inequality.

Constitutions As Relational Contracts: Explaining Procedural Safeguards in Municipal Charters

erms, government rights prove to be no more than citizen rights elaborated in greater detail to empower and to constrain citizens who specialize as enforcing agents. Government rights are (1) to be a central party common to all contracts, (2) to monitor strategic positions, (3) to establish agreements therein, (4) to exercise legitimate coercive authority, and (5) to maintain its own strategic position.3 If any of these are absent, the government cannot serve. Only if the government is the central party to all contracts, with access to everyone, can it claim to protect everyone against defection by others. Someone outside government's purview could wreak havoc. Only if government can monitor strategic positions can it assess and control incentives for defection and discover the division of resources that people judge politically appropriate. That requires government to aggregate information about feasible alternatives, individual preferences over them, best hopes, and conflict costs. However imperfectly, people reveal by their actions-both public and private-their aspirations and capabilities which, in turn, determine the extent o which they accept or resist the concessions entailed in political outcomes. Establishing agreements acceptable to people is government's raison d'etre. People depend on it to articulate and defend what they judge to be right. In essence, they have a stake in their strategic positions, and they create a state to sustain it. To do that, they give governmental gents the legitimate authority to coerce. This conclusion echoes Hayek's (1973) well-known ormative prescription for the role of government, but here it emerges as a deduction from a positive analysis of the role of the state. Any state must in some measure coerce. Only if enforcing agents can maintain their own strategic positions could anyone persist in that job. Agents themselves are social actors with utility functions and plausibly prefer to concede as little as possible. In this sense an n-person divisible prisoner's dilemma game becomes a more complex one in which a new actor (or an old actor in a new role) obtains power of a rather unique sort to control other players. If, as we assert, these are the universal, mutually exclusive, and exhaustive features of rights as they are embodied in any constitutional arrangement, then they constitute a useful analytic tool. We can discriminate among alternative constitutions according to the way in which each allocates these rights between the government and its constituents and across constituents, as well. The Constitutional Convention, as we have 'This construction builds heavily on Alchian and Demsetz (1972), a theory that explains the emergence of private property rights as an efficient response to the high costs of monitoring behavior in market activities. In our theory, however, creating a government is not necessarily a response to market failure, and equity plays a larger ole. This content downloaded from 74.67.219.0 on Tue, 10 Feb 2015 12:04:05 PM All use subject to JSTOR Terms and Conditions BARGAINING AND CONSTITUTIONAL CONTRACTS I65 seen, dwelt on allocating just these rights to suit the constellation of interests and powers present in Philadelphia. How these rights are defined determines the extent o which Leviathan will be shackled. A second contribution of this analysis is what it tells us about the process of bargaining over rights in specific contexts (see also Eavey and Miller, 1984). Our reconciliation of rationalist versus materialist views of the convention is an illustration. Finally, it is of course important o do more than unify perspectives. Specifically, it is important o generate falsifiable propositions. That is when a well-structured formal theory proves its mettle. For example, one might disentangle the defection and division aspects of any negotiation and then link these to predictable patterns of bargaining behavior. Where defection problems dominate and the bargaining range is small (i.e., issues of division are trivial), the process of allocating rights hould not be terribly problematic. Surrendering rights to the enforcing agent comes easily. Having witnessed the poisoning of the common weal by internal tariffs, eparate monetary programs, and independent foreign policies, the convention delegates moved rather assuredly to delegate regulatory discretion on these matters to the new government. By contrast, if the division problem dominates that of defection, as it did in apportioning seats to the Congress, the process of allocating rights becomes more fitful and protracted because the enforcing agent is more likely to become embroiled in partisan fights. Such was the story at the convention until an artfully crafted compromise catered to the identifiable interests held dear by various participants. Third, on issues where both defection and division loom large, the process of allocating rights is especially complex and problematic. Such was the case in regulating navigation and trade in 1787. One straightforward empirical application of these ideas is to reforming constitutions. For example, in urban politics municipal charters erve as miniconstitutions. Constituent interests in tax and expenditure policies can be assessed; measurable demographic trends alter the strategic positions of competing roups; and the allocation of rights among them vary under different provisions in systematic and predictable ways (cf. Maser, 1985). A second application is to extending constitutions. In a contractual paradigm, statutes and the organizations created to administer them can be studied as extensions of a constitutional contract o deal with circumstances not foreseen at the time of its ratification. Here, one essential feature that influences the contracting process and final form is the information cost peculiar to various circumstances. Where, for example, the cost of discerning acceptable divisions outweighs the cost of implementing them, the rights of the enforcing agent are likely to be constrained. This content downloaded from 74.67.219.0 on Tue, 10 Feb 2015 12:04:05 PM All use subject to JSTOR Terms and Conditions i66 Douglas D. Heckathorn and Steven M. Maser Thus, broad tax and expenditure policies are set by agents representative of and accountable to the voters; the Internal Revenue Service and Social Security Administration resolve more narrow disputes administratively. Agents who regulate business activities affecting human life and safety tend to be held more closely accountable to elected officials, as in administrative structures, than regulatory agents who deal with more easily measured economic problems, as do most of the more independent commissions. In this way analyzing bargaining in constitutional contracts provides a conceptual bridge to the emerging economics of organizations (Moe, 1984; Maser, forthcoming). Our central thesis has been that the creation of a constitution and the system of protected rights it entails can be understood as arising through a process of strategic bargaining over alternative contractual relations by actors who are rational both in economic and in broader political terms. In essence, we have proposed bargaining as a lens through which to view the rational and strategic alculations of constitutional framers. As an interpretive d vice, it proved useful in looking at the historical evidence about the U.S. Constitutional Convention of 1787 and in understanding the interplay of rationalistic and materialistic oncerns of the convention's delegates. Manuscript submitted 18 November 1985 Final manuscript received 14 April 1986

https://www.jstor.org/stable/pdfplus/2111328.pdf

Bargaining and Constitutional Contracts

Bargaining and the Sources of Transaction Costs: The Case of Government Regulation

After decades of studying municipal charters largely by looking for patterns in the data, we have a good basis for proceeding more formally with testable theories. The political significance of demographic change becomes apparent by looking at its impact on political conflict in combination with the biases in social-choice rules. The theory of civil rights provides a framework for doing this. It suggests identifying (1) the distribution of civil rights conveyed to citizens by alternative charters and (2) the bases for political conflict, such as different demands for services and the unequal command of economic resources to satisfy them. Charters, then, become political tools. Simple statistical tests fail to refute this.

Demographic factors affecting constitutional decisions: the case of municipal charters

We outline a theory of public policy using our transaction space model of contractual analysis. This approach is based on transaction cost economics, game theory, and the contractual paradigm. It treats government activities, including statutes and the organizations that administer them, as long-term contracts negotiated to economize on the costs of decision making. We return to Theodore Lowi's typology of public policies--although our construction departs from its underlying assumptions in numerous ways--to answer two questions. First, how does government come to be involved in some coercive activities and not others? Second, why does Lowi's typology appear to fit some policies so well and to be inadequate for others? According to our theory, demand for government intervention arises when people cannot resolve private problems of coordination, division, and defection, each a distinct dimension of transaction space. Lowi's typology fits unidimensional problems best. Multidimensional problems are more comp...

https://www.jstor.org/stable/info/2131684

Steven M. Maser

Papers

Constitutions As Relational Contracts: Explaining Procedural Safeguards in Municipal Charters

Bargaining and Constitutional Contracts

Bargaining and the Sources of Transaction Costs: The Case of Government Regulation

Demographic factors affecting constitutional decisions: the case of municipal charters

The Contractual Architecture of Public Policy: A Critical Reconstruction of Lowi's Typology