Showing papers in "Constitutional Political Economy in 2004"

The Status of the Status Quo

Abstract: The status quo plays a central role in both the positive and normative analysis associated with the constitutionalist and contractarian perspective. This paper reviews the status of the status quo in this context by identifying and addressing a series of questions relating to the definition, emergence and value of the status quo.

The Status Quo in Contractarian-Constitutionalist Perspective

Abstract: That it favors the status quo is one of the most common and persistent objections raised against the contractarian-constitutionalist approach and, specifically, against its emphasis on voluntary agreement as the fundamental legitimizing principle for social reform. This paper seeks to clarify certain ambiguities that have surrounded the arguments of critics as well as contractarian responses to them. Its main emphasis will be on separating two issues the differences between which have not always been sufficiently recognized in the debate, namely, on the one hand, the role of the status quo as the inevitable starting point of any change and, on the other hand, the issue of the normative evaluation of the status quo.

Government Spending and Taxation in Democracies and Autocracies

Abstract: The paper develops a theoretical rationale for a non-linear relationship between the level of democracy and government spending. A model is presented showing why and how political participation influences the spending behavior of opportunistic governments that can choose an optimal combination of rents and public goods to attract political support. If the level of democracy remains low, governments rationally prefer rents as an instrument to assure political support. With increasing democratic participation, however, rents become an increasingly expensive (per unit of political support) instrument while the provision of public goods becomes more and more efficient in ensuring the incumbent government's survival in power. As a consequence, an increase in democracy, which drives a country from a pure autocracy to a semi-participatory system, tends to reduce government spending, while an increase in political participation from a semi-participatory country to a full democracy tends to raise the size of the public sector.

Colonization and the Rule of Law: Comparing the Effectiveness of Common Law and Civil Law Countries

Abstract: The rule of law is one of the most important components of any explanation of cross-national differences in economic well-being. But what leads to better rule of law in a country? Using an institutional approach this paper probes the effect of legal systems in influencing the rule of law. There has long been speculation that the countries adopting English common law are better at providing legal dispute resolution than those adopting the continental forms of civil law. That speculative assessment is found to be true only in those countries that have been colonized, further analysis demonstrates that it is the effectiveness of the protection of property rights in common law systems rather than the institutions themselves that influence rule of law statistics. The paper calls for a more refined examination of legal systems which takes into consideration whether law is organically developed or transplanted.

The Optimal Decentralisation of Government Activity: Normative Recommendations for the European Constitution

Abstract: This article surveys the research on the efficient assignment of policy tasks to different levels of government and applies the results on the delimitation of competencies within the EU. A precise derivation of an optimal degree of decentralisation is not possible on purely theoretical grounds, it has to be determined case-by-case. Systematic evidence on direct relationships between economic performance and fiscal decentralisation is both scarce and ambiguous. Comparing the actual and prospective delimitation of EU-competencies with the normative recommendations, remarkable discrepancies arise in the fields of agriculture and defence. The establishment of a flexible assignment scheme is an undeniable necessity in order to guarantee reversibility and to cope efficiently with changing conditions. In this respect, the European Convention has delivered insufficient results in its final draft Treaty as of July 2003.

The Prosecution of Public Figures and the Separation of Powers. Confusion within the Executive Branch – A Conceptual Framework

Abstract: Criminal investigation and prosecution of politicians, top civil servants and other public figures are topics frequently discussed in the media. The nature of the investigating or prosecuting authority varies between countries - from the general public prosecutor, through magistrates to independent counsels or parliamentary investigation commissions. This paper analyzes the role and status of public prosecutors within the separation of powers-concept. Prosecutors are usually part of the executive and not the judicial branch, which implies that they do not enjoy the same degree of independence as judges, and are ultimately subordinated to the directives of the minister of justice or the government. Conflicts of interest may hence arise if members of government can use the criminal process for their own or partisan interests. The incentives of public prosecutors in different jurisdictions are compared.

Federalism and Conflicts over Principalship. Some Insights into the American Constitutional History

Abstract: The article provides an economic interpretation of Kelsen's theory of decentralized governments. It helps to distinguish different forms of federalism and in particular the corresponding conflicts of principalship inside the governmental structure. The model is applied to the early American constitutional history and shows how opposed views of agency relationships in the constitution foreshadowed what would later end up in a civil war.

Expressive and Instrumental Voting: The Scylla and Charybdis of Constitutional Political Economy

Abstract: Brennan and Hamlin [(2002) Constitutional Political Economy 13(4): 299–311] noted that expressive voting still holds at the constitutional phase. The argument, when taken to its necessary conclusion, proves quite problematic for Constitutional Political Economy. Veil mechanisms following Buchanan induce expressive voting at the constitutional phase, removing the normative benefits ascribed to the hypothetical unanimity principle. If the constitution is authored by a small group and the veil is thereby removed, instrumental considerations come to bear and the authors of the constitution establish themselves as Oligarch.

Vertical and Horizontal Trust Networks in Bureaucracies: Evidence from the Third Reich

Abstract: In a seminal contribution to the literature on bureaucracy, Breton and Wintrobe (The Logic of Bureaucratic Conduct: An Economic Analysis of Competition, Exchange, and Efficiency in Private and Public Organization. New York, NY: Cambridge University Press, 1982) develop a model wherein subordinates and superiors in a bureaucratic structure “trade” with each other to advance the objectives of the superiors. The success of such an organizational arrangement (for superiors) is based upon the development of “vertical trust networks” in a way that facilitates the promise of “informal payments” by superiors in return for “informal services” provided by their subordinates. Breton and Wintrobe [Journal of Political Economy 94 (1986) 905] also provide a theoretical application of their model by describing the Nazi bureaucracy as a conglomeration of competing agencies that zealously carried out the “Final Solution” to the “Jewish question.” As an extension, this note develops two compelling empirical examples of vertical and horizontal trust networks within the Nazi regime: Einsatzgruppen A’s (Special Action Detachments) attempt to liquidate all Lithuanian Jews after the German invasion of the U.S.S.R. in 1941 and the 20 July 1944 attempt to assassinate Adolf Hitler.

Contractarianism as Liberal Conservatism: Buchanan's Unfinished Philosophical Agenda

Abstract: This paper distinguishes several types of contractarianism. It argues that Buchanan type contractarianism may be classified as a specific “formal type” of conservatism that grants normative status to the status quo. How such conservative contractarianism relates to and possibly blends into classical liberalism is sketched and it is suggested that classical liberal ideals along with a specific form of conservatism rather than the idea of a contract per se should be seen as the core of Buchanan type contractarianism.

Political Learning: The Neglected Precondition of Constitutional Reform

Abstract: This paper analyses the claim of constitutional economics that liberal economic policy requires far-reaching constitutional reform. The paper starts with a restatement of this claim and reinforces the rationale of the currently most influential variants of constitutional economics as represented by contractarian constitutional economics (Brennan, Buchanan), on the one hand, and Hayek’ s evolutionary theory, on the other. However, these constitutional proposals have shortcomings because the institutional preconditions of constitutional reform are not sufficiently reflected. Instead, I argue that, in face of economic crisis, a revision of in-period politics requires no more collective rationality than constitutional reform does. As a consequence, the introduction of new constitutional rules depends on political learning. The article concludes that constitutional rules in the sense of CPE can stabilise political learning but they cannot replace it.

The Invisible Hand of James Madison

Abstract: Scholars have disagreed about how to interpret James Madison's Federalist essays 10 and 51, in which he explains and justifies the underlying principles of the new Constitution. Was Madison the architect of a structure of counterpoise, which would force individuals, interests, and institutions to obstruct one another so as to avoid tyranny, or was he a republican statesman, designing a system that would recruit virtuous citizens to public office? I argue that these clashing interpretations can be reconciled by viewing Madison as a theorist who was applying Adam Smith's economic concepts to political phenomena By putting into practice Smith's insight that competition among self-interested actors can achieve the public interest, Madison incorporated both umpired strife and virtuous citizenship into the meta-principles of the Constitution.

An Introduction to the Status Quo

Abstract: The following collection of articles focus on the role and status of the idea of the status quo in constitutional economics, and derive from a symposium held in May 2004 in Blacksburg, Virginia. This brief note provides an introduction both to the papers presented and to some of the issues raised in considering the status quo.

Constitutions for Local Collective Action and Institutional Interdependence

Abstract: Collective action can take place at a plurality of levels. It has to be based on a constitution which defines the basic rules of interaction. Here, we are concerned with the problem of the constitutional setting of “bottom-up” formal institutions with a “club” nature. The pressure to improve the efficiency of services pushes local administrations to co-ordinate to produce public goods. This process has stimulated the birth of different forms of agencies or private companies with a “club” nature. The aim of this paper is to discuss the effects of institutional interdependence on the efficiency of this kind of collective action. In order to shed some light on this problem, the paper first discusses the problem of the relativity of efficiency to the institutional setting. A framework of analysis is then discussed to identify the main factors affecting collective action. Finally some evidence will be provided by a comparative institutional analysis performed on some case studies concerning local associational forms among communes in north-eastern Italy.

Vetoes Overridable by Simple Majorities

Abstract: Conventional wisdom has it that the absolute (purely negative) veto is ineffective when overridable by a simple majority. That is flatly false. The examples that prove this surprising fact are themselves surprisingly ordinary yet oddly resistant to direct observation. They reveal virtues of a neglected institutional design.

On Political Competition: Democracy, Opinion and Responsibility

Abstract: In this paper, I consider the influence of political competition on opinion. After reflecting on the notion “opinion” as a concept in the economic analysis of politics, I turn to Hayek's Constitution of Liberty and consider his argument for democracy on the grounds that it is the form of government which best promotes progress in opinion. Yet Hayek's claim that democratically formed opinion improves is unsubstantiated. I turn to accounts of expressive voting thereafter to show why opinions which are realised in the form of votes may be anything other than propitious to democratic culture. I then return to Hayek and consider what becomes of “opinion” in Law, Legislation and Liberty. His claim that opinion improves under democratic institutions is no longer of great significance to him. Indeed, his account of the rise of “bargaining politics” provides evidence against the claim that opinion improves. I conclude by asking how democracy can be shielded from opinion, that is, how opinion might be improved in ways which go beyond Hayek's model of political competition outlined in Constitution of Liberty. To this end, I look to accounts of deliberative democracy and expressive politics for support.

A Theoretical Basis for the Consideration of Spending Thresholds in the Analysis of Fiscal Referendums

Abstract: This paper concerns the political economy of budget balances and focuses on fiscal referendums. It specifically suggests – on the basis of theoretical arguments –that any analysis of fiscal referendums must take their spending thresholds into account. Thus, it claims that mandatory fiscal referendums can impose greater constraints than optional fiscal referendums. In conclusion, various recommendations based on this observation are proposed.

Can We Know the Status Quo

Abstract: This brief essay discusses some of the conceptual difficulties and issues associated with defining and recognizing the status quo. These considerations cast doubt on using the status quo as a normative constraint in the formulation and application of policy.