PSC/PEC/ECON 582: POLITICAL ECONOMY II Time & Location:Wednesday 14:00-16:40, 112 Harkness Hall Instructor: Tasos Kalandrakis Office: 327 Harkness Hall Office hours: Wednesday, 10:00-12:00 E-mail: kalandrakis@mail.rochester.edu Tel: (585) 273-4902 Political Economy is a broad field in the boundaries of Political Science and Economics that emphasizes the interplay of political and economic forces in shaping distribution and efficiency in societies. Rather than offer a survey of the diverse literature that spans this research area, in this seminar we shall focus on contributions that emphasize political/distributional aspects and the role of institutions in shaping social outcomes. Maintained assumption is that agents are optimizers of some sophistication and behave in order to have their preferences prevail, possibly at the cost of efficiency. Given the emphasis on distribution, the question of multi-agent bargaining will be covered in some generality. Subsequently, we treat contributions from the applied gametheoretic literature on political institutions, their origins and effects. Topics may include parliamentary government; endogenous legislative organization (rules of procedure, seniority, committees); debate and information; lobbying; political parties; courts; bureaucracy; formation & breakup of nation-state; federalism; etc. The course concludes with the study of some broad questions on the nature and emergence of institutions. Emphasis on particular topics may vary with the configuration of class interests. Research directions will be discussed. This is a research seminar and depth of coverage will be emphasized at the expense of breadth. Each week we shall focus on a couple of selected papers. Class participants are expected to take turns and present a good fraction of these papers. Evaluation: Your grade will be based on class participation (15%), a class presentation 15%, assignments 30%, and a research proposal (40%). Participation: Each week you are expected to have read the papers covered and be able to contribute during presentations with questions, comments, and articulate coherent thoughts. Presentations: You will be required to present one of the papers covered during the semester on a topic that will be assigned ahead of time. Preparing a presentation forces you to think seriously about the assigned topic and comprehend the structure of the argument and formal proof. Your presentation should take approximately one hour unless otherwise instructed. It should include motivation for the research question, a clear statement of the model and assumptions, and a fair part of the basic proof arguments. You are evaluated on your comprehension of the paper as well as the quality of the presentation. You should contact me ahead of time for advice on the paper and to work through the specifics for each weekly topic.
Assignments: Depending on the suitability of the papers we cover, there will be a few assignments over the course of the semester. The goal of the assignment is to enhance understanding specific models, and of modeling in general. Good formalism and clear mathematical statements are appreciated, but the emphasis is on the applied theory aspect of the exercise, i.e., understanding the model and solving it. Research proposal: Ideally this should involve the development of a model on a question relevant to your own research, but might also be an empirical project under certain conditions. Sometime toward the middle of the semester we will schedule a meeting to discuss possible ideas and appropriate length and format for the proposal, depending on the nature of the topic you wish to undertake. You will present your proposal at the end of the semester. Reading: Each week you are all expected to have read closely the articles that we discuss or your fellow students present. More comprehensive reading lists for each topic are provided for your convenience should you wish to follow a particular topic more closely. Prerequisites: An understanding of non-cooperative game theory at the level of PSC 584 or similar is required for the course. TENTATIVE SCHEDULE (I will make an effort to cover topics that reflect your research interests as much as is possible. If there are related topics/papers of particular relevance to your current or future research let me know) I. Sequential Bargaining Baron, David P., and John A. Ferejohn. 1989. Bargaining in Legislatures. American Political Science Review 85(December): 137-64. Baron, David P. and Ehud Kalai. 1993. "The Simplest Equilibrium of a Majority Rule Game." Journal of Economic Theory, 61: 290-301. Banks Jeffrey S., and John Duggan. 2000. A Bargaining Model of Collective Choice. American Political Science Review 94(March): 73-88. Banks Jeffrey S., and John Duggan. 2006. A Bargaining Model of Legislative Policy- Making. QJPS. Eraslan, H. 2002. "Uniqueness of Stationary Equilibrium Payoffs in the Baron-Ferejohn Model," Journal of Economic Theory, 103(1): 11-30. Eraslan, H. and A. McLennan. Uniqueness of Stationary Equilibrium Payoffs in Coalitional Bargaining, mimeo. Kalandrakis, Tasos. 2004. Equilibria in Sequential Bargaining Games as Solutions to Systems of Equations, Economics Letters, 84(3): 407-11. Kalandrakis, Tasos. 2006. Regularity of Pure Strategy Stationary Equilibria in a Class of Bargaining Games. Economic Theory. Kalandrakis, Tasos. 2004. Proposal Rights and Political Power, American Journal of Political Science.
Merlo, A. & C. Wilson. 1995. "A Stochastic Model of Sequential Bargaining with Complete Information," Econometrica, 63(2): 371-399. Rubinstein, Ariel. 1982. Perfect Equilibirum in a Bargaining Model, Econometrica, 50(1): 97-109. II. Government Formation Baron, David. 1991. A Spatial Bargaining Theory of Government Formation in a Parliamentary System. American Political Science Review 85(March): 137-64. Baron, David. 1993. Government Formation and Endogenous Parties, American Political Science Review, 87, 34-47. Baron, David. 1998. Comparative Dynamics of Parliamentary Governments. American Political Science Review 92(September): 593-609. Baron DP, Diermeier D. 2001. Elections, governments, and parliaments in proportional representation systems QJE 116 (3): 933-967. Diermeier, D., H. Eraslan, & A. Merlo. 2003. A Structural Model of Government Formation, Econometrica 71 (1): 27-70. Deirmeier, Daniel and Timothy Feddersen. 1998. Cohesion in Legislatures and the Vote of Confidence Procedure. American Political Science Review 92(September): 611-21. Diermeier, D. and A. Merlo (2000), Government Turnover in Parliamentary Democracies, Journal of Economic Theory, 94, 46-79. Kalandrakis, Tasos. A Theory of Minority and Majority Governments, mimeo. Merlo, Antonio. 1997. "Bargaining over Governments in a Stochastic Environment," The Journal of Political Economy, 105, 1: 101-131. III. Vetos & Audiences Groseclose T, McCarty N. 2001. The Politics Of Blame: Bargaining Before An Audience," American Journal Of Political Science 45 (1): 100-119. Matthews, S. 1989. Veto Threats: Rhetoric in a Bargaining Game, QJE, 104(2), 347-369. McCarty, Nolan. 2000. Proposal rights, veto rights, and political bargaining, AJPS, 44 (3): 506-522. McCarty, Nolan. 2000. Presidential pork: Executive veto power and distributive politics, American Political Science Review, 94 (1): 117-129 MAR 2000 Winter, E. 1996. Voting and Vetoing, American Political Science Review 90:813-823. IV. Political Rhetoric & Information Austen-Smith, David. 1990. Information Transmission in Debate, American Journal of Political Science, 34(February): 124-152. Battaglini, Marco. "Multiple referrals and Multidimensional Cheap Talk", Econometrica. Crawford and Sobel, "Strategic Information Transmission'' Econometrica 1982, 52(6), 1431-1451. Austen-Smith D, Feddersen TJ. Deliberation, preference uncertainty, and voting rules, APSR100 (2): 209-217.
Glazer, Jacob and Ariel Rubinstein (2001), Debates and Decisions, On a Rationale of Argumentation Rules, Games and Economic Behavior, 36 (2001), 158-173. Krishna and Morgan. 2001. "A Model of Expertise", QJE 2: 747-775. Morris, S. 2001. Political Correctness, Journal of Political Economy 109, 231-265. Sobel, J. (1985). A Theory of Credibility, Review of Economic Studies 52, 557-573. Spector, David. 2000. "Rational Debate and One-Dimensional Conflict," QJE (February): 181-200. V. Legislative Organization: Multicameralism, Committees, & Seniority Austen-Smith, D. 1993. Interested Experts and Policy Advice: Multiple Referrals Under Open Rule, Games and Economic Behaviour, 199: 3-39. Cremer J. 1986. Cooperation In Ongoing Organizations Quarterly Journal Of Economics 101(1): 33-49. Diermeier, D. 1995. "Commitment, Deference, and Legislative Institutions," American Political Science Review 89(2): 344-355. Gilligan and Krehbiel, "Organization of Informative committees by a rational legislature" American Journal of Political Science 1990, 34(2), 531-564. Gilligan and Krehbiel, "Collective Decision Making and Standing Committees: An informational Rationale for Restrictive Amendment Procedures," Journal of Law, Economics, and Organization 1987, 3(2), 145-193. Krehbiel, Keith, Kenneth A. Shepsle, and Barry R. Weingast, "Controversy: Why are Congressional Committees Powerful?" American Political Science Review 81 (1987): 929-45. Krishna V, Morgan J. 2001. Asymmetric information and legislative rules: Some amendments, APSR 95 (2): 435-452. McKelvey, Richard and Raymond Reizman. 1992. Seniority in Legislatures, American Political Science Review, 86(4): 951-965 Shepsle K, Nalebuff B 1990. The Commitment To Seniority In Self-Governing Groups Journal Of Law Economics & Organization 6: 45-72 Sp. Iss. Shepsle, Kenneth A. and Barry R. Weingast, "The Institutional Foundations of Committee Power," American Political Science Review 81 (1987): 85-104. Weingast, Barry R. and William Marshall, "The Industrial Organization of Congress." Journal of Political Economy 96 (1988): 132-63. Diermeier and Myerson, "The Internal Organization of Legislatures" AER 1999 December, 89(5), 1182-1196. VI. Lobbying, Special Interests, & (In)Efficiency Acemoglu, Daron and James Robinson. 2001. Inefficient Redistribution, APSR, 95 (3): 649-661. Austen-Smith David. 2000. Redistributing income under proportional representation Journal of Political Economy 108 (6): 1235-1269. Banks JS. 2000. Buying supermajorities in finite legislatures, APSR 94 (3): 677-681 Bennedsen and Feldman (2002), "Lobbying Legislators", Journal of Political Economy. Groseclose and Snyder, "Buying Supermajorities" APSR, June 1996, 90(2), 303-315. Eddie Dekel, Mathew Jackson, and Asher Wolinsky. Vote Buying I: General Elections'
Eddie Dekel, Mathew Jackson, and Asher Wolinsky. ``Vote Buying II: Legislatures and Lobbying. Lohmann, S. 1998. An information rationale for the power of special interests, APSR 92(4): 809-827. VII. Political Parties Caillaud, B. Tirole J. 2002. Parties as political intermediaries, QJE 117 (4): 1453-1489. Eguia, J. Voting Blocs, Coalitions and Parties, mimeo Jackson, M. and B. Moselle (2001), "Coalition and Party Formation in a Legislative Voting Game", Journal of Economic Theory, 1-39. Levy, G. 2002. A Model of Political Parties, JET Roemer, J. 1999. "The Democratic Political Economy of Progressive Income Taxation", Econometrica, 67(1), 1-19. Snyder, J. & M. Ting. 2002. "An Informational Rationale for Political Parties." American Journal of Political Science 46(1): 90-110. VIII. Number of States, Federalism, & Integration Alesina, Alberto and E. Spolaore. 1997. On the number and size of nations, Quarterly Journal of Economics 112: 1027-56. Bolton, Patrick and Gerard Roland. 1997. The Breakup of Nations: a Political Economy Analysis, Quarterly Journal of Economics 112: 1057-90. Cremer, J. and T. Palfrey. In or Out? Centralization by Majority Vote. European Econ. Rev.. 40 (January 1996):43-60. Cremer, J. and T. Palfrey. Political Confederation. Am. Pol. Sci. Rev. 93 (March 1999a): 69-83. Cremer, J. and T. Palfrey. "Federal Mandates by Popular Demand," Journal of Political Economy 108 (October 2000): 905-27. Kessler AS, Lulfesmann C, Myers GM. 2002. Redistribution, fiscal competition, and the politics of economic integration, RESTUD 69 (4): 899-923. Nechyba, T. Existence of Equilibrium and Stratification in Local and Hierarchical Tiebout Economies with Property Taxes and Voting, Economic Theory 10 (August 1997):277-304. IX. Bargaining Dynamics Marco Battaglini & Stephen Coate."Inefficiency in Legislative Policy-Making: A Dynamic Analysis." AER, forthcoming. Baron, David. 1996. A Dynamic Theory of Collective Goods Programs, American Political Science Review 90:316-30. Baron, David and Michael Herron. 1999. A Dynamic Model of Multidimensional Collective Choice, research paper 1559, GSB, Stanford University. Duggan, J. and T. Kalandrakis. A Dynamic Model of Legislative Bargaining. Gomes A. and P. Jehiel. 2005. Dynamic Processes of Social and Economic Interactions: On the Persistence of Inefficiencies, JPE Kalandrakis, Tasos. 2004. A Three-Player Dynamic Majoritarian Bargaining Game, Journal of Economic Theory, 116(2): 294-322.
Kalandrakis, Tasos. Majority Rule Dynamics with Endogenous Status-Quo, mimeo. X. Miscellaneous Abreu D, Gul F. 2000. Bargaining and reputation, Econometrica, 68 (1): 85-117. Acemoglu, Daron and James Robinson. 2001. "A Theory of Political Transitions", American Economic Review, 91,September: 938-63. Aghion P, Alesina A, Trebbi F. 2004. Endogenous political institutions QJE, 119 (2): 565-611 MAY 2004. Barbera S, Jackson MO. 2004. Choosing how to choose: Self-stable majority rules and constitutions QJE, 119 (3): 1011-1048 AUG 2004 Crawford, Vincent P. 1995. Adaptive Dynamics in Coordination Games, Econometrica 63: 103-43. Mailath, G., Morris, S., & A. Postlewaite. 2001. Laws and Authority, working paper. Rabin, Matthew.1994. "A Model of Pre-game Communication." Journal of Economic Theory 63: 370-91. Tirole J. 1996. A Theory of Collective Reputations (with applications to the persistence of corruption and to firm quality), RESTUD, 63 (1): 1-22. Yong-Gwan Kim and Joel Sobel, "An Evolutionary Approach to Pre-Play Communication." Econometrica 63 (1995): 1181-93. Young, H. Peyton. 1993. "The Evolution of Convention." Econometrica 61: 57-85. XI. End of Semester: Presentation of Research Proposals