Historical Background

1
Historical Background Intro to Rational Choice
Theory

• Three historical venues
• Campaign for Ratification of the American
  Constitution, 1787-1788
• Long battle over political and economic reform in
  Victorian Britain, 1832-1885
• Drive for Confederation in Canada, 1864-1867

2
Ratification of the American Constitution,
1787-1788

• American Revolution Declaration of
  Independence, 1776
• United States formed initially under Articles of
  Confederation
• Articles created a loose federation in which
  federal government was,
• Responsible for foreign affairs defence
• Reliant on states for revenue no federal taxes!
• Members of Congress appointed by States and
  attendance not compulsory!

3
Ratification of the American Constitution,
1787-1788

• State governments were themselves weak
• Debilitating public debts from war with Britain
• Rhode Island blanket debt forgiveness!
• Shays Rebellion in 1787
• Except in Mass., executive branches of states
  were weak (e.g., no veto)
• Legislature pre-eminent, but subject to rotation,
  term limits, recall

4
Ratification of the American Constitution,
1787-1788

• The result was a weak inefficient federal
  government
• Congress have come to no determination yet
  respecting the Peace Establishment, nor am I able
  to say when they will. I have lately had a
  conference with a Committee on this subject, and
  have reiterated my former opinions, but it
  appears to me that there is not a sufficient
  representation to discuss Great National points.
• (Washington to Clinton)

5
Ratification of the American Constitution,
1787-1788

• Madisons Vices (of the Articles)
• Trespasses of the States on the rights of each
  other.
• These are alarming symptoms, and may be daily
  apprehended as we are admonished by daily
  experience. See the law of Virginia restricting
  foreign vessels to certain ports of Maryland in
  favor of vessels belonging to her own citizens
  of N. York in favor of the same.

6
Ratification of the American Constitution,
1787-1788

• Madisons Vices (of the Articles)
• Want of concert in matters where common interest
  requires it.
• This defect is strongly illustrated in the state
  of our commercial affairs. How much has the
  national dignity, interest, and revenue suffered
  from this cause? Instances of inferior moment are
  the want of uniformity in the laws concerning
  naturalization literary property of provision
  for national seminaries, for grants of
  incorporation for national purposes, for canals
  and other works of general utility, wch. may at
  present be defeated by the perverseness of
  particular States whose concurrence is necessary.

7
Ratification of the American Constitution,
1787-1788

• Amendment of Articles is problematic, requires
  unanimity
• Madison Virginians organize Annapolis
  Convention
• to meet such other Commissioners as were, or
  might be, appointed by the other States in the
  Union, at such time and place as should be agreed
  upon by the said Commissions to take into
  consideration the trade and commerce of the
  United States, to consider how far a uniform
  system in their commercial intercourse and
  regulations might be necessary to their common
  interest and permanent harmony...

8
Ratification of the American Constitution,
1787-1788

• These Commissioners meet in Philadelphia in
  1787
• Two broad camps
• Federalists (e.g., Madison, Hamilton, Morris) a
  majority
• Anti-federalists (e.g. Elbridge Gerry)

9
Ratification of the American Constitution,
1787-1788

• Madisons Virginia Plan
• Centralized republic
• Antagonistic to states parochialism
• but what about legitimate state interests?
• abiding fear of concentrated power?
• The New Jersey Plan The Articlesagain ?
• The Hamilton Plan almost monarchical
• Source http//teachingamericanhistory.org/convent
  ion/

10
Theoretical Problems of the Articles

• Madisons analysis identifies two theoretical
  problems
• Collective Action Problems
• Conflict of interest
• Coordination Problems
• Lack of information

11
Collective Action Problems

• Joint action / cooperation required
• All actors better off if all contribute fully
• Each actor best off by free-riding
• The Prisoners Dilemma

12
Prisoners Dilemma

• Problem
• All states are better off with free trade
• but also want to close their ports to outside
  ships to protect local shipping

13
Prisoners Dilemma

• Model problem as a normal form game
• Players have strategies
• Free Trade
• Block Ports

14
Prisoners Dilemma

• Cells list players payoffs (i.e., preferences)
• Row players payoffs listed first
• Higher payoffs are better

15
Prisoners Dilemma

• Each state prefers other to open ports
• In aggregate, better off with free trade
• Cannot tell a priori what other state will do

16
Prisoners Dilemma

• States search for best response to other states
  best strategy
• e.g., State 1 asks if I play free trade, what is
  State 2s best strategy? Its to block ports (3
  beats 2)

17
Prisoners Dilemma

• State 1 asks if I block ports, what is State 2s
  best strategy? Its to block ports
• Thus, State 2 always better off blocking ports
• Now State 1 asks Whats my best strategy given
  State 2 is blocking ports?

18
Prisoners Dilemma

• State 1 if I free trade when State 2 blocks
  ports, I get 0.
• Whereas if I block ports, I get 1. So I should
  block ports
• Block Ports, Block Ports is the Nash Equilibrium

19
Nash Equilibrium

• Each actor doing the best it can given other
  actors doing likewise
• A best response to a best response
• No incentive for any actor to unilaterally alter
  strategy
• Self-enforcing situation

20
Theoretical Problems of the Articles

• Madisons analysis identifies two theoretical
  problems
• Collective Action Problems
• Conflict of interest
• Coordination Problems
• Lack of information

21
Coordination Problems

• Not all interactions fail because of a conflict
  in interests
• Coordination failure is also a problem
• e.g., to make driving safe we all have to
  coordinate of driving on the same side of the road

22
Coordination in Normal Form

• States have no conflict of interest
• Both states prefer left (right) if other state
  chooses left (right)
• No state has incentive to switch strategy once

23
Coordination in Normal Form

• NOTE
• There are two Nash equilibria here
• Left, Left
• Right, Right
• Left by any state is best response to Left by
  any state

24
Coordination in Normal Form

• Wheres the problem, then?
• In absence of communication, what strategy does
  state choose?
• Require a focal point, a signal about what
  strategy is likely to succeed

25
Maximizing Gains vs Minimizing Losses

• We solved games by asking for each player
• Is this the best I can do given that the other
  player is doing their best too?
• What if we had each player ask
• Is this the best I can do given that the other
  player is trying to do the worst to me?

26
Prisoners Dilemma

• new logic makes no difference in Prisoners
  Dilemma
• State 1 says If I free trade, state 2 will block
  her ports to stick me with a 0

27
Prisoners Dilemma

• and if I block ports, State 2 will block her
  ports to stick me with a 1 instead of giving me a
  3
• so State 2 always blocks ports,
• hence my best response is still to block ports

28
Maximizing Gains vs Minimizing Losses

• What if we had each player ask
• Is this the best I can do given that the other
  player is trying to do the worst to me?
• but this will not work with coordination games

29
Coordination in Normal Form

• State 1 says If I play left, State 2 will play
  right to stick me with a 0
• and if I play right, State 2 will play left to
  stick me with a 0
• but that assumes a conflict of interest where
  there is none!
• Its irrational!

30
Political Economic Reform in Victorian Britain

• End of the old regime
• 1776 Loss of American Revolution
• Pulls power away from King to Parliament
  Cabinet
• 1789 French Revolution
• Creates elite resistance to radical reform (e.g.
  universal suffrage)
• 1803-1815 Napoleonic Wars
• Leaves Britain as worlds unchallenged
  superpower, but at great financial cost

31
Political Economic Reform in Victorian Britain

• Beyond these political events, great economic and
  social change
• Industrial Revolution Urbanization
• Growing and increasingly radical working class
• Shift of wealth from country to city, i.e., elite
  divisions between Tories (old, landed
  aristocracy) and Liberals/Whigs (newer, urban
  capitalists)
• Peterloo Massacre 1819, Corn Law Repeal,
  Chartism

32
Political Economic Reform in Victorian Britain

• Response is evolutionary change
• Reform Acts, 1832, 1868, 1885
• Repeal of the Corn Laws Free Trade in 1847
• Ascendancy of Cabinet Commons, 1910
• Home Rule in Ireland, 1921

33
Drive for Confederation in Canada 1864-1867

• Impetus generated by Rebellions of 1837 1838
• Durham Report
• Responsible Government
• Provides motive for temporary unity among
  colonists Baldwin-Lafontaine Coalition

34
Drive for Confederation in Canada 1864-1867

• Impetus generated by Rebellions of 1837 1838
• Durham Report
• Assimilation Act of Union 1841
• Fuses Upper Lower Canada
• Equal representation in Legislative Assembly
• Marred by deep social cleavages, double-majority
  principle weak / non-existent parties

35
Drive for Confederation in Canada 1864-1867

• Key players realise that building a durable
  centrist coalition is the key
• the mass of the people are sound, moderate in
  their demands and attached to British
  institutions, but they have been oppressed by a
  miserable little oligarchy on one hand, and
  excited by a few factious demagogues on the
  other. I can make a middle reforming party, I
  feel sure, which will put down both.
• Lord Sydenham
• (Careless 1967, 39)

36
Drive for Confederation in Canada 1864-1867

• How to build such a coalition?
• G-G loses battle vs Responsible Government early
  on
• John A. Macdonald Conservative accommodation
  with the French.
• George Brown Radicalism Rep-by-pop