The industrial organization of Congress (Weingast-Marshall)

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The industrial organization of Congress
(Weingast-Marshall)

• The organization of Congress meets remarkably
  well the electoral needs of its members.(..) If a
  group of planners sat down and tried to design a
  pair of American national assemblies with the
  goal of serving members electoral needs year in
  and year out they would be hard pressed to
  improve on what exists. (David Mayhew )

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The industrial organization of Congress

• A huge variety of interests are represented in
  the legislature and almost none is represented by
  a majority
• The diversity of interests creates gains from
  exchange
• If public policies reflect a series of bargains
  among various interests, how are these bargains
  maintained over time ?

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Transaction costs

• 2 problems
• Imperfect observability
• Incompleteness of contracts (moral hazard problem)

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Three assumptions
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Vote trading (or logrolling) models, Tullock 1981
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Not only porkbarrel politics

• Pork Barrel programs (distributive policies)
  benefit flows are contemporaneous to different
  legislators Usual legislative instrument to
  prevent future reneging omnibus bill
• However many programs imply
• Noncontemporaneous benefit flows
• Nonsimultaneous exchange

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Repeat play and reputation useful but not always
sufficient
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An idealized legislative committee system
Gatekeeping power
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An idealized legislative committee system
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Consequences of the idealized legislative
committee system on trade enforcement

• One group of legislators seeks dams and bridges
  another wants regulatory benefits.
• The 2 groups now are in two different committees.
  
• The control over the agenda within its
  jurisdiction implies that a committee has a veto
  power over the proposal of others
• Ex post reneging is not possible anymore

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Consequences of the idealized legislative
committee system on the type of policies and the
identity of the gainers
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Consequences of the idealized legislative
committee system on the type of coalitions

• Successful coalitions must include the members of
  the relevant committee
• Policy and coalitions are more durable small
  electoral shifts do not matter

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Summary
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Why Parties? (Aldrich)

• There is a set of incentives for ambitious
  politicians to turn to parties. They can solve
  efficiently difficult problems
• Collective action (social choice)problems in
  policy making
• Collective action (public goods) problems in
  elections

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Why Parties? (Aldrich)Collective Action problems
(social choice type)
Bill (voted against the Status Quo) Bill (voted against the Status Quo) Bill (voted against the Status Quo)
Legislator X Y Z
A 4 3 -9
B 3 -9 4
C -9 4 3

• Independent Voting Outcome All bills pass Payoff
  (-2A , -2B , -2C)
• Pareto optimal result Defeat all bills Payoff
  (0, 0, 0)
• Party of A and B Outcome Pass only X Payoff
  (4,3,-9)

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Why Parties? (Aldrich)Collective Action problems
(public good type)
Players 2 Choice Players 2 Choice
Players 1 Choice Cooperation Defection
Cooperation (3,3) (1,4)
Defection (4,1) (2,2)
Nash Equilibrium, Pareto inferior
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Collective Action problems with Universalism
(pork barrel projects)
Bill(voted against the Status Quo) Bill(voted against the Status Quo) Bill(voted against the Status Quo)
Legislator X Y Z
A 3 -1 -1
B -1 3 -1
C -1 -1 3

• Independent Voting Outcome All bills fail Payoff
  (0A , 0B , 0C)
• Pareto optimal result Pass all bills Payoff
  (1, 1, 1)
• Universalism norm Pass all bills Payoff (1,
  1, 1)
• Expected utility of minimal voting coalition
  (Weingast 1979) Payoff (2/3,2/3,2/3) Each mvc
  member receives 2, Each non mvc member receives
  -2 probability to be mvc member 2/3
  Exp.utility (2/3)(2) (1/3)(-2)2/3
• Party of A and B Outcome Pass bills X and Y
  Payoff (2,2,-2)

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Convenience to form a party even without
collective action problems (pork barrel projects)
Bill(voted against the Status Quo) Bill(voted against the Status Quo) Bill(voted against the Status Quo)
Legislator X Y Z
A 2 -1 -1
B -1 2 -1
C -1 -1 2

• Independent Voting Outcome All bills fail Payoff
  (0A , 0B , 0C)
• Pareto optimal result Pass all bills Payoff
  (0A , 0B , 0C)
• Universalism norm Pass all bills Payoff (0A ,
  0B , 0C)
• Expected utility of minimal voting coalition
  (Weingast 1979) Payoff (0,0,0) Each mvc member
  receives 1, Each non mvc member receives -2
  probability to be mvc member 2/3 Exp.utility
  (2/3)(1) (1/3)(-2)0
• Party of A and B Outcome Pass bills X and Y
  Payoff (1,1,-2)

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Pork Barrel, Universalism and Party Formation

• n legislators mminimal majority size
• b benefit to pass a bill for the winner
• Cgeneral cost of the bill
• cC/n individual cost (for the legislator, namely
  the costituency)
• Any legislator in choosing independently will
  vote for any bill for which b-cgt0
• However in order to approve his/her bill a
  legislator need to find a majority in other
  terms he/she has to pay the cost of other
  bills..
• A series of pork barrel bills will pass if b
  mc gt0 for all members of a minimum winning
  coalition in other terms if the benefit to
  approve his/her project overcomes the cost to
  approve the bills of the other coalition members.

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Pork Barrel, Universalism and Party Formation

• However the benefit b can really take place only
  if the MP is member of the winning coalition.
• p a priori probability to be member of a minimum
  winning coalition
• If all minimum winning coalitions are equally
  likely then each MPs expects to receive
  p(b-mc)(1-p)(-mc)pb-mc
• The critical problem here is the uncertainty.
  Binding unanimous coalition that cancels the
  uncertainty (universalism) can be a better
  institutional solution (condition b-ncgtpb-mc)
• Forming a party is even more convenient.
• (condition b-mcgtpb-mc always true)

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Social Choice problems (one bill against another)
Preference ranking on bills Preference ranking on bills Preference ranking on bills
Legislator First Second Third
A X Y Z
B Z X Y
C Y Z X
Utility Value 4 3 -9

• Round-robin tournament Y beats Z (A,C) Z beats
  X(B,C) X beats Y (A,B) ??
• Sequential agendasincere voting

First step Final step Payoff to (A,B,C)
(X,Y)X (X,Z)Z (-9,4,3)
(X,Z)Z (Z,Y)Y (3,-9,4)
(Y,Z)Y (Y,X)X (4,3,-9)
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Social Choice problems (one bill against another)
Preference ranking on bills Preference ranking on bills Preference ranking on bills
Legislator First Second Third
A X Y Z
B Z X Y
C Y Z X
Utility Value 4 3 -9

• Round-robin tournament Y beats Z (A,C) Z beats
  X(B,C) X beats Y (A,B) ??
• Sequential agenda sophisticated voting

First step Final step Payoff to (A,B,C)
(X,Y)Y (Y,Z)Y (3,-9,4)
(X,Z)X (X,Y)X (4,3,-9)
(Y,Z)Z (Z,X)Z (-9,4,3)
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Social Choice problems (one bill against another)
Preference ranking on bills Preference ranking on bills Preference ranking on bills
Legislator First Second Third
A X Y Z
B Z X Y
C Y Z X
Utility Value 4 3 -9

• Round-robin tournament Y beats Z (A,C) Z beats
  X(B,C) X beats Y (A,B) ??
• Equiprobable order of voting Expected outcome
  (-2/3, -2/3, -2/3)
• Temporary coalitions cycle.
• Party of A and B Outcome Pass X. Payoff (4,3,-9)

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Absence of a Social Choice problem
Preference ranking on bills Preference ranking on bills Preference ranking on bills
Legislator First Second Third
A X Y Z
B Z X Y
C Y X Z
Utility Value 4 3 -9

• Round-robin tournament X beats Y (A,B) ,Y beats
  Z (A,C) X beats Z (A,C)Outcome X
• Sequential agenda sincere voting

First step Final step Payoff to (A,B,C)
(X,Y)X (X,Z)X (4,3,3)
(X,Z)X (Z,Y)X (4,3,3)
(Y,Z)Y (Y,X)X (4,3,3)
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Absence of a Social Choice problem
Preference ranking on bills Preference ranking on bills Preference ranking on bills
Legislator First Second Third
A X Y Z
B Z X Y
C Y X Z
Utility Value 4 3 -9

• Round-robin tournament X beats Y (A,B) ,Y beats
  Z (A,C) X beats Z (A,C)Outcome X
• Sequential agenda sophisticated voting

First step Final step Payoff to (A,B,C)
(X,Y)X (X,Z)X (4,3,3)
(X,Z)X (Z,Y)X (4,3,3)
(Y,Z)Y (Y,X)X (4,3,3)
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Social Choice problems (only one bill to approve)
Preference ranking on bills Preference ranking on bills Preference ranking on bills
Legislator First Second Third
A X Y Z
B Z X Y
C Y X Z
Utility Value 4 3 -9

• Round-robin tournament X beats Y (A,B) ,Y beats
  Z (A,C) X beats Z (A,C)Outcome X
• Equiprobable order of voting All pass X. Payoff
  (4,3,3)
• Temporary coalitions (A,B),(B,C), (A,C) pass X.
  Payoff (4,3,3)
• Party of A and B Outcome Pass X. Payoff (4,3,3)
• No incentive for party formation!!

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Collective action and electoral mobilization

• Two problems
• The calculus of voting RPBD-C Pprobability
  that the vote affects the outcome Bthe
  differential benefit from the election of the
  preferred candidate D the duty as citizen. P is
  usually very small.
• Becoming informed

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Incentive for Party Affiliation for candidates

• Affiliation provides the candidate of a brand
  name, useful to convey in a cheap way information
• Affiliation provides economies of scale for the
  party campaign efforts.