New Economics Papers
on Collective Decision-Making
Issue of 2011‒08‒22
six papers chosen by

  1. Why Do Voters Dismantle Checks and Balances? By Daron Acemoglu; James A. Robinson; Ragnar Torvik
  2. Time to Decide: Information Search and Revelation in Groups By Campbell, Arthur; Ederer, Florian; Spinnewijn, Johannes
  3. Can Market Failure Cause Political Failure By Aney, Madhav; Ghatak, Maitreesh; Morelli, Massimo
  4. Income Inequality, Mobility, and the Welfare State: A Political Economy Model By Bossi, Luca; Gumus, Gulcin
  5. Democratic Accountability, Deficit Bias, and Independent Fiscal Agencies By Xavier Debrun
  6. Agreement theorems with interactive information: possibilities and impossibilities By Tarbush, Bassel

  1. By: Daron Acemoglu; James A. Robinson; Ragnar Torvik
    Abstract: Voters often dismantle constitutional checks and balances on the executive. If such checks and balances limit presidential abuses of power and rents, why do voters support their removal? We argue that by reducing politician rents, checks and balances also make it cheaper to bribe or influence politicians through non-electoral means. In weakly-institutionalized polities where such non-electoral influences, particularly by the better organized elite, are a major concern, voters may prefer a political system without checks and balances as a way of insulating politicians from these influences. When they do so, they are effectively accepting a certain amount of politician (presidential) rents in return for redistribution. We show that checks and balances are less likely to emerge when (equilibrium) politician rents are low; when the elite are better organized and are more likely to be able to influence or bribe politicians; and when inequality and potential taxes are high (which makes redistribution more valuable to the majority). We show that the main intuition, that checks and balances, by making politicians “cheaper to bribe,” are potentially costly to the majority, is valid under different ways of modeling the form of checks and balances.
    JEL: H1 O17 P48
    Date: 2011–08
  2. By: Campbell, Arthur; Ederer, Florian; Spinnewijn, Johannes
    Abstract: We analyze costly information acquisition and information revelation in groups in a dynamic setting. Even when group members have perfectly aligned interests the group may inefficiently delay decisions. When deadlines are far away, uninformed group members freeride on each others' efforts to acquire information. When deadlines draw close, informed group members stop revealing their information in an attempt to incentivize other group members to continue searching for information. Surprisingly, setting a tighter deadline may increase the expected decision time and increase the expected accuracy of the decision in the unique equilibrium. As long as the deadline is set optimally, welfare is higher when information is only privately observable to the agent who obtained information rather than to the entire group.
    Keywords: deadlines; group decisions; information disclosure; information search
    JEL: D71 D82 D83 H42
    Date: 2011–08
  3. By: Aney, Madhav; Ghatak, Maitreesh; Morelli, Massimo
    Abstract: We study how inefficiencies of market failure may be further amplified by political choices made by interest groups created in the inefficient market. We take an occupational choice framework, where agents are endowed heterogeneously with wealth and talent. In our model, market failure due to unobservability of talent endogenously creates a class structure that affects voting on institutional reform. In contrast to the world without market failure where the electorate unanimously vote in favour of surplus maximising institutional reform, we find that the preferences of these classes are often aligned in ways that creates a tension between surplus maximising and politically feasible institutional reforms.
    Keywords: adverse selection; asset liquidation; market failure; occupational choice; political failure; property rights
    JEL: O12 O16 O17
    Date: 2011–08
  4. By: Bossi, Luca (University of Pennsylvania); Gumus, Gulcin (Florida Atlantic University)
    Abstract: In this paper, we set up a three-period stochastic overlapping generations model to analyze the implications of income inequality and mobility for demand for redistribution and social insurance. We model the size of two different public programs under the welfare state. We investigate bidimensional voting on the tax rates that determine the allocation of government revenues among transfer payments and old-age pensions. We show that the coalitions formed, the resulting political equilibria, and the demand for redistribution crucially depend on the level of income inequality and mobility.
    Keywords: redistribution, mobility, inequality, structure induced equilibrium
    JEL: D72 H53 H55
    Date: 2011–08
  5. By: Xavier Debrun
    Abstract: Despite growing interest among policymakers, there is no theory of independent fiscal institutions. The emerging literature on "fiscal councils" typically makes informal parallels with the theory of central bank independence, but a very simple formal example shows that such a shortcut is flawed. The paper then illustrates key features of a model of independent fiscal agencies, and in particular the need (1) to incorporate the intrinsically political nature of fiscal policy - which precludes credible delegation of instruments to unelected decisionmakers - and (2) to focus on characterizing "commitment technologies" likely to credibly increase fiscal discipline.
    Keywords: Fiscal policy , Central bank autonomy , Political economy , Budget deficits , Budgetary policy , Inflation ,
    Date: 2011–07–26
  6. By: Tarbush, Bassel
    Abstract: Following from Tarbush (2011a), we explore the implications of using two different definitions of informativeness over kens; one that ranks objective, and the other subjective information. With the first, we create a new semantic operation that allows us to derive agreement theorems even when decision functions are based on interactive information (for any r ≥ 0). Effectively, this operation, unlike information cell union captures the notion of an agent becoming “more ignorant” for all modal depths. Using the definition that ranks subjective information however, we show an impossibility result: In generic models, agreement theorems using the standard Sure-Thing Principle do not hold when decision functions depend on interactive information (when r > 0).
    Keywords: Agreeing to disagree; knowledge; common knowledge; belief; information; epistemic logic
    JEL: D89 D83 D80
    Date: 2011–08–17

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