nep-pol New Economics Papers
on Positive Political Economics
Issue of 2005‒06‒27
six papers chosen by
Eugene Beaulieu
University of Calgary

  1. A Note on Negative Electoral Advertising By Subhadip Chakrabarti
  2. Political economy and pensions in ageing societies – a note on how an ”impossible” reform was implemented in Sweden. By Kruse, Agneta
  3. The Role of Preconceived Ideas in Macroeconomic Policy: Japan's Experiences in Two Deflationary Periods By Koichi Hamada; Asahi Noguchi
  4. Political renegotiation of regulatory contracts By Cecile Aubert; Jean- Jacques Laffont
  5. W.E. Johnson’s 1913 Paper and the Question of His Knowledge of Pareto By Ivan Moscati
  6. Local Life and Municipal Services in Spain at the Beginning of the 20 th Century. By Gregorio Núñez

  1. By: Subhadip Chakrabarti
    Abstract: In their seminal paper, Harrington and Hess (1996) discuss a model where candidates differ along two dimensions - ideology which is modeled by the standard Hotelling-Downs formulation and valence factors which encompass traits which all voters agree as desirable. While valence factor is given, the voter perception of a candidate’s ideology can be influenced via advertising. In this expository note, we extend the model model to take account of valence as well as ideological advertising but we restrict our attention only to negative advertising. We find that when the available resources are sufficiently small and certain technical conditions are fulfilled, the expected result holds, namely, the candidate with the higher initial valence index will run a relatively personal campaign while the candidate with the lower initial valence index will run an ideological campaign.
    Keywords: Negative Advertising, Electoral Contests
    JEL: C72 D72
    Date: 2005–03
  2. By: Kruse, Agneta (Department of Economics, Lund University)
    Abstract: Ageing puts a strain on most countries’ pension systems; forecasts show them to be more or less unsustainable. Evidence from social choice research, theoretical as well as empirical, does not seem to offer a way out of the dilemma, as the median voter will resist a reform. Despite this, Sweden has implemented a major reform, supposedly making the system sustainable. The question in this paper is thus: how was it possible to launch such a reform in Sweden? The analysis is based on majority voting models. Important explanatory factors are age structure as well as the age of the median voter; both of these go against the probability of a reform. A focus on age structure in combination with transitional rules and specific features of the reform may provide an explanation.
    Keywords: political economy; pension reform; median voter; age structure
    JEL: D72 H55 J26
    Date: 2005–06–07
  3. By: Koichi Hamada; Asahi Noguchi
    Abstract: This paper examines the role of misleading economic ideas that most likely promoted the economic disasters of the two deflationary periods in Japanese economic history. Misleading ideas deepened the depression during the interwar years, and erroneous thinking has prolonged the stagnation of the Japanese economy since the 1990s. While the current framework of political economy is based on the self-interest of political agents as well as of voters, we highlight the role of ideas in policy making, in particular, in the field of macro-economy where the incidence of a particular policy is not clear to the public. Using two significant examples, this paper illustrates the role of preconceived ideas, in contrast to economic interests, as dominant forces influencing economic policy making.
    Date: 2005–06
  4. By: Cecile Aubert (Universite Paris Dauphine, Eurisco); Jean- Jacques Laffont (IDEI, Toulouse)
    Abstract: Governmental contracts may be renegotiated after political changes. Current governments can anticipate this and strategically distort contracts to influence renegotiation outcomes. In this sequential common agency game, the initial contract impacts elements of the renegotiation process: outside options (a `leverage' effect), and the beliefs of the new government through partial information revelation (a `strategic' effect). We characterize the optimal initial contract, as a function of political stability, time preference, and profits appropriation by the initial government. It always entails either full separation or strategic, partial, information revelation. Last, institutional rules imposing immediate payments to the firm help limit output distortions.
    Keywords: Renegotiation, Political uncertainty, Regulation.
    JEL: D82 L51 D73
    Date: 2005–06–15
  5. By: Ivan Moscati (Bocconi University - IEP)
    Abstract: In 1913, the Cambridge logician W.E. Johnson published a famous article on demand theory in the Economic Journal. Although Johnson’s treatment of the subject strongly resembles the analysis set forth by Pareto in the Manual of Political Economy, Johnson does not cite the Italian economist. This has aroused a long-standing debate about Johnson’s actual acquaintance with Pareto’s works, but the debated point has never been thoroughly investigated. The present paper addresses the question of Johnson’s knowledgeof Pareto both from an analytical and historical viewpoint, by examining Johnson’s life in the Cambridge environment and his available unpublished papers. Even though the new evidence gathered gives some weight to the thesis that Johnson could not have been unaware of Pareto’s Manual, it cannot exclude the possibility that the logician wrote his paper autonomously.
    Keywords: Johnson, Pareto, Cambridge School, Consumer Theory, Complementarity
    JEL: B31 B13 B21
    Date: 2005–06–16
  6. By: Gregorio Núñez (Department of Economic Theory and Economic History (University of Granada) and “Grupo de Estudios Históricos sobre la Empresa”)
    Abstract: The interpretation that still prevails of the political and economic history of Spain at the beginning of the century, emphasizes the basically rural and backward character of a society that grew and was modernized very slowly. Even as late as 1932-1936, during the Second Republic in Spain, political backwardness, industrial underdevelopment and engrained agrarian conflict are common factors stressed by many authors and, in contrast, there was a lack of a solid alternative politically and economically rooted in their as yet minority urban middle classes.3 And «perhaps the sole outstanding fact in 1898 was the extent and unanimity of the malaise in the middle class» [PAN-MONTOJO, 1998, p.262]. Recently these ideas are being revised in search of «more subtle interpretations of the political reality which is more prosaic, but not for that reason less complex». Political historians such as Forner and García argued that political fraud, corruption and backwardness cannot explain completely and convincingly early 20 th century Spain. On the contrary, they suggest that the implicit critical factor in the so-called «vieja política» (old politics) was a more general lack of civic maturity, that might have filled the established rules of the political game with democratic content [FORNER & GARCÍA, 1992, pp. 41 y ss.]; but in fact Spanish society only gradually began to fill this gap. They also add that, in such a process of growing maturity, cities played, as should be expected, a fundamental role.
    Keywords: City and Town Life - Spain - History, Cities and Towns - Economic History – Spain – 1878-1944, Urban Life – Spain – 1878-1944, Urban policy, Urbanization - Spain.
    Date: 2005–06–16

This nep-pol issue is ©2005 by Eugene Beaulieu. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.