The purpose of this course is to apply the New Economics of Organization to questions central to political scientists and students of political-economy. Although much of the logic was developed by studying problems of markets, firms, and contracting, this approach applies to a far wider range of problems. The focus throughout the course will be on institutions, their evolution, their purpose, and their stability. The course will develop a unified approach and apply it to a wide range of topics.

Course structure. The course opens with an examination of the basic logic of the approach. Because no integrated treatments of theory exist, it is necessary to learn the approach through the major papers on a set of disparate topics. Of necessity, this requires focusing in part on markets and firms. Thus, this section begins with the theory of the firm, focusing on the issue of the separation of ownership and control. Because delegation to managers potentially allows for managerial discretion, the institutions of the firm are designed to mitigate this effect.

Having developed the theoretical building blocks, we turn to politics. The first application concerns political institutions in modern America. We will cover at least two topics: (a) Congress: the literature demonstrates that congressional institutions are designed to further the goals of congressmen, and that they are well suited for this purpose. Yet why do they choose specific institutions and not others? We will see that the logic used in the classic statements of this approach, e.g., Fenno (1961) and Mayhew (1974), parallels that developed in the theory of the firm. (b) Delegation to bureaucrats by politicians closely parallels the issue of delegation to managers by shareholders. Although the institutions designed to mitigate bureaucratic discretion greatly differ from those for managers, their purpose is the same: to limit the ex post discretion potentially exercised by delegates, in this case, bureaucrats.

A second set of applications concerns the evolution of political institutions in a historical perspective. We will cover some subset of the following: (a) The institutions underpinning the organization of trade prior to the rise of the nation state, that is, prior to the rise of third party enforcement of contracts by the state; (b) a comparative study of English and French institutions during their 125 year rivalry from 1689-1815.

An third application turns to problems in comparative politics: democracy and democratic stability; and commitment problems as the central political impediment to economic and political development.

A fourth topic concerns self-enforcing political stability. We first look at various approaches to federalism. In our last class, we turn to the break down of American political stability in the Civil War. The thesis concerning the American Civil War focuses on the credible commitment by the North to honor rights in slaves throughout the early to mid-19th century. The formation of the Republican Party, though not abolitionists, meant the demise of the North's credible commitment. Secession occurred as soon as the Republicans had captured all the relevant agenda mechanisms (both houses of Congress and the Presidency), leaving the South with no credible promise that its rights in slaves would be maintained.

Course requirements: (1) Students are required to read all the material; be ready to summarize each paper in a cogent paragraph; and participate in class discussion. Although I rarely call on particular students, I expect each student to be prepared to begin the discussion of each reading with a short description of the main question and finding. If discussions do not arise naturally, I will assign students responsibility for leading a discussion of particular works.

(2) Writing. Students are required to write a major research paper that applies the logic developed in the course to a topic of their choice. The paper is due on the Monday, June 5. We will discuss format, length, and research for the paper in class. Quality of exposition matters! This is a firm due date, and I rarely grant exceptions. If you can’t meet this deadline, please don’t take this class.

As a further note: In past years, students from have produced papers that were ultimately published. I hope you will become sufficiently interested to pursue your paper beyond the class.

Two final notes: First, the reading list contains far more readings and topics than can be covered in one quarter. We will therefore read a selected subset, as indicated by an asterisk (*). I provide the longer list for two reasons: (a) to suggest further readings on the topics covered and on related topics that are not covered; (b) to provide a set of suggestions for paper topics. Second, the readings are not designed to be representative of the major approaches found in particular fields (e.g., comparative politics). Instead, they are intended to show how the approach to institutions developed in the course can illuminate issues central to the field.

Course Outline:

(Readings are indicated by a *)
 
 

I. Institutions in Politics, Economics, and History (Class 1)

 
        Suggestions for further readings

        Alchian (1950) "Uncertainty, Evolution, and Economic Theory"
        Kreps (1990) "Corporate Culture" in Alt and Shepsle.
        Milgrom, North, and Weingast (1988) "The Law Merchant." Ec and Pol
        Axelrod (1984) The Evolution of Cooperation
        Axelrod (1986) "The Evolution of Cooperation Among Egoists"
        Greif, Milgrom, and Weingast (1994) "The Merchant Guild" JPE
        Knight (1992) Institutions and Social Conflict
        Milgrom and Roberts (1992) Economics, Organization, and Management
        North (1972) "Markets and other Allocation Systems in History"
        North (1991) Institutions, Institutional Change, and Economic Performance.
 

II. Theory of Institutions:

         A. Class 4: Congressional institutions

        *Calvert (1995) "The rational choice theory of social institutions"
        *Cox and McCubbins (1993) Legislative Leviathan: Parties and Committees in the US House
        of Representatives.
        *Weingast & Marshall (1988) "Industrial Organization of Congress" JPE

        Suggestions for further readings

        Aldrich (1995) Political Parties
        Banks and Calvert (1991) "Communication and Efficiency in Coordination Games
        Fenno (1961) "Appropriations Process as a Political System"
        Ferejohn (1986) "Food Stamps"
        Fiorina (1989) Congress: Keystone of the Washington Establishment (2nd ed.)
        Gamm (1998) Urban Exodous
        Kiewiet and McCubbins (1991) The Logic of Delegation
        Krehbiel (1991) Information Based Rationales for Congressional Organization
        Laver and Shepsle (1994) Making and Breaking Governments
        Mayhew (1974) Congress: The Electoral Connection
        Shepsle and Weingast (1987) "Institutional Foundations of Committee Power" APSR
        Shepsle and Weingast (1995) Positive Theories of Congressional Institutions
        Weingast (1979) "Rational Choice Perspective on Congressional Norms" AJPS
        Weingast (1991) "Fighting Fire with Fire."

B. Class 5: Bureaucratic Institutions:

        *McCubbins, Noll, and Weingast (1999) "Political Origins of the APA"
        *Milgrom and Roberts (1990) "Influence Costs" In Alt and Shepsle
        *Moe (1989) "The Political Structure of Agencies"

        Suggestions for further readings

        de Figueiredo (1997) "The Structure of Reciprocity"
        Ferejohn Shipan (1989) "Congressional influence on Telecommunications Policy," in
            Dodd and Oppenheimer, Congress Reconsidered 4e.
        Kiewiet and McCubbins (1990) Logic of Delegation Ch on "Delegation"
        Macey (1992) "Organizational Design and the Control of Administrative Agencies."
        McCubbins and Schwartz (1984) "Police Patrols vs. Fire Alarms." AJPS
        Moe (1984) "The New Economics of Organization" AJPS
        Moe (1990) "The Politics of Structural Choice."
        Noll (1985) "Administrative Behavior"
        Niskanen (1971) Bureaucracy and Representative Government
        Snider and Weingast (1995) "The American System of Shared Powers:
            Congress, the President, and the NLRB"
        Weingast (1984) "Congressional-Bureaucratic System"
        Wilson (1980) "Politics of Regulation"

        Additional topics of interest (not covered in class)

        C. The presidency

        Bailey, Goldstein, and Weingast (1997) "The Origins of American Trade Policy: Rules,
            Coalitions, and International Politics" World Politics
        Cameron (1997) Presidential Vetoes
        Kiewiet and McCubbins (1991) The Logic of Delegation
        Moe (1990) "The Institutionalized presidency"

        D. Parties
 
        Aldrich (1995) Why Parties? The Origin and Transformation of Party Politics in America.
        Baron (19**)
        Cooper and Brady (1988) Parties
        Cain Ferejohn Fiorina (1987) Personal Vote (Ch 1,9)
        Cox and McCubbins (1993) Legislative Leviathan:
            Parties and Committees in the US House of Representatives.
        Kohno (1997) Japan’s Postwar Party Politics
        Krehbiel (199*) "Where’s the Party?" British J. of Pol. Sci.
        Ramseyer & Rosenbluth (1992) The Political Marketplace

        E. Political machines:

        Caro (1974) Power Broker
        Inman and Rubinfeld (1979) "Judicial Pursuit of Local Fiscal Equity" Harvard Law Rev.
        Kreps (1990) "Corporate Culture" in Alt and Shepsle, eds.,
        Miller (1981) Cities by Contract

        F. Macroeconomic Credibility

        Alesina and Drazen (1991) "Why are stabilizations delayed" AER.
        Alesina and Tabellini (1988) "political cycles"
        Drazen (2000) Political Economy in Macroeconomics
        Kydland and Prescott. 1977. "Rules Rather than Discretion: The Inconsistency of Optimal Plans," JPE
        Lohmann (1988) "Delegation to a Monetary Authority"
        Lohmann, (1996) "Federalism and Central Bank Autonomy:
            The Politics of German Monetary Policy, 1960-1989"
        Persson and Svensson (1989) "Why a Stubborn Conservative Would Run a Deficit:
            Policy with Time-Inconsistent Preferences." QJE
        Persson and Tabelini (1994) Monetary and Fiscal Policy
        Sargent (1986) "Post-WWI Hyperinflations"
        Sargent (1998) Conquest of American Inflation
        Sargent and Velde (1994) "Macroeconomic causes and consequences of the French Revolution" JPE

IV. Evolution of Political Institutions in a Historical Perspective: Europe

Class 6: England vs. France in Early Modern Europe (1689-1815).

        *Root (1989) "Tying the King's Hands: Credible Commitments And Royal Fiscal Policy During the Old Regime."
            Rationality and Society
        *North and Weingast (1989) "Constitutions and Commitment: Evolution of Institutions Governing Public Choice
            in 17th-Cent. England" J. Ec History

        Suggestions for further readings

        Bein (1987) "The Uses of Privilege under The Ancien Regime."
        Brewer (1990) Sinews of Power.
        Hoffman (1994) "Taxes, Fiscal Crises, and Representative Institutions: The Case of Early Modern France" in
            Hoffman and Norbert (1994)
        Hoffman and Norbert (1994) Fiscal Crises, Liberty, and Representative Government, 1450-1789
        Hoffman and Rosenthal (1997) "The political-economy of absolutism reconsidered"
        Maitland (1909) Constitutional History of England
        North (1981) Structure and Changes
        North (1990) Institutions, Institutional Change
        Root (1994) The Fountain of Privilege: Institutional Innovation and Social Change in Old Regime
            France and England
        Sargent and Velde (1994) "Macroeconomic causes and consequences of the French Revolution" JPE

        Additional topics of interest (not covered in class)

        1. Institutions underpinning the organization of trade: Markets and states in medieval Europe

        Greif (1994) "Cultural Beliefs and the Organization of Society"
        Greif (1997) "Podesta"
        Greif, Milgrom, and Weingast (1994) "Coordination, Commitment, and Enforcement:
            The Case of the Merchant Guild" JPE
        Pirenne (1925) Medieval Cities, ch. 6
        DeRoover (1963) "Organization of Trade [in Medieval Europe]"
        Fox (1971) History in Geographic Perspective
        Greif (1989) "Reputations and Coalitions in Medieval Trade."
        Lopez (1981) Commercial revolution in the middle ages
        Milgrom, North and Weingast (1988) "Law Merchant" Ec and Pol
        Root (1994) Fountain of Privilege

        2. Feudal organization:

        Fenoaltea (1975) "The Rise and Fall of a Theoretical Model: The Manorial System"
        Goubert (1973) The Ancient Regime
        North and Thomas (1973) Rise of the Western World
        North (1981) Structure and Change
        Root (1989) "Tying the King's Hands" Rationality and Society
        DeTocqueville, L'Ancien Regime

        3. State Building and Military Technology:

        Bean (1973) "War and the Birth of Nations." J of Ec History
        Cipolla (1965) Guns and Sails
        Kennedy (1988) The Rise and Fall of the Great Powers.
        McNeill (1982) Pursuit of Power
        Parker (1990) The Military Revolution

        4. Political Foundations of Sovereign Debt

        Conklin (1993) MS on Spain
        Eaton, Gersovitz and Stiglitz (1986) "Pure Theory of Country Risk"
        Hoffman and Rosenthal (1995) "Historical Lessons for development: the European Experience"
        Levi (1988) Of Rule and Revenue
        Lipson (1988) "International Organization of Third World Debt" in
            Bates, Towards a Political economy of International Debt
        Weingast (1997) "Political Foundations of Limited Government: Sovereign Debt," in Drobak and Nye, forthcoming.

5. The Rise of Representative Institutions:

        Haggard and Kaufman (1995) Democratic Transitions
        Karl (1986) "Pacts"
        North (1994) [history of liberty MS]
        North and Weingast (1989) "Constitutions and Commitment" J Ec History
        Pirenne (1915) Democracy in the Low Countries
        Putnam (1983) Making Democracy Work
        Schultz and Weingast (1996) "The Democratic Advantage"
        Waley (1988) The Italian City Republics
        Weingast (1997) "The Political Foundations of Democracy and the Rule of Law" APSR

V. Commitment Problems in Comparative Politics

Class 7: Democracy

        *Przeworski (1991) Democracy and the Market Ch 1.
        *Weingast (1997) "Political Foundations of Democracy and the Rule of Law" APSR

Class 8: Development

        *Fiorina and Noll (1978) "Voters, Legislators and Bureaucrats" J Pub Economics
        *Spiller and Wm Savedoff, "Government opportunism and the performance of enterprises."
            ch 1 of: Spilled Water: Political Economy of Water Regulation in Latin America, (1998)
        *Weingast (1995) "The Economic Role of Political Institutions" JLEO

        Suggestions for further readings on comparative politics

        Abernethy (1999) MS on empires.
        Ames (1987) Political Survival
        Almond and Verba (1963) Civic culture
        Amsden (1989) Asia’s Next Giant
        Barnett and Meuller (1974) Global Reach
        Bates (1984) Markets and States in Tropical Africa
        Bates (1983) "Modernization and Ethnic politics" in Oloronsura and Rothchild.
            State Versus Ethnic Claims: African Policy Dilemmas
        Bates (1988) "Review of the Development Literature" in his essays.
        Campos and Roots (1996) Key to the Asian Miracle
        De Soto (1989) The Other Path
        Diamond (1994) Nationalism, Ethnic Politics, and Democracy
        Ensminger (1992) Making a Market
        Fearon and Laitin (1996) "Explaining Interethnic cooperation" APSR
        Geddes (1994) Politicians’ Dilemma
        Haggard and Kauffman (1995) Democratic Transitions
        Hoffman and Rosenthal (1997) "Historical Lessons for development: the European Experience"
        Horowitz (1985) Ethnic Groups in Conflict
        Kautsky (1982) Traditional Empires, Parts I-II.
        Laitin (1988) "Language Games"
        Laitin (1998) Identity in Formation
        Levi (1988) Of Rule and Revenue
        Lipjhart (1974) Politics of Accommodation
        Litwack (1991) "Legality and Market Reform in Soviet-type economies"
        North (1981) Structure and Change
        North (1987) "England vs. Spain"
        North (1990) Institutions
        North and Thomas (1973) Rise of the Western World
        O'Donnell and Schmitter (1986) Transitions
        Popkin (1978) Rational Peasant
        Putnam (1993) Making Democracy Work
        Rabushka and Shepsle (1972) Politics in Plural Societies
        Rogowski (1987) "Trade and the Variety of Democratic Institutions"
        Rogowski (1988) Commerce and Coalitions
        Rosenthal (1992) Fruits of Revolution
        Stiglitz (1998) "The Private Uses of Public Interests: Incentives and Institutions." J. of Economic Perspectives
        Weingast (1994) "Political Impediments to Economic Reform: Political Risk and Enduring Gridlock"

        Corruption:

        Campos (1991) "Political Economy of Cronyism"
        Montinola (1992) "Political Foundations of Corruption"
        Shleifer and Vishny (1993) "Corruption" QJE
        Tirole (1992) "Persistence of Corruption"
        Manion (1994) [corruption in China]

        Ethnic politics
 
        Fearon (1994) "Ethnic Violence as a commitment problem"
        de Figueiredo and Weingast (1999) "Rationality of Fear"

VI. International Organization:

        Axelrod and Keohane (1985) "Achieving Cooperation Under Anarchy"
        Bueno de Mesquita (1988) "Contribution of Expected Utility Theory to the Study of International Conflict."
        Fearon (1996) "Signaling and Commitment in International Politics"

        Suggestions for further readings

        BDM (1997) [New MS]
        Fearon (1990) [MS on international cooperation]
        Greif, Milgrom and Weingast (1990) "Merchant Gilds as a Nexus of Contracts."
        Goldstein (1993) Ideas, Interests, and American Trade Policy
        Keohane (1984) After Hegemony
        Leeds, "Domestic Political Institutions, Credible commitments, and International cooperation," AJPS 1999.
        Martin (1998) Democratic Commitments
        Milner (1998) [Ms on trade agreements]
        Weingast (1996) "An Endogenous Role for Sovereignty" Politics and Society
        Yarbrough and Yarbrough (1992) Cooperation and Governance in International Trade
 

VIII. State Building, Constitutions, and Commitment

        A. Constitutions as Self-enforcing Constraints
            (with applications to political reform in the former communist regimes)
 
        Gibbons and Rutten (1996) "Hierarchical Dilemmas"
        Greif, Milgrom Weingast (1994) "The Merchant Guild"
        Milgrom, North, and Weingast (1989) "The Law Merchant"

        B. NEO and State-building
 
        Grief (1997) "The Podesta"
        Greif, Milgrom Weingast (1994) "The Merchant Guild"
        North, Summerhill and Weingast (1998) "Order, Disorder and Economic Change: Latin America vs. North America"

        Suggestions for further reading

        Persson, Roland, and Tabellini (1996) "Separation of powers"
        Shleifer and Vishny (1993) "Corruption"

        C. Revolution

        Ackerman (1992) Liberal Revolution
        Haber and Razo (1998) "political instability and economic performance."
        Moore (1966) Social Origins of Dictatorship and Democracy
        Rakove, Rutten, and Weingast (1998) "Ideas, Interests, and Credible Commitments in the American Revolution"
        Sargent and Velde (1992) "Macroeconomic causes and consequences of the French Revolution" JPE
        Skocpol (1979) States and Social Revolutions Ch **

        Suggestions for further readings

        Almond and Verba (1963) The Civic Culture
        Boettke (1992) Peristroika, Ch 6.
        Calvert (1992) "Elements of a Theory of society among Rational Actors"
        Hardin (1989) "Why a Constitution?" in Grofman and Wittman
        Litwack (1991) "Legality and Market Reform in Soviet-type economies"
        Montinola, Qian, and Weingast (1995) "Federalism, Chinese Style" World Politics
        Ordeshook (1992) "Constitutions as Self-Enforcing Constraints" Constitutional Political Economy
        Weingast (1997) "The Political Foundations of Democracy and the Rule of Law" APSR

        Additional topics of interest

        1. Environmental factors affecting statehood

        Bean (1973) "War and the Birth of Nations." JEH
        Casella and Feinstein (1992) "Public Goods in Trade: On the Formation of Markets and Political Jurisdictions"
        Hirschleifer (1994)
        North (1981) Structure and Change, Ch. **
        Olson (1990) "Autocracy, Democracy, and Prosperity" APSR
        Scully (1992) Constitutional Environments and Economic Growth

        2. Logic of Constitutional Constraints:

        Buchanan and Brennan (1980, 1985) Power to Tax; and The Reason of Rules
        Elster
        Friedrich (1968) Constitutional Government and Democracy
        Friedrich (1968) Limited Government
        Hayek (1960) Constitution of Liberty
        Holmes
        Helman (1997, 1998)
        Riker (1981) Liberalism vs. Populism (ch 1 and 9)
        Weingast (1988) "Political Institutions and Public Performance in Modern America"

        3. The historical-institutional approach to state building

        Bensel (1994) Yankee Leviathan
        Evans, Rueschemeyer and Skocpol (1985) "Bringing the State Back in"
        Hall and Taylor (1997) [survey of the new institutionalisms]
        Skocpol (1979) Social Revolutions
        Skocpol (1993) Soldiers and Mothers
        Skowronek (1983) Building a New American State
 

IX. Constitutions, Credible commitments, and Political Stability

 A. Class 9: Federalism

        *Diaz, 1999, Federalism in Mexico
        *Iaryczower, Saiegh, and Tommasi, "Coming Together: The Industrial Organization of Federalism"
        *Montinola, Qian, and Weingast (1995) "Federalism, Chinese Style"

        Suggestions for further reading

        Bednar, Eskridge, and Ferejohn (1996) "A Political Theory of Federalism"
        Riker (1964) Federalism
        Solnick (1996) "Political economy of Russian Federalism"
 

B. Class 10: The role of institutions in the American Democratic Stability and its break down in Civil War

        *Weingast (1997) "Political Stability and the Civil War: Commitment, Institutions, and American Democracy "
        *Wright (1978, ch 5) "Cotton, Slavery, and the Civil War"

        Suggestions for further readings

        Fogel (1989) Without Consent or Contract
        Fogel and Engerman (1974, 1977) Time on the Cross
        Giennapp (1986) Origins of the Republican Party
        Holt (1981) Political Crisis of the 1850s
        Lee and Passell (1979, ch 10) "Economic Causes of Civil War"
        Potter (1976) The Impending Crisis
        Ransom (1989) Conflict and Compromise
        Riker (1981, ch 9) "Manipulation... The Development of the issue of Slavery as a Prelude to the Civil War"
        Robach (1992) An Imaginary Negro in an Impossible Place
        Silbey (1985) Partisan Imperative
        Weingast (1996) Institutions and Political Commitment:
            A New Political Economy of the American Civil War Era