Suchergebnisse

Resistance to socially desired reforms may arise from uncertainty about the consequences of reforms at the individual level (Fernandez and Rodrik, 1991). Without a binding commitment, a promise to compensate losers will not raise support for reforms due to a credibility problem. This paper shows that voting simultaneously on several reforms may solve the credibility problem. It is argued that the governmental agreement in the Netherlands has served as a means to vote simultaneously on several reforms and has helped breaking political deadlocks. Moreover, our model provides an explanation for some perceived changes in the Dutch policy making process.

After decades of government growth, Western countries have witnessed major policy reversals. Prominent examples include the far-reaching policy reversals implemented by Thatcher, Reagan, and Douglas. This paper offers an explanation for these policy reversals. Our key argument rests on the assumptions that public decisions are made by majority rule and that voters have incomplete information about the aggregate consequences of all possible bundles of public projects making up the government. Unlike existing explanations, our theoryis consistent with the observations that policy reversals are often undertaken simultaneously and that separate parts of the package of policy reversals are not welcomed enthusiastically by voters.

Can vanity do any good? It may seem obvious to answer this question in the negative, as economists have shown how reputational concerns lead agents e.g. to ignore valuable information, to herd, and to become overly risk averse. We explore how proud agents may be a social blessing. An agent may exert effort to become informed about the uncertain benefits of aproject. A smart agent's efforts make him better informed; a dumb agent's efforts are to no avail. If an agent does not know his type, pride is socially beneficial. If an agent knows his type, a dumb agent takes inefficient, unconventional decisions to mimick a smart agent. The latter exerts more effort in order not to be mistaken for a dumb. This holds whether or not project rejection is a save haven for the dumb.

The collection of information necessary fordecision-making is often delegated to agents (e.g. bureaucrats,advisors, lawyers). If both the pros and cons of a decision haveto be examined, it is better to use competing agents instead of asingle agent. The reason is that two conflicting pieces ofinformation cancel each other out. Using two agents, eachsearching for one cause yields full information collection atminimum costs. This provides a rationale for advocacy in politicaland judicial systems. In this paper, we provide a rationale forthe sequential nature of information collection in advocacysystems. If two agents search simultaneously, the incentive tocontinue searching is affected by the information found by theother agent. This forces the principal to leave rents to theagents. If agents search sequentially, the reward can be madeconditional on the information found in earlier stages. Thisreduces the cost of information collection. However, sequential advocacyimplies either a more sluggish decision-making processor a less-informed decision.

Uncertainty about the future preferences of the government may induce policy makers to run excessive budget deficits. As a solution to this problem, economists have proposed to impose a binding debt rule. In this paper we argue that a binding debt rule does not eliminate the distortions due to strategic behaviour of politicians. Rather, strategic manipulation shifts from public debt to public investment. As an alternative, we examine the effects of a capital borrowing rule which permits the government to run a budget deficit equal to the amount of public investment. We show that this rule effectively eliminates strategic behaviour.