A dynamic theory of parliamentary democracy

This paper presents a dynamic model of elections, government formation, and legislation in a parliamentary democracy with proportional representation in which the policy chosen in one period becomes the status quo for the next period. The electorate votes strategically by taking into account the likely governments that parties would form based on their representation and the policies they would choose as a function of the status quo. The status quo thus affects both the election outcomes and the bargaining power of the parties during government formation. A formateur party therefore has incentives to strategically position the current policy to gain an advantage in both the next election and the subsequent bargaining over government formation and policy choice. These incentives can give rise to centrifugal forces that result in policies that are outside the Pareto set of the parties.     

Elections with platform and valence competition

We study a game in which candidates first choose platforms and then invest in costly valences (e.g., engage in campaign spending). The marginal return to valence depends on platform polarization—the closer platforms are, the more valence affects the election outcome. Consequently, candidates without policy preferences choose divergent platforms to soften valence competition. Moreover, exogenous increases in incentives for valence accumulation lead to both increased valence and increased polarization—the latter because candidates seek to avoid the costs of extra valence. As a result, the increase in valence is smaller than it would have been with exogenous platforms. Finally, the model highlights the overlooked substantive importance of common modeling assumptions. Changing the source of uncertainty in our model from noise around the median voter's ideal point to a shock to one candidate's valence (as is common in the literature) leads to complete platform convergence for all parameter values.     

Political Competition, Rent Seeking and the Choice of Environmental Policy Instruments: Comment

In this comment, I analyze Damania's political economy model (Environmental and Resource Economics 13: 415–433, 1999), correcting some flaws and clarifying some ambiguities. I arguethat the political parties are identical at the outset of the game. Onlyafter the parties have chosen the instrument (standards or taxation) and thestrictness of environmental policy do the environmentalists and thepolluting firms know which party to support in the election campaign. Inequilibrium, both parties choose the same platform, so that both have anequal probability of winning the election.     

Optimal information acquisition and monetary policy

I study optimal monetary policy with an expectational AS curve and private agents who optimally choose their amount of information pertinent to predicting policy. Shocks with time-varying variance (ARCH) induce interesting information acquisition (IA) dynamics; optimal IA affects optimal policy and vice versa. Under discretion, IA dynamics cause time-varying effectiveness of policy because of the expectational AS curve; policy may be rendered completely ineffective. In policy game equilibrium, a fall in the shock’s variance typically induces less IA and raises welfare. In one exceptional case the opposite occurs, a result which does not require implausible unstable equilibria. An agent becoming informed increases the endogenous component of economic volatility; IA therefore has a negative externality. Under commitment policy’s effectiveness is again time-varying, but policy is never completely ineffective: commitment enables the central bank to credibly limit policy’s volatility; this limits private agents’ incentive to become informed, so limits expectation-induced policy neutrality.     

Designing tax policy in federalist economies: An overview

The emerging economic federations of the European Union, Russia, and South Africa, along with the established federations in Australia, Canada, and the United States, confront the task of designing the institutions for federal fiscal policy. This paper reviews the literature on the design of tax policy in federalist economies. We conclude that taxation by lower level governments can lead to significant economic inefficiencies and inequities. The usual ‘assignment’ view of federalis recommends central government policies — for example, resident-based taxation or grants-in-aid — to correct these failures. These recommendations assume that the central government will act as a benevolent social planner. The ‘political economy’ view of federalism suggests that this assumption is in error and that additional federalist institutions must be considered. Alternative legislative structures and constitutional rules are considered.     

Using Random nth Price Auctions to Value Non-Market Goods and Services

Public policy decision making often requires balancing the benefits of a policy with the costs. While regulators in the United States and abroad rely heavily on benefit-cost analysis, critics contend that hypothetical bias precludes one of the most popular benefit estimation techniques—contingent surveys—from providing reliable economic values for nonmarket goods and services. This paper explores a new methodology to obtain the total value of nonmarket goods and services—random nth price auctions. The empirical work revolves around examining behavior of 360 participants in a competitive marketplace, where subjects naturally buy, sell, and trade commodities. The field experiment provides some preliminary evidence that hypothetical random nth price auctions can, in certain situations, reveal demand truthfully.     

Interdisciplinary policy analysis in economic forecasting

Economic policy formulation suffers from many ills, not the least of which is a basic inadequacy in the methods of long-range economic forecasting. This article discusses the need for a longer time perspective in economic policy and the shortcomings of current methods in regard to philosophical assumptions, theoretical limitations, economic modeling problems, and institutional issues. Interdisciplinary policy modeling is suggested as a partial solution to these shortcomings, and two examples are offered—one in regional policy simulation and other in world food-supply modeling.     

Environmental adders in the real world

This paper evaluates the use of environmental ‘adders’ as a regulatory instrument. It evaluates their likely performance in meeting the policy objective of social costing given the changes in the electric utility industry's structure and in environmental policy since the efforts to estimate these costs were initiated. The prognosis is largely negative — suggesting that environmental adders are inconsistent with the increased competition already underway in the utility industry, as well as with the trend toward greater use of true market-based approaches to environmental policy that are not subject to detailed economic regulation.     

The Czech economic crisis: Policy revenge?

The current Czech economic crisis is defined and its causes are analyzed. The role of policies followed after the collapse of communism—especially the privatization strategy, macroeconomic stabilization (based on a balanced budget and a stable exchange rate regime), and the microsphere liberalization in the absence of a functioning legal environment—will be assessed in view of current economic difficulties. These policies are identified as the primary cause of these difficulties. The need for policy changes and the nature of such changes are elucidated.     

Knowledge, economic structure, and growth

This paper proposes a two-sector growth model to examine the dynamic interactional relationships between capital and knowledge. The economy consists of two production sectors—industry and service—and one knowledge production sector—research institutions and universities. The university is financially supported by the government by taxing the service and industrial sectors. We provide a compact framework for analyzing the interactions of the three sectors with a given population and a fixed preference structure of the population. The model also determines the dynamics of the price of the industrial good, the wage rate, and the interest rate. First, we guarantee the existence of equilibria and provide the stability conditions. Then, we examine the effects of changes in the government's research policy and some other parameters upon the system.     

WHY DOES A TWO-PARTY SYSTEM EXIST?: A NEW ECONOMIC EXPLANATION*

The purpose of this paper is to present a new economic explanation for why a multiple-party system can endogenously arise as a result of the electoral process. The traditional view on the electoral process (i.e., the median voter theorem) is that political parties that pursue policies in the interest of the median voter are led to a convergence of policies. However, this view cannot explain why either conservative or liberal parties win election in many democratic countries. In order to explain this paradox, the following model considers an economy with three types of parties: conservative, middle, and liberal parties. In the model, the policy of each party is assumed to be time-consistent, so that the policy of the middle party generally leads to suboptimal outcomes for the majority voters. Thus, the “rational” majority voters try to elect the political party whose objective is biased. As a result, the electoral process may lead to a two-party system where both conservative and liberal parties have a chance to win election.     

偏好反转对协同知识创新决策的影响

基于协同知识创新决策风险性,引入行为经济学偏好反转理论,从知识积累视角构建偏好反转影响下的知识创新模型。将协同知识创新决策从单纯的选择决策拓展为选择/放弃决策,在不同决策背景下对模型进行演算。结果发现,当协作方对创新资源投入分摊比例较低时,主体对未来收益的不确定性预期较低,而在偏好反转的影响下,放弃决策对预期收益的退出定价可能较高,从而使背离放弃决策相比进入选择决策更有利于协同创新。研究结论解释了当前较多的协同知识创新联盟尽管没有实现科技政策调整的预期效果,但未大规模解体且力趋稳定合作的现象。     

Who Wants an Independent Central Bank? Monetary Policy‐making and Politics

The costs and benefits of cooperative monetary and fiscal policy are analysed in the framework of a partisan business-cycles model. It is shown that political parties with different ideologies prefer to choose different arrangements for macroeconomic policy-making. More specifically, right-wing parties favour independent central banks more than left-wing parties. An independent central bank is also the generally preferred option from a social welfare point of view. In addition, the form of policy-making arrangements between the fiscal and monetary authorities is shown to influence the extent of partisan cycles.
JEL classification : E 32; E 58; E 63; C 72     

Power sharing and electoral equilibrium

This paper considers a model of (consensual) democracy where political parties engage first in electoral competition, and they share policy-making power afterward according with the votes gathered in the election. The paper uncovers the difficulties to guarantee stability in this institutional setting; and it provides a condition of symmetry on parties’ political motivations that ensures the existence of pure strategy equilibrium under a broad family of power sharing rules, ranging from fully proportional to winner-take-all. The equilibrium analysis shows that power sharing and ideology exert a centrifugal force on policy platforms that increases party polarization, with the paradoxical result that consensual democracies can actually lead to more radical electoral campaigns than winner-take-all.     

试析哈珀政府的对华人权外交

哈珀政府上台以来，采取了有别于历届政府的、以人权外交为主的对华政策，影响了两国关系的正常发展，也受到了有关各方的批评。要改善与促进双边关系，双方应该加强对话，理解彼此的国情、社会制度和文化传统，扩大共识，缩小分歧；同时加强彼此之间的经济、文化交流与合作。     

Science policy mechanism and technology development strategy in the developing countries

The strengthening of science and technology is essential for economic growth in the developing countries. Effective science policy mechanisms do not suffice. An adequate infrastructure must be established—one that is conducive to this task. The paper focuses on the roles of government and industry in creating a favorable environment.     

Forest policy for sustainable commodity wood production: an examination drawing on the Australian experience

This paper presents a policy framework aimed at sustainability in Australia's wood-based industry. It commences with a historical overview to illuminate how culture and environment combined to fast-track Australia's plantation establishment. This maturing estate is now generating new choices about meeting wood needs and the future for native forests. The essence of the forest problem lies in the nature of commodity production where cost reduction, essential for the firm's survival, comes at the expense of native forest ecological integrity. The framework explicitly includes Australia's plantation wood resource that, by definition, is excluded from the ‘multiple use’ approach to managing native forests for wood production. Three systems are identified—native forests as self-regenerating ecosystems, wood production systems to meet human material needs and rural socio-economic systems—and a dual strategy developed to enhance their persistence capacity. This strategy combines shifting commodity wood production from native forests to plantations and adding value by domestic processing. The strategy works in a complementary way across the three systems, meaning that trade-off is avoided at this level. Native forest ecosystems cease to be threatened by the intensification pressures inherent in commodity production and relatively labour-intensive wood products manufacturers enhance their competitiveness by processing agriculturally grown wood. A highly integrated regional industry can enhance the economic viability of wood growing that helps buffer agricultural land against the price-cost squeeze of commodity production. The policy framework may not be economically efficient if, after removing government subsidies and props to the older and less competitive native forest based sector, further measures are required to stimulate investment in plantation processing. Under these conditions, a specific wood industry policy can be argued on environment grounds. Trade-off is between market interventionist industry policy and general economic efficiency—fundamentally different to the native forest conservation versus industry trade-off commonly understood.     

THE PARTISAN MODEL OF MACROECONOMIC CYCLES: MORE THEORY AND EVIDENCE FOR THE UNITED STATES*

The “Partisan Theory” of macroeconomic policy is based on the idea that political parties typically weight nominal and real economic performance differently, with left-party governments being more inclined than right-party ones to pursue expansive policies designed to yield lower unemployment and higher growth, but running the risk of extra inflation. Given suitable assumptions about the structure of the macroeconomy, partisan models imply a political signal in demand management, output and inflation movements originating with shifts in party control of the government. In this paper I develop and test with postwar US data a revised Partisan model that allows for (i) uncertainty among policy authorities about the sustainable output growth rate and therefore about how aggregate demand expansions will be partitioned between extra output and extra inflation, and (ii) ex-post and projective learning and preference adjustment under such uncertainty. Dynamic numerical analysis of a small, stylized political-economic model based on these extensions of Partisan Theory generates within-sample forecasts that correspond remarkably well to the observed pattern of price, output and nominal spending fluctuations under the parties.     

Vox Populi,Vox Dei? Tacit collusion in politics

We study competition between political parties in repeated elections with probabilistic voting. This model entails multiple equilibria, and we focus on cases where political collusion occurs. When parties hold different opinions on some policy, they may take different policy positions that do not coincide with the median voter's preferred policy platform. In contrast, when parties have a mutual understanding on a particular policy, their policy positions may converge (on some dimension) but not to the median voter's preferred policy. That is to say, parties can tacitly collude with one another, despite political competition. Collusion may collapse, for instance, after the entry of a new political party. This model rationalizes patterns in survey data from Sweden, where politicians on different sides of the political spectrum take different positions on economic policy but similar positions on refugee intake—diverging from the average voter's position, but only until the entry of a populist party.     

碳排放约束下的发电技术选择——以PC发电和IGCC发电为例

以两种发电技术——PC发电和IGCC发电为例,研究了在碳排放约束下发电企业的技术选择问题。结果表明:当碳排放价格处于低位时,PC发电的投资价值仍优于IGCC发电;随着碳排放价格的提高,IGCC发电的投资价值将超过PC发电,因此投资PC发电极可能是短视的;当企业投资CCS技术后,投资IGCC发电可能使企业拥有氢能源转换期权,该期权能激励投资IGCC发电的企业更早投资CCS技术。最后,基于破坏性创新理论,进一步论证了投资PC发电可能是短视行为的原因。