Conference on Political Economy

NBER Reporter, Summer 1989 | Go to article overview

Conference on Political Economy


Conference on Political Economy

The NBER held a conference on political economy in Cambridge on May 19-20. Alberto Alesina, NBER and Harvard University, organized the following program:

Sebastian Edwards and Guido Tabellini, NBER and

University of California at Los Angeles, and Alex

Cukierman, Tel Aviv University, "Seigniorage and

Political Instability"

Discussant: Nouriel Roubini, NBER and Yale

University

John Londregan and Keith Poole, Carnegie-Mellon

University, "Coups d'Etat and the Military Business

Cycle"

Discussant: James Alt, Harvard University

Linda Cohen, University of California at Irvine,

"Political Perceptions of Economics: The Case of

Synthetic Fuel Development"

John Ferejohn and Charles R. Shipan, Stanford

University, "The Threat of Legislation: Congress and

Administrative Agencies"

Discussant: Paul L. Joskow, NBER and MIT

Matthew McCubbins, University of California at San

Diego, "Party Governance and U.S. Budgetary

Policy"

Discussant: Robert P. Inman, NBER and University

of Pennsylvania

David Baron, Stanford University, "Regulatory

Incentives Mechanisms, Commitment, and Political

Action"

Jean Tirole, MIT, and Jean-Jacques Laffont, Harvard

University, "The Politics of Government

Decisionmaking: Regulatory Institutions" and "The Politics

of Government Decisionmaking: A Theory of

Regulatory Capture"

Discussant: Thomas Romer, Carnegie-Mellon

University

Barry Weingast, Stanford University, "The Political

Economy of Regulatory Agency Decisionmaking"

Discussant: Jeffrey Banks, University of Rochester

Seigniorage is an optimal source of governmental revenue if there is tax evasion or there are large tax collection costs. Edwards and Tabellini argue that the efficiency of the tax system also reflects deliberate political decisions, as well as its stage of development or the structure of the economy. In particular, the equilibrium efficiency of the tax system, and hence seigniorage, also depend on political stability. They find that more unstable countries rely on seigniorage much more than stable and homogeneous societies do.

The transfer of power through the use of military force is a commonplace event in world affairs. No two coups d`etat are identical, but their common denominator generally is poverty, according to Londregan and Poole. They analyze political and economic data from 121 countries for 1950-82 and find that the poorest countries are 21 times more likely than the richest to experience coups. Poverty also increases the likelihood that a government is overthrown by a coup. Thus even authoritarian governments have powerful incentives to promote economic growth, not out of concern for the welfare of their citizens, but because failure to deliver adequate economic performance may lead to their removal. Londregan and Poole also find that the aftereffects of a coup include a heritage of political instability and an increased likelihood of further coups.

The synthetic fuel development program was arguably the worst of the energy policies instituted by the U.S. federal government following the oil crises in the 1970s. Project choices were made in haste, using technologies that were poorly suited to the program's goals and that had little chance of technological success. The program was characterized by boom and bust cycles, and was cancelled in the early 1980s. Cohen analyzes roll call votes in Congress and relates program failures to changes in the coalition of support groups in Congress. She shows that the program was not a simple pork barrel. Support in Congress depended on a shaky coalition that formed after OPEC oil shocks in the 1970s, but evaporated once oil prices started falling in the 1980s.

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