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
Discussant: Nouriel Roubini, NBER and Yale
John Londregan and Keith Poole, Carnegie-Mellon
University, "Coups d'Etat and the Military Business
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
Discussant: Paul L. Joskow, NBER and MIT
Matthew McCubbins, University of California at San
Diego, "Party Governance and U.S. Budgetary
Discussant: Robert P. Inman, NBER and University
David Baron, Stanford University, "Regulatory
Incentives Mechanisms, Commitment, and Political
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
Discussant: Thomas Romer, Carnegie-Mellon
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. …