Executive Veto Power and Constitutional Design

A “separation of powers” system provides for an executive and legislature with independent powers. While only the legislature can pass bills, executive approval is commonly required for them to become law. The executive exercises veto power by withholding approval. Executive veto power is simple if the executive can only approve a bill or reject it in its entirety; it is constructive if he can amend a bill in certain ways. It is qualified if the legislature can override a veto; it is unqualified otherwise. Any such system creates a gamelike strategic interaction between the legislature and executive. The chapter provides an expository sketch of a variety of such veto games. The analysis is based on a one-dimensional spatial model given three different behavioral assumptions: sincere behavior by both the legislature and executive, strategic behavior by both, and strategic behavior coupled with the possibility of a credible veto threat by the executive. Several extensions and qualifications are briefly noted.

Voting and Popularity

For about 45 years, vote and popularity functions have been estimated for many countries, indicating that both voting intentions and actual votes are influenced by economic development. The economy is, of course, not the only and probably not always the most important factor, but there is no doubt anymore that it is an important factor. The most relevant variables are still unemployment and/or real growth, and inflation. The estimated coefficients vary considerably between countries and time periods. In studies done, retrospective sociotropic voting dominates. However, the evidence is not so univocal; rather, it tells that voting has egotropic as well as sociotropic aspects, and it is prospective as well as retrospective. It is still open what roles self-interest and altruism play in voting.

Precursors to Public Choice

This chapter reviews the many appearances, disappearances, and reappearances of axiomatic thought about social choice and elections since the era of ancient Greek democracy. Social choice is linked to the wider public-choice movement because both are theories of agency. Thus, just as the first public-choice theorists include Hobbes, Hume, and Madison, so the first social-choice theorists include Pliny, Llull, and Cusanus. The social-choice theory of agency appears in many strands. The most important of these are binary vs. nonbinary choice; aggregation of judgement vs. aggregation of opinion; and selection of one person vs. selection of many people. The development of social choice required both a public-choice mindset and mathematical skill.

Bicameralism

In modern democracies, the legislative power is vested in parliaments with diverse organizational structures. Bicameral legislatures, requiring concurrent deliberation by two bodies, are present in about one-third of the world’s countries. Bicameralism typically serves the important purpose of accommodating the representation of heterogeneous interests from distinct social cleavages or geographic entities, but it is also associated with advantages such as greater stability of policies, increased accountability, and better quality of legislation. These benefits, however, only arise under specific circumstances, and the greater procedural complexity brought about by two chambers is not without costs. Disagreement between the two chambers often leads to costly legislative gridlock. Bicameralism can also open the door to pressure groups advancing their requests for favorable legislation when the chambers do not have time to carefully consider its consequences. The constitutional choice of bicameralism and its optimality ultimately rest on the subtle balance between its costs and benefits.

Voting at the U.S. Constitutional Convention

This chapter describes how the public-choice perspective has provided new insights into the U.S. Constitutional Convention of 1787. It reviews articles on the impact of the rules of the Convention, attempts to infer delegate votes, and reviews how public choice has helped us understand the adoption of various clauses in the Constitution and studies of the Beard thesis.

Is Democracy Exportable?

Among many aspects to the question of whether democracy is exportable, this contribution focuses on the role of the people, understood not as a unitary actor but as a heterogeneous set: the citizens. The people matter, in a different way, both in the countries to which democracy might be exported and in the democratic countries in which the question is about promoting democracy elsewhere. The mechanisms or characteristics involved in the discussion include yardstick competition, differences among citizens in the intensity of their preferences, differences among autocracies regarding intrusion into private life, citizens’ assessments of future regime change, and responsiveness of elected incumbents to the views of minorities. The second part of the contribution explains why promotion of democracy is more likely to work through citizens’ concern with human rights abuses than with regime characteristics.

Is Government Growth Inevitable?

Despite massive worldwide growth of government in the twentieth century, there have been periods in the U.S. and other countries when growth has slowed or reversed. Government growth is not inevitable. Explanations of government growth fall into three major categories. Path-dependent theories emphasize factors that continually push the size of government up, so the current size is in part a function of its past size. Theories about the equilibrium size of government explain why government is big, but not why government grows. If equilibrium conditions change, that can produce government growth. Theories also describe ideological shifts that cause people to want, or at least accept, bigger governments. All these explanations could have an effect on government growth. However, none appears to be persuasive enough to explain all the growth that occurred.

Direct Democracy and Public Policy

An extensive literature seeks to measure the effect of the initiative and referendum on public policies. Several conclusions emerge: The initiative and referendum have different effects on policy. Requiring popular approval of fiscal policies (mandatory referendums) results in lower expenditure, taxes, and debt. The initiative process gives voters more power and results in policies closer to the median voter preference; this often has reduced spending (American states, Swiss cantons), but sometimes has increased spending (cities). The initiative is associated with more socially conservative policy choices. Spurious correlation is a concern in many studies, and more research on causality is needed.

Federalism

Federalism is a governance structure that enables the aggregation of mass areas under one government. Federalism is a more complex form of governance than a unitary system. Under a federal structure of government, the activities are constitutionally divided (or shared) between constituent governments and a central government, implying a permanent coexistence and bargaining between participating governments and the center or among participating governments themselves. This chapter delineates the current state of knowledge regarding federalism and its twin concept of decentralization from the public-choice perspective. First, the chapter looks at federalism as an explanatory variable by examining how it shapes various outcomes ranging from economic growth to incidence of terrorism. Second, it deals with endogenous federalism and thus factors that explain how it emerges, survives, and changes. In the last part, the chapter summarizes several potential avenues for future research on federalism.

Politics, Direct Investment, Public Debt Markets, and the Shadow Economy

The chapter first considers the role of politics on the size of the shadow economy and how it is affected by political institutions. Second, it investigates the role of the informal sector on direct investment and public debt markets in the “official” economy. The informal sector has significant adverse effects on credit ratings, lending costs, and investment decisions. This has policy implications, especially in the context of the ongoing sovereign debt crisis, since it suggests that, if politics succeed in reducing the informal sector of financially challenged countries, this is likely to reduce credit risk concerns, cutting down lending costs, and stimulating investment.