Transactions costs and production in a legislative setting

Abstract

In a recent contribution to the literature on public sector production, Crain, Leavens and Tollison [C-L-T, AER, September 1986] argue that production in a legislative setting may be characterized aptly by an Alchian/Demsetz type model of team production. They operationalize their model by arguing that more valuable inputs in the production process (more trustworthy congressmen) will be reimbursed accordingly (via faster and/or more frequent passage of sponsored bills than for less trustworthy House members). Lack of a specified residual claimant, such as the party or some other entrepreneurial political entity, aside, the basic point seems well taken: team production is part and parcel of the legislative process. In fact, however, it is not clear that legislative output results from team production. The logrolling model of legislative activity is an obvious, competitive alternative to the team production model. What does seem abudantly clear vis-t-vis any model of legislative activity is that transactions costs (in a variety of forms) play an important role in determining final results. The purpose of this paper is to provide additional evidence from the state legislatures that gives credence to the importance of transactions costs, in a team production or logrolling setting, in determining legislative outcomes. According to C-L-T, the team production model of legislative organization implies that more senior, more trustworthy members of the legislative body will secure passage of 'their' bills faster than less senior, less trustworthy members of the legislature. Across several specifications of the model, their empirical results support this implication, for the 96th Congress. If a single legislative period were the correct time unit of analysis for bills, the results would be convincing. However, bills may be (and frequently are) introduced into numerous legislative sessions prior to receiving final approval. Under the circumstances, the correct time period of analysis may extend across several legislative periods,