Political Transaction Research Articles

A Transaction Cost Approach to the Autonomization of Government Organizations: A Political Transaction Cost Framework Confronted with Six Cases of Autonomization in the Netherlands

The aim of this paper is to explore the relevance of some important aspects of transaction cost economics (TCE) to a better understanding and explanation of the autonomization of government organizations. As TCE, with its focus on economic efficiency, was basically developed for the profit sector, its main concepts have to be adapted for the public sector. This paper presents a 'political transaction cost' framework which emphasizes 'political rationality' and 'political efficiency'. TCE's main concepts—the transaction characteristics specificity, frequency/scale and uncertainty and its assumptions about human behaviour, i.e. bounded rationality and opportunism,—are discussed for politically governed organizations and they are related to autonomization. The results of exploratory case research into six government organizations in the Netherlands suggest that such factors as bounded rationality, opportunism, political efficiency, and social institutions may have played an important part in the autonomization of the organizations involved. It seems that strictly economic aspects were less relevant whenever a decision to autonomize was taken and a specific form of autonomization was chosen.

Constitutionalism, division of power and transaction costs ∗

According to many democracytheorists, there is an unavoidabletrade-off between constitutionalism and theneed for political action. This papercriticizes that belief. Rather, it arguesthat a division of power, while sometimesentailing high political transaction costs,can nevertheless be beneficial andthat it is not necessarily the case that adivision of power does entail hightransaction costs. The analysis expands theframework of Buchanan and Tullock (1962).Constitutionalism is thus defended againstone of its main perceived deficiencies: itsbringing about gridlock. This does notalways happen, and when it does, it isoften a good thing.

THE POLITICAL ECONOMY OF AUTOMOBILE SAFETY INSPECTIONS

Studies of traffic safety typically assumethat policies are adopted to further thepublic interest, thereby ignoring thepolitical motives for policy. Sincepolitical motives can influence the designor enforcement of policies, accounting forpolitical motives has relevance forevaluating policy effectiveness. Weexamine the political motives concerning afrequently-studied traffic safety policy: state-mandated vehicle safety inspection. We distinguish between public interest andspecial interest explanations for safetyinspection. Our econometric models examinethe incidence of inspection across states,and determinants of regulated inspectionfees. The evidence strongly rejects apublic interest explanation, but specialinterest hypotheses also do not proveentirely satisfactory. Since recentstudies find that inspections fail toimprove highway safety, we attribute thecontinued existence of inspection programsto political transaction costs rather thanto the demands of interest groups.

Nonmajoritarian Institutions and the Limits of Democratic Governance: A Political Transaction-Cost Approach

This paper is a first step towards a positive theory of nonmajoritarian institutions. Delegation of powers to such institutions is best understood as a means of reducing certain political transaction costs. The precise nature of the relation between political sovereign and independent delegate has not been carefully investigated. Both economists and political scientists tend to rely on the available results of principal-agent theory. This paper shows why this approach is not entirely satisfactory. While the key problems of agency theory - hidden action and hidden information - are present in any relation based on specialisation and the division of labour, they are not central to the context investigated here. Instead, I argue that the fiduciary principle should be recognised as the central element in the governance structure of nonmajoritarian institutions.

State Intervention and the Role of History - state and private actors in Swedish network industries

Three main theoretical positions towards state intervention and regulation are discussed in relation to the case of Swedish infrastructure. The positive, the normative, and the political transaction cost approaches are examined in relation to the historic development of regulatory systems in civil aviation, railroads, and telecommunications. The authors show that governance regimes have historical roots, and develop differently due to policies implemented by state agencies. Three points are illuminated with a view to the interaction between state and private actors in the transport and communication sector. First, the role and function of the state agencies as well as the political system itself point to the need for a more refined analysis of state action. The active role of state agencies is also discussed emphasizing the difference between political decisions and the implementation of such decisions. Second, the role of a historical perspective is discussed, arguing that it makes possible a better understanding of the reasons behind choices of particular strategies. Finally, there might be good reason to expect the state either to act solely as a rent seeker, or as a promoter of optimal solutions.

The Interdependence Between Private and Constitutional Law: a Comment on the Grady & McGuire' Paper

After having summarized the paper by Grady & McGuire, one of their central conjectures, namely that inequality is necessary and sufficient for the emergence of efficient private law is discussed. It is argued that due to inequality, rulers have incentives to discriminate between subjects. Thus, their interests might very well diverge from those of many subjects with regard to private law. It is further argued that political transaction costs and path dependence should be taken explicitly into account when explaining the development of private law. The present author concludes that the approach taken by Grady & McGuire is compatible with that of public choice, although they aim to criticize the public choice approach.

The American States and Their Evolving Impact on Agricultural Policies

Although agricultural analysts have spent a considerable amount of time studying the effects of national policy institutions and processes, little is known about what impact the American states and their politics have on agriculture (Schuh, p. 1328). This is not surprising. The general effects of state governments on public policy are largely unexplored in any comprehensive way (Browne and VerBurg, p. xi). This is unfortunate because many American states increasingly do more while the national government does less. In effect, the states do what federal officials will not do in public policy. Although this analysis cannot fill the void in state agricultural policy, it does accomplish two things: It explains why the states are doing more, and it explores the implications of states doing more in the agricultural sector. Specifically, it asks, given the variation in the political transaction costs of securing information and negotiating agreements as imposed by policy decisions (North), whether some places are better than others for agricultural producers and firms to do business in. Moreover, it asks why these places are better for sector interests.

Channeling Ideological Change: The Political Economy of Dependence on Government

This paper is concerned with two aspects of the process of ideological change: endogenously manipulable political transaction costs and dependence on government. Building on economic models of ideological evolution that suggest the self-validating nature of institutional change, this paper analyzes a complementary process that facilitates institutional changes initially incompatible with people's beliefs. Self-interested reshaping of political transaction costs and creation of dependence on government are seen as mechanisms that support institution-legitimating ideological transformation. The evolution of Social Security's compulsory old-age insurance in the United States is used to illustrate relevant processes of institutional and ideological change. Copyright 1993 by WWZ and Helbing & Lichtenhahn Verlag AG

William Bradford's "Dialogue" with History

text was priceless, he proclaimed. There was nothing like it in human annals since the story of Bethlehem, for it was the only authentic history of what we have a right to consider the most important political transaction that has ever taken place on the face of the earth.' Presumably lost during the American Revolution, Bradford's handwritten history was rediscovered in London in 1855, and American and British diplomats spent four decades arguing over who was its proper owner. Queen Victoria, Parliament, the Senate, the Archbishop of Canterbury, and the President of the United States all had been among the contenders for the honor.2

Ethics and Etiquette of Third World Debt

Third World debt, seen as distant from the realm of international affairs and ethics, is often subject to abstract economic analysis. Peter Bauer argues that in fact the way in which debt is addressed by debtors and lenders is heavily politicized and should be subject to ethical considerations. Many Third World countries choose to prolong debt even though they are capable of repaying it; moreover, the methods of gauging and reporting current income are spurious and subject to manipulation by countries' trade policies. The ethical questionability of some Third World practices is matched by equally questionable activity in the West. Special interest groups' agendas and banks' eyes for profits influence economic policy in favor of Third World countries, further increasing their debt. Bauer's discussion of these issues of denial and permissiveness depicts Third World debt as a political transaction that wrongly escapes ethical judgement.

The internationalization of the region: The case of northeast Asian international relations

The literature on the role of regions in international relations is extensive. A ‘region’ is variably defined in terms of proximity or separateness, homogeneity, interdependence? common political orientations, institutional membership, transaction flows, or other ad hoc issues. Regions are thought to be important to the study of international relations because it is somehow assumed that regions lead to regionalism, i.e. the idea that the region has its own characteristics and logic of interaction and thus should be differentiated from outside.

A Note on the Pejavar Copper Plate 1352 Saka, 1430 A.D.

Karnataka has rich epigraphical sources. The entire edifice of Karnataka history from the 3rd century B.C. down to the end of Vijayanagara rests on epigraphical records. A volume of information concerning the political conditions, government and administration, political geography, the social structure and the life of the people, the religious faiths, economic conditions and many other topics, can be derived from a critical study of the inscriptions.The inscription under discussion is a copper plate from the village of Pejavar, Mangalore Taluka, South Kanara District, Karnataka State. The copper plate is now in the possession of K. Venkatraya Achar, Suratkal. It belongs to the period of the Vijayanagara emperor Immadi Devarāya (1424–1446 A.D.). The copper plate is in the Kannada language and script. The script seems to belong to a later period. The epigraphic department of the Government of India noticed this inscription in its annual report in the year 1967–68. Sri Venkatraya Achar, the discoverer of the inscription, made a few observations in the year 1957. This paper seeks to provide fresh information on political, religious and land transaction procedures on the basis of the contents of the copper plate.

Democratising Glory? The Victoria Cross Paintings of Louis Desanges

The Victoria Cross Gallery was a series of fifty oil paintings executed by the British artist Louis Desanges between 1859 and 1862. Each of the paintings was based on an heroic action that had won the Victoria Cross. The Gallery was exhibited at the important metropolitan art centre, the Crystal Palace, throughout the 1860s and 1870s. Desanges' paintings must therefore have been the most familiar representations of contemporary war for many middle-class Londoners in the midVictorian period. The paintings also received a wider circulation in the form of photographs and as illustrations for a book by Samuel Beeton, Our Heroes of the Victoria Cross. Desanges' paintings will be discussed here in relation to the contemporary power struggle between the aristocracy and the increasingly selfconfident upper middle classes for control over the army. The emergent class, whose wealth was derived from commerce, asserted that the right to lead in Government, the Civil Service and the Forces should be won in open competition among gentlemen. In the Army, this class had only penetrated as far as the middle ranks of the officer corps, with the majority of the highest ranks still being occupied by men from the aristocracy. Desanges' paintings constructed memorable images of young officers from the upper middle class, and articulated the claim of that group to command the Army through their possession of the qualities of 'efficiency' and 'valour'. The Victoria Cross, a new award for military gallantry, was announced during the closing stages of the Crimean War, in January 1856. The terms of its creation stated that it was open to both services, and to junior officers and the ranks.' Existing awards for soldiers, such as the Order of the Bath, were traditionally given to high-ranking officers for long service or distinguished martial achievement.2 The Victoria Cross was designed to reward acts of individual courage performed in the presence of the enemy. Historians have constructed its institution as evidence of the increasing democratisation of the nation and the Army, since it recognised and rewarded the courage of the 'rank and file', whose contribution to the forces had been acknowledged during the Crimean War.3 'Cast in a thoroughly heroic mould, the British soldier had become the focal point of public attention.'4 It will be argued here that this heroicization of the ranks formed one of a series of strategies on the part of the upper middle classes to demonstrate the unfitness of the aristocracy to control the Army. In the 1850s, the Army, like the Civil Service and other public institutions was the target of 'reform' groups who pressured for the end of promotion by patronage.5 In 1840 there had been a parliamentary inquiry into the military system of promotion by 'purchase', under which officers' ranks were obtained by a combination of political influence and monetary transaction. Due to the powerful opposition of the Duke of Wellington and the Queen, the attack on this traditional preserve of the aristocracy was deflected.6 The Crimean War, with its economic and military losses, was used as 'proof' that high-ranking aristocratic officers such as Lord Raglan and Lord Cardigan were dangerously unfit to command. The attack was aimed both at their lack of administrative ability and their inability to lead on the field of battle. In May 1855, at a meeting of 'thirty-seven of the influential men of the City' it was asserted that 'the true remedy for the system of mal-administration, which has caused so lamentable a sacrifice of labour, money and human life, is to be sought in the introduction of enlarged experience and practical ability into the Service of the State.'7 Despite disclaiming any desire to 'exclude the aristocratic classes from participating in the Councils of State', the meeting proclaimed the necessity of administering the Government and the Army on 'business principles', by persons selected on the basis of 'free competition, throwing open all public situations to merit and not confining them to birth or property.'8 All the speakers at this meeting, claimed to be an all-party gathering, were Liberal Members of Parliament, or Liberal financiers and industrialists. Within the Army, aristocratic leaders were also attacked on the question of their 'efficiency'. The inadequate organisation of the commissariat and of the troops had caused huge loss of human and material resources. The new mythology of the heroic common soldier served to enhance the value of working-class lives as military assets, but should not be taken to imply any breaking down of class barriers or a democratisation of the Army. The officer-ranks relationship was modelled on that of master-servant, with renewed emphasis on the feudal responsibilities of the master in caring for his dependents. Junior officers in the Crimea were lavishly praised in the Press for their devotion to

Nonspatial Candidate Characteristics and Electoral Competition

BASIC TO MODELS of electoral competition is the assumption that candidates adopt positions on policy issues as a means of attracting votes. However, candidates are also judged on the basis of human qualities and other attributes not related to the policies they espouse in a campaign. The spatial theory of electoral competition has, in the past, treated such attributes as part of the policy space over which candidates compete. However, certain difficulties attend such an interpretation. For example, it is difficult to view a candidate's personality as something which can be altered to please the voters. The mistakes that an incumbent has committed in office are not things he can erase to compete more effectively for votes. A candidate's religion cannot be abandoned because it is a political liability. In short, there are nonspatial attributes that affect voter evaluations of each candidate, which are beyond that candidate's immediate control. It is the purpose of this paper to incorporate these nonspatial attributes into the spatial model of electoral competition to show how the policy outcome of two candidate electoral competition is af-

Gladstone, Forster, and the release of Parnell, 1882 – 8

It is intended to examine in this article an instance of Gladstone’s ‘sophistry’ employed in defence of Parnell himself; the review which Gladstone wrote of T. Wemyss Reid’s biography of W. E. Forster, and which appeared in the Nineteenth Century for September 1888, under the title ‘Mr Forster and Ireland’. Considered as sophistry, it is, indeed, a virtuoso performance; some of the documents material to the case are ignored, others are misconstrued, others yet are quoted so selectively as to disguise the fact that, in reality, they contradict the argument they were adduced to prove, and the whole thesis depends upon a play upon meanings which trembles upon the brink of transparency. Merely to expose Gladstone, however, in a practice of which his enemies have so often accused him, and which, in any case, is not uncommon in politics, would be to indulge illfeeling without benefiting scholarship. The review deserves wider attention in that it is also a unique interpretation of the ‘Kilmainham treaty’. Other accounts, in all their diversity, have tended to agree that the episode was in some sense a political transaction.