Structure-induced Equilibrium Research Articles

The Effects of Issue Salience on Political Decision-making

Game-theoretic models of political decision-making regard policy outcomes as a combined result of actor preferences and institutions. This paper explores the effects of adding relative issue salience to the analysis. I focus on non-cooperative models of complete and perfect information that are based on the concept of structure-induced equilibrium (Shepsle in Am J Polit Sci 23(1):27–59, 1979). Assuming a progressive agenda-setter and two conservative voters, I show how a change of the relative issue salience for players in a game results in a different equilibrium outcome in a political decision-making body.

Institutionalism as a Methodology

We provide a definition of institutionalism and a schematic account that differentiates between institutional theories (in which institutions are exogenous) and theories of institutions, in which some (but not necessarily all) institutions are endogenous. Our primary argument is that institutionalism in the contemporary context is better characterized as a method than as a body of substantive work motivated by the so-called chaos problem. Secondary arguments include the following. (1) While it is important to differentiate sharply between institutions and behavior, institutionalism presupposes a well-defined behavioral concept. (2) When making the challenging transition from developing institutional theories to developing theories of institutions, it is essential to hold behavioral axioms fixed and to choose a form of equilibrium that exists for the class of games studied. (3) For most research programs today, a form of Nash equilibrium has the requisite properties while the core, and structure-induced equilibria (SIE) that rely on the core, often lack the requisite properties.

Political Stability in Divided Societies: A Rational-Institutional Explanation

Analyses of consociationalism and corporatism are based, more often than not, on descriptive case studies. These concepts are considered to explain the stability of the political systems, where one would expect that conflict and stalemate in democratic decision-making were the rule rather than the exception. In this article an attempt is made to develop a more general argument, based on the idea of a structure-induced equilibrium, to analyse institutional adaptation and change in plural societies. Central to this approach, which I label 'rational institutionalism', are the concepts of 'room to manoeuvre' for political and societal actors, on the one hand, and the 'feasibility of political choice' allowing for more space to develop positive sum results for all involved, on the other hand. This argument is first elaborated a priori and then applied to Dutch consociationalism and corporatism. These empirical illustrations demonstrate that a logic of interaction has been developed in the Netherlands, which is not a feature of the Dutch case alone, but can be understood as a form of institutional adaptation and change. This institutional approach can be considered as an analytical instrument to explain political stability under differing circumstances cross-nationally and across time in democracies.

THE ROCHESTER SCHOOL: The Origins of Positive Political Theory

▪ Abstract The Rochester school of political science, led by William H Riker, pioneered the new method of positive political theory. Positive political theory, or rational choice theory, represents the attempt to build formal models of collective decision-making processes, often relying on the assumption of self-interested rational action. This method has been used to study such political processes as elections, legislative behavior, public goods, and treaty formation and diplomatic strategy in international relations. In this article, we provide a retrospective account of the Rochester school, which discusses Riker's theoretical synthesis and his institution building in the 1950s, 1960s, and 1970s. We discuss some of the most important Rochester school contributions related to spatial models of voting, agenda setting, structure-induced equilibria, heresthetics, game theory, and political theory. We also briefly situate positive political theory within the larger context of political science and economics.

Managing the Evolution of Multilateralism

One of the most prominent characteristics of multilateral organizations is that they do not “spring forth full blown”; they grow. Although this is well known, relatively few attempts have been made to explain it at a general level or to explore its implications. In this paper we show why states that desire to create a multilateral organization or agreement might be attracted to a strategy that involves admitting potential members sequentially based on their preferences. Such a “sequential construction” strategy can generate an unusual kind of structure-induced equilibrium that dramatically mitigates the breadth-depth trade-off and increases the level of cooperation a multilateral is able to attain. We evaluate these claims with data drawn from the history of the European Union and twenty environmental multilaterals.

The Staying Power of the Legislative Status Quo: Collective Choice in Canada's Parliament after Morgentaler

AbstractRational choice theory has drawn attention to the phenomenon of structure-induced equilibrium in situations of potential cycling. When there is no majority, first preference or Condorcet winner, the outcome is determined by agenda control and institutional rules of decision making. Within that context, the status quo has a special advantage because of the parliamentary amendment procedure, in which the status quo, as the default option to the bill in formal form, is not voted upon until the last stage. The unsuccessful attempts of the Canadian government of Prime Minister Brian Mulroney to respond legislatively to the Supreme Court's Morgentaler decision illustrate these general principles of rational choice. The government was unable to get legislation passed because, with cyclical configurations of opinion in both the House of Commons and the Senate, institutional rules, especially the order of voting required by the parliamentary amendment procedure, favoured the status quo.

Subcommittee Agenda Control

The conventional wisdom holds that standing committees and subcommittees gain disproportionate influence over the policy decisions for which they have agenda control. Two solution concepts which make predictions about the influence of decentralized agenda setters are the structure-induced equilibrium (SIE) and the structural core; they differ in their predictions because the latter (but not the former) assumes that logrolling across agenda jurisdictions will occur. Experimental evidence suggests that agenda setters do bargain across jurisdictions (contrary to the SIE), and that the outcome of this bargaining process determines the value of agenda control to the agenda setters. When both subcommittee agenda setters have preferences that diverge sharply from those of the parent committee, agenda setters have an unambiguous incentive to cooperate with each other. When one subcommittee agenda setter has preferences more representative of the parent committee, the more extreme agenda setter is at a bargaining disadvantage.

Redistributive policy, inequality and growth

Does redistribution increase inequality? Is inequality harmful for growth? Both questions have recently been addressed in a number of single-tax models. In this paper, I examine the relationship between policy, growth and inequality when income and inherited wealth can be taxed at different rates. In the model, parents accumulate human capital and a return-bearing, storable good in order to increase the quality of their children. Inequality arises because the learning ability of children is stochastic. Redistributive labor income taxation has a negative impact on short- and long-run growth while taxation of inherited stocks increases growth. Effects of both taxes on income inequality are ambiguous. A switch from income to inheritance taxation may increase average utility of all generations involved. I calculate a structure-induced equilibrium of the political process by means of a stochastic simulation of the model. In the short run initial wealth-inequality can stimulate growth, while initial inequality of the endowment with human capital is harmful for growth.

POLITICAL INFLUENCE AND REGULATORY POLICY: THE 1984 DRUG LEGISLATION

I. INTRODUCTION In the late 1970s and early 1980s dissatisfaction with the length, complexity and cost of the drug approval process combined with rising prescription drug prices led to Congressional attempts at reform. These focused on two issues: to compensate the developers of new drugs for the increasing costs and delays associated with FDA approval and to increase the availability of generic drugs. Until 1984, these reform attempts failed. I use the structure-induced equilibrium (SIE) theory of Shepsle and Weingast [1981] to examine why regulatory reforms prior to 1984 were stalemated, and why the 1984 drug legislation was ultimately enacted. My results show that prior to 1984, the preferences of the members of the key congressional committees were such that the proposed bills could not beat the status quo. However, changes in both membership and turnover on the House Subcommittee on Health and the Environment, combined with a change in the majority party in the Senate, led to a situation in which the 1984 drug legislation could defeat the status quo in both the House and the Senate. The Drug Price Competition Act facilitated the market entry of generic drugs following patent expiration by allowing generic versions of brand-name drugs patented after 1962 to use an abbreviated new drug application (ANDA).(1) The Patent Term Restoration Act extended the patent lives of brand-name drugs for up to five years to compensate for patent life lost during the FDA approval process. Initial, unsuccessful legislative reforms were introduced into Congress in 1978-79 and 1981-82, but no legislative reforms were passed until 1984. These earlier unsuccessful reform efforts raise the following questions. First, why did the status quo prevail until 1984 as the legislative equilibrium? Second, what endogenous changes occurred to produce the new legislative equilibrium in 1984? While much of the previous literature about the pharmaceutical industry has focused on the efficiency and distributive effects of public policy, I focus on the theory of regulatory policy.(2) The sequence of legislative actions leading to the 1984 drug legislation shows how competing interest groups, representing brand-name and generic drug firms, forced legislators to face trade-offs in accommodating their interests. I look most closely at the members of the House and Senate committees with jurisdiction over pharmaceutical regulation issues. Data representing brand-name and generic firm or consumer interests are used to construct estimates of legislative preferences (ideal points).(3) Then, the SIE theory is used to generate predictions about legislative behavior and outcomes to help explain the initial failure of regulatory reform in 1979 and its ultimate success in 1984. The results from the analysis explain both why the status quo prevailed in 1979 and why it was overturned in 1984. The analysis also illustrates how the industry and consumer groups represented on the relevant committees can protect their interests. This occurred in both 1979, when the Senate passed legislation favorable to the generic drug industry, and 1981, when legislation supported by the brand-name drug firms was passed. In each case, representatives of the unfavored interest group were able to block legislation in the House. Legislation was possible only when the majorities on the House and Senate committees could agree on a single policy which could defeat the status quo in both committees. Moreover, this policy provided benefits to both sets of industry interests represented by committee members. The paper is organized as follows. In sections II and III, I describe the theory of political outcomes used in this analysis and provide some background on pharmaceutical regulation prior to the reforms. The estimation of congressional ideal points is discussed in section IV. Sections V and VI examine congressional responses to the 1979 drug reforms and interest group activity in the 1980s. …

Committee Power, Structure-Induced Equilibria, and Roll Call Votes

Using the concept of structure-induced equilibrium, this essay develops a simple behavioral model of roll call voting. The main results are (1) If some committees are outliers relative to the legislature as a whole-that is, if the median ideal point of the committee members is different from the median ideal point of the whole legislature-then roll call data are likely to be artificially unidimensional. This is because outlier committees will often exercise their gatekeeping power, so that the set of bills on which roll calls are taken will not be a random sample of all possible bills, but instead there will be important selection bias. (2) The unidimensional bias generally persists even as the dimensionality of the policy space becomes large; in fact, when the number of outlier committees is large, the bias may actually increase as the number of policy dimensions increases, both in absolute and relative terms. (3) Even if committees are preference outliers, it may be impossible to discover this fact by looking only at roll call votes. That is, the roll call data might indicate that committees are representative samples of the full legislature even when they are not. This is again the result of a selection bias: the roll calls that would distinguish certain committee members from other legislators never occur.

Gatekeeping or Not, Sample Selection in the Roll Call Agenda Matters

In his comment on the paper Committee Power, Structure-Induced Equilibria, and Roll Call Votes, Howard Rosenthal makes four points. The first three points have to do with the details of scaling, and while important for distinguishing between good and bad scaling techniques, they do not really affect the main conclusions one should draw from the paper. This is because the artificial unidimensionality produced by committee gatekeeping power is independent of the scaling technique used. To the extent that gatekeeping is important, it puts a unidimensional bias in the roll call data themselves; thus, any good scaling technique applied to the data should find a high degree of unidimensionality because the unidimensionality is really there. The problem is, the roll call data are too unidimensional relative to the distribution of legislators' true ideal points. Rosenthal's fourth point is more crucial, since it questions the importance of gatekeeping itself, and I shall therefore devote a bit more discussion to it. I have no major disagreements with any of the first three points. It is surely inappropriate to apply the theorist's assumption of errorless voting to actual data, just as it is inappropriate to apply any purely deterministic model in the social sciences to actual data-one always needs an error term. Also, the percentage of votes correctly classified may not be an appropriate maximand for scaling techniques, since it often leads to ugly scalings in which voting errors may be far from the cutting lines (this leads one to wonder, however, whether scholars should pay as much attention to the percentage of votes correctly classified as they do). The natural conclusion to draw from these points is clear: theorists who wish to explore the nature of roll call voting by building models that generate artificial roll call data should use a procedure such as DNOMINATE to scale the artificial data generated by the model. This conclusion cannot be taken too literally for the time being, however, since there is currently no publicly available software to run D-NOMINATE (or any similar statistical model). Rosenthal's fourth point is that the model in my essay is too stylized to be applied to the U.S. Congress. While the list of important details left out of the model is obviously long, the main intuitions developed are compelling enough that they should continue to hold in more elaborate settings. Empirically, the issue is straightforward: What fraction of the unidimensionality found in roll call voting is due to committee gatekeeping? While I do not have the answer, I can

The Robustness of the Structure-Induced Equilibrium

This paper analyzes the question of the existence of a structure-induced equilibrium (SIE) under assumptions weaker than those considered by Kenneth Shepsle (1979). It turns out that the existence result is extremely fragile: counterexamples show that weakening almost any of the assumptions of the original theorem can result in the nonexistence of an SIE. I then utilize the insights of these counterexamples to construct new models in which SIE will exist and derive implications from these models for questions of legislative politics.

Studying Institutions

This article examines recent developments in a literature referred to as `the new institutionalism'. After reviewing some of the consequences for the study of institutions of the behavioral revolution and the elaboration of Arrovian theories of social choice, the author develops the theory of structure-induced equilibrium and explores the two sides of the institutional coin - an examination of the consequences of institutional structure and an explanation of the development of institutional structure.

Spatial Models of Legislative Choice

Two classes of models that reflect how legislators make collective choices have become increasingly sophisticated in the last decade. Structure-induced equilibrium models explain stable outcomes in terms of the structural attributes of the legislature. Recent gametheoretic models offer explanations of some nonobvious regularities in legislative behavior in terms of uncertainty about procedures and differential access to information. The increasing realism and attendant complexity of these models enable them to address interesting substantive questions and to offer theoretical explanations that are subject to empirical verification.

The P-Set: A Structure-Induced Equilibrium for Sequential Legislative Voting

Legislative voting is a formally defined collective decision-making process that includes a relatively small number of participants. Thus one might expect that process to be effectively modeled by a number of game-theoretic solution concepts and for legislatures to be important laboratories for testing hypotheses derived from game theory. The failure to realize these expectations is understandable if one attempts to interpret the solution concepts in a legislative context: restrictive voter preference requirements and questionable incentives for agenda formation raise serious doubts about the efficacy of existing game theoretic solutions for modeling legislative voting decisions. The P-set is developed from the sequential structure of legislative voting, and the assumption that legislator decisions to add an issue to that sequence are based on the maximin principle. It addresses both questions of agenda and outcome stability. In general, the P-set maximizes existence by relaxing the normally stringent preference conditions for stability. In this paper consideration is given to problems associated with the application of game-theoretic solution concepts to the analysis of legislative voting decisions. In particular these solutions, which qualify as preference-induced equilibria, raise questions about how elements in a solution set come before the voters. To answer these questions, an alternative approach to stability in collective choice is proposed. The P-set is a structure-induced equilibrium, derived from the sequential order of legislative voting that enables legislators to anticipate and respond to the consequences of adding to the sequence of issues that forms a voting decision.'

Executive veto, legislative override, and structure-induced equilibrium

In this study the structure-induced equilibrium approach for modeling democratic institutions is extended to allow for the added structural features of executive veto and legislative override. A multidimensional model is presented for a budgetary process involving three actors — a legislature, an appropriations committee, and an executive. In order to focus attention on the role of the veto and override possibilities, simplifying assumptions are made with regard to other aspects of the agenda formation process. In particular, the committee has monopoly agenda power, a closed amendment control rule is operative, and perfect-foresight expectations are held by the committee and the executive. Given these assumptions, utility maximization by the several actors generates a budget outcome characterized as a structure-induced equilibrium. The general model is illustrated geometrically with a two-dimensional example, permitting budget outcomes to be analyzed for various combinations of veto rules and override provisions. The analysis demonstrates that budget outcomes are sensitive to alternative specifications of veto rules and override provisions. In the illustration, executive veto power is shown to vary directly with both the permissiveness of the veto rule and the stringency of the override provision. Similar relationships, however, are not found to exist for total budget expenditures.

Executive Veto and Informational Strategy: A Structure-Induced Equilibrium Analysis

This paper explores the strategic value of incomplete preference revelation for an executive with veto authority within a budgetary process. The analysis indicates which forms of veto power can be augmented by the strategic manipulation of information on preferences. The lesson of the analysis is that the failure to consider the strategic value of incomplete preference revelation is a methodological shortcoming of standard structure-induced equilibrium analysis, since without such consideration equilibrium outcomes are subject to misspecification; the true power bestowed upon individual political actors by alternative institutions is misunderstood; and the informational gamesmanship that is so much a part of the political process is left unexplained.

Voter Expectations in Multi-Stage Voting Systems: An Equilibrium Result

Recent work by Shepsle (1979) on structure-induced equilibrium has been challenged by Denzau and Mackay (1981), who show that voter expectations about the outcome of future votes can upset the stability induced by voting on issues one at a time. We show that under a politically informed model of voter expecations, risk aversion on each issue is necessary and sufficient for equilibrium under all voter forecasts when issues are voted on one at a time. This result gives an important insight into the role played by risk aversion in ensuring stability in real world voting systems.

Gatekeeping and Monopoly Power of Committees: An Analysis of Sincere and Sophisticated Behavior

By modeling sophisticated forms of committee behavior-sophistication with full information and expected utility maximization with incomplete information-this article more fully conveys the nature and importance of committee power than does previous work based on sincere committee behavior. Under the germaneness rule, for example, sophisticated committee behavior greatly expands the set of structure-induced equilibrium points. Under the closed rule, as another example, sophisticated committee behavior, based on compromise and a careful crafting of bills, moves legislative outcomes closer to the committee's preferred outcomes. Incomplete information and risk aversion lead committee members to behave more cautiously, thereby introducing more inertia into the legislative process and expanding equilibrium sets.

Structure-Induced Equilibria and Perfect-Foresight Expectations

This paper extends the work on structure-induced equilibria by explicitly considering voters' expectations. The standard assumption of myopic expectations is contrasted with the alternative assumption of perfect-foresight expectations. In the institutional setting examined perfect foresight means voters know how the outcome on the first issue in a sequence of two issues conditions majority-rule outcomes on the second issue. If voters act on this knowledge when voting on the first issue, then several important results follow. First, voters may possess multipeaked preferences defined over the first issue with a majority cycle resulting so that there is no equilibrium to the whole sequence of elections. Second, even if cycling does not result, the exact location of the equilibrium involves a broader conspiracy than previously thought-a conspiracy of not only preferences and institutional structure but also voters' expectations as conditioned by that structure.