Insiders
To Elect or to Appoint? Bias, Information, and Responsiveness of Bureaucrats and Politicians
Matias Iaryczower, Garrett Lewis & Matthew Shum
Journal of Public Economics, forthcoming
Abstract:
In this paper, we address empirically the trade-offs involved in choosing between bureaucrats and politicians. In order to do this, we map institutions of selection and retention of public officials to the type of public officials they induce. We do this by specifying a collective decision-making model, and exploiting its equilibrium information to obtain estimates of the unobservable types. We focus on criminal decisions across US states' Supreme Courts. We find that justices that are shielded from voters' influence ("bureaucrats") on average (i) have better information, (ii) are more likely to change their preconceived opinions about a case, and (iii) are more effective (make less mistakes) than their elected counterparts ("politicians"). We evaluate how performance would change if the courts replaced majority rule with unanimity rule.
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Lauren Cohen, Karl Diether & Christopher Malloy
NBER Working Paper, August 2012
Abstract:
In this paper we demonstrate that legislation has a simple, yet previously undetected impact on firm stock prices. While it is understood that the government and firms have an important relationship, it remains difficult to determine which firms any given piece of legislation will affect, and how it will affect them. By observing the actions of legislators whose constituents are the affected firms, we can gather insights into the likely impact of government legislation on firms. Specifically, focusing attention on "interested" legislators' behavior captures important information seemingly ignored by the market. A long-short portfolio based on these legislators' views earns abnormal returns of over 90 basis points per month following the passage of legislation. Further, the more complex the legislation, the more difficulty the market has in assessing the impact of these bills. Consistent with the legislator incentive mechanism, the more concentrated the legislator's interest in the industry, the more informative are her votes for future returns.
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A Positive Theory And Empirical Analysis Of Strategic Word Choice In District Court Opinions
Rachael Hinkle et al.
Journal of Legal Analysis, forthcoming
Abstract:
Supported by numerous empirical studies on judicial hierarchies and panel effects, Positive Political Theory (PPT) suggests that judges engage in strategic use of opinion content - to further the policy outcomes preferred by the decision-making court. In this study, we employ linguistic theory to study the strategic use of opinion content at a granular level - investigating whether the specific word choices judges make in their opinions is consistent with the competitive institutional story of PPT regarding judicial hierarchies. In particular, we examine the judges' pragmatic use of the linguistic operations known as "hedging" - language serving to enlarge the truth set for a particular proposition, rendering it less definite and therefore less assailable - and "intensifying" - language restricting the possible truth-value of a proposition and making a statement more susceptible to falsification. Our principal hypothesis is that district court judges not ideologically aligned with the majority of the overseeing circuit judges use more hedging language in their legal reasoning in order to insulate these rulings from reversal. We test the theory empirically by analyzing constitutional criminal procedure, racial and sexual discrimination, and environmental opinions in the federal district courts from 1998 to 2001. Our results demonstrate a statistically significant increase in the use of certain types of language as the ideological distance between a district court judge and the overseeing circuit court judges increases.
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From Litigation to Legislation in Tobacco Politics: The Surrender of Philip Morris
Martha Derthick
Political Science Quarterly, Fall 2012, Pages 401-415
Abstract:
Asks why it was possible for Congress to enact regulation of tobacco manufacture in 2009 after many years of indulging the industry. She finds the explanation in the rise of opposition to the industry in the Democratic Party and the embrace of regulation by Philip Morris, the major manufacturer, which was seeking safety and stability after repeated assaults from an array of public and private actors in legislatures, courts, and the media.
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War, the Presidency, and Legislative Voting Behavior
William Howell & Jon Rogowski
American Journal of Political Science, forthcoming
Abstract:
An extraordinary body of scholarship suggests that war, perhaps more than any other contributor, is responsible for the emergence of a distinctly modern presidency. Central to this argument is a belief that members of Congress predictably and reliably line up behind the president during times of war. Few scholars, however, have actually subjected this argument to quantitative investigation. This article does so. Estimating ideal points for members of Congress at the start and end of the most significant wars in the past century, we find consistent - albeit not uniform - evidence of a wartime effect. The outbreaks of both world wars and the post-9/11 era - though not the Korean or Vietnam wars - coincided with discernible changes in member voting behavior that better reflected the ideological leanings of the presidents then in office. In the aftermath of all these wars, meanwhile, members shifted away from the sitting president's ideological orientation. These findings are not confined to any single subset of policies, are robust to a wide variety of modeling specifications, and run contrary to scholarship that emphasizes ideological consistency in members'
voting behavior.
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The "Problem of Preferences": Medicare and Business Support for the Welfare State
David Broockman
Studies in American Political Development, forthcoming
Abstract:
Few political observers would readily assume that a present-day politician's or interest group's claims about their preferences accurately reflect their genuine views. However, scholars often unwittingly make this very assumption when inferring the preferences of historical political actors. In this article I explore the influence of business groups on Medicare's passage to illustrate how inattention to political actors' strategic misrepresentations can bias qualitative and quantitative research. An ongoing debate wrestles with the pattern that businesses often grant support to welfare-state expansions just before they occur, a regularity some take as evidence that business interests dictate these expansions. I use Medicare as a case study and document that key business groups and their allies did not truly favor the program. However, I also show that these actors strategically misrepresented their preferences as Medicare's passage became likely in order to advance more limited alternatives. The strategic nature of this position is exceptionally easy to miss; yet inattention to it produces the opposite, erroneous conclusion about these actors' historical role. Medicare's legislative history thus illustrates the methodological necessity of documenting whether political actors are misrepresenting their preferences. I discuss how scholars can do so by tracing actors' stated preferences across strategic circumstances, including audiences and time.
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Constitutional Change and American Pivotal Politics
Keith Dougherty & Justin Moeller
American Politics Research, forthcoming
Abstract:
Recent studies of legislative gridlock espouse the importance of institutional design in separation-of-powers games. However, few scholars have focused on the effects of the adoption of the U.S. Constitution on legislative gridlock. This article attempts to fill that gap by determining whether the Constitution improved the marginal effect of the gridlock interval on the ability to change policy. Results suggest that policy is more responsive to the range of pivotal players (in both the negative and the positive direction) under the Constitution than under the Articles of Confederation, providing empirical evidence that it may be the superior design.
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Elections and the Quality of Public Officials: Evidence from U.S. State Courts
Claire Lim & James Snyder
NBER Working Paper, September 2012
Abstract:
We investigate the influence of electoral rules and voter information in elections on voting outcomes and the quality of public officials, using new data on state court judge elections in 39 states in the U.S. from 1990 to 2010. We find, first, that voting is very partisan in partisan judicial elections - i.e., there is a strong correlation between the Democratic "normal vote'' and the Democratic vote share for judges - but not in non-partisan or non-competitive "retention'' elections. This partisan voting behavior cannot be attributed to clear differences between Democratic and Republican judges in their sentencing decisions, since such differences, if any, are small and not consistent. Second, we find that incumbent judges' quality has little effect on their vote share or probability of winning in partisan general elections. By contrast, it has a substantial effect in non-partisan elections and partisan primary elections. It also has a noticeable effect on their vote share in retention elections, but the magnitude is often too small to affect reelection. Evidence on turnout is consistent with a simple "voting cue'' hypothesis. We find that about 83% of the voters who vote on the top office on the ballot also vote on judicial elections in partisan elections. In contrast, in nonpartisan and retention elections, only 76% and 67% of those who vote on the top office also vote on judicial candidates, respectively. In addition, the amount of newspaper coverage affects voter turnout only in non-partisan elections.
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The social constitution of regulation: The endogenization of insider trading laws
Zahn Bozanic, Mark Dirsmith & Steven Huddart
Accounting, Organizations and Society, October 2012, Pages 461-481
Abstract:
Accounting research, whether founded in an economics or sociological paradigm, has generally treated regulation as an exogenous part of the environment that shapes the behavior of those who operate within it. Recently, joining those who have advanced the regulator capture hypothesis, the exogenous presumption of the regulatory framework has been challenged by institutional theorists within the sociology literature, and it has been reasoned that those regulated seek to influence the regulations applied to them to gain advantage. In effect, the actions of those regulated "endogenize" the regulations that gird them. Employing this emerging strand of institutional theory research, we probe efforts to "endogenize" the Securities and Exchange Commission's (SEC) regulation of insider trading. More specifically, applying both latent and manifest content analyses, we examine archival material relating to the development of insider trading regulations, focusing in particular on the social negotiation of the SEC's Rule 10b5-1, which prohibits company officers from trading in their company's stock while in "knowing possession" of material, non-public information. Our results suggest that those regulated by 10b5-1 effectively influenced this regulation (viz., by way of successfully advocating for an affirmative defense provided for so-called "planned trades"). Our analysis suggests that endogenization is an on-going, recursive process marked by moves and counter-moves among contending factions. Implications are explored.
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In search of El Dorado: The elusive financial returns on corporate political investments
Michael Hadani & Douglas Schuler
Strategic Management Journal, forthcoming
Abstract:
Although many believe that companies' political activities improve their bottom line, empirical studies have not consistently borne this out. We investigate the relationship between corporate political activity (CPA) and financial returns on a set of 943 S&P 1500 firms between 1998 to 2008. We find that firms' political investments are negatively associated with market performance and cumulative political investments worsen both market and accounting performance. Firms placing former public officials on their boards experienced inferior market performance and similar accounting performance than firms without such board members. We find, however, that CPA is positively associated with market performance for firms in regulated industries. Our results challenge the profit-maximizing assumptions underlying CPA research and focus on agency theory to better understand CPA.
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Elections, Leaders, and the Composition of Government Spending
Adi Brender & Allan Drazen
Journal of Public Economics, forthcoming
Abstract:
Do elections allow voters to express their policy preferences, with change in government spending patterns following the election of a new leader? How long does it take for the composition of government spending to change following a change in leadership? Or, do significant spending changes precede (rather than follow) elections, with incumbents using significant changes in spending composition as an electoral tool? Using a dataset we created on government expenditure composition in 71 democracies over 1972-2009, we examine the relation between elections and significant changes in the composition of government spending. We find that leaders' replacements have no significant short-run effect on expenditure composition, even after controlling for various political and economic variables. Over the medium-term leadership changes are associated with larger changes in expenditure composition, but only in developed countries. We also find that election years are associated with larger expenditure composition changes in established democracies, but not in new democracies, which previous work has found raise their overall level of expenditures in election years.
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Electoral Systems, Voters' Interests and Geographic Dispersion
Stephanie Rickard
British Journal of Political Science, October 2012, Pages 855-877
Abstract:
There is general agreement that democratic institutions shape politicians' incentives to cater to certain constituencies, but which electoral system causes politicians to be most responsive to narrow interests is still debatable. Some argue that plurality electoral rules provide the greatest incentives for politicians to cater to the interests of a few; others say proportional systems prompt politicians to be relatively more prone to narrow interests. This study suggests that both positions can be correct under different conditions. Politicians competing in plurality systems privilege voters with a shared narrow interest when such voters are geographically concentrated, but when they are geographically diffuse, such voters have greater political influence in proportional electoral systems. Government spending on subsidies in fourteen developed countries provides empirical support for this argument.
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Charles Lamb & Adam Nye
Political Science Quarterly, Fall 2012, Pages 445-467
Abstract:
Show how the Federal Housing Administration continued to permit racial segregation in its mortgage insurance program for years after the Truman administration indicated that it must alter that policy. They argue that the case once again illustrates that presidential control has its limits as bureaucracy successfully defied presidential preferences and continued on a policy trajectory opposed by the president.
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Cycles of Distrust: An Economic Model
Daron Acemoglu & Alexander Wolitzky
MIT Working Paper, July 2012
Abstract:
We propose a model of cycles of distrust and conflict. Overlapping generations of agents from two groups sequentially play coordination games under incomplete information about whether the other side consists of "extremists" who will never take the good/trusting action. Good actions may be mistakenly perceived as bad/distrusting actions. We also assume that there is limited information about the history of past actions, so that an agent is unable to ascertain exactly when and how a sequence of bad actions originated. Assuming that both sides are not extremists, spirals of distrust and conflict get started as a result of a misperception, and continue because the other side interprets the bad action as evidence that it is facing extremists. However, such spirals contain the seeds of their own dissolution: after a while, Bayesian agents correctly conclude that the probability of a spiral having started by mistake is sufficiently high, and bad actions are no longer interpreted as evidence of extremism. At this point, one party experiments with a good action, and the cycle restarts. We show how this mechanism can be useful in interpreting cycles of ethnic conflict and international war, and how it also emerges in models of political participation, dynamic inter-group trade, and communication -- leading to cycles of political polarization, breakdown of trade, and breakdown of communication.
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Bradley Hays
Politics and Religion, August 2012, Pages 394-418
Abstract:
School prayer represents a curiosity of Reagan era politics. Reagan and the social conservative movement secured numerous successes in accommodating religious practice and faith in the public sphere. Yet, when it came to restoring voluntary school prayer, conservatives never succeeded in securing the judicial victory that they sought despite conditions that seemingly favored change. Herein, we attempt to reconcile Reagan era successes with Reagan era failures by exploring Reagan's entrepreneurial activity to affect both the demand (i.e., judges) and supply (i.e., litigants) side of legal change. Identifying Reagan's entrepreneurial activities in his attempt to alter national social policy reveals the resilience of legal institutions to presidential and partisan regimes. Reagan's efforts to change national school prayer policy gained some measure of legislative success by securing the Equal Access Act but it failed to garner a change in school prayer jurisprudence. We conclude by noting that the difficulty of influencing both the demand and supply side of legal change in a timely manner and its implication for reconstructing policy through the courts.
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Endogenous Jurisprudential Regimes
Xun Pang et al.
Political Analysis, forthcoming
Abstract:
Jurisprudential regime theory is a legal explanation of decision-making on the U.S. Supreme Court that asserts that a key precedent in an area of law fundamentally restructures the relationship between case characteristics and the outcomes of future cases. In this article, we offer a multivariate multiple change-point probit model that can be used to endogenously test for the existence of jurisprudential regimes. Unlike the previously employed methods, our model does so by estimating the locations of many possible change-points along with structural parameters. We estimate the model using Markov chain Monte Carlo methods, and use Bayesian model comparison to determine the number of change-points. Our findings are consistent with jurisprudential regimes in the Establishment Clause and administrative law contexts. We find little support for hypothesized regimes in the areas of free speech and search-and-seizure. The Bayesian multivariate change-point model we propose has broad potential applications to studying structural breaks in either regular or irregular time-series data about political institutions or processes.
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Intergroup Argumentation in City Government Decision Making: The Wal-Mart Dilemma
Stephenson Beck, Katherine Gronewold & Kai Western
Small Group Research, October 2012, Pages 587-612
Abstract:
Intergroup argumentation is an important aspect of civic activism, but it has yet to be studied from an interaction perspective. Using group argumentation research as a foundation, this study analyzed intergroup argumentation complexity and strategy by applying the Conversational Argument Coding Scheme (Canary, Ratledge, & Seibold, 1982) to a Lawrence, KS, USA, city commission meeting. Analysis found that Wal-Mart officials spent the majority of their speaking time framing their positions (i.e., delimitors), whereas city commissioners spent most of their time seeking convergence, and the public spent more time than the other groups using generative mechanisms. Findings suggest the need to distinguish between argument effectiveness and argument complexity, an important theoretical implication for argumentation research.