Weingast B.R., Wittman D. The Oxford Handbook of Political Economy
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992 politics and scientific enquiry
and especially if majority voting is operative, there may exist generalized consensus
at the constitutional level. The rules in prospect or in being may secure widespread
adherence and acceptance if, over an anticipated whole sequence of particular actions,
all members of the polity expect to secure positive benefits.
For scientific analysis, the focus shifts from questions concerning the desirability of
this or that particular policy proposal, as it moves through the complex institutional
structure through which political outcomes finally emerge, to questions concerning
the efficacy of the structure, as described by the rules of the political game, by the
constitution. Constitutional political economy emerges as a research program on its
own.
This program involves analyses of processes through which constraints are se-
lected, as opposed to analyses of processes through which choices are made among
exogenously determined and imposed constraints. Such research becomes relatively
unfamiliar territory, especially to economists. The enterprise does require acceptance
of the presumption that the basic structures of rules, the inclusive constitution of
a society, are subject to deliberatively designed and implemented change. These
structures become variables, and the working properties of alternative sets of rules
become direct objects of enquiry. Also, as a normatively meaningful program, con-
stitutional political economy does rest on the proposition that constitutions, as such,
can constrain the excesses of politics.
Practical examples of the relevance of this research program emerged in the discus-
sions concerning the prospects for selecting a constitution for the European Union
in the early years of the new century, and in the efforts to design constitutions for
the republics that were components of the Soviet Union. Questions as to the relative
efficacy of parliamentary and republican systems of governance, of unicameral and
bicameral legislatures, of plurality and proportional representation, of federal and
unified structures, remain active objects of enquiry, along with many other less
inclusive ones.
12 Politics as Exchange
.............................................................................
In Section 1, I stated that enquiry into politics over the half-century incorporates
the economists’ approach to social interaction, and specifically in the concentration
on the behavior of individual actors in political processes—actors who are modeled
as furthering identifiable interests in accordance with precepts of rationality. Almost
exclusive emphasis has been on the development of a micro- rather than on a macro-
politics. A “positive” science of politics need go no further; the objective may be lim-
ited to the politics that is observed, whether this be described by the behavior of the
autocratic ruler, the participant in large-number electoral settings, the bureaucratic
rent-seeker, the party chairman, the representative agent in any of several roles, or any
other of the many public choice situations that require individual action.
james m. buchanan 993
As also noted, however, for most practitioners, science has as its ultimate normative
purpose some improvement or betterment in the human condition. In this sense, a
pure science of politics limited to an understanding of that which is observed would
be of limited value. Normative relevance emerges only as the purpose of politics is
specified, thereby allowing assessment of the observed against some scalar. At this
level, there is still another element that links development in political enquiry with
the economists’ approach. In some meaningful sense, the whole enterprise of politics
must be interpreted as a complex process of exchange, in which participants agree to
give up liberties of independent action and secure, in return, the benefits of shared
goods and services, including, importantly, the protective shield for person, property,
and contract.
The political nexus and the economic nexus are necessarily coincident, and the
central subject matter for enquiry becomes the institutional structure within which
persons seek to secure mutual gains. This basic element in modern political economy
implies, of course, that the philosophical foundations are in the theories of social
contract. In game-theoretic formulations, and relating to the Paretian–Wicksellian
criteria discussed above, the great game of politics must be modeled not only as
positive rather than zero or negative sum in some aggregative sense, but as positive
sum as evaluated by every participant.
The distributional conflict that seems to describe so much of the politics observed
must not be elevated to a position as the exclusive explanatory element. Distributional
conflict will, of course, be omnipresent in the operation of post-constitutional or
ordinary politics. But politics must be modeled as being more than a simple struggle
among interests. (Politics is not, and cannot be, conceived of as war by other means.)
There is conflict among interests, yes, but always within a consensual structure that
ensures against permanent or locked-in discrimination against any set of interests as
evaluated over a sequence of electoral periods, and that guarantees open entry into
political competition, and that imposes no prohibition on exit.
13 The Science as Such
.............................................................................
In the introduction, I also stated that enquiry into politics had become more “scien-
tific” over the course of the half-century, with the word enclosed in quotation marks.
And, in Section 7, I suggested that an operational science, of sorts, has emerged,
a science that meets the conventional criteria. We do know more about how the
political economy works, and we can advance falsifiable predictions as to the effects
of this or that change in the institutional structure. The important development
was, however, the break-out from the dominant mindset that modeled politics as
the search for the summum bonum, whether carried out by a benevolent despot, by
agents motivated by utilitarian norms, or by citizens who generally subsume their
separate interests within some generalized public interest. This mindset was unable
994 politics and scientific enquiry
to respond to the important Marxian challenge that viewed politics “before the
revolution” as aimed at advancing the interests of the ruling class. In a very real sense,
the half-century generated escapes from these countervailing visions and produced
in scholarly and public attitudes both an ability and a willingness to look at politics
“without romance,” or politics, “warts and all.”
As noted, an ultimate test of science is whether or not the human condition is
bettered by some applications of its findings. A few decades are perhaps too short
for the full impact of the new political economy, the modern science of politics, on
the organization of social interaction to be felt. On the other hand, having cleared
up the intellectual-scientific brush, so to speak, the way should be clear to examine
constructively the complex web of political processes, with a view toward identifying
perverse incentive arrangements, the removal of which would allow participants to
secure more of whatever it is that they value. Agreement should converge, among
both scientists and citizens, on the dissipation of value potential observed in rent-
seeking efforts to garner differential gains for specialized interests. The incorporation
of some equivalent of the generality principle into practical politics might indeed
work wonders.
8
Residues of both the romantic and Marxian visions of politics remain, and critics
will continue to express yearnings for a politics that can only be imagined rather than
realized. But genuine scientific progress has been made; definitive research programs
have emerged that share a common hard core that seems unlikely to be successfully
challenged.
References
Arrow,K.1951. Social Choice and Individual Values.NewYork:Wiley.
Black,D.1948. On the rationale of group decision making. Journal of Political Economy,
56: 23–34.
1958. The Theory of Committees and Elections. Cambridge: Cambridge University Press.
Bowen,H.1943. The interpretation of voting in the allocation of economic resources.
Quarterly Journal of Economics, 58: 27–49.
Brennan,G.,andBuchanan,J.M.1984. Voter choice: evaluating political alternatives.
American Behavioral Scientist, 28: 185–201.
and Lomasky,L.E.1993. Democracy and Decision: The Pure Theory of Electoral Preference.
Cambridge: Cambridge University Press.
Buchanan,J.M.1954. Individual choice in voting and the market. Journal of Political Economy,
62: 334–43.
1960. “La scienza delle finanze:” the Italian tradition in fiscal theory. Pp. 24–74 in Fiscal
Theory and Political Economy: Selected Essays. Chapel Hill: University of North Carolina
Press.
1968. An economist’s approach to “scientific politics.” Pp. 77–88 in Perspectives in the
Study of Politics, ed. M. Parsons. Chicago: Rand-McNally.
⁸ See Buchanan and Congleton 1998 for extensive discussion.
james m. buchanan 995
1975. The Limits of Liberty: Between Anarchy and Leviathan.Chicago:Universityof
Chicago Press.
1995. Foundational concerns: a criticism of public choice theory. Pp. 3–20 in Current
Issues in Public Choice, ed. J. Casas Pardo and F. Schneider. Cheltenham: Edward Elgar.
and Congleton,R.D.1998. Politics by Principle, Not Interest: Toward Nondiscriminatory
Democracy. New York: Cambridge University Press.
and Tullock,G.1962. The Calculus of Consent: Logical Foundations of Constitutional
Democracy. Ann Arbor: University of Michigan Press.
Coase,R.1960. The problem of social cost. Journal of Law and Economics, 3: 1–44.
de Jasay,A.1985. The State. Oxford: Basil Blackwell.
de Viti de Marco,A.1936. First Principles of Public Finance,trans.E.P.Marget.London:
Harcourt Brace.
Fasiani,M.1951. Principii di scienza delle finanze. Turin: G. Giappichelli.
Robbins,L.1932. The Nature and the Significance of Economic Science. London: Macmillan.
Samuelson,P.A.1954. The pure theory of public expenditures. Review of Economics and
Statistics, 36: 387–9.
Stigler,G.J.,andBecker,G.S.1977. De gustibus non est disputandum. American Economic
Review, 67: 76–90.
van Creveld,M.L.1999. The Rise and Decline of the State. Cambridge: Cambridge University
Press.
Wicksell,K.1896. Finanztheoretische Untersuchungen. Jena: Gustav Fisher (repr. as pp. 72
–118
in Classics in the Theory of Public Finance, ed. R. A. Musgrave and A. T. Peacock. New York:
St Martin’s Press, 1958).
chapter 56
..............................................................
THE FUTURE OF
ANALYTICAL
POLITICS
..............................................................
melvin j. hinich
1 Introduction
.............................................................................
The development of a science of political economy has a bright future in the long
run. But the short run will most likely be similar to what has transpired these last
thirty years in academia—a stumbling in the dark. I will address in this chapter some
serious problems with the recent research agenda in political economy that are likely
to continue on in the near future. The problem with present research is that it too
often ignores the following interrelated issues: (1) multidimensional political choices,
(2) the lack of equilibrium in political games, (3) the lack of common knowledge,
and (4) the complex non-linear dynamics of the political/economical system. Making
significant progress requires addressing these problems. Moreover, the solution to
these problems will be found in integrating various strands of social science research
into a new formulation that deals with these issues. My discussion will be within the
context of electoral politics.
2 The Past
.............................................................................
The influence of analytical political economy
1
has greatly increased since An Economic
Theory of Democracy by Anthony Downs, The Theory of Committees and Elections
¹ I use the terms “analytic politics” and “analytical political economy” rather than “political
economy” by itself because there are two conflicting meanings of the term. To some the field of political
melvin j. hinich 997
by Duncan Black, and The Calculus of Consent by James Buchanan and Gordon
Tullock were first published. A Google search on the words “political economy”
yields 36,900,000 links, and similar searches on “formal theory in political science”
and “analytical politics” yield 12,300,000 and 2,630,000 links respectively. In contrast
the well-established field of comparative politics in academic political science yields
8,700,000 links for a Google search of “comparative politics.”
When I first started working in analytical politics with Otto Davis, the median
voter result in one of the chapters of Downs’s thesis was hardly known. The dominant
paradigm amongst political scientists interesting in voting behavior in those days was
“party identification,” abbreviated as PI. Voters vote for a party because they identify
with that party based on sociological reasons. PI is similar to what is called “brand
loyalty” in marketing. A consumer buys a product with a brand that the consumer
trusts. The idea of having choices based on utility functions was almost strictly con-
fined to microeconomic theory and statistical decision theory until so-called “formal
theorists” successfully made inroads in the contentious field of political science. In the
face of this success, many political scientists outside of formal theory argue that the
major journals of the field such as the American Political Science Review and the
American Journal of Political Science publish too many papers using mathematics and
statistics that they cannot understand.
2
The problem is that, after this fine start, much of the research did not progress
in a meaningful way. For example, too many papers continue to assume a single
dimension when this assumption clearly does not hold. Furthermore the assumption
of common knowledge borrowed from modern game theory is much too strong and
the game models ignore the non-linear dynamics of the system.
3 Problems for Future Academic
Research
.............................................................................
The interdisciplinary nature of research on social choice problems that was standard
among the top scholars in economics, psychology, and sociology in the 1950sand
early 1960s has been replaced by the frantic effort to publish in top journals. If we
economy is the development of theory of the interrelationship between politics and economics using the
model of rational individual choice based on utility theory. To others “political economy” is a
Marxist-based theory. Another possible alternative term is “public choice.” This term is perceived by
many scholars to be the type of public finance economics developed by James Buchanan, Gordon
Tullock, and their students and colleagues. I believe that the field of public choice is a subset of analytical
politics.
² Some but not all important past contributions to analytical politics besides Arrow, Black, Buchanan
and Tullock, and Downs are in the following papers and books: Aldrich 1994;Coughlin1992;Cox1987;
Cox and McCubbins 1993, 1994; Denzau and Mackay 1981; Denzau and Parks 1977, 1979;Feldand
Grofman 1987;Kadane1972; Kramer 1972, 1973;McKelvey1976, 1986; McKelvey and Ordeshook 1990;
Miller 1980;Ordeshook1986, 1997;PooleandRosenthal1996;Shepsle1979;Slutsky1977; and Riker and
Ordeshook 1968.
998 the future of analytical politics
are to make significant advances in political economics that will allow policy-makers
to follow and predict shifts in the political structure of democracies, we will have to
build interdisciplinary research teams. The models we have now have to be expanded
and extended and their implications have to be tested with solid empirical analysis
involving data.
The typical paper today uses a spatial model that is still based on a single dimension
whose interpretation alternates between a single political issue and a latent ideological
dimension, usually called a Downsian dimension. Even though multidimensional
utility-based choice models have been an integral part of economic theory for a long
time, papers on analytical politics in economics usually employ game theory based on
the median voter model where the political choices are confined to the unit interval.
This problem should be overcome by a generalization of the theory.
An especially creative application of single-dimensional theory in a multidimen-
sional setting is the structurally induced model of legislatures developed by Kenneth
Shepsle and Barry Weingast (1981, 1987). Each committee or subcommittee is re-
stricted to a single issue and the median voter model is applied to the committee
voting decisions. One problem with the original theory is that it requires that the
legislators have separable preferences for the issues that are dealt with by other
committees. The structurally induced equilibrium theory should be generalized to
allow for the politicians to have non-separable preferences for the issues dealt with
during a legislative session.
The extensive use of single-dimensional models is surprising, as a number of
multidimensional models have been developed in the past. The work (cited in the
references) that I have done with Otto Davis, Peter Ordeshook, James Enelow, and
Michael Munger is based on a theory where issues spaces are linked to a low-
dimensional latent ideological space. This work is confined to explaining plurality
rule systems. Laver and Schofield have developed a theory of multiparty politics with
multiple dimensional spaces in the context of proportional representation systems.
Because this approach relies on multiple rather than single-dimensional models, their
work may serve as a basis for future research.
Most models of political games assume that the politicians are solely driven by their
desire to get elected and re-elected. One major exception to this crucial assumption
was the work of Donald Wittman (1973, 1977, 1983). Wittman argues that candidate
and party preferences are part of the larger political game. This approach should be
incorporated in a general theory of political competition.
Another problem that must be addressed is the oversimplification of political
game theory. Political economic models are mainly developed by game theorists who
apply the same assumption of common knowledge to political games as they do to
economic games. Economists who model politics rarely cite relevant papers in the
political science journals that do not conform to the styles that are demanded by
economic theorists. The fashion these days is to develop a model that is so highly
simplified that the model has little or no relationship with the complex reality of
politics, nor does it have a relationship with analytical work published in political
science journals.
melvin j. hinich 999
The future for the development of analytical politics in academic economics is also
limited by the rigid adherence in the profession to strict rationality. I expect that
the developments in the new field of evolutionary economics will be incorporated in
analytical politics. An important contribution in this field is a recent working paper
by Andrew Lo. Lo argues that “much of what behavioralists cite as counterexamples to
economic rationality—loss aversion, overconfidence, overreaction, mental account-
ing, and other behavioral biases—are, in fact, consistent with an evolutionary model
of individuals adapting to a changing environment via simple heuristics.” Modeling
decision heuristics in the chaotic world of political games is an especially important
challenge for the advancement of analytical politics. His paper is directed to a revision
of the theory of market efficiency but his discussion applies to any decision process.
We also have to admit that economic science can only make very limited forecasts
about economic systems especially in light of the fact that economics systems are
non-linear, a fact supported by empirical evidence (see Brooks, Hinich and Molyneux
2000; and Brooks and Hinich 2001). A non-linear process is path dependent and non-
scalable. This means that the reaction to a shock at time t
1
can be radically different
from the reaction of the same process to the same level of a shock at time t
2
> t
1
even though the parameters of the system remain constant. This property of non-
linear systems makes it very difficult to develop good predictions even in the short
run. The simplified game-theoretic models in economics fail to capture this aspect of
the economy. Likewise, simplified game-theoretic models of political systems cannot
capture their non-linear dynamics.
The linear modeling and fitting approach may yield useful forecasts of a non-linear
process but there is no way to know when the linear forecasts are very wrong. The
usefulness of a linear approach to forecasting an episodic non-linear process is even
more questionable than the use of a linear approach to forecasting a stationary non-
linear process.
Political systems are not only highly non-linear, they have a fundamental uncer-
tainty due to the lack of a majority rule core that has been studied for a variety
of voting mechanisms by numerous scholars over the last forty years. It is time
that we faced up to the theoretical results about the lack of equilibrium in political
systems. Let us leave equilibrium analysis behind us and start on the quest to develop
dynamic models of political systems that have the power to make non-trivial short-
run forecasts beyond “tomorrow will be like today unless there is a surprise.”
The study of politics is the hardest task in the social sciences. The political system
defines the scope of the economics system while taking resources from the economy
in order to run campaigns and produce the types of compromises that are required
of a stable economic and political system. Politics involves group choices as well as
individual choices. Emotions are as important in politics as self-interest.
Political and social games are so complex that the assumption of common knowl-
edge that all actors know all the states of nature in the games and the conditional joint
density of the states is grossly false. The future is unknowable and the fundamental
uncertainties in politics are as much a part of political life as in economics, sociology,
and war.
1000 the future of analytical politics
Life is complex and so we must simplify our analysis to obtain useful insights.
The art of research involves creation of simplifications that provide insights based on
evidence and observations. Advances in analytic political economy will have to deal
with the issues that I have raised in this chapter, but at the same time the models will
have to make the appropriate simplifications.
4 Speculation about the Future of
Analytical Political Theory for
National Policy
.............................................................................
An organized program to develop a scientific approach to analyzing political systems
would play an important role in support of a nation’s defense and foreign policies. A
political leadership in some nation will eventually decide to set up and fund a research
institute to manage a continuing research program on these topics from an analytical
perspective.
A research institute designed to make significant progress in our understanding of
politics must have the following characteristics. Such an institute has to be indepen-
dent of the day-to-day policy struggles that are a fact of life in any nation’s govern-
ment. The director of this institute should have a classical liberal arts education with
a strong background in the natural sciences and a deep interest in the social sciences
literature. The director should of course have experience in managing scientists and
engineers working on projects that have well-defined goals, such as putting men on
the moon and getting them back alive. I do not imply that the moon project goal is
a model for the development of an analytical political system program, but practical
and achievable goals must be set in order to avoid turning the institute into a report-
generating machine.
I have no idea which country and what type of funding agency will carry out such
a task nor when it will happen. I believe that it will happen, and that if one country
does, then others will follow.
References
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Press.
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1968. On the power and importance of the mean preference in a mathematical
model of democratic choice. Public Choice, 5: 59–72.
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of Economic Theory, 16: 208–19.
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analysis based on the theory of games. Journal of Politics, 35: 154–93.
and Munger,M.1994. Ideology and the Theory of Political Choice.AnnArbor:University
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1997. Analytical Politics. New York: Cambridge University Press.