INCENTIVES AND POLITICAL ECONOMY by Jean-Jacques Laffont ( 9780198294245 )

Item Details

Title:

INCENTIVES AND POLITICAL ECONOMY

By:

Format:

Hardback

List price:	£93.00
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ISBN 10:

0198294247

ISBN 13:

9780198294245

Publisher:

OXFORD UNIVERSITY PRESS

Pub. date:

30 March, 2000

Series:

Clarendon Lectures in Economics

Pages:

272

Description:

Incentives and Political Economy constructs a normative approach to constitutional design using recent developments in contract theory. It treats political economy as the study of the incentive problems created by the delegation of economic policy to self-interested politicians. Politicians are treated successively as informed supervisors or residual decision-makers. The optimal constitutional responses to the activities of interest groups are characterizedin various circumstances, as well as the optimal trade-off between flexibility of decision-making and discretion to pursue personal agendas when the incompleteness of the constitutional contract is recognized.

Synopsis:

Mainstream economics has recognized only recently the necessity to incorporate political constraints into economic analysis intended for policy advisors. Incentives and Political Economy uses recent advances in contract theory to build a normative approach to constitutional design in economic environments. The first part of the book remains in the tradition of benevolent constitutional design with complete contracting. It treats politicians as informed supervisors and studies how the Constitution should control them, in particular to avoid capture by interest groups. Incentive theories for the separation of powers or systems of checks and balances are developed. The second part of the book recognises the incompleteness of the constitutional contract which leaves discretion to the politicans selected by the electoral process. Asymmetric information associates information rents with economic policies and the political game becomes a game of costly redistribution of those rents.Professor Laffont investigates the trade-offs between an inflexible constitution which leaves little discretion to politicians but sacrifices ex post efficiency and a constitution weighted towards ex post efficiency but also giving considerable discretion to politicians to pursue private agendas. The final part of the book reconsiders the modeling of collusion given asymmetric information. It proposes a new approach to characterizing incentives constraints for group behaviour when asymmetric information is non-verifiable. This provides a methodology to characterise the optimal constitutional response to activities of interest groups and to study the design of any institution in which group behavior is important.

Illustrations:

figures

Publication:

Imprint:

Oxford University Press

Returns:

Non-returnable

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