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Mainstream economics has only recently recognized the need 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. It is written by one of Europe's leading theorists. 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 recognizes the incompleteness of the constitutional contract which leaves a lot of discretion to the politicians 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 characterize the optimal constitutional response to activities of interest groups and to study the design of any institutions in which group behavior is important.
| ISBN | 0199248680 | | Pages | 272 | | ISBN13 | 9780199248681
(What's this?) | | Volumes | 1 | | Publisher | Oxford University Press | | Weight (grammes) | 328 | | Imprint | Oxford University Press | | Published in | Oxford | | Format | Paperback | | Series title | Clarendon Lectures in Economics S. | | Publication date | 18 Oct 2001 | | Height (mm) | 216 | | Library of Congress | HD | | Width (mm) | 138 | | DEWEY | 330 | | Spine width (mm) | 15 | | DEWEY edition | DC21 | | Academic level | Professional / Scholarly |
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Chapter 1: Introduction; PART I: POLITICIANS AS INFORMED SUPERVISORS; Chapter 2: The Complete Contract Approach to Constitutional Design; Chapter 3: An Incentive Theory of the Separation of Powers; Chapter 4: Checks and Balances; PART II: FLEXIBILITY VERSUS DISCRETION IN CONSTITUTIONAL DESIGN; Chapter 5: Political Economy and Industrial Policy; Chapter 6: Political Economy and the Marginal Cost Pricing Controversy; Chapter 7: Toward a Political Theory of the Emergence of Environmental Incentive Regulation; PART III: COALITION FORMATION AND CONSTITUTIONAL DESIGN; Chapter 8: Optimal Constitutional Responses to Coalition Formation; Chapter 9: Collusion and Decentralization; Chapter 10: Concluding Remarks
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