1 Finer, Samuel, Adversary Politics and Electoral Reform (London: Wigram, 1975); Finer, Samuel, The Changing British Party System, 1945–79 (Washington, DC: American Enterprise Institute, 1980).
2 APSA, ‘Toward a More Responsible Two-Party System’, American Political Science Review, 44 (1950), Supplement.
3 Shepsle, Kenneth, ‘The Role of Institutional Structure in the Creation of Policy Equilibrium’, in Rae, Douglas and Eismeier, Theodore, eds, Public Policy and Public Choice (Beverly Hills, Calif.: Sage, 1979) and others have argued for strong, centralized two-party systems based on their supposed greater stability.
4 Olson, Mancur Jr, The Rise and Decline of Nations (New Haven, Conn.: Yale University Press, 1982); ‘An Appreciation of the Tests and Criticisms’, Scandinavian Political Studies, 9 (1986), 65–80; and ‘A Theory of the Incentives Facing Political Organizations: Neo-Corporatism and the Hegemonic State’, International Political Science Review, 7 (1986) 165–89.
5 Olson, , The Rise and Decline of Nations.
6 The definitions of ‘encompassing’, ‘deadweight losses’ and ‘Westminster parties’ are open to debate. I will present exact definitions below, after reviewing various definitions.
7 Olson, , ‘An Appreciation of the Tests and Criticisms’ and ‘Theory of the Incentives Facing Political Organizations’.
8 Taken from Olson, , ‘A Theory of the Incentives Facing Political Organizations’.
9 In the presentation, like Olson, I will analyse the effects on income, not wealth. Wealth raises separate problems that must be dealt with in another paper.
10 Both groups, as will be shown below, are encompassing. However, the second group will have an incentive to stop all rent-seeking behaviour, while the first group will only reduce its rent-seeking behaviour. The rent-seeking group will pursue redistributive policies if they are profitable, that is, if the gains exceed the costs to the group. The rent seekers are not deterred if their policies impose net losses on society as a whole.
11 Harberger, A., ‘Monopoly and Resource Allocation’, American Economic Review, 44 (1954), 77–87.
12 Tullock, G., ‘The Welfare Cost of Tariffs, Monopolies and Theft’, Western Economic Journal, 5 (1967), 224–32. See also Bhagwati, Jagdish, ‘Directly-Unproductive Profit Seeking (DUP) Activities’, Journal of Political Economy, 90 (1982), 988–1002. Bhagwati's directly unproductive profitseeking, or DUP, is a closely related variant of Tullock's argument.
13 The relationship between Harberger's consumer surplus loss, Tullock, 's ‘unproductive’ lobbying costs and private costs of lobbying is not necessarily linear and additive. For a good exposition, see Bhagwati, , ‘Directly-Unproductive’. A general equilibrium analysis of rent seeking, which requires a separate paper, is necessary to show all the possible relations between the three.
14 The distinction between productive and unproductive activities has a long history in economics. The Physiocrats – for example, Mirabeau and Quesnay – first made the distinction. They argued that farming was the only productive economic activity and that manufacturing was unproductive. Classical economists like Smith and Marx took over the distinction, but the specific activities included in each category differed from the Physiocrats. Marx denned labour expended in the manufacturing of products or farming as productive activity, while he considered managerial labour and all labour engaged in the service sector as unproductive. Neoclassical economists have simply dropped the distinction.
15 See Helpman, Elhanan, ‘The Exact Measure of Welfare Losses which Result from Trade Taxes’, International Economic Review, 19 (1978), 157–63, for a good exposition.
16 Hufbauer, Gary, Berliner, Diane and Elliott, Kimberly, Trade Protection in the United States: 31 Case Studies (Washington, DC: Institute for International Economics, 1986), pp. 14ff.
17 Jankowski, Richard, ‘Preference Aggregation in Political Parties and Interest Groups: A Synthesis of Corporatist and Encompassing Organization Theory’, American Journal of Political Science, 32 (1988), 105–25; and ‘Preference Aggregation in Firms and Corporatist Organizations: The Enterprise Group as a Cellular Encompassing Organization’, American Journal of Political Science, 33 (1989), 973–96.
18 Magee, S., Brock, W. and Young, L., Black Hole Tariffs and Endogenous Policy Theory (New York: Cambridge University Press, 1989).
19 Magee, , Brock, , and Young, , Black Hole Tariffs.
20 Jankowski, , ‘Preference Aggregation in Political Parties and Interest Groups’, and ‘Preference Aggregation in Firms and Corporatist Organizations’.
21 Jankowski, , ‘Preference Aggregation in Political Parties and Interest Groups’, and ‘Preference Aggregation in Firms and Corporatist Organizations’.
22 Olson, , The Rise and Decline of Nations; ‘An Appreciation of the Tests and Criticisms’; and ‘A Theory of the Incentives Facing Political Organizations’.
23 Magee, , Brock, and Young, 's evidence (see Black Hole Tariffs) for their analysis is a negative correlation between lawyers per 100,000 population and the economic growth rate.
24 Olson, , The Rise and Decline of Nations.
25 Olson, , The Rise and Decline of Nations; ‘An Appreciation of the Tests and Criticisms’; and ‘A Theory of the Incentives Facing Political Organizations’.
26 A discrete or continuous measure would require a metric for all three characteristics. However, I know of no theoretical basis for the required weights or metric.
27 Blondel, Jean, ‘Party Systems and Patterns of Government in Western Democracies’, Canadian Journal of Political Science, 1 (1968), 180–203.
28 Two and a half party systems are those with several parties, but where two parties dominate. Either dominant party forms a ruling coalition with a minority party. Hence, the dominant party is held accountable.
29 Vanhanen, Tatu, The Process of Democratization (New York: Crane Russak, 1990).
30 Janda, Kenneth, Comparative Political Parties: A Cross-National Survey (New York: The Free Press, 1980).
31 Political parties within a country sometimes have different internal structures. Hence, the measures used are an average of all the political parties within each country.
32 Duverger, Maurice, Political Parties (London: University Paperbacks, 1954), pp. 43ff.
33 Blondel, Jean, Comparative Government (Deddington, Oxon: Philip Allan, 1990).
34 See, for example, McCallum, J., and Blais, A., ‘Government, Special Interest Groups, and Economic Growth’, Public Choice, 54 (1987), 3–18; and Lange, Peter and Garrett, Geoffrey, ‘The Politics of Growth: Strategic Interaction and Economic Performance in the Advanced Industrial Democracies, 1974–1980’, Journal of Politics, 47 (1985), 792–827.
35 Solow, Robert, ‘Technical Change and the Aggregate Production Function’, Review of Economics and Statistics, 39 (1957), 312–20.
36 The second reason Solow gives is because population growth is not uniform over time or between countries. Hence, it is possible to have a positive growth rate of GNP, a positive growth rate in population size and a decline in per capita GNP.
37 Solow, , ‘Technical Change and the Aggregate Production Function’.
38 Maddison, Angus, Phases of Capitalist Development (Oxford: Oxford University Press, 1982).
39 Choi, Kwang, ‘A Statistical Test of Olson's Model’, in Mueller, D., ed., The Political Economy of Growth (New Haven, Conn.: Yale University Press, 1983).
40 Choi, , ‘A Statistical Test of Olson's Model’.
41 Choi, , ‘A Statistical Test of Olson's Model’, presents a full description of the construction of the index. I use his Index B. I also ran the analysis with his Index A, and as in Choi's analysis, the findings the same.
42 Jankowski, , ‘Preference Aggregation in Political Parties and Interest Groups’.
43 Pryor, Frederick, ‘Corporatism as an Economic System: A Review Essay’, Journal of Comparative Economics, 12 (1988), 317–4.
44 Jankowski, , ‘Preference Aggregation in Firms and Corporatist Organizations’.
45 Lehner, Franz, ‘Consociational Democracy in Switzerland: A Political Economic Explanation and Some Empirical Evidence’, European Journal of Political Research, 12 (1984), 25–42.
46 Olson, , ‘An Appreciation of the Tests and Criticisms’, and ‘A Theory of the Incentives Facing Political Organizations’.
47 Vanhanen, , The Process of Democratization.
48 A number of different specifications were tried. For example, concurrent systems were coded 1.5, that is, between executive and legislative dominated. In none of the variations did the (EXECUTIVE) variable reach statistical significance.
49 In this article I have presented only a detailed exposition of Olson's Westminster model of political parties. I just claim that the responsible party model of the APSA is essentially identical to the Westminster model. See Jankowski, Richard, ‘Westminster and Responsible Parties: A Comparison’ (unpublished manuscript, for a detailed exposition of the linkages between the responsible and Westminster models).
50 Magee, , Brock, and Young, , Black Hole Tariffs.
51 See Jankowski, Richard, ‘A Missing-Market Interpretation of the Paradox of Vote Trading’ (paper presented at the Public Choice Society Meetings, 1989) for a possible explanation of the findings that does not rely upon the encompassing character of political institutions.
52 Finer, , Adversary Politics and Electoral Reform; also, The Changing British Party System, 1945–79.
53 The Australian lower house uses a preferential voting rule in single-member districts.
54 De Long, Bradford, ‘Productivity Growth, Convergence and Welfare’, American Economic Review, 78 (1988), 1133–7.
55 North, Douglas C., Structure and Change in Economic History (New York: Norton, 1981) and Institutions, Institutional Change and Economic Performance (Cambridge and New York: Cambridge University Press, 1990).
56 This proposition is common to Downs, Anthony, An Economic Theory of Democracy (New York: Harper and Row, 1957); and Olson, Mancur Jr, The Logic of Collective Action (Cambridge, Mass.: Harvard University Press, 1965). Groups engaged in ongoing economic activities can use their pre-existing organizations to promote or fight public policies. Non-economic groups rarely have these pre-existing organizations. Hence, the costs of building such organizations is substantially higher.
57 Tullock, G. and Buchanan, J., The Calculus of Consent (Ann Arbor: University of Michigan Press, 1962); Weingast, Barry and Marshall, William, ‘The Industrial Organization of Congress: Or Why Legislatures, Like Firms, Are Not Organized as Markets’, Journal of Political Economy, 96 (1988), 132–63.
58 Hence, transaction costs that undermine the efficacy of Coase's private bargaining might also preclude encompassing political institutions.
59 Another line of inquiry is to establish an alternative set of deadweight losses which are based on economic conditions. The most wide-ranging work on deadweight losses is found in the extensive optimal tax literature. But the maximum deadweight losses (excess burden) established by this literature is only a fraction of the revenues (redistributive gains?) raised. See Fullerton, Don, ‘Reconciling Recent Estimates of the Marginal Welfare Cost of Taxation’, American Economic Review, 81 (1991), 302–8, for a discussion of empirical estimates of the excess burden of taxation.
60 Cellular encompassing organizations are better mechanisms for reducing redistributive policies because they perform their function even if the deadweight gains are smaller than the redistributive gains. Olson's encompassing organizations cast a much coarser net because they only constrain redistributive policies which have deadweight losses twice the size of redistributive gains.
61 This linkage between the effects of institutions and their microfoundations is controversial because it requires a selection mechanism. Such a mechanism has not been established for social phenomenon, as opposed to natural selection for biological systems.
62 Additional effort must also be given to expand Vanhanen's measure of political systems and Blondel's measure of party competition. At present, they are based on an impressionistic reading for a number of countries.
63 Shepsle, , ‘The Role of Institutional Structure’.
64 See Jankowski, , ‘A Missing-Market Interpretation of the Paradox of Vote Trading’, for an effort along these lines.
65 An example illustrating the need for an integrated analysis is seen if we assume that vote-trading promotes economic efficiency. In this case, strongly centralized political parties will retard economic efficiency because centralized political parties limit vote-trading among their members. By contrast, if vote-trading reduces economic efficiency, strong parties are needed to prevent vote-trading. Any complete analysis of interest aggregation must examine all the institutions simultaneously to determine their ultimate effect.