Political bubbles McCarty, Nolan; Poole, Keith T; Rosenthal, Howard
2013., 20130521, 2013, 2013-05-21
eBook
Behind every financial crisis lurks a "political bubble"--policy biases that foster market behaviors leading to financial instability. Rather than tilting against risky behavior, political ...bubbles--arising from a potent combination of beliefs, institutions, and interests--aid, abet, and amplify risk. Demonstrating how political bubbles helped create the real estate-generated financial bubble and the 2008 financial crisis, this book argues that similar government oversights in the aftermath of the crisis undermined Washington's response to the "popped" financial bubble, and shows how such patterns have occurred repeatedly throughout US history.
The authors show that just as financial bubbles are an unfortunate mix of mistaken beliefs, market imperfections, and greed, political bubbles are the product of rigid ideologies, unresponsive and ineffective government institutions, and special interests. Financial market innovations--including adjustable-rate mortgages, mortgage-backed securities, and credit default swaps--become subject to legislated leniency and regulatory failure, increasing hazardous practices. The authors shed important light on the politics that blinds regulators to the economic weaknesses that create the conditions for economic bubbles and recommend simple, focused rules that should help avoid such crises in the future.
The first full accounting of how politics produces financial ruptures,Political Bubblesoffers timely lessons that all sectors would do well to heed.
The development and elaboration of the spatial theory of voting has contributed greatly to the study of legislative decision making and elections. Statistical models that estimate the spatial ...locations of individual decision-makers have made a key contribution to this success. Spatial models have been estimated for the U.S. Congress, the Supreme Court, U.S. presidents, a large number of non-U.S. legislatures, and supranational organizations. Yet one potentially fruitful laboratory for testing spatial theories, the individual U.S. states, has remained relatively unexploited, for two reasons. First, state legislative roll call data have not yet been systematically collected for all states over time. Second, because ideal point models are based on latent scales, comparisons of ideal points across states or even between chambers within a state are difficult. This article reports substantial progress on both fronts. First, we have obtained the roll call voting data for all state legislatures from the mid-1990s onward. Second, we exploit a recurring survey of state legislative candidates to allow comparisons across time, chambers, and states as well as with the U.S. Congress. The resulting mapping of America's state legislatures has great potential to address numerous questions not only about state politics and policymaking, but also about legislative politics in general.
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During the past two generations, democratic forms have coexisted with massive increases in economic inequality in the United States and many other advanced democracies. Moreover, these new ...inequalities have primarily benefited the top 1 percent and even the top .01 percent. These groups seem sufficiently small that economic inequality could be held in check by political equality in the form of “one person, one vote.” In this paper, we explore five possible reasons why the US political system has failed to counterbalance rising inequality. First, both Republicans and many Democrats have experienced an ideological shift toward acceptance of a form of free market capitalism that offers less support for government provision of transfers, lower marginal tax rates for those with high incomes, and deregulation of a number of industries. Second, immigration and low turnout of the poor have combined to make the distribution of voters more weighted to high incomes than is the distribution of households. Third, rising real income and wealth has made a larger fraction of the population less attracted to turning to government for social insurance. Fourth, the rich have been able to use their resources to influence electoral, legislative, and regulatory processes through campaign contributions, lobbying, and revolving door employment of politicians and bureaucrats. Fifth, the political process is distorted by institutions that reduce the accountability of elected officials to the majority and hampered by institutions that combine with political polarization to create policy gridlock.
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Political Game Theory is a self-contained introduction to game theory and its applications to political science. The book presents choice theory, social choice theory, static and dynamic games of ...complete information, static and dynamic games of incomplete information, repeated games, bargaining theory, mechanism design and a mathematical appendix covering, logic, real analysis, calculus and probability theory. The methods employed have many applications in various disciplines including comparative politics, international relations and American politics. Political Game Theory is tailored to students without extensive backgrounds in mathematics, and traditional economics, however there are also many special sections that present technical material that will appeal to more advanced students. A large number of exercises are also provided to practice the skills and techniques discussed.
Testing political antitrust McCarty, Nolan; Shahshahani, Sepehr
New York University law review (1950),
10/2023, Volume:
98, Issue:
4
Journal Article
Peer reviewed
Observers fear that large corporations have amassed too much political power. The central fact that animates this concern is growing economic concentration-the rise in the market share of a small ...number of top firms. These firms are thought to use their enhanced economic power to capture the government and undermine democracy by lobbying. Many scholars and activists have urged the use of antitrust law to combat this threat, leading a "political antitrust" movement that advocates explicit incorporation of political considerations into antitrust enforcement. Political antitrust has sparked great debate not only in academic circles but also among policymakers.
But the debate has been largely data-free; there is little systematic evidence on whether increased economic concentration leads to democratic harms in established democracies. This Article seeks to fill that gap, bringing systematic data analysis to bear on the issue for the first time. We make three contributions. First, we create a comprehensive dataset on lobbying of the federal government, capturing nearly one million records over the past two decades. This data was drawn from the reports required by the Lobbying Disclosure Act as compiled by In Song Kim, to which we contributed by refining the coding, improving the matching between lobbying reports and industry and firm data, and adding new data. Second, we use our dataset to map lobbying patterns, focusing on the connection between economics and politics. Third, we empirically test some postulates of political antitrust.
Our findings do not support the political antitrust movement's central hypothesis that there is an association between economic concentration and the concentration of lobbying power. We do not find a strong relationship between economic concentration and the concentration of lobbying expenditure at the industry level. Nor do we find a significant difference between top firms' and other firms' allocation of additional revenues to lobbying. And we find no evidence that increasing economic concentration has appreciably restricted the ability of smaller players to seek political influence through lobbying. Ultimately, our findings show that the political antitrust movement's claims are not empirically well-supported in the lobbying context. Our findings do not allay all concerns about transformation of economic power into political power, but they show that such transformation is complex and nuanced, and they counsel caution about reshaping antitrust law in the name of protecting democracy.
Does Gerrymandering Cause Polarization? McCarty, Nolan; Poole, Keith T.; Rosenthal, Howard
American journal of political science,
July 2009, Volume:
53, Issue:
3
Journal Article
Peer reviewed
Both pundits and scholars have blamed increasing levels of partisan conflict and polarization in Congress on the effects of partisan gerrymandering. We assess whether there is a strong causal ...relationship between congressional districting and polarization. We find very little evidence for such a link. First, we show that congressional polarization is primarily a function of the differences in how Democrats and Republicans represent the same districts rather than a function of which districts each party represents or the distribution of constituency preferences. Second, we conduct simulations to gauge the level of polarization under various "neutral" districting procedures. We find that the actual levels of polarization are not much higher than those produced by the simulations. We do find that gerrymandering has increased the Republican seat share in the House; however, this increase is not an important source of polarization.
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7.
Learning from each other Jenkins, Jeffery A.; McCarty, Nolan; Stewart, Charles
Public choice,
12/2020, Volume:
185, Issue:
3/4
Journal Article
Peer reviewed
Open access
Within political science, a movement focused on increasing the credibility of causal inferences (CIs) has gained considerable traction in recent years. While CI has been incorporated extensively into ...most disciplinary subfields, it has not been applied often in the study of American political development (APD). This special issue considers ways in which scholars of CI and APD can engage in mutually beneficial ways to produce better overall research. As the contributions to the symposium demonstrate, clear scientific gains are to be had from greater CI–APD engagement.
I develop a model of policy making in complex domains where bureaucrats find it very difficult to establish autonomous sources of expertise, so regulators are highly dependent on the regulated ...industry and its willingness to engage in selfregulation. In the model, a legislative principal decides whether to delegate the power to an agency to regulate the activities of a firm or industry. The policy domain is complex in that knowledge of the implications of different policy choices is concentrated in the firm. The agency can learn about the policy environment only through monitoring the firm’s efforts at self-regulation. The main result is that, as policy becomes more complex, regulatory outcomes are increasingly biased toward those preferred by the firm. Moreover, when the agency has preferences that diverge from the firm’s, the firm invests less in its own self-regulatory efforts for fear that its policy investments will be expropriated.
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9.
Agenda Control under Policy Uncertainty Callander, Steven; McCarty, Nolan
American journal of political science,
January 2024, 2024-01-00, 20240101, Volume:
68, Issue:
1
Journal Article
Peer reviewed
Models of agenda setting are central to the analysis of political institutions. Elaborations of the classical agenda‐setting model of Romer–Rosenthal have long been used to make predictions about ...policy outcomes and the distribution of influence among political actors. Although the canonical model is based on complete and perfect information about preferences and policy outcomes, some extensions relax these assumptions to include uncertainty about preferences and reversion points. We consider a different type of uncertainty: incomplete knowledge of the mapping between policies and outcomes. In characterizing the optimal agenda setting under this form of uncertainty, we show that it amends substantively the implications of the Romer–Rosenthal model. We then extend the model dynamically and show that rich dynamics emerge under policy uncertainty. Over a longer horizon, we find that agenda control suppresses the incentive of legislators to experiment with policy, leading to less policy learning and worse outcomes than are socially efficient.
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The idea of America as politically polarized—that there is an unbridgeable divide between right and left, red and blue states—has become a cliché. What commentators miss, however, is that increasing ...polarization in recent decades has been closely accompanied by fundamental social and economic changes—most notably, a parallel rise in income inequality. In Polarized America, Nolan McCarty, Keith Poole, and Howard Rosenthal examine the relationships of polarization, wealth disparity, immigration, and other forces, characterizing it as a dance of give and take and back and forth causality. Using NOMINATE (a quantitative procedure that, like interest group ratings, scores politicians on the basis of their roll call voting records) to measure polarization in Congress and public opinion, census data and Federal Election Commission finance records to measure polarization among the public, the authors find that polarization and income inequality fell in tandem from 1913 to 1957 and rose together dramatically from 1977 on; they trace a parallel rise in immigration beginning in the 1970s. They show that Republicans have moved right, away from redistributive policies that would reduce income inequality. Immigration, meanwhile, has facilitated the move to the right: non-citizens, a larger share of the population and disproportionately poor, cannot vote; thus there is less political pressure from the bottom for redistribution than there is from the top against it. In "the choreography of American politics" inequality feeds directly into political polarization, and polarization in turn creates policies that further increase inequality.
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