The Cambridge series on the Political Economy of Institutions and Decisions is built around attempts to answer two central questions: How do institutions evolve in response to individual incentives, strategies, and choices, and how do institutions affect the performance of political and economic systems? The scope of the series is comparative and historical rather than international or specifically American, and the focus is positive rather than normative.

For two decades, a – perhaps the – central emphasis of the empirical study of political economy in industrial societies has been on one interaction, the relationship between the impact of the economy on electoral outcomes on the one hand and, on the other, the incentives and abilities of elected politicians to affect, and maybe manipulate, macroeconomic policy in ways which depend critically on the institutional context. In this book, Alberto Alesina and Howard Rosenthal provide by far the richest model of this interaction yet developed, along with a battery of supporting, and generally supportive, empirical evidence. Their model incorporates an explicit theory of voting, in which ideologically moderate voters divide their votes over elected representatives in a political regime in which there are multiple elections and executive and legislative powers reside in separate institutions. By doing so voters achieve significant moderation of economic policy, enforcing a balance between politicians' desires to stimulate output and restrict inflation. A number of observable features, including post-election partisan-inspired cycles in output and the regular midterm loss of votes by the executive's legislative partisans, are derived from the model and shown to be regular features of the American political economy.