Introduction

We assume that the reality that is captured by the word democracy embodies mechanisms similar, though not identical, to those contained in the reality that is identified as the market; we further assume that democracy can be correctly analyzed and understood with the tools and methodology of conventional neoclassical economic theory which were crafted to analyze and understand markets. Given these two assumptions, no less than four analytical building blocks must be assembled to model democratic politics. The first building block must focus on the factors that give form to the demand side of politics; a second must concentrate on the variables that shape and determine supply; a third must be concerned with the forces that work to bring about a reconciliation of supply and demand–an equilibrating mechanism also capable of tracking how democracies adjust when they are subjected to external disturbances;–and a fourth must pay attention to the various devices (legal, cultural, social, political, and constitutional) that serve to enforce equilibrium outcomes.

Before proceeding with our discussion, we make two points regarding the above assumptions. First, democratic politics, like market calisthenics, can be more or less competitive and therefore more or less responsive to the preferences of citizens–to the demand side of politics. The degree of competition which, at any moment, distinguishes a democracy is the product, again as in markets, of structural and behavioral attributes of the organization of supply and of demand.

Introduction

Our purpose is to assess whether the economic size of the public sector is too small or too big to promote economic growth, first in general for all countries in the world and then for political regimes dichotomized as democracies and dictatorships. Even if many believe that, as Rodrik (1992, p. 331) puts it, “it is the quality of intervention that matters, not its quantity,” we show that mere quantity does have consequences. Our econometric analysis extends and modifies that of Ram (1986), but we also seek to place the econometric analysis in a broader theoretical context.

Section 2 is an introduction to the perennial discussion of the relation between the state and the market. Section 3 summarizes alternative ways of thinking about the economic role of government. Section 4 sets up the econometric analysis, the results of which are presented in Section 5. Finally, Section 6 examines the impact of regimes.

The state and the market

Capitalism is a system in which most productive resources are owned privately. Yet under capitalism, property is institutionally distinct from political authority. As a result, there are two mechanisms by which resources can be allocated to uses and distributed among households: the market and the state. The market is a mechanism in which scarce resources are allocated by their owners: Individuals cast votes for allocations with the resources they own and these resources happen to be always distributed unequally. The state is also a system that allocates resources, including those it does not own, with rights distributed differently from the market.

Renewed interest in democracy–in its virtues and limitations, in its relationships to liberty, security, and stability, and in its connections to a variety of attributes such as its capacity to solve collective problems–has been motivated to a considerable degree by developments that have taken place over the last fifteen to twenty years. Foremost among these developments is the fact that a number of countries in the Americas and in Europe that had never experienced democracy, or had not been ruled democratically for many years, recently opted for that form of governance. Of considerable importance also is the fact that many of the countries that have recently chosen democracy had, for decades, functioned under the rules and conventions characteristic of planned collectivist systems. This fact has posed the question of whether democracy is compatible with economic collectivism or whether it requires the more or less simultaneous adoption of a capitalist market system. Conversely, inasmuch as people in these newly democratic countries are primarily concerned with their economic well-being, the question of whether the transition to a market economy is easier or more difficult under democracy has also been pushed to the fore. Of equal importance is the fact that the disappearance of economic collectivism as an alternative to capitalism (for the time being at least) has fostered a reorientation of systemic thinking, on both sides of the ideological spectrum, toward the subject of democracy in all its dimensions–the nature of the system, the way it works or can be made to work, its prerequisites, its results, and so on.

Introduction

Modern societies depend increasingly on participation to achieve economic efficiency, both in the marketplace and in parliament. For example, in many universities, students assign marks to their teachers to help them be more effective; and many firms, public and private, ask customers to fill in forms that rate customer's satisfaction with the service provided. In politics the main form of participation is represented by the act of voting: It is, however, a very incomplete form of participation, and the economic consequences of this limitation need to be acknowledged and better understood. This essay points to three major issues. The first is related to the lack of representation for a significant share of the population, namely children and young people. The second issue regards the economic consequences of the relationship between younger and older voters, as revealed by the multipeak surface of the joint age–income distribution. A simple way to analyze this issue is to refer to the median voter model, exploiting the implied statistical relationship between median and average income. The third issue points to the problem of low political participation as a possible cause of higher violent crime rates, higher law enforcement costs, and a lower quality of life. Possible solutions to the issues raised are simply hinted, because they need to be specific to each country: in particular, the potential benefits of new information technology need to be explored.

Democracy and group census

Because it faces severe limits on its workability, democracy is not a panacea for politics. It works only on the margins of great issues. The few big issues it can handle are those on which there is broad consensus–such as the consensuses in the United Kingdom, Canada, and the United States on fighting World War II. Most forms of government could handle such issues roughly as well. Indeed, the United Kingdom handled World War II by ceasing to be democratically accountable for the duration of the war. For conflictual issues, democracy can work only against a background of rough coordination on order. Without that essentially prior coordination, democracy is trammeled or irrelevant. And even with the relevant coordination on order, if precise theoretical claims are at issue, democracy works only in the sense that it reaches a result–but not in the sense that it gets the right result. Often, indeed, a democrat would want decisions to not be made democratically.

Democracy is essentially a member of the mutual-benefit class of theories. If political divisions cut very much deeper than the marginal issues on which we can democratically compromise, democracy may no longer seem to produce mutual benefits. It then produces major–not marginal–winners and losers. Big disagreements bring us down. For example, democracy could not handle conflict over slavery in the United States, it was very shaky in handling socialism in the postwar United Kingdom, and it could not even get off the ground in independent Burundi with its first democratic election pilloried as merely an ethnic census.

Introduction

The quest for control of the public machinery has accompanied the entire history of political life, insofar as “the utility function of the agents is not identical with that of the ruler” (North, 1981, p. 25). Today, when we contrast the ramification of public action with the effectiveness of parliamentary control, it is easy to see that the quest is still going on, and if anything is more impelling. Should we conclude that the growth of the welfare state and the widening of democracy has brought about the dethronement of the voter? And who has gained effective power? The notion of bureaucratic capture is one answer, though it is difficult to assign the roles of captor and captive when the rules of the bureaucratic game are concocted inside the political game. Why should representative bodies accept to be dispossessed if they can enact new rules, deny money, and redress the balance of power at any time? Mathew McCubbins and Thomas Schwartz (1984) suggested that the control of the elected assemblies materializes through either “fire-alarm” or “police-patrolling” devices, the former being the case of the U.S. Congress called to act when needed, the latter of the more systematic control exerted by parliaments. Both systems, however, seem to face similar problems, and it is not easy to assess whether that metaphor effectively expresses real differences or generalizes scattered pieces of evidence. In either case, the intriguing question is to ask why the controls and the features of bureaucracies should be different under different democratic systems.

In this chapter we evaluate the assumptions underlying the model of intercameral bargaining developed in Chapter 4. We do so by analyzing six laws passed by the French legislature between 1971 and 1981. In Chapter 4 we argued that impatience to reach agreement drives bicameral bargaining and that impatience is generated by a number of factors: the desire of legislators to be viewed as efficient, the need to resolve fiscal or political crises, and the concern that legislators will defect from the political coalition supporting the bill. Moreover, we concluded that the relative power of each house in bicameral legislatures is a function of institutional constraints and the impatience of each legislature to reach a deal. In this chapter, we examine the assumption that impatience for legislative outcomes (1) drives the negotiating process and (2) determines the outcomes of bicameral negotiations in France (within the limits set by institutional constraints). As in Chapter 6, because we focus such attention on a single country, we also address the relevant French legislative analyses on relative house power. One explanation of senatorial power, expertise, is common to many countries, as noted in Chapter 1. The second explanation, presidential politics, is peculiar to France.

We proceed by defining the concept of impatience and our approach to operationalizing that concept. We then briefly present the two alternative models of French legislative behavior against which we pitch our own. In the third section, we evaluate the three competing hypotheses in light of six pieces of legislation. The detailed examination of the bills as they shuttle from one chamber to the other allows us to focus on the process of bicameral negotiations.

Bicameral legislatures are those whose deliberations involve two distinct assemblies. As such, they are relatively modern political institutions that only gained popularity in the eighteenth and nineteenth centuries, despite much earlier origins in the fourteenth-century English parliament. Nonetheless, earlier political institutions share some of the features of more modern bicameral legislatures, and the intellectual debate over the merits of multiple deliberative assemblies is centuries old. In this chapter, we trace the evolution of bicameral institutions and the intellectual justifications that underpin those structures. We do so by following two threads of analysis, what we call the political and efficient dimensions of bicameralism.

We begin with a definition of the political and efficient dimensions of bicameralism, as these two themes surface repeatedly in the text. We proceed via a chronological overview of the institutional evolution of dual deliberative structures in various eras, accompanied by an intellectual history. In Sections 1 through 3, we review the pre-bicameral institutions of ancient Greece and Rome, the development of the first, class-based bicameral legislature in Britain, and the creation of an alternative federal model in the United States. In Sections 4 and 5, we trace the divergent paths of institutional development in Europe that privilege the distinctions between federal and unitary political systems. Finally, we summarize the contemporary debate on bicameralism, which tends to emphasize either the political or the efficient dimension of bicameral legislatures.

THE TWO DIMENSIONS OF BICAMERALISM

Legislation changes the previously established way of doing things. Whether it regulates behavior in a new way or deregulates behavior and permits individual choice, legislation changes the status quo. In bicameral legislatures, the status quo may be modified in two ways.

Given the diverse national paths in the development of bicameral legislatures, it is not surprising to find substantial institutional variation. In this chapter, we explore these institutional differences. The characteristics of lower and upper legislative houses differ on a number of dimensions, and analysts have relied on these differences to explain cross-national variations in upper house power. Although there are variations in size, legislative term of office, turnover, membership, representativeness, and institutional power, two particular characteristics have been emphasized. The first is the membership of the two houses, based on selection methods and categories of citizens represented. The second is the relative power of the two houses as reflected in their mechanisms for resolving intercameral differences. Here we focus on these two critical dimensions of variation.

Political analysts who examine the variation in bicameral institutions argue that bicameralism produces disparate results across countries. Lijphart (1984) attributes variation to the degree of congruence between the two legislative houses and power asymmetries, whereas Mastias and Grangé (1987) focus on upper house legitimacy as the important independent variable.

Lijphart (1984: 99) defines “congruence” as similarity of political composition. Regardless of the variations in selection methods, if the two houses have similar political representation, they are deemed congruent. Disparities in power range from full symmetry, where agreement of the two houses is necessary to enact a law, to total asymmetry, where one house is granted decision-making power. Using these two categories, Lijphart constructs three types of bicameralism. He argues that “strong” bicameral legislatures are characterized by significant differences in composition and by relatively symmetric power. “Weak” bicameral legislatures are characterized either by asymmetric power or by congruent chambers.

As we discussed in Chapter 2, conference committees are frequently employed to reconcile intercameral differences. Conference committees are important because, in most cases, they are the last stage where legislative compromises are worked out and legislation is forged. The outcome of conference committee deliberations is then introduced to the parent chambers for approval under closed rule, that is, without possibility of amendment. Consequently, a strategic conference committee can select, from among all the proposals that the parent chambers prefer over the status quo, the one that is closest to its own preferences. The parent chambers may dislike one provision or another of the compromise bill, but they cannot alter the specifics; they can only reject the whole bill and start the legislative process again. Consequently, if a bicameral legislature resolves its differences through a conference committee, the compromise elaborated in this committee usually becomes the law.

In all countries where the institution exists, except for the United States, the committee is composed of an equal number of members from each chamber, and it decides as a unicameral institution. In the U.S., the size of the conference committee varies as does the number of delegates from each house. Decisions are made by the so-called unit rule, that is, by concurrent majorities of each chamber's delegation. In countries where committees decide as unicameral institutions, the decision-making rule is by majority, with the exception of Japan, which requires qualified majorities.

To analyze the U.S. conference committee, we refer the reader to Chapter 3, since the unit decision-making rule is the same as bicameral decisions. However, before proceeding, we point out one aspect of the unit rule that we will refer to subsequently.

In the next four chapters we empirically investigate the predictions developed in Part II and compare our findings with alternative theories of bicameralism outlined in Chapter 1. In Chapters 6 and 7, we draw on data from the French Fifth Republic. The prominent position of France is attributable to the complexity of its institutions: the two houses may be equal or, upon decision of the government, unequal; the deliberation may involve a conference committee or not; the navette may conclude after a single round or last indefinitely. With the exception of the United States and the European Union, no other country or institution has bicameral procedures that vary so extensively. Thus, France presents an opportunity to test various dimensions of our models and to evaluate institutional features of the bicameral systems described in Chapter 2 within a single country, so that we can hold a variety of conditions constant.

Chapter 8 relies more heavily on data from other countries in order to capture the variations in conference committee composition, decisionmaking rules, and constraints imposed by the parent chambers – the characteristics of conference committees that are important independent variables in our theoretical models. The tests presented here are far from exhaustive. We strongly believe our models should undergo additional evaluation employing data from a wide variety of countries. Nonetheless, the evidence presented here helps to establish the plausibility of the models developed in Part II.

In Part III, we employ both statistical analysis and case studies to evaluate our theoretical arguments. Undoubtedly, it would be helpful to extend statistical analyses further than we have done in this book.

The goal of Part I is to present the diversity of bicameral institutions over time and among countries, as well as the diversity of theoretical justifications employed to promote them. Bicameral institutions have been adopted by class societies and by federal states, by republican polities and by unitary political systems. They have been used to maintain the status quo, to amalgamate the preferences of different constituencies, and to improve legislation, and have been justified in all of these terms. The diversity of bicameral legislatures extends to the institutional devices employed to resolve differences between the two legislative chambers, the navette (shuttle) system, conference committees, joint sessions of two chambers, one-chamber decisions; these are rules that may be applied individually or in combination. In a word, bicameral institutions are protean. They change forms and functions, and the arguments that justify or explain them follow these transformations.

This part of the book is divided into two chapters. Chapter 1 focuses on the history of bicameral diversity and presents the different theoretical justifications for bicameralism, while Chapter 2 provides information about the geographic dimension, the institutions regulating bicameral interactions in different countries today.

Chapter 1 begins with the earliest known political institutions that divided legislative deliberations between two or more chambers and follows the institutional evolution up to the modern period. At the same time, we trace the intellectual debate about the merits of this institutional structure. We describe the reasons proffered by various politicians and political theorists to justify the existence of two legislative bodies. The historical presentation emphasizes the dual evolution of institutional structures and intellectual debates.