Conference committees are frequently employed to resolve disagreements between chambers that remain after one or more rounds of the navette. In Chapter 5, we pointed out that the importance of conference committees lies in their ability to make proposals to the parent chambers under closed rule, that is, without amendments. Consequently the details of a bicameral compromise are worked out in the conference committee, without possibility of new input from the parent chambers. Delegating the power of agenda setting to the conference committee presents the parent chambers with a serious danger, a “runaway conference” in U.S. terminology (Longley and Oleszek 1989: 4–5). The runaway conference is a conference committee that proposes compromise positions that either differ from the common positions of the chambers or exclude common positions of the chambers.

To avoid this danger, the parent chambers have two ways to rein in conference committees. The first is the explicit, restrictive, and credible specification of the set of acceptable solutions. Where the lower and upper house versions of the bill follow the same structure and disagreements are located at specific points, the conference committee may be restricted to discussing only those aspects remaining in disagreement and to locating a compromise somewhere between the positions of the two parent chambers. Conversely, where the two versions of the bill differ widely, sharing only the topic of legislation, the leeway of the conference committee expands to the maximum. In Chapter 5, we noted that since the compromise must be within the bicameral restrictions, reducing the space contained within bicameral restrictions will reduce the freedom of choice of the committee.

This chapter is designed to test the model developed in Chapter 4. Consequently, we retain the assumption that bicameral negotiations are driven by impatience to reach agreement. We operationalize impatience in terms of the strength and breadth of the governing political coalition. The reader should suspend judgment about the adequacy of our choice until the following chapter, where we take time to examine the impatience assumption critically.

The complete information model developed in Chapter 4 connects different institutional features of the navette system with outcomes. The incomplete information model of Chapter 4 predicts that under conditions of one-sided incomplete information, the number of negotiating rounds in bicameral legislatures increases with one house's uncertainty about the other house's impatience (time discount factor). In more common political terminology, relations between the chambers should be more acrimonious under conditions of uncertainty; it will take longer for the two houses to reach agreement.

We test these predictions with data from the French legislature under the Fifth Republic. France represents a natural test of the model of one sided incomplete information because the composition of the Senate remained relatively constant while the composition of the National Assembly varied widely – from a Gaullist to a Socialist majority, by way of a centrist–Gaullist coalition. We argue first that the composition of the National Assembly affects the impatience of that legislative body to reach agreement. We argue second that the changing composition of the National Assembly introduces uncertainty about the impatience of the legislative body in a nonlinear fashion.

Approximately one-third of the world's countries have bicameral legislatures, that is, legislatures that involve two distinct chambers in their deliberations. These bicameral legislatures are not merely relics of longforgotten constitutional compromises. Although many of them have long constitutional histories, a number of newly forged constitutions, in Central Europe and Latin America in particular, also provide for dual legislative bodies. But there is surprisingly little agreement on the actual impact of bicameral institutions. As the quotations cited above suggest, bicameralism has both advocates and opponents. In this book, we address the debate and examine the effect of bicameral institutions on political outcomes.

The existence of a second chamber appears to have little effect on the relationship between the legislature and the executive. In presidential systems, the executive is elected directly and does not need the political support of the legislature to survive. In parliamentary systems, where the government needs the political support of the parliament to survive, this support is measured almost exclusively in the popularly elected lower chamber. Consequently, the relationship between legislative and executive is rarely altered directly by the existence of a second chamber.

In this chapter we present a short recapitulation of our arguments and findings. We began with a review of the historical and geographic dimensions of bicameralism. We pointed out that bicameral institutions are protean and, like the ancient Greek god Proteus, change form. These different forms are accompanied by different analyses and justifications for such institutions. We know that our unscripted excursion in time and space impressed the reader with the variety of forms and functions.

In Part I we demonstrated that bicameral institutions can serve either functional (classes) or geographic diversity (federalism), but diversity does not require bicameral representation. Both stratified and federal societies may be represented by unicameral legislatures. From this account, we want to stress one historical point. Although currently federalism appears to be the only justification for an upper chamber's veto power, federalism was originally organized through unicameral legislatures with qualified majority or unanimity as the decision-making rule.

The institutions of bicameralism are diverse in their specifics, but they involve some form of the navette system, usually followed by some stopping rule: either conference committees, or joint sessions, or the possibility of one chamber to overrule the other. Financial legislation often elicited a different set of institutional rules. The wealth of institutional “details” in Part I may have seemed overwhelming in the beginning.

Part II aimed to organize this diversity and to demonstrate the bottom line consequences of bicameralism. We drew a series of conclusions, some of them singled out as “propositions” in Chapters 3 to 5, others simply discussed in the text. Here we recapitulate briefly.

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.

Tsebelis and Money make a path breaking contribution to the “transactions benefits” theory of political institutions, which holds that a role of institutions is to prevent some collective choices from arising, or otherwise limit the number of enforceable policy outcomes. By doing so, institutions can provide outcomes or opportunities for transacting that improve on the status quo, and that would not happen in their absence. The intuition of Tsebelis and Money's work is that outcomes in a bicameral legislature are both political and efficient. By the latter they describe a form of stability; namely, the bicameral outcome has to be overturned by two majorities, whereas outcomes in either unicameral legislature of which the bicameral one is composed are more prone to being overturned, more prone to cycling, and thus less likely to produce an outcome and to remain at the status quo. Politics is also always likely to be involved no matter what the second chamber does, whether it contributes information or expertise or represents the preferences of more and different people. When different preferences are involved, bicameralism can frustrate several tyrannies: of the majority (by supplying some minority a veto), of the minority (by involving more nearly 50 percent in outcomes), of colluders, or of agenda setters.

In the preceding chapter we argued that bicameralism stresses one dimension of conflict, the line connecting the centers of the yolks of each chamber. Here we take this finding for granted. We assume conflict along one dimension, either because there is only one policy dimension or because, on the basis of the previous argument, the two chambers are negotiating along line UL of Figure 3.6. This dimension represents the redistributive, or political, dimension of bicameralism described in Chapter 1.

In the following account we present complete and incomplete information models of bargaining. Complete information is the technical term indicating that the two players know each other's payoffs, while incomplete information indicates that some characteristic of one player is unknown to the other player.

Consider the lower house and the upper house as unified players and their ideal positions L and U on a particular bill. Along line segment LU, each house prefers a point that is closer to its own ideal point. Rubinstein (1982, 1985) developed the first bargaining model where two players divide an object between them – in this case, a dollar. One can think of the dollar as a unit segment with each player bargaining for the largest part. Our spatial representation of bargaining in legislatures is similar to the Rubinstein model; one difference is that, in the dollar model, each player is interested in obtaining the biggest possible part, while in our spatial representation, each player wants the smallest part. For reasons of mathematical convenience we will adopt the Rubinstein representation, where each player is interested in maximizing his or her share of the dollar.

The basic problem with identifying the possible outcomes of a majoritarian decision-making process, such as decisions of unicameral or bicameral legislatures, is the fact that collective preferences, unlike individual ones, are not transitive. This means that although a legislature can prefer outcome a over b, and outcome b over c, by majority rule, it is still possible for the same legislature to prefer outcome c over a. This set of preferences results in unstable decision making; any outcome may be defeated by a majority, and that outcome in turn may be defeated by yet another majority. And the process may be repeated endlessly.

For this reason, the concept of the core became a basic tool in social choice theory and cooperative game theory. The core is the set of points that cannot be defeated by the application of the decision-making rule. So the core of a unicameral institution is the set of points that cannot be defeated by majority or any other decision-making rule; the core of a bicameral legislature is the set of points that cannot be defeated by concurrent majorities in both chambers; and so forth.

For unicameral legislatures, Plott has shown that the necessary and sufficient conditions for the existence of a core are very restrictive (Plott 1967: 790). He demonstrated that in a legislature with an odd number of members, a core exists in an n-dimensional legislative space (n > 1) only when it is located on the ideal point of at least one member and the remaining even number of members are “divided into pairs whose interests are diametrically opposed.”

What difference does it make if a country has a bicameral legislature instead of a unicameral one? Our purpose in Part II is to outline a framework to answer this question and to analyze the historical and geographic diversity of bicameral institutions. Thus, the overarching research question is supplemented by more detailed investigations of the specific mechanisms of intercameral reconciliation. What difference does it make if the navette system can last for one, or two, or an infinite number of rounds, as exemplified in the procedural rules of Austria, France, and Italy, respectively? What is the effect of a conference committee at the end of the navette instead of a final decision by the upper chamber or the lower one, as exemplified in the procedural rules of Switzerland, the Netherlands, and Spain, respectively? Does it make any difference if the government introduces legislation in the lower house first, as required by many constitutions for budgetary matters? Do conference committees affect the outcomes of bicameral bargaining and, if so, how?

Our account demonstrates that bicameral institutions share features that differentiate their outcomes from unicameral ones. In addition, we show how the institutional variations of bicameralism affect relative house power, providing a series of hypotheses that can be tested systematically. Part II constitutes the theoretical foundation on which we conduct empirical analyses in subsequent chapters, so that, in the conclusions, we will be able to assess critically the arguments on bicameralism proposed by various analysts.

Figure II. 1 presents in a nutshell the problem we investigate in this part of the book. The current policy, the status quo, is indicated in the figure by the point SQ.

Some of the arguments made in this book, such as the proposition that bicameralism makes a change to the status quo more difficult than unicameralism, may seem intuitive, even trivial, to the reader. Other arguments, like the rarity of a bicameral core in more than two dimensions, or empirical evidence, such as the connection between chamber composition and length of intercameral negotiations, dispute the conventional wisdom in the literature or point legislative research in a new direction.

In this chapter we review the different theories and arguments presented in the literature with a critical eye, explaining which are sound and justified, which require restrictions or modifications, and which are false and unsupported by the evidence. Finally, we raise other methodological, theoretical, and empirical issues that merit a more sustained investigation.

The chapter is organized in three sections, ordered from the more specific and the less objectionable to the more general and controversial. The first section deals with topics and ideas that are considered intuitive or at least well known. We show how we generalize these ideas or how we restrict their domain of application. The second section demonstrates that on a series of issues, we disagree both in theory and in evidence with the existing literature. The third part discusses the research agenda generated by this book. Given that some items fall into multiple categories, there is an overlap of subject matter among the three parts.

In Chapter 3, I pointed out that in order to cooperate, resource owners must cede to each other control over some of the attributes of their resources. Since it is too costly to price every attribute, their use will be sub-optimal, and some potential gains will be forsaken as a result. Sole ownership of all of the resources involved would eliminate the deadweight loss associated with cooperation. However, sole ownership may result in yet a greater loss due to reduced specialization; if this is the case, it will not be chosen. It might appear that in the case of commodities or assets that consist of single physical entities rather than those that are more complex, sole ownership would be routinely adopted. But because most, if not all, transacted commodities have many attributes, multiple ownership of commodities may be preferred to sole ownership. In this chapter, I shall suggest sources of potential gains from multiple ownership, offer hypotheses regarding the form the division of ownership will take, and discuss the organizations that are expected to emerge to handle relations among the owners.

The physical entities I consider to be commodities or assets typically consist of many attributes, and often different subsets of asset-attributes are owned by different individuals. For instance, the economic and legal ownership of every asset subject to guarantee (or to liability) is divided between its holder and its guarantor; similarly, the ownership of every rented asset is divided between the nominal owner and the renter.

Since the publication of the first edition of this book I have continued to conduct research regarding economic organization and political economy. This work is reflected primarily in Chapters 5 and 6 of the current edition. I have also separated the discussion of divided ownership from that of the firm. The former now occupies Chapter 4, whereas in Chapter 5 I offer new thoughts on the latter. In Chapter 6 I briefly speculate on the emergence of property rights and the state.

Teaching property rights courses over the last few years has led me to discover in the first edition some errors, many ambiguities, and several instances that call for elaboration. I have attempted to correct the mistakes, clarify the exposition, and elaborate when necessary. I have also added a number of illustrations, some of which derive from new research on property rights.

I wish to thank Dean Lueck, who read the entire manuscript, for his helpful comments; my daughter Tamar, for enlivening the presentation and protecting the English language; and the Earhart Foundation for its generous financial support.

By the beginning of the twentieth century, slavery had largely disappeared. Although the institution is extinct, comparing slaves and free laborers and exploring the forces that permitted slavery to flourish under certain circumstances can shed light on present-day institutions. It is particularly illuminating with respect to the understanding of the evolution of the status of women and general policing and ownership practices.

THE SLAVE CONTRACT

Labor services, routinely exchanged in the market, are subject to contract. The typical contract for the services of a free worker transfers a rather narrow, usually short-term set of attributes from the labor owner to its buyer. Slavery, too, may be viewed as a labor contract – one, however, that gave slave owners extensive rights over their slaves. In the case of forced slavery, the contract extended over the slave's lifetime. The voluntary slave contract typically specified a shorter duration and gave the owner fewer rights over the slave than did the forced slave contract.

Forced slavery was initiated by theft – free people were captured and, as the term suggests, were forced into slavery. Voluntary slavery was the result of an explicit contract – a contract to which both parties agreed, presumably in the belief that signing the contract would be beneficial to each. In some cases voluntary slavery resulted when people who had posted themselves as loan collateral defaulted on their contract and lenders assumed ownership over them. Indentured servitude, a form of voluntary slavery, was a direct method of repaying loans.

In the slave societies of the American South and the West Indies, as well as in others, slaves consistently – albeit rarely – bought their contracts from their owners in order to redeem themselves from slavery. In these societies the law afforded owners virtually absolute rights over their slaves, only seldom granting any legal rights to the slaves themselves; consequently slaves were not legally entitled to own the property necessary for self-purchase. There was no legal barrier or authority to stand in the way of owners' retaining both slave and freedom money. Nevertheless self-purchase, whereby slaves acquired legal rights to their own labor, did occur.

As will be elaborated upon in Chapter 7, the study of property rights and of the costs of transacting can yield an explanation as to why slaves were able to buy their freedom; such explanations can be tested against the facts. The property rights model I develop in this book can provide explanations of an array of such phenomena, which standard economic theory cannot successfully address. These explanations range from identifying the reasons behind the choice between wage and piece-rate contracts to pinpointing the conditions under which charity is more efficient than profit-seeking behavior.

In the following chapter, I shall define “property rights” and introduce some of the central ideas of this book. In Chapter 2, the examination of the gasoline shortage of the 1970s illustrates the usefulness and importance of the property rights framework and familiarizes the reader with its mechanics.

In previous chapters I demonstrated the expediency of using the property rights approach to explain various aspects of such specific phenomena as gasoline price controls and slavery, and to develop a general approach to, among other things, non-market allocation, the maximizing role of restrictions on private property rights, and, in the context of farm tenancy, the choice among various forms of control. The property rights framework can be applied to other problems as well. I shall now briefly consider several of these problems, beginning with an analysis of the individuals' ability to protect themselves against losses to monopoly, proceeding to a discussion of the relationship between property rights and theft and of property rights in relation to innovation and to price information, and concluding with an exploration of property rights as they relate to wildlife.

PROTECTION AGAINST LOSSES TO MONOPOLY

Monopolies are said to result in resource misallocation, which takes two forms. The first and better-known type of misallocation arises because monopolies produce “too little,” charging prices that exceed marginal costs, whereas the second type arises in the process of creating monopolies. Would-be monopolists spend resources in order to attain monopoly positions, and such expenditures are dissipating. The magnitude of these capture costs is comparable to that of the expected profits of the monopoly. Naturally, monopolists have economic rights to whatever gains they obtain. Since monopolists' gains exceed their contributions, their gains occur, in part, at the expense of others; thus, they also seem to have the right to harm other people.