¹ Finer, Samuel, Adversary Politics and Electoral Reform (London: Wigram, 1975)Google Scholar; Finer, Samuel, The Changing British Party System, 1945–79 (Washington, DC: American Enterprise Institute, 1980).Google Scholar

² APSA, ‘Toward a More Responsible Two-Party System’, American Political Science Review, 44 (1950), Supplement.Google Scholar

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)Google Scholar 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)Google Scholar; ‘An Appreciation of the Tests and Criticisms’, Scandinavian Political Studies, 9 (1986), 65–80Google Scholar; and ‘A Theory of the Incentives Facing Political Organizations: Neo-Corporatism and the Hegemonic State’, International Political Science Review, 7 (1986) 165–89.Google Scholar

⁵ Olson, , The Rise and Decline of Nations.Google Scholar

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’Google Scholar and ‘Theory of the Incentives Facing Political Organizations’.

⁸ Taken from Olson, , ‘A Theory of the Incentives Facing Political Organizations’.Google Scholar

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.Google Scholar

¹² Tullock, G., ‘The Welfare Cost of Tariffs, Monopolies and Theft’, Western Economic Journal, 5 (1967), 224–32.Google Scholar See also Bhagwati, Jagdish, ‘Directly-Unproductive Profit Seeking (DUP) Activities’, Journal of Political Economy, 90 (1982), 988–1002.CrossRefGoogle Scholar 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’Google Scholar lobbying costs and private costs of lobbying is not necessarily linear and additive. For a good exposition, see Bhagwati, , ‘Directly-Unproductive’.Google Scholar 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), 157–63CrossRefGoogle Scholar, 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.Google Scholar

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), 105–25CrossRefGoogle Scholar; 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.Google Scholar

¹⁸ Magee, S., Brock, W. and Young, L., Black Hole Tariffs and Endogenous Policy Theory (New York: Cambridge University Press, 1989).Google Scholar

¹⁹ Magee, , Brock, , and Young, , Black Hole Tariffs.Google Scholar

²⁰ Jankowski, , ‘Preference Aggregation in Political Parties and Interest Groups’Google Scholar, and ‘Preference Aggregation in Firms and Corporatist Organizations’.

²¹ Jankowski, , ‘Preference Aggregation in Political Parties and Interest Groups’Google Scholar, and ‘Preference Aggregation in Firms and Corporatist Organizations’.

²² Olson, , The Rise and Decline of NationsGoogle Scholar; ‘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)Google Scholar 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.Google Scholar

²⁵ Olson, , The Rise and Decline of NationsGoogle Scholar; ‘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.CrossRefGoogle Scholar

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).Google Scholar

³⁰ Janda, Kenneth, Comparative Political Parties: A Cross-National Survey (New York: The Free Press, 1980).Google Scholar

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.Google Scholar

³³ Blondel, Jean, Comparative Government (Deddington, Oxon: Philip Allan, 1990).Google Scholar

³⁴ See, for example, McCallum, J., and Blais, A., ‘Government, Special Interest Groups, and Economic Growth’, Public Choice, 54 (1987), 3–18CrossRefGoogle Scholar; 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.CrossRefGoogle Scholar

³⁵ Solow, Robert, ‘Technical Change and the Aggregate Production Function’, Review of Economics and Statistics, 39 (1957), 312–20.CrossRefGoogle Scholar

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’.Google Scholar

³⁸ Maddison, Angus, Phases of Capitalist Development (Oxford: Oxford University Press, 1982).Google Scholar

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).Google Scholar

⁴⁰ Choi, , ‘A Statistical Test of Olson's Model’.Google Scholar

⁴¹ Choi, , ‘A Statistical Test of Olson's Model’Google Scholar, 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’.Google Scholar

⁴³ Pryor, Frederick, ‘Corporatism as an Economic System: A Review Essay’, Journal of Comparative Economics, 12 (1988), 317–4.CrossRefGoogle Scholar

⁴⁴ Jankowski, , ‘Preference Aggregation in Firms and Corporatist Organizations’.Google Scholar

⁴⁵ Lehner, Franz, ‘Consociational Democracy in Switzerland: A Political Economic Explanation and Some Empirical Evidence’, European Journal of Political Research, 12 (1984), 25–42.CrossRefGoogle Scholar

⁴⁶ Olson, , ‘An Appreciation of the Tests and Criticisms’Google Scholar, and ‘A Theory of the Incentives Facing Political Organizations’.

⁴⁷ Vanhanen, , The Process of Democratization.Google Scholar

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).Google Scholar

⁵⁰ Magee, , Brock, and Young, , Black Hole Tariffs.Google Scholar

⁵¹ See Jankowski, Richard, ‘A Missing-Market Interpretation of the Paradox of Vote Trading’ (paper presented at the Public Choice Society Meetings, 1989)Google Scholar for a possible explanation of the findings that does not rely upon the encompassing character of political institutions.

⁵² Finer, , Adversary Politics and Electoral ReformGoogle Scholar; 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.Google Scholar

⁵⁵ North, Douglas C., Structure and Change in Economic History (New York: Norton, 1981)Google Scholar and Institutions, Institutional Change and Economic Performance (Cambridge and New York: Cambridge University Press, 1990).Google Scholar

⁵⁶ This proposition is common to Downs, Anthony, An Economic Theory of Democracy (New York: Harper and Row, 1957)Google Scholar; and Olson, Mancur Jr, The Logic of Collective Action (Cambridge, Mass.: Harvard University Press, 1965).Google Scholar 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)Google Scholar; 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.CrossRefGoogle Scholar

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), 302–8Google Scholar, 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’.Google Scholar

⁶⁴ See Jankowski, , ‘A Missing-Market Interpretation of the Paradox of Vote Trading’Google Scholar, 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.