¹ The journals from which we have drawn articles are the American Economic Review, Econometrica, Journal of Economic Theory, Journal of Political Economy, Quarterly Journal of Economics and the Review of Economic Studies.

² Samuelson, Paul A., ‘Arrow's Mathematical Politics’, in Hook, Sidney, ed., Human Values and Economic Policy (New York: New York University Press, 1967), pp. 41–52.Google Scholar

³ Persson, Torsten and Tabellini, Guido, Political Economics: Explaining Economic Policy (Cambridge: MIT Press, 2000)Google Scholar.

⁴ Persson, Torsten, Roland, Gerard and Tabellini, Guido, ‘Comparative Politics and Public Finance’, Journal of Political Economy, 108 (2000), 1121–61.CrossRefGoogle Scholar

⁵ Baron, David P. and Ferejohn, John A., ‘Bargaining in Legislatures’, American Political Science Review, 83 (1989), 1181–206CrossRefGoogle Scholar.

⁶ In both regimes district-based constituencies with first-past-the-post electoral arrangements are assumed. Some of the papers reviewed below examine alternative specifications.

⁷ For example, preference aggregation problems within institutions (cycling), or the means by which they are resolved, are not elaborated upon.

⁸ Lizzeri, Alesandro and Persico, Nicola, ‘The Provision of Public Goods under Alternative Electoral Incentives’, American Economic Review, 91 (2001), 225–39.CrossRefGoogle Scholar

⁹ Voters are treated as having identical tastes. Lizzeri and Persico note that introducing heterogeneity does not yield many new insights.

¹⁰ A related paper we mention in passing is Laslier, Jean-François and Picard, Nathalie, ‘Distributive Politics and Electoral Competition’, Journal of Economic Theory, 103 (2002), 106–30CrossRefGoogle Scholar. Given a normative ideal of equal division of a surplus, they ask what political institutions will produce this. Studying two-party Downsian competition in a multidimensional strategy space, they find that, in every mixed strategy equilibrium, any distribution of the surplus receiving positive probability weight has the property that no individual receives more than twice the average, i.e., Downsian competition in equilibrium limits the amount of social inequality.

¹¹ Austen-Smith, David, ‘Redistributing Income under Proportional Representation’, Journal of Political Economy, 108 (2000), 1235–69.CrossRefGoogle Scholar

¹² Austen-Smith, ‘Redistributing Income’, p. 1236.

¹³ Austen-Smith, ‘Redistributing Income’, p. 1239.

¹⁴ The parties in Austen-Smith's rendition of PR, for example, are associated with occupational categories – thus there is one for the employer class (a conservative party), one for the employee class (a centre party), and one for the unemployed (a radical party). This is a pretty good modelling move for a simple political arrangement. As the economy becomes more complex, with more occupational categories, and the political dynamics get more complex, with social as well as economic bases for political conflict for example, more subtle modelling choices must be made.

¹⁵ Related to the work of Austen-Smith is Azariadis, Costas and Galasso, Vincenzo, ‘Fiscal Constitutions’, Journal of Economic Theory, 103 (2002), 255–81CrossRefGoogle Scholar. They are interested in intergenerational fiscal relationships – e.g., social security transfers from young to old, security of public debt repayments, maintaining the currency – and their durability over time under different political arrangements. Constitutional regimes, restricting contemporaneous majority choice by (in effect) giving constraining power to previous generational choices, provide ‘an endogenous mechanism of partial policy commitment’ (p. 257). The authors in this way begin to provide an account of political arrangements by incorporating rational expectations about their impact on economic patterns.

¹⁶ Acemoglu, Daron and Robinson, James A., ‘Why Did the West Extend the Franchise? Democracy, Inequality, and Growth in Historical Perspective’, Quarterly Journal of Economics, 115 (2000), 1167–200CrossRefGoogle Scholar. This paper is part of a much larger project: Acemoglu, Daron and Robinson, James A., Economic Origins of Dictatorship and Democracy (Cambridge: Cambridge University Press, 2005)CrossRefGoogle Scholar.

¹⁷ It is no accident that Acemoglu and Robinson's recent book has a title very similar to Moore, Barrington Jr, Socialf Origins of Dictatorship and Democracy (Boston, Mass.: Beacon Press, 1966)Google Scholar.

¹⁸ A closely related paper, though more abstract and less historically grounded, is Conley, John P. and Temimi, Akram, ‘Endogenous Enfranchisement When Groups’ Preferences Conflict’, Journal of Political Economy, 109 (2001), 79–102Google Scholar. They determine when an unenfranchised group should threaten in order to secure the franchise. These authors focus much more on what such a group must do, and whether it is in their interest to do it, to make their threats credible. The equilibrium conditions of their model revolve around privileged groups’ losses from extending the franchise, non-privileged groups’ threat technology, and the degree of policy conflict between groups.

¹⁹ Lizzeri, Alessandro and Persico, Nicola, ‘Why Did the Elites Extend the Suffrage? Democracy and the Scope of Government, with an Application to Britain's “Age of Reform” ‘, Quarterly Journal of Economics, 119 (2004), 707–65.Google Scholar

²⁰ They are only tangentially concerned with the downside of franchise extension from the elite's perspective, namely the redistributive impulse of newly enfranchised voters.

²¹ Bolton, Patrick and Rosenthal, Howard, ‘Political Intervention in Debt Contracts’, Journal of Political Economy, 110 (2002), 1103–34.CrossRefGoogle Scholar

²² Acemoglu, Daron and Robinson, James A., ‘A Theory of Political Transitions’, American Economic Review, 91 (2001), 938–63Google Scholar.

²³ As Acemoglu and Robinson note, this argument bears a familiar relationship to one proposed by Ellman and Wantchekon (taken up in the second section of Part I of our essay, see p. 376). Acemoglu and Robinson observe that, backward inducting from the prospect of a coup, the poor could set a tax rate just low enough to dissuade the elite from mounting a coup. ‘Although the society always remains democratic [in this case], it is in some sense “under the shadow of a coup”, as the coup threat limits overall redistribution’ (Acemoglu and Robinson, ‘A Theory of Political Transitions’, p. 948).

²⁴ Acemoglu and Robinson, ‘A Theory of Political Transitions’, p. 957. An extremely rich alternative explanation for ‘consolidation’ (though not pitched in this way) is developed in Benabou, Roland and Ok, Efe A., ‘Social Mobility and the Demand for Redistribution: The POUM Hypothesis’, Quarterly Journal of Economics, 116 (2001), 447–87CrossRefGoogle Scholar. They examine the extent to which beliefs in the ‘prospect of upward mobility’ (POUM) discourage massive expropriation and redistribution even with an extended franchise. This requires that a sufficient number of voters with less-than-median income (a fortiori, less-than-mean income) entertains beliefs about the attractiveness of their own future prospects and those of their progeny. They show that there exists a range of incomes below the mean that will oppose lasting redistribution if and only if tomorrow's expected income is a rising and concave function of today's income. (As well, voters cannot be too risk averse, for if they were they would desire the insurance provided by redistributive policies.)

²⁵ There are a few exceptions, e.g., Austen-Smith's contribution.

²⁶ Barbera, Salvador and Jackson, Matthew O., ‘Choosing How to Choose: Self-stable Electoral Rules’, Quarterly Journal of Economics, 119 (2004), 1011–48.CrossRefGoogle Scholar

²⁷ Messner, Matthias and Polborn, Mattias K., ‘Voting on Majority Rules’, Review of Economic Studies, 71 (2004), 115–32.CrossRefGoogle Scholar

²⁸ Messner and Polborn, ‘Voting on Majority Rules’, p. 131.

²⁹ Whereas Messner and Polborn focus on changes in the decisive voter under different majority requirements with regard to the age of the population, a related concern is addressed by Jehiel and Scotchmer who focus on changes in the composition of the citizenry due to immigration. In their set up individuals with heterogeneous preferences for a public good which is locally provided, and has no positive spillovers, form jurisdictions and establish rules under which immigrants may be admitted. A partition of the citizenry into jurisdictions is stable when, under the existing rules, no migrant who would be attracted to a jurisdiction is allowed to move under existing rules of exclusion (Jehiel, Philipe and Scotchmer, Suzanne, ‘Constitutional Rules of Exclusion in Jurisdiction Formation’, Review of Economic Studies, 68 (2001), 393–413CrossRefGoogle Scholar).

³⁰ Aghion, Philippe, Alesina, Alberto and Trebbi, Francesco, ‘Endogenous Political Institutions’, Quarterly Journal of Economics, 119 (2004), 565–612.CrossRefGoogle Scholar

³¹ Lijphart, Arendt, Democracies: Patterns of Majoritarian and Consensus Government in Twenty-One Countries (New Haven, Conn.: Yale University Press, 1984)CrossRefGoogle Scholar.

³² Lagunoff, Roger, ‘A Theory of Constitutional Standards and Civil Liberties’, Review of Economic Studies, 68 (2001), 109–32.CrossRefGoogle Scholar

³³ Maskin, Eric and Tirole, Jean, ‘The Politician and the Judge: Accountability in Government’, American Economic Review, 94 (2004), 1034–54.CrossRefGoogle Scholar

³⁴ A related question, addressed by Shleifer, Glaeser and Johnson, is whether law enforcement is best carried out by regulators or judges, challenging the view that enforcement of contracts by judges is always superior. In some areas such as insider trading, judges may be unwilling to bear prohibitive search costs of investigation. Appointed regulators, however, may be overzealous in their pursuit of wrongdoing; their immediate career concerns may override a concern for justice (see Shleifer, Andrei, Glaeser, Edward and Johnson, Simon, ‘Coase Versus the Coasians’, Quarterly Journal of Economics, 116 (2001), 853–99Google Scholar).

³⁵ A politician for whom the value of office is high will always pander to the electorate in the first period and implement his ideal policy in the second period. Moreover, since such a politician always yields to populist pressures, his first period actions do not reveal his preferences. The desire by a politician to give in to populist pressures also reduces his incentive to collect costly information. Thus, if a politician is not perfectly informed, though better informed than the public, then representative democracy becomes a less attractive option. We note however that these results rely upon a problematic assumption. In their model, the ability of the public to monitor the politician or the judge is equivalent. This seems unrealistic. Both politicians and judges will reveal their preferences through the actions they take, the politician through his legislative behaviour and the judge through his pronouncements; but it seems likely that in most circumstances the public is better able to screen politicians.

³⁶ Hanssen, Andrew F., ‘The Optimal Level of Judicial Independence’, American Economic Review, 94 (2004), 712–29CrossRefGoogle Scholar.

³⁷ Landes, William M. and Posner, Richard A., ‘The Independent Judiciary in an Interest Group Perspective’, Journal of Law and Economics, 18 (1975), 875–901CrossRefGoogle Scholar

³⁸ As pointed out by Horn, legislative and administrative procedures that increase the cost of revisions in legislation also increase the value of any law from which interest groups might benefit. See Horn, Murray J., The Political Economy of Public Administration (Cambridge: Cambridge University Press, 1995)CrossRefGoogle Scholar.

³⁹ Cremer, Jacques and Palfrey, Thomas R., ‘Federal Mandates by Popular Demand’, Journal of Political Economy, 108 (2000), 905–27CrossRefGoogle Scholar.

⁴⁰ Oates, Wallace, Fiscal Federalism (New York: Harcourt-Brace, 1972)Google Scholar.

⁴¹ Weingast, Barry, Shepsle, Kenneth and Johnsen, Christopher, ‘The Political Economy of Benefits and Costs: A Neoclassical Approach to Distributive Politics’, Journal of Political Economy, 89 (1981), 642–64.CrossRefGoogle Scholar

⁴² Bennedsen and Feldman analyse a similar model where a multi-member legislature allocates a public good with differential benefits across districts. They compare the incentives of lobbyists to gather and disseminate information to a decentralized legislature like the US Congress to a centralized parliament with strong party cohesion (Bennedsen, Morton and Feldmann, Sven, ‘Lobbying Legislatures’, Journal of Political Economy, 110 (2002), 919–46Google Scholar).

⁴³ Ben Lockwood, ‘Distributive Politics and the Costs of Centralisation’, Review of Economic Studies, 69 (2002), 313–37.

⁴⁴ See, for example, Ferejohn, John, ‘Incumbent Performance and Electoral Control’, Public Choice, 30 (1986), 5–26CrossRefGoogle Scholar; and, more recently, Besley, Timothy and Case, Anne, ‘Incumbent Behaviour: Vote-seeking, Tax-setting and Yardstick Competition’, American Economic Review, 85 (1995), 25–45Google Scholar.

⁴⁵ Caselli, Francesco and Morelli, Massimo, ‘Bad Politicians’, Journal of Public Economics, 88 (2004), 759–82.CrossRefGoogle Scholar

⁴⁶ Dal Bo, Ernesto and Di Tella, Rafael, ‘Capture by Threat’, Journal of Political Economy, 111 (2003), 1123–53Google Scholar.

⁴⁷ In a companion paper, Dal Bo and Di Tella focus on the trade-off which interest groups face when both bribes and threats are available to them: ‘Plato o Plomo: Bribes and Punishments in a Theory of Political Influence’, American Political Science Review, 100 (2006), 41–55. The theme of protecting politicians from interest groups is taken up by Dewan, Torun and Myatt, D. P., ‘Scandal, Protection and Recovery in the Cabinet’, American Political Science Review, 101 (2007), 63–79CrossRefGoogle Scholar.

⁴⁸ See Dixit, Avinish, The Making of Economic Policy: A Transactions-Costs Politics Perspective (Cambridge, Mass.: MIT Press, 2000)Google Scholar.

⁴⁹ The classic in this genre is Niskanen, William, Bureaucracy and Representative Government (Chicago: Aldine, 1971)Google Scholar.

⁵⁰ Acemoglu, Daron and Verdier, Thierry, ‘The Choice Between Market Failures and Corruption’, American Economic Review, 90 (2000), 194–211CrossRefGoogle Scholar.

⁵¹ In Prendergast's paper taken up below, such misreporting is due to the bureaucrat's incentive to hold on to her job.

⁵² This effect is similar to that identified in the efficiency-wages literature. See Shapiro, Carl and Stiglitz, Joseph E., ‘Equilibrium Unemployment as a Worker Discipline Device’, American Economic Review, 74 (1984), 433–44.Google Scholar

⁵³ Prendergast, Canice, ‘The Limits of Bureaucratic Efficiency’, Journal of Political Economy, 111 (2003), 929–58CrossRefGoogle Scholar.

⁵⁴ This is not entirely home-grown in economics. An important precursor is Feddersen, Timothy J., ‘A Voting Model Implying Duverger's Law and Positive Turnout’, American Journal of Political Science, 36 (1992), 938–62Google Scholar.

⁵⁵ Rubinstein, Ariel, ‘Perfect Equilibrium in a Bargaining Model’, Econometrica, 50 (1982), 97–109Google Scholar.

⁵⁶ One exception is Silbert's study of the impact of a committee structure on the incentive for policy makers to follow inflationary policy. See Silbert, Anne, ‘Monetary Policy Committees: Individual and Collective Reputations’, Review of Economic Studies, 70 (2003), 649–66CrossRefGoogle Scholar.

⁵⁷ Crawford and Sobel, ‘Strategic Information Transmission’.

⁵⁸ Gilligan, Thomas and Krehbiel, Keith, ‘Collective Decision-making and Standing Committees: An Informational Rationale for Restrictive Amendment Procedures’, Journal of Law, Economics and Organization, 3 (1987), 145–93Google Scholar.

⁵⁹ See, for example, Feddersen, Timothy and Pesendorfer, Wolfgang, ‘The Swing Voter's Curse’, American Economic Review, 86 (1996), 408–24Google Scholar.

⁶⁰ Casseli and Morelli, ‘Bad Politicians’; Dal Bo and Di Tella, ‘Capture by Threat’, and ‘Plato o Plumo’.

⁶¹ Picketty, Thomas, ‘Voting as Communicating’, Review of Economic Studies, 67 (2000), 169–91Google Scholar; Razin, Ronny, ‘Signaling and Election Motivations in a Voting Model with Common Values and Responsive Candidates’, Econometrica, 71 (2003), 1083–119Google Scholar. Earlier efforts to model communication by political scientists appear in the literature. For example, see McKelvey, Richard and Ordeshook, Peter, ‘Elections with Limited Information: A Fulfilled Expectations Model Using Contemporaneous Poll and Endorsement Data as Information Sources’, Journal of Economic Theory, 36 (1985), 55–85CrossRefGoogle Scholar.

⁶² Morelli, ‘Party Formation and Policy Outcomes under Different Electoral Systems’, Review of Economic Studies, 71 (2004), 829–53; Baron, David and Diermeier, Daniel, ‘Elections, Governments, and Parliaments in Proportional Representation Systems’, Quarterly Journal of Economics, 116 (2001), 933–67Google Scholar; Diermeier, Daniel and Merlo, Antonio, ‘Government Turnover in Parliamentary Democracies’, Journal of Economic Theory, 94 (2000), 46–79CrossRefGoogle Scholar.

⁶³ Austen-Smith, ‘Redistributing Income’.