V55.0604 Societies and the Social Sciences
S. J. Brams
New York University Dept. of Politics, 715
Broadway, Rm. 424
Fall 1996 Office Hours:
3-5 PM, Mon. and Wed.
Preceptors: Catalin Cretu and Jeffrey Lax
Phone: 998-8510
The emergence of democratic institutions in Eastern Europe, the former Soviet Union, and many developing countries raises the question of what political and economic institutions function best. Is a parliamentary system better than a presidential system? Is the ownership of private property the key to developing a market economy?
Likewise in democracies like the United States, questions are continually raised about how institutions might be improved? Should Congress give line-item veto authority to the president? Should the Federal Communications Commission auction off airways, and if so, what kind of auction is best?
The problem of comparing institutions is a difficult one. Consider, as a case in point, the relative merits of the Electoral Collegethe formal institution for electing a president prescribed by the U.S. Constitutionand a frequently proposed election reform, direct election of the president. Since the U.S. Constitution was ratified over 200 years ago, attempts have been made to enact a constitutional amendment that would mandate direct popular-vote election of the president. But if there is a popular-vote election, should there be a 40% or 50% threshold that a candidate must obtain in order to be elected, with a runoff held if nobody attains this threshold? Or should a different system of voting be used, such as approval voting, which would allow voters to vote for more than one candidate if there are more than two candidates running?
Informed answers to these questions require that we specify criteria for evaluating institutions. In this course, we will invoke such criteria as efficiency, fairness, and invulnerability to manipulation; particular emphasis will be placed on fairness, because this is perhaps the main ideal to which most democracies aspire.
But what do we mean by fairness? In the case of the Electoral College, for example, does this mean the principle of one person, one vote? (If so, approval voting violates this principle.) In the case of dividing up the marital property in a divorce, does this mean that the items each party receives should have the same monetary value? (If so, then the husband still might envy the wife because she gets some heirlooms that he treasured.)
The last example illustrates that the division of goods in a divorce caseor items in an estate dispute or land in a border conflictmight not be envy-free. Envy-freeness and other properties of fair division will be analyzed, and algorithms that produce envy-free allocations will be described. The tools of game theory and social-choice theory will be
among those brought to bear in the rational-choice analysis of institutions, which involves the derivation of consequences from assumptions about what individuals seek to maximize.
Because one cannot in general guarantee all the good things one might desire (the desiderata), tradeoffs are inevitable. Consequently, a major purpose of this course will be to analyze, theoretically, some of these tradeoffs, showing which institutions satisfy what set of desiderata. But just as significant as this theoretical analysis will be more applied
analysis, demonstrating the relevance of the theory to real-world institutions, from election systems to auction procedures.
The principal by-product of such analysisand the theme that is reflected in the title of this courseis normative: to design institutions that are better (i.e., satisfy more desiderata) than extant institutions. If these institutions are also relatively simple and practicable (which are desiderata in their own right), then we might recommend that they be implemented. The discussion of implementation problems in both the political and economic spheres will be an important feature of the course.
In addition to the required readings, further readings will be recommended throughout the course for those interested in pursuing particular topics in greater depth. No mathematical training beyond high school mathematics is assumed in the course; however, much of the reading is quite analytic and will require sustained reflection to absorb and understand (this is not material that can be skimmed the night before the exam!).
The written requirements of the course include both a midterm and a final examination. These exams will contain problems that you will be asked to analyze and solve, using the theory and methods developed in the course. There will also be a short paper, of no more than eight pages, on a topic that is chosen in consultation with the instructor or a preceptor. Each of these three written requirements will count approximately 1/3 towards
your final grade.
Required Books (both Brams-Taylor and Young are in paperback)
Brams, Steven J., and Alan D. Taylor. Fair Division: From Cake-Cutting
to Dispute Resolution. Cambridge, UK: Cambridge University Press, 1996.
F
Wittman, Donald. The Myth of Democratic Failure: Why Political Institutions
are Efficient. Chicago: University of Chicago Press, 1995. M
Young, H. Peyton. Equity in Theory and Practice. Princeton, NJ: Princeton
University Press, 1994. E
Assignments Due
Sept. 9 & 11: Introduction and Overview; F, ch. 1; M, ch. 1; E
Sept. 16 & 18: Equity, Priority, and Proportionality; F, ch. 2; E, ch. 2
Sept. 23 & 25: Apportionment and the Division of Indivisible Goods; F, ch. 3; E, ch. 3
Sept. 30 & Oct. 2: Proportionality Vs. Envy-freeness; F, ch. 4; E, ch. 4
Oct. 7 & 9: Divorce and Cost-Sharing; F, ch. 5; E, ch. 5
Oct. 14 & 16: Moving Knives and Taxes; F, ch. 6; E, ch. 6
Oct. 21 & 23: Bargaining Vs. Guaranteeing; F, ch. 7; E, ch. 7
Oct. 28 & 30: Review; Midterm Examination
Nov. 4 & 6: Other Fairness Solutions; E, chs. 8 & 9
Nov. 11 & 13: Divide-the-Dollar and the Problem of Efficiency; F, ch. 8; M, chs. 2-5
Nov. 18 & 20: Political Markets and Institutions; M, chs. 6-12
Nov. 25 & 27: Auctions; F, ch. 9
Dec. 2 & 4: Short paper due; Elections; F, ch. 10
Dec. 9 & 11: Summing Up and Review; F, ch. 11; M, chs. 13 & 14; E, ch. 10
Dec. 16 (?): Final Examination
Selective Bibliography
The three required books have reasonably up-to-date references to the literature on the theory and, to a less extent, the practice of institutional design. The following books provide additional material on (1) general topics related to institutions and their performance and (2) some of the more analytic readings on equity, fairness, and justice.
Institutions and Their Performance
Bogdanor, Vernon (ed.). The Blackwell Encyclopaedia of Political Institutions. Basil Blackwell, 1987.
Eggertsson, Thrinn. Economic Behavior and Institutions. Cambridge U. Press, 1990.
Frydman, Roman, and Andrzej Rapaczynski. Privatization in Eastern Europe: Is the State Withering Away? Central European University Press, 1994.
Grofman, Bernard, and Donald Wittman (eds.). The Federalist Papers and the New Institutionalism. Agathon, 1989.
Hart, Oliver. Firms, Contracts, and Financial Structure. Oxford Universiity Press, 1995.
Kagel, John H., and Alvin E. Roth (eds.). The Handbook of Experimental Economics. Princeton University Press, 1995.
Mitchell, William C., and Randy T. Simmons. Beyond Politics: Markets, Welfare, and the Failure of Bureaucracy. Westview, 1994.
North, Douglas C. Institutions, Institutional Change, and Economic Performance. Cambridge University Press, 1990.
Ostrom, Elinor. The Evolution of Institutions for Collective Action. Cambridge University Press, 1990.
Przeworski, Adam. Democracy and the Market: Political and Economic Reforms in Eastern Europe and Latin America. Cambridge University Press, 1991.
Putnam, Robert D. Making Democracy Work: Civic Traditions in Modern Italy. Princeton University Press, 1993.
Riker, William H. The Art of Political Manipulation. Yale University Press, 1986.
Riker, William H. Liberalism Against Populism: A Confrontation Between the Theory of Democracy and the Theory of Social Choice. W. H. Freeman 1982.
Schotter, Andrew. The Economic Theory of Social Institutions. Cambridge University Press, 1981.
Tommasi, Mariano, and Katheryn Iefulli (eds.). The Economics of Human Behavior. Cambridge University Press, 1995.
Weaver, R. Kent, and Bert A. Rockman (eds.). Do Institutions Matter? Government Capabilities in the United States and Abroad. Brookings Institution, 1993.
Weimer, David L. (ed.). Institutional Design. Boston: Kluwer Academic, 1995.
Williamson, Oliver E. The Economic Institutions of Capitalism: Firms, Markets, Relational Contracting. Free Press, 1985.
Williamson, Oliver E. The Mechanisms of Governance. Oxford University
Press, 1996.
Equity, Fairness, and Justice
Barry, Brian. Theories of Justice: A Treatise on Social Justice, vol. 1.
University of California Press, 1989.
Barry, Brian. Justice as Impartiality: A Treatise on Social Justice, vol. 2. Clarendon/ Oxford University Press, 1995.
Benjamin, Martin. Splitting the Difference: Compromise and Integrity in Ethics and Politics. University Press of Kansas, 1990.
Brams, Steven J. Negotiation Games: Applying Game Theory to Bargaining and Arbitration. Routledge, 1990.
Ellickson, Robert C. Order without Law: How Neighbors Settle Disputes. Harvard University Press, 1991.
Dasgupta, Partha. An Inquiry into Well-Being and Destitution. Oxford University Press, 1993.
Elster, Jon. Local Justice: How Institutions Allocate Scarce Goods and Necessary Burdens. Russell Sage Foundation, 1992.
Frohlich, Norman, and Joe A. Oppenheimer. Choosing Justice: An Experimental Approach to Ethical Theory. University of California Press, 1992.
Goodwin, Barbara. Justice by Lottery. University of Chicago Press, 1992.
Kolm, Serge-Christophe. Modern Theories of Justice. MIT Press, 1996.
LeGrand, Julian. Equity and Choice: An Essay in Economics and Applied Philosophy. HarperCollins Academic, 1991.
Mellers, Barbara A., and Jonathan Baron (eds.). Psychological Perspectives on Justice: Theory and Applications. Cambridge University Press, 1993.
Moulin, Herv. Cooperative Microeconomics: A Game-Theoretic Introduction. Princeton University Press, 1995.
Roemer, John E. Theories of Distributive Justice. Harvard University Press, 1996.
Sen, Amartya. Inequality Reexamined. Russell Sage Foundation/Harvard University Press, 1992.
Zajac, Edward E. Political Economy of Fairness. MIT Press, 1995.