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Transaction Costs and Coalition Stability under Majority Rule

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  • Ronald N. Johnson
  • Gary D. Libecap

Abstract

Government program allocations are more stable and more equally shared than theory predicts. Although various explanations have been offered, we emphasize the high transaction costs of political negotiations and coalition enforcement. Cycling predictions ignore the cost to politicians of repeatedly forming coalitions and neglect the opportunity costs of failed coalitions and the loss of related government programs that bring valuable constituent benefits. Because of these costs, Congress relies on coalitions larger than the minimum necessary to enact a program, adopts relatively egalitarian programmatic sharing rules, and resists efforts to change those allocations. To illustrate we analyze the Federal Highway Trust Fund. Copyright 2003, Oxford University Press.

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  • Ronald N. Johnson & Gary D. Libecap, 2003. "Transaction Costs and Coalition Stability under Majority Rule," Economic Inquiry, Western Economic Association International, vol. 41(2), pages 193-207, April.
    • Handle: RePEc:oup:ecinqu:v:41:y:2003:i:2:p:193-207
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    Cited by:

    1. Stefano Barbieri & Kai A. Konrad & David A. Malueg, 2020. "Preemption contests between groups," RAND Journal of Economics, RAND Corporation, vol. 51(3), pages 934-961, September.
    2. Armelle Mazé, 2005. "Contract Law and the self-enforcing range of contracts in agriculture," Working Papers halshs-00354960, HAL.
    3. Armelle Mazé & Claude Ménard, 2010. "Private ordering, collective action, and the self-enforcing range of contracts," European Journal of Law and Economics, Springer, vol. 29(1), pages 131-153, February.
    4. Fleck, Robert K., 2013. "Why did the electorate swing between parties during the Great Depression?," Explorations in Economic History, Elsevier, vol. 50(4), pages 599-619.
    5. Xuesong Li & Yunlong Ding & Yuxuan Li, 2019. "M-Government Cooperation for Sustainable Development in China: A Transaction Cost and Resource-Based View," Sustainability, MDPI, vol. 11(7), pages 1-17, March.
    6. Maze, Armelle, 2006. "Multilateral reputation mechanisms and contract law in agriculture : complement or substitutes," 2006 Annual meeting, July 23-26, Long Beach, CA 21285, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    7. John Joseph Wallis & Barry R. Weingast, 2005. "Equilibrium Impotence: Why the States and Not the American National Government Financed Economic Development in the Antebellum Era," NBER Working Papers 11397, National Bureau of Economic Research, Inc.
    8. Robert K. Fleck, 2008. "Voter Influence and Big Policy Change: The Positive Political Economy of the New Deal," Journal of Political Economy, University of Chicago Press, vol. 116(1), pages 1-37, February.
    9. Gary D. Libecap, 2016. "Coasean Bargaining to Address Environmental Externalities," NBER Working Papers 21903, National Bureau of Economic Research, Inc.
    10. Armelle Mazé & Claude Ménard, 2010. "Private Ordering, Collective Action, and the Self-Enforcing Range of Contracts. The Case of French Livestock Industry," Post-Print halshs-00624288, HAL.

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    JEL classification:

    • K0 - Law and Economics - - General
    • H0 - Public Economics - - General
    • D7 - Microeconomics - - Analysis of Collective Decision-Making

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