Fall 1987

AEC 809 Institutions, Behavior and Performance

Prof. James Shaffer

Department of Agricultural Economics

Michigan State University


Week 1

Introduction; Objectives; Evaluation; Books and readings-Approach: The class is a place to try out ideas-the readings and discussions are intended as inputs to your paradigm and framework for policy analysis and as input to your Journal File (JF). Overview; policy and program design and evaluation-toward a useful paradigm. Introduction of participants.


Week 2 Readings

Discussion and Suggestions

A. This course is about the relationship of institutions, behavior and performance in political economic systems. We start with a review article discussing the roles of economists in instituting public policy in the U.S. Federal Government. Economists are a particular class of participants in the policy process. The way they perform their various roles can influence the performance of the political economy. As economists and policy analysts we need to understand not just the policy process but the various roles of the economists and analysts in the process.

This course is not intended to be a critique of mainstream economics. Economists have developed a rich set of concepts and observations which are useful in analysis. However, policy conclusions drawn from theories based upon clearly couterfactual assuptions have to be understood for what they are. Thurow provides a critique of what he calls the equilibrium price-auction view of behavior....


Week 3 Readings

A. Bartlett, Randall. Economic Foundation of Political Power; The Free Press, pp.4-79 and 130-198.

B. Langlois, Richard N. "The New Institutional Economics: An Introductory Essay," Economics As A Process, Cambridge University Press, 1986, pp. 1-25.

C. Lang, Mahlon. "Economic Efficiency and Policy Comparisons," AJAE, November 1980, pp.772-777.

D. Shaffer, J.D. and A.A. Schmid. "Community Economics: A Framework for Analysis of Community Economic Problems."

Discussion and Suggestions

A. The purpose of this reading is (1) to illustrate the development and application of a paradigm as an example for your own intellectual craftsmanship-i.e., and illustration for your own JF and book; (2) to illustrate that the paradigm makes a difference; (3) to provide concepts for your own analytical framework; (4) to illustrate the pervading influence of uncertainty in the policy process; (5) to illustrate the application of behavioral assumptions in policy analysis; (6) to add to the exploration of the major policy question concerning the articulation of preferences and the policy response to preferences; and (7) to show something of the relationship between political and economic power and some of the implications for policy.


Week 4 Readings

A. Hirschman, A.O. Exit, Voice and Loyalty, Harvard University Press, 1970, pp.1-126.

B. Shaffer, J.D. "Property, Market Structure and Efficiency" (processed).

C. Williamson, Oliver E. "The Economics of Governance: Framework and Implications," Economics As A Process, Cambridge University Press, 1986, pp. 171-202.

D. Littlechild, Stephen C. "Three Types of Market Process," Economics As A Process, Cambridge University Press, 1986, pp. 27-39.

Week 5 Readings

A. 1. Platt, John. "Beyond Freedom and Dignity-A Revolutionary Manifesto," The Center Magazine, Vol. V, No. 2, March 1972, pp. 34-52 (also Chapter 2 in Wheeler, H., ed., Beyond the Punitive Society).

2. . "Social Traps," American Psychologist, August 1973, pp. 641-651.

B. Heiner, R.A. "The Origin of Predictable Behavior," American Economic Review, September 1983.

C. Olstrom, Elinor. "Issues in Improving the Performance of Local Government From the Citizen's Point of View" (processed).

Discussion and Suggestions

A. The purpose of this set of readings is to explore the implications of some important behavioral concepts for policy analysis. The behavioral link between institutions and performance is critical. See what you can draw from these readings for your own framework of analysis and analysis of your policy area. How do the readings influence your ideology, especially in respect to the proper role of government and the universal issue of social control? Do you believe it is possible to design an better culture?

Note that Skinner's radical behaviorism is essentially a theory of learning. It differs "radically" from classical conditioning. "But stimuli do no elicit operant responses; they simply modify the probability that responses will be emitted. They do so because of the contingencies of reinforcement in which they have played a part, and they may act in combination with other conditions, possibly but not necessarily to the point at which a response occurs. This is a far different role from that of the eliciting stimulus in a reflex." (Skinner, p. 222 - D)

Week 6: Readings-- Institutional Change and Stability

A. Harris, Marvin. Cows, Pigs, Wars and Witches, Vintage, 1975 (Paper), pp. 1-152 only-especially pp. 11-34 and 11-152.

B. Shaffer, J. "On Institutional Obsolescence and Innovation-Background for Professional Dialogue and Public Policy," AJAE, May 1969, pp. 245-267. (Contains a paradigm relating the industrialization process and institutional change, pp. 246-7.)

C. Downs, Anthony. "The Successes and Failures of Federal Housing Policy," The Public Interest, Winter 1974, pp. 124-145.

D. Thurow, L. "Toward a Definition of Economic Justice," The Public Interest, Spring 1973, pp. 56-80. Supplementary: Posner, R. and L. Thurow, "On Economic Justice: An Exchange, " The Public Interest, Fall 1973.

E. Stiglitz, Joseph E. "Information and Economic Analysis: A Perspective, "Economic Journal, pp. 21-40, Vol. 95, Supplement to Royal Economic Society Conference Papers, 1985.

Week 7: No reading assignments. Work on your JF. Catch up on reading

Mid-term exam.

The mid-term exam will focus on the potential relationship of ideas from the course to your JF.

Week 8: Readings

A. Shaffer, J.D. "On the Structure of Power in the United States Political Economy-Some Issues and Alternatives," Increasing Understanding of Public Problems and Policies, Farm Foundation, Chicago, 1975, pp. 14-30.

B. Galbraith, J.K. "Power And the Useful Economist," AER, March 1973, pp. 1-11.

C. Lerner, Abba P. "The Economics and Politics of Consumer Sovereignty," AER, May 1972, pp. 258-266.

D. Gintis, H. "Consumer Behavior and the Concept of Sovereignty: Explanations of Social Decay," AER, May 1972, pp. 268-278.

E. Seidman, R.B. "Contract Law, the Free Market, and State Intervention," Journal of Economic Issues, December 1973, pp. 553-573.

F. Samuels, W. "A General Paradigm of Choice of Power," from "Welfare Economics, Power and Property" in Wunderlich, Gene and W.L. Gibson, Jr. (eds.), Perspectives of Property, Institute for Research on Land and Water Resources, The Pennsylvania State University, 1972, pp. 63-67.

This week's readings deal with power, the concept of sovereignty, preferences, and some implications for policy analysis. Again, emphasis is on introducing concepts and contrasting views of the world and showing some application to policy problem definition and institutional design. Institutions structure power relationships. Participants in a system exercise differential power-i.e., they have different degrees of control within the system. A dimension of performance is the distribution of power. Note that the question of whose preferences count is a question of the distribution of power.

Week 9: Readings

A. Shaffer, J.D. "Notes for a Theory of Personality for a Theory of Consumer Behavior."

B. Leibenstein, Harvey. "A Branch of Economics is Missing: Micro-Micro Theory," Journal of Economic Literature, June 1979, pp. 477-502.

C. Kunreuther, H. and P. Slovic. "Economics, Psychology, and Protective Behavior," AER, May 1978, p. 64.

D. Morrison, Denton. "Some Notes Toward Theory on Relative Deprivation, Social Movements, and Social Change," American Behavioral Scientist, May/June 1971, pp. 675-690.

E. Roberts, Marc J. "An Evolutionary and Institutional View of the Behavior of Public and Private Companies," AEA, May 197

F. Shaffer, J.D. "On the Concepts of Agricultural Commodity Development Boards as Institutions for Fomenting Economic Development."

Discussion and Suggestions

The readings and discussion are intended to provide raw material to help you develop your own framework for policy analysis. The readings have emphasized various paradigms or ways of looking at how the political economy "works." Your policy analysis framework should deal with the question-what needs to be taken into account in policy analysis? While many of the readings have a flavor of being critical of the neo-classical economic paradigm, the intent is not to devalue the insights of that paradigm, but rather to build on and modify it as appropriate for effective policy analysis.

Week 10: Readings

A. Wellford, H. Sowing the Wind, Bantom, Chapter 3, "The Forgotten Man: The Federal Meat Inspector," pp. 45-78; Chapter 13, "The Enforcement Labyrinth," pp. 331-353; Chapter 14, "Conclusion," pp. 354-356; Supplementary: Chapter 1 and Chapter 9 and other chapters.

B. Schon, Donald A. "Planning and Managing Change," The Bureaucrat, July 1974, pp. 153-161.

C. Wood, Garland P. and J.D. Shaffer. "Institutional Performance in Agricultural Development" (processed).

D. Leontief, Wassily. "What An Economic Planning Board Should Do," Challenge, July-August 1974, pp. 35-40.

Discussion and Suggestions

The focus of this week's readings is on implementation of public programs and policies. Most of the efforts of government are, of course, expended on implementation. But the details of implementation are frequently neglected in policy and program design. Predicting performance associated with a program or policy requires the identification of all the relevant participants and predicting their behavioral response to the rules. It is often very complex. The theme is "Good intentions are not enough."


Week11: Summing Up

Work on Journal File. Be prepared to discuss your analytical framework and policy area.

[Editors note: The "Discussion and Suggestions" sections have been abbreviated from the original, which contained many questions for students to consider.]