Bar Ilan University
On the Origins and Consequences of Organizational Governance
Spring 2010

Posker Stenhus

Professor:   Roger D. Congleton
 George Mason University
Bio , Vita

Office at Bar Ilan :  326 (blg 504)
Phone:  03 531 8922


<>Suggested Texts: Congleton, R.D. (2009) Perfecting Parliament: Liberalism, Constitutional Reform, and the Rise of  Western Democracy. (forthcoming 2011, Cambridge U. Press, [Part I].)

Congleton, R. D. and B. Swedenborg (2006) Democratic Constitutional Design and Public Policy. Cambridge Mass: MIT Press.
Some Useful Links
Public Choice Society
European Public Choice Society
Public Choice

(Room 11, Blg 504)
Dates Tentative Lecture Plan Lecture Readings

Analytical History: Origins of Governmental Institutions

25 May (14:00-16:00)
I. Team Production and the Origin of Formal Organizations
Economies of scale, formeteurs, and the returns from organization.
Background readings:

Olson, M. (1965) The Logic of Collective Action. Cambridge: Harvard University Press.
Alchian, A. A. and H. Demsetz (1972) "Production, Information Costs and Economic Organization," American Economic Review 62: 777–795.
Ostrom, E. (1991) Governing the Commons: the Evolution of Institutions for Collective Action. Cambridge: Cambridge University Press.
Williamson, O. (1996) The Mechanisms of Governance. Oxford: Oxford University Press.

PP: Chapter 2
26 May (10:00-12:00)
II. Organizational Decisionmaking and Institutions for Collective Choice
Why every organzation needs (and has) a government, organizational rule of law, and a constitution.
Background readings:

Buchanan, J. M. and G. Tullock (1962) The Calculus of Consent, Logical Foundations of Constitutional Democracy. Ann Arbor: University of Michigan Press.
Congleton, R. D. (1984) "Committees and Rent-Seeking Effort," Journal of Public Economics 25: 197–209.
Congleton, R. D. (2007b) "Informational Limits to Democratic Public Policy: The Jury Theorem, Yardstick Competition, and Ignorance," Public Choice 132: 333–52.
Congleton, R. D. (2004b) "Mutual Advantages of Coercion and Exit within Private Clubs and Treaty Organizations: Toward a Logic of Voluntary Association," Revista de Political Economy 4: 49–78.
PP: Chapter 3
27 May (12:00-14:00)
III. Monopoly Power, Exit, Regional Governance, and the Rule of Law
Sharing authority, imposing rules on "outsiders," asymmetric laws, economic bounds on arbitrary rule, regional governance and the organization of violence
Background readings:

Congleton, R. D., A. Kyriacou and J. Bacaria (2003) "A Theory of Menu Federalism: Decentralization by Political Agreement," Constitutional Political Economy 14:167–90.
Congleton, R. D. and S. Lee (2009) "Efficient Mercantilism? Revenue-Maximizing Monopolization Policies as Ramsey Taxation"  European Journal of Political Economy 25 (2009): 102-14.
Olson, M (1993) "Dictatorship, Democracy, and Development," American Political Science Review 87: 567–576.
Tullock, G. (1974) The Social Dilemma. Blacksburg: Center for Study of Public Choice.
PP: Chapter 4

Governance in the Very Short and Long Run

31 May (18:00-20:00)
IV. On the Logic and Politics of Crisis Management
Crisis management as short term adjustments to unanticipated shocks, external and external shocks, contrived crises
Background readings:

Congleton, R. D. (2001a) "Rational Ignorance and Rationally Biased Expectations: The Discrete Informational Foundations of Fiscal Illusion." Public Choice 107: 35–64.
Sobel, R. S., and P. T. Leeson (2006) "Gvernment's Response to Hurricane Katrina: A Public Choice Analysis," Public Choice 127: 55-73.
Crisis Management
1 June (14:00-16:00)
V. A Case Study in External Shocks: Hurricane Katrina
Background readings:
Oates, W. (1972) Fiscal Federalism. New York: Harcourt Brace Javanovich.
Handwerk, B. (2005) “New Orleans Levees Not Built for Worst Case Events,” National Geographic News (September 2).
Chari, V. V., L. Christiano, and P. J. Kehoe (2008) “Facts and Myths about the Financial Crisis of 2008,” Federal Reserve Bank of Minneapolis, Working Paper 666 (October).
Huricane Katrina

2 June (10:00 - 12:00)
VI. A Case Study in Untended Consequences: The Financial Crisis of 2008-09
Background readings:
Breton, A. and R. Wintrobe (1975) “The Equilibrium Size of a Budget-Maximizing Bureau: A Note on Niskanen’s Theory of Bureaucracy,” Journal of Political Economy 83: 195–207.
Case, K. E. and R. J. Shiller (2003) “Is there a Bubble in the Housing Market?” Cowles Foundation Paper 1089, Yale University.
Crippen, D. L. (2001) Federal Subsidies and the Housing GSEs. Congressional Budget Office Report, Washington. Available at
Lei, V., C. N. Noussair, and C. R. Plott (2001) Nonspeculative Bubbles in Experimental Asset Markets: Lack of Common Knowledge of Rationality vs. Actual Irrationality," Econometrica 69: 831-59.

Financial Crisis of 2008
3 June (12:00 - 14:00)
VII. Constitutional Reform, Democracy, and Long-Run Governance
The balance of authority within divided governments, constitutional gains to trade, and shifts in the balance of authority.
Background readings:
Congleton, R. D. (2007a) "From Royal to Parliamentary Rule without Revolution, the Economics of Constitutional Exchange within Divided Governments," European Journal of Political Economy 23: 261–84.

3 June
FINAL Exams Distributed

constitutional gains to trade



Complete Authority

8, 10



Shared Authority


10, 12





6, 14

US Capital