[This paper provides a theory of legislative institutions that parallels the theory of the firm and the theory of contractual institutions. Like market institutions, legislative institutions reflect two key components: the goals or preferences of individuals (here, representatives seeking reelection) and the relevant transactions costs. We present three conclusions. First, we show how the legislative institutions enforce bargains among legislators. Second, we explain why, given the peculiar form of bargaining problems found in legislatures, specific forms of nonmarket exchange prove superior to market exchange. Third, our approach shows how the committee system limits the types of coalitions that may form on a particular issue.]

This paper extends Stigler and Peltzman's approach to regulation by incorporating a legislature. The model yields comparative statics results and hence testable implications. The paper then tests between two opposing approaches about regulatory agency behavior. The first assumes agencies operate independently of the legislature and hence exercise discretion; the second assumes that Congress controls agency decisions. The recent behavior of the Federal Trade Commission provides the empirical setting. Substantial evidence is found for the specific predictions of the model, including the hypothesis of systematic congressional influence over FTC decisions.

We interpret historical evidence in light of a repeated-game model to conclude that merchant guilds emerged during the late medieval period to allow rulers of trade centers to commit to the security of alien merchants. The merchant guild developed the theoretically required attributes, secured merchants' property rights, and evolved in response to crises to extend the range of its effectiveness, contributing to the expansion of trade during the late medieval period. We elaborate on the relations between our theory and the monopoly theory of merchant guilds and contrast it with repeated-game theories that provide no role for formal organization.

This essay offers a rational political explanation for the notorious inefficiency of pork barrel projects with an optimization model of legislative behavior and legislative institutions. The model emphasizes the (economically arbitrary, from a welfare point of view) importance of the geographic incidence of benefits and costs owing to the geographic basis for political representation. We explore the implications of a legislator's objective function and derive conditions under which a representative legislature will select an omnibus of projects each of which exceeds the efficient scale.

Recent results in the theory of pure rule demonstrate the genericity of rule cycles. As established by Richard McKelvey (1979), L. Cohen (1979) and N. Schofield (1978), rule nearly always breaks down and, when it does, the breakdown is complete. The theorems given below may be summed up in the following three assertions: 1) For any policy or alternative, there exists a set of alternatives that command a of votes against it; 2) this situation is not an abberation but rather is the general case; and 3) it is almost always possible in multidimensional choice settings to find a sequence of votes that begins at any point and ends at any other point. Majority rule may wander anywhere. Yet, when these theoretical assertions are applied to legislatures based upon rule, they contain no obvious policy content or predictions. The key insight which we elaborate in this paper is that rule is not self-implementing-there is no majority rule machine into which we feed preferences and out of which come outcomes. Rather, there is a complex series of institutional arrangements underpinning the operation of rule legislatures-arrangements from which theorists have (mistakenly) abstracted. In fact, rule theorists have not focused at all on institutional details; instead they have restricted themselves to the rule dominance relation, operating under the implicit assumption that what may be proved true about this relation is true of all legislative institutions based upon it. In this paper, we show that this assumption is misleading and that the the results based upon it must be reinterpreted in order to be useful for understanding real world committees and legislatures.