Political Studies (1995). XLIM. 308 717 Recent Work in Game Theory and Coalition Theory’ Stewart Woon Hasvard University and St John’s College, Oxford AND Tain MCLEAN Nuffield College, Oxford 1. Introduction: Why Rational Choice Theory? ‘sand international to be reviewed . while the more advanced Applications of game theory and coalition theory relations continue to proliferate Even the clem below incorporate very recent work in game theor "Phe books reviewed in this ariel are Vosphonkss ona reviews Theory of Moves (Cambridge, Cambridge University Press. 1994), nd 8 Nau, Thinking Steateeieails> dhe Cazsperivive Fadge an Business. Polities, and Brorsdar Life (New York. Norton. 1991) Michatet Nicholson, Fornia! Theories fn Internstotal Refosions (Cambridge, Cambridge University Press. 1989 Michac! Nicholson, Raiionaliiy andthe Avalysis of katernarional Congtier (Cambridge. Cambridge University Pross. 1992), P. Oxdeshook, a Political Theory Prianer (London. Routed, 1992), R. Powell, Au rience Theor: the Scare! for Credibatre (Cambridge. Cambridge University Press. 1990} More adscacod books Jelfrey Banks, Siencting Games in Polviced Seance (Chur, London, Harwood. 1991), W, Con and M.D, McCubbins, Legislarive Feriurhum: Pacty Gaverament in the House (Berkeley. versity of California Pross, 1993}, 1 Pathologies of Rational Choice Theory: a Critique af Applications ia Vale University Press, 1994), sion and Legisfarive Organization (Ann Arbor, University of Michigans Press, U D.P. Gro and 1. Shapi Political Science ¢Nex Haven C K. Krehbiel, Ju 1991) M. Laver and (. Budge (eds), Paris Poly and Goreroment Coatitions (Basingstoke, Macrall: 1992) aver ancl Norman Schofield, Mufiyurry Gaxcenment” the Potties of Coulition In Eurape Oxford University Press. 1990), th A, Shepsle, Madels uf Multiporiy Electoral Comperinion sChur. London, Harwood, 1991). G. Toohelis, Nested Gans: Rational Choe its Comparative Polities (Berkeley. University of Caniforaia Press, 190), = The ideas bobind cosition theory are basically those of zero-sum games, whereas all other applications in 20 ‘eo non-zero-sian games. The power to govern is generally taken to beat take of fixed size. so thal the enalition bargaining game is 7eT0.sum, However, several of the books tnder Feview c1oss the fromtisr between ames asd the set, Therslore, we eonsider both coalition theory and game theory raure generally so, Oxo ONE F.C a 288 St Copyright © 2001. All Rights Reseved.704 Review Section ‘ones deal with concepts (‘signalling games’, ‘nonmyopic equilibria’) that only a few years ago were only seen on the preprint circuit Game theory deals with interactions among rational choosers, Many scholars in other branches of political science and international relations are sceptical of rational choice theory, and will not regard its rapid evolution as good news. There are frequent attacks on the rational choice programme. Until recently they have come in two main versions: one which attacks its supposed ideology; the other. its supposed unreality. We deal summarily with these before consider- ing a new line of attack, by Green and Shapiro. at greater length. We will conclude that rational choice does have a problem but that it is not what any of, the critics say it is. Attacks on the (supposed) polities of rational choice are numerous. A ro example is the claim that ent insofar as policies of tax-cuting, privatizing, deregulating and “rolling ba the state’ have an intellectual basis, these theories supply it.* This particular claim is unpersuasive. Of the three works cited, one contains no argument about the desirable size of government, and one contains an argument for government intervention. Only James Buchanan is admittedly a neoclassical ideologue. But the methodology of rational choice no more presupposes a right- wing ideology than the methodology of atomic physics presupposes an enthusiasm for dropping bombs. (Nor should the myth of its mathematical inaccessibility scare people off.) The second line of attack is to say that people. and nations, are irreducibly unique. Only somebody who knows a lot about Mongolia is entitled to say anything about Mongolia. The task of political science is to offer thick description of the unique circumstances of politics in each place and time. To writers of this school, rational choice offers nothing more than an irritation. But this claim is so strong that it imperils any generalization about anything in social science.’ We do not want to give up so easily. One of the paths to fruitful generalization has been to posit assumptions about the rationality of actors. Rationality ‘is nothing more than an optimal correspondence between ends and means’. but it is a correspondence with weak and strong requirements. The former demand that preferences and beliefs are internally coherent (i.e. not contradictory, not intransitive, and in the case of uncertainty. conforming to basic probability axioms), the latter that the actions of individuals conform to the preferences they hold. Rational choice analysis does not presuppose self- interested behaviour, nor does it reduce to the claim that people think and act identically. Rather, it examines individuals in the pursuit of broadly conceived goals, goals which may vary depending upon any factor one wishes to specify. > Hugh Stretton and Lionel Orchard, Public Goods, Public Enterprise, Public Chotce: Theoretical Foundations of the Contemporary. Attack on Goveenprent (Basingstoke. Macmillan, 1994), p. 2 “These theories’ ate identified as those initiated by J. M, Buchanan. “The pure theory of goverment finance: a stiggested approach’, Journal of Political Econony. 57 (1949), 496-S08: K. Arrow, “A difficulty in the concept of social welfare’, Journal of Political Economy. 58 (1950), 338-46; and P. Samuelson, “The pure theory of public expenditure’. Review of Economies and Statistics. 36 (1954), 387-9, Our counter-claim is also strong and we have no space to defend it he Rationality and the Analysis of Insernational Conitict, pp. 223 2 S"Tsebelis, Nested Gums, p. 18 bur soe Nicholson, Cooviight @ 3007 Ail Rights Reseved‘ew Section 705 This goes some way towards disarming the objection “but people are not rational’, & second riposte is to invoke the “as if” thesis." People may not be rational, but they act as if they are. Consequenily, a methodology which 's with assumpiions of rationality is predictively though not descriptively George Tsehelis is one of several game theorists who contend that ‘the assumption of rationality is a legitimate approximation of realistic situations. motives. caleulations. and behavior where “the actors’ ty and goals ablished and the rules of the interaction are precise and to the interacting agents’.’ This defence goes to the heart of the issue between the ‘interpretative’ and “theoretical” schoo!s. The study of politics can be soem us the inspection of cnrrent and past events with the eye of the historian or journalist. Another view, however. seeks ta make generalizable state- ments about politics. classifying tke objects of political study as instances of classes of events (in some sort of analogy. however imperfect, with the natural sciences). A frequent charge against rational choice approaches is that they sacrifice accuracy for parsimony. complexity for simplicity, Yet if rational choice. as Tsebelis suggests. can delineate the conditions under which it is reasomiable to use rationality as a descriptive as well as a theoretical assumption, and develop theoretical accounts of the consequences of relaxing and modifying these assumptions, then the trade-off between theoretical and descriptive power can be significantly reduced. Green and Shapiro's Pathologies of Rational Choice Theory, which is curvenily ereating a considerable stir in American political science, raises more novel criticisms by attacking the adequacy of empirical explanations offered by rational choice.* They think the problem lies in ‘the characteristic aspiration of rationat choice theorists to come up with universal theories of politics’ Elaborate theories and incestuous model modification mean that litle attention is paid 10 how theories may be operationalized and tested. When theories are tested the work iy marred by « serizs of methodological frauds to generate the Fight answer. Hypotheses are constructed in ways that make then immune to contradictory dita: evidence is selected and stylized to bias the conclusion; empirical anomalies are explained away by post hoc alterations to the argument: and alternative explanations (or null hypotheses) are ignored. The result is a body of work in which “data no longer test theories: instead, theories continually impeach and elude data, In short, empirical research becomes theory driven rather than problem driven, designed more to save or vindicate some variant of rational choice theory than to account for any specific set of political phenomena’ (p. 6) Green and Shapiro exptore four literatures at the heart of rational choice the paradoa of voter turnout: spatial theories of electoral competition; the instability of majority rule: and collective action problems of organizational action. These chapters are highly entertaining: the authors know these literatures back to front, and are not afraid to name names. Their most * Paul Samuolson, ‘Problems of methodology discussion’. Ap and. Procecskives. 53. (1863), rican Economic Review Papers 3317 sce also” the ‘cle vonespt of “potential explanation” in Hempel. ypccis of Seéeatific Explanation (Nea York, Fies. 1968), and Robert Nozick, Anarct Styre usd Ciopaa iN. York. Basie, 1994) PM yscheis, Nested Guanes, pp. 32 3. ° A round able on the book at the 199 meeting of the animated over 100 pasticipants ican Political Science Association Copyright @ 2001. All Rights Reseved.706 Review Section convineing (and wittiest) attack is on the easiest target of the four, namely the failure of rational choice to explain why people vote. Rational choice writers should concede that ground, and defend their approach more robustly on territory they are likelier to hold. It makes little sense {© argue that voters are rational calculators; it makes a lot of sense to argue that legislators an lobbyists are. ed with their exposures of methodological lapses are thoughtful -al digressions [e.g. on uncertainty in spatial theory (pp. 159-69) and on whether not having a core in a bargaining game is really an important issue (pp. 132-6)]. They complain that results from experimental social psychology (often undertaken by rational choice scholars themselves) rarely confirm and usually contradict the simple predictions of rational choice. In short, rational choice theory may be analytically impressive, but has contributed next to nothing to our understanding of polities. Anticipating the debate that is already following, Green and Shapiro respond to ten counterarguments. Anticipating is not the same as answering, however, and two of the objections are worth pursuing. Firstly, rational choice theory is now turning from internal foundational questions to substantive, applied concerns. Green and Shapiro at times ridicule the way in which rational choice articles end with calls for more empirical work, but only when these appeals are answered will we discover whether the weaknesses ascribed to the paradigm are really ‘pathological’ or merely the problems of « fledgling theory. Secondly, the authors fail to observe what Kenneth Shepste has called ‘the first law of wing walking” ~ ie. do not let go of something until you have something else to hang on to. The book's method of assessment is to use e.xamples from the literature to test the approach as a whole. Certainly there are eases which are methodo- logically suspect, and cases which point to general problems. of testing hypotheses in social science, but neither justify the conclusion that there is something pathological about the rational choice paradigm. Rational choice 's which shed light on their subject matter, and erate testable hypoth can which argue against competing explanations. The books by Krehbiel and by Cox and McCubbins, reviewed below. are excellent examples. It may not be 10 easy, but it can be done. 2. Bquilibr The key concept of game theory is that of equilibrium, An equilibrium is an outcome that remains stable in Some sense. Game theoretic equilibrium is said to exist where no player has an incentive to deviate from her chosen strategy given the strategy of other players. This is a powerful organizing idea, in its classical form as first proposed by John Nash in 1951 (and as listed in the citation for the 1994 Nobel Prize in Economies which Nash shared with John Concepts and Recent Developments ® Mentioned by Shepste in his contribution to the round table discussion of Green and Shapiro's ‘book at the 1994 American Pohtical Science Association convention. New York Older rational-choice work that in our view does not sulfer from Green and Shapiro's pathologies includes Morris Fiorina, Retroypective Voting in uerican National Elections (New Haven, Yale University Press, 1981) and W. H. Riker, “The heresthetic of constiution-mthine: th Presidency in 1787, with comments on determinism and rationa! choice”. America Pofitical Scien Review, 78 (1984). 116 ‘Copyright ® 5001. All Rights Reseved.ew Section 707 Hassanyi and Reinhard Selten).!! Game theorists are moving beyond Nash ‘brium ia various directions, for reasons we try to explain below. But the idea is simple. elegant, and powerful. In sensitive hands, it can lead to very illuminating conclusions about politics. The lending themes ii political game theory over the last ten years include the evolution of co-operation, credible threats, and extensions to Nash equilibrium inchiding subgame perfect equilibrium and Bayesian equilibrium, Some of these are more formally defined below but an informal survey may help here. Nash equilibrium is essentially a static idea. Furthermore, some Nash equilibria are defective: players cun sce that they would each be better off somewhere else. The best-known of these is the outcome in a prisoners’ ditemma in which both (all) players defect when each would be better off if all co-operated. But prisoners’ dilemmas sometimes do have co-operative solutions. Is this because the players ‘ate irrational, or because Nash equilibrium is not the last word? Game theorists, naturally, prefer the second explanation. Biologists and social scientists are ‘ntensively exploring the idea that co-operation might evolve because, in repeated interactions. players would reward each other's co-operation and punish cach other's defections. However, in so doing, rational individuals must hot make incredible threats. An equilibrium which involves no. incredible threats is called ‘subgame perfect’. Another way to refine Nash equilibrium is to assume that players only have probabilistic. not certain, knowledge of the state of the world. A cational player starts with some (arbitrary) assumption about the probabilily of each possible state of the world, but updates her assumptions, (and hence changes her strategy) as more information becomes available. This leads to what is known sts Bayesian equilibrium. Not only has the understanding of the concept of equilibrium been extensively refined in the past ten years, but the focus has shifted from iteration to information. Robert Axctrod's influential The Evolution of Cooperation (New York, Ba 1984) suggested that the Prison: Dilerama paradox disappears. because if the same game is repeated many times tit-for-tat strategies are very often both stable and successful, However, tit-for-tat is not subgame-perfect ‘The key to understanding when equilibria hold is provided by assumptions about incomplete information, not the mere fact of iteration, (A game of incomptete information is onc in which not all the payofs to all players from every move are common knowledge.) 3. Textbooks and Reviews Every so offen, a new review of game theory for complete beginners is needed. Highly approachable examples in the past. still worth reading, are J. D. Williams’ The Conpleat Straiegyst (New York, McGraw-Hill, rev. edn, 1966), and Michael Laver's The Politics of Privare Desires (Harmondsworth, Penguin, 1981), But as game theory moves on, so must beginners” books on it. Avinash Dixit and Barry Nalebult’s Thinking Strategically: the Competitive Edge in vs. Polities, and Everyday Life (New York. Norton, 1991) will delight some and infuriate others. European readers may be put off by a tone of business-school cockiness hich starts with the subtitle. However, this is not the sort of book that blares at you from: airport bookstalls. This book is serious. and "14. Nash. Non-cooperative games, dninuls of Mathematics, 54.4951), 286-95, «Post Sais Aes, PPS Copyright © 2001 - All Rights Reseved.708 Review Section although the authors “draw on the shared experiences of most American readers’, they even refer to cricket and Cambridge May Balls. They show how far the balance in game theory has swung away from the matrix, normal-form, style of analysis towards the game-tree. extensive-form style, Given that the normal form is easier to explain and seems to capture the essence of, for instance. prisoners’ dilemma and chicken in one simple diagram, why has this shift taken place? Because the simple diagram is too simple. To present, for instanee, the Cuban Missile Crisis as “the world’s most desperate game of chicken’! is to ignore the fact that Kennedy and Khrushchev were playing a sequential, not a simultaneous, game. For any sequential game the best form of analysis is th extensive form, using backward reasoning to prune the game tree at those nodes which lead to dominated outcomes. Thus the strategic doctrine of massive retaliation, as propounded by John Foster Dulles in the 1950s, was not credible because the USSR could reason that. if the USA arrived at the node at which it had to put its threat of massive retaliation into effect, it would not be in its interest to do so. Curiously Dixit and Nalebuff, whose book is generally excellent on credible threats, Seem to get this one wrong. although it is discussed in every other introductory (ext on game theory. They cut a few other corners and take a few liberties _ e.g. by changing Pliny the Younger’s classic story about manipulation in dhe Roman Senate. But they lead to slightly more advanced treatments. such as those by Michael Nicholson and Peter Ordeshook. Michael Nicholson’s two recent books in the series ‘Cambridge Studies in International Relations’ have « considerable amount in common, although Rationality and the Analysis of International Conflict is more elementary than Formal Theories in International Relations. Both may be recommended for students at the appropriate stage. Rationality has worked well as a course text for one of us. receiving good student evaluations. Rarionality does not take rationality for granted. It contains both an interesting chapter on the irrationality of decision-makers under stress and a vigorous defence of rational-choice methods in international relations. Format Theories treats similar material at a more advanced level, and has a particularly useful section on Lewis Richardson's model of the arms race as a physical differential- equation system (like the weather; Richardson was the founder of scientific meteorology), and on what has happened to the Richardson model Peter Ordeshook’s earlier textbooks were An Iuiroduction to Positive Political Theory (with W. H. Riker: Englewood Clifls NJ. Prentice-Hall, 1973), and Game Theory and Political Theory: an Introduction (Cambridge, Cambridge University Press. 1986). For Ordeshook. in 1973, game theory was positive (as opposed to normative) political theory: in 1986 it was something which stood. alongside political theory: now. it i political theory. But perhaps the oldest title was the best. Game theory is not the whole of political theory. Although it has something to say on the classical normative questions of equality, rights, liberty democracy. and so on, it is not at the heart of normative theory. However, it is at the heart of positive theory. which dominates posteraduate training in politics in North America. despite its low visibility in the UK. Ordeshook’s book gives the reader a good speeding-up towards the research frontier 21, MeLean, Public Choice (Oxford, Blackwell, 1987), p. IRL TT Sasi Ail Righis Reseved.Review Section 709 One of its great merits is in bringing together areas which have threatened to diverge. Ordeshook shows the relationship between the concepts of Condorcet winner and strategic voting in voting theory. and Nash equilibrium and subgame perfect equilibrium in mainstream game theory, Subgame perfect equilibrium has become a key concept. When we view a game in its extensive form. like a branching tree where cach point where branches split is a decision node for one player a subgame is any self-contained part which is itself a game, Thea, in Ordeshook’s definition (p. 87}, A subgame perfect equilibrium is un n-tuple of strategies such that, when we look at any subgame, it yields an equilibrium in that subgame. This means that a rational player would not issue any threats to do something which. if it came to a decision, she would not actually do. All parents of young children know the importance of subgame perfection, So do most students of nuclear war. Massive retaliation was not credible because it was not subgame perfect. Any such strategy involves a threat of the form “If you invade West Germany/do not withdraw your missil Cuba/launch nuclear weapons against us, we will massively re 2 with our (surviving) nuclear weapons’. This may sound convincing as a threat But if it failed to deter an aggressor. the issuer of the threat would have to decide whether to carty it out. The consequences of carrying it out (nuclear winter, further destruction of the issuer's cities) would be worse than the consequences of not carrying it out, This fact is common knowledge. Therefore. the threat is not credible. Therefore, it may be ignored, Thus it is absolutely essential that strategies involving dhreats and promises should be subgame perfect. As already noted, Axelrod's initial attempts to prove that Tit-for-Tat was a stable strategy in repeated prisoners’ dilemmas fail the subgame perfection test.'* There is another lucid explanation of most of this in Robert Powell’s Nuclear Deterience Theory: the Search for Credibility (Cambridge, Cambridge Univer- ity Press. 1990). Nowhere is i more imporiant to distinguish between credible and incredible threais than in the grim game of nuclear deterrence. It would be tempiing to dismiss Powell's work as out of date as soon as it was published. because of the collapse of the Soviet Union, But the logic of Powell's argument is perfectly general. applying just as much to North and South Korea as to the USA and the Soviet Union." Poised in between our elementary and our advanced books is Steven Brams’ latest offering, Theory of Mares. Brams writes so lucidly that his works may be used in introductory courses even when. as here. he is trying to introduce new concepts to the discipline. The idea behind Brams’ theory of moves (TOM) is simple. Neither the matrix Cnormal’) nor the game tree Cextensive’) form of characterizing games fully describes the situation in which players have the choice whether to move first, second, or not at alll: and in which they may be starting from any of the outcomes in the normal-form game. In economics Jargon, TOM endogenizes these decisions. That is, for each starting position and each player, it examines whether it is rational to move, If the game tree can be set out in full, players can rule out certain examples by backward induction, Axctrod. Evolution of Cooperation: |. MeLean, “Some rooent work in public ehoiee, Artis Journal of Poli Science, Vo 1986}. 377 at pp. 382 3, ' For more on currcit work on game theory yn international relations, see S. Haggard and B. A. Simmons. “Theories of international regimes’. Intermational Organization, 41 (1987), 491 S17. HL. Milner, “International theories of cooperation among nations: strengths and weaknesses’, World Palities. 44 (1992), 466, 96 1 Po Copyright © 2001. All Rights Reseved.70 Review Section as in the case of the madness of Mutually Assured Destruction discussed earlier Brams thus tackles the inadequacies of Nash equilibrium trom yet another perspective. Brams analyses the 56 distinct non-trivial 2x2 (two players, two choices per player) ordinal games catalogued by Rapoport and Guyer in 1966" and usefully recapitulated here, He shows that in many of them TOM gives better and, arguably, more believable results than does the standard reasoning based on the concept of Nash equilibrium. As usual with Brams. he attaches entertaining stories, frequently from the Hebrew Bible. to give life to the games. This makes him sound uncannily like Hobbes. However, some of the 22 games are indeterminate, From some starting positions, it pays each player 10 move first, From others. it pays each phtyer (0 try to foree the other to move first. This generates what Brams calls an ‘anticipation game’. which may have the same payol? matrix as the game it anticipates. In such cases, TOM is beat like the piper’s son, unless one player has more ‘moving power’ than the other Brams’ moving power encompasses the credible threats of conventional game theory. The book concludes with some tentative explorations into the cases of more than two players and/or strategies. Critics of Brams have already argued that the approach contains nothing that cannot be dealt with using now stindard (ools such as subgame perfection, successive el ation of dominated strate; and Bayesian updating. But Brams' approach has the great merit of simplicity. Some of the stories he tells, sound just a bit too glib: and most readers are probably less fascinated than he with the vengeful and nareissistic God of the Hebrew Bible. But his approach is likely to remain fruitful 4. More Advanced Books Keith Krehbiel’s book summarizes research which he and Thomas Gilligan have been publishing in leading American journals for several years. Iv challenges the view of Congress which has been dominant since Dahl and Mayhew. indeed since James Bryce and Woodrow Wilson.'® In this view Congress is distributive and particularistic. “The distributive perspective . depicts @ legislature asa collective choice body whose principal task is to allocate policy benefits’.!” Congressional commitiees are each stuffed with “high demanders’ of the service they provide - thus, for instance, the Agriculture Committee will comprise Congress members from farm districts, who will try to benefit farmers at the expense of everybody else, But since every commitice tries to do the same for its client group. the outcome is one that nobody wants. Politics is efficient from the point of view of Congressmen while being inefficient from the point of view of the public. It is efficient for Congressmen because they logroll until no more logs are to be rolled. They are then at the Pareto Trontier. which isan economist’s vision of efficiency. But it isa desolate frontier from the citizen's point of view. The consequence of this logrolling is hele to be that every °© §, Rapoport and M. Guyer. “A taxonomy of 22 gamey. General Systems. L196), 203. WA. Bryce. The American Commanucatrh iNew York, Potnam, reprint eda 1959 Woodrow Wilson, Congressional Government (New York, Meridian, reprinted. 196i): R.A. Dahl. Profice to Democratic Theory (Chicago, Uaiversity of Chicago Press. 198%, D. Mayhew. Congress. the Electoral Connection (New Haven. Yake University Press. 19741 Krehbiel, Balormution arid Legislative Organization p. 3Review Section vi distiict gets a favour, w! favour Classic studies of the tariff legis view." Krehbic! prefers what he calls an ‘informational’ perspective. Congress is a Rousseauvian deliberative body which tries to find out the common good, It is divided into committees because some people are more expert on one subject and some on another. Farmers get on to the Agriculture Committee of the House and bankers on to the Commerce Committee because they know about farming and banking. not because they want to distribute pork to other farmers and bankers, This nay seem a surprisingly starry-cyed perspective for a hard- bitten scholar of Congress to adopt. But Krehbiel scores some hits. He shows that members of some of the main pork-distributing committees of the House are not bigger spenders in the committee's ficld than the median Con- gressman." Agriculture Committee members actually scored lower on the farm interest groups’ approval scores than non-menibers. The only main committees which showed a statistically significant association in the expected direction were Armed Services and Education and Labor. Krehbiel aims to show that some Congressional debates are actually about asymmetry of information, He quotes an exchange during a debate on appropriations for the Strategic Defense Initiative (Star Wars’), in which the left-wing Democrat Barbara Boxer attacked a pro-Slar Wars speaker who had complained that ‘America spends almost as much on panty hose {tights} as it does on Star Wars: h leaves everybody worse off than if nobody had got a tion of 1824 and of 1930 bolster t Panty hose has a clear function. Star Wars does not. Panty hose has a mission that does not change every day. The Star Wazs mission has changed From a protective shield to military installation defense to accidental launch protection to brian! pebbles to terrorist detervence. Let uy face it, Star Wars has changed more times than Imelda Marcos has changed her 5 However, this did not persuade committee Republicans to abandon their support for Star Wars. Krehbiel’s arguments about seniority ace also contest- able. In the traditional ‘distributive’ view, seniority is a resource for getting a bigger slice of pork. Krehbiel argues (p. 142) that seniority is not about pork but about greater information. Thus it is acceptable that long-standing House meibers should have first pick of committees because they are repositories of information. They used to say that about aldermen in Britain, too. Fortunately, the distributive view prevailed, aldermen were abolished in 1972, and a resource available only to unelected party hacks disappeared Gary Cox and Matthew MeCubbins, in Legislative Leviathan, also attack the Woodrow Wilson orthodoxy on Congress. They wish to show that parties ‘organizations. Typically, such lobbies give a House ether 4 score of 100 if the rember votes the way the interest group wails on every measure, ne 0 i the merahor opposes the interest group an every measure © Cengressiinal Record. 25 July (1989), quoted by Krehbiel, Infovenution and Legislative Onpaniziion. p. 63 + tal Copyright © 2001. All Rights Reseved.712 Review Section matter in the House of Representatives. Recent followers of Woodrow Wilson have claimed that in sufficiently powerful regression models. party. simply disappears as a predictor of Congress members’ (MCs) behaviour: in oth words, that party explains nothing that is not already explained by the interests of MCs and of their districts. Cox and McCubbins respond with equally impressive statistics of their own, on the House since 1945 (with occasional glances backwards). The sophistication of their statistics is easily missed, since they are beautifully economical with their tables (a Cox characteristic). They show that House committees are not nearly so much dominated by special interests as is generally assumed. Like Krehbiel. they find that Armed Se a conservative outlier, and Education & Labor a liberal outlier. For the rest, the hypothesis that they are no different from the whole House cannot be rejected Cox and MeCubbins find no general decline in the parties’ internal cohesion The Republicans have declined: the Democrats reached a trough in the era of Vietnam and civil rights. from which they have since climbed out. In general. Cox and McCubbins’ arguments seem to work best for the Demoerats. ‘Their constructive analysis mostly derives from the theory of the firm. Parties. like firms, are seen as solutions to collective action dilemmas. Cox and MeCubbins thus follow Hobbes: or at least an interpretation of Hobbes where the Sovereign is the solution to a prisoners’ dilemma or other co-ordination game in which sovereignless people find themselves”! Hence their mysterious title. The theory of the firm asks: Why do firms exist? All of firms’ overheads would be saved if each worker offered his/her skills directly in the market. The answer, roughly. is that co-ordination and oversight are needed to prevent cheatin; Although everybody prefers an equilibrium where each worker does good work. every individual whose skills cannot be directly observed by a customer has in incentive to shirk.” Analogously. every MC has son interest in the suecess of hisher party. On an issue like the 1986 tax reform, every House Democrat had an interest in the Democratie package’s being carried. but a contrary district interes! in favour of tax breaks for that distriet’s economy. On that occasion, House Democrats reached the co-operative. not the selfish, equilibrium. Jeffrey Banks’ book is another extension of Nash equilibrium. Banks observes that before Harsanyi’s seminal work on games of incomplete informa- tion, “the toolbox possessed by the rational choice analyst was incompatible with the logical underpinnings of the environments which the analyst wished to explore’? His short, dense and technically demanding monograph reviews models of incomplete information in American political science. “Signaling games’ are games in which the actions of some participants communicate information to others, More specifically, a subset of players have a ‘valuable’ information (i.e. information which determines the optimality of participants’ decisions) and act prior to the uninformed players, thus ereating the possibility of “signaling” this information. ess to 2 For this interpretation see. cg. J. MeLean. “The social contrat in Levy and the prisoners dilemma supergame'. Potvical Stas, 29 (1981), 89.51. J. Hampton. Hobbes und the Sovral Contract Tradition (Carabridge. Cambridge University Pres, 1986) *'Sce Ri Coase, “The nature of the fim’. Eeanomctrica as. 4 (1932), 386 40S: O. Williamson The Economic hnstitutions of Capitan: Fim, Markers. Relational Contracts (New York, Free 1985). > Joh Harsanyi, Gans with incomplete information played by Bayesian ply Science, 14 967 ¥), 159 82, 320-34, and 4N6 80 Banks, Seguaing Gans p Monagenvens ‘Couurichi © 3001 All Righis Reseved.Review Section 3 Banks demonstrates the inadequacy of complete information models in explaining political behaviour in six issue areas. and summarizes a variety of uses of more sophisticated models involving incomplete information and uncertainty. Some of the puzzles consist of supposedly irrational behaviour why. for example, does the US Congress prefer closed legislative rules (where the committee can demand that the floor take-or-leave a given recommenda tion) to open rules (where the floor can make amendments to committee recommendations)? Gilligan and Krehbiel argue that congressmen may favour such rules because commitices make “better” decisions in virtue of an informa-tional advantage over the floor. Why do leaders engage in costly punishment of followcrs in the course of reputation building when backwards induction in the standard analysis shows such behaviour to be non-credible and thus irrational? Alt, Calvert and Humes" show that if there is initial uncertainty about the leader’s preferences, costly punishment can prove a credible deterrerit against possible future transgressions and thus establish reputation building as an equilibrium phenomenon. Banks also shows how the introduction of incomplete information challenges conventional theories. In the simple binary voting procedure of Ordeshook and Paltrey. for example, uncertainty among voiers about each others’ preferences is sufficient to prevent the Condorcet winner from being chosen.?* Incomplete information may also serve to expisin puzzling f political life, such as why leaders give speeches, and why s uur (on the former, Matthews, Austen-Smith ~ on the latter, Powell, Morrow) sof rational choice complain that such “puzzles” only exist for scholars who persist with unrealistic assumptions about human bebaviour. But this is unfair, To be able to use ever-more sophisticated models of rational behaviour to explain basic political phenomena is surely a mark of the success of the methodology and the realism of its assumptions. Banks’ text demonstrates how a common and simple heuristic approach can be used to explain an impressive variety of important political phenomena, Furthermore, constructing ‘models’ not only enables us to answer questions and puzzles, but can provide more precise links between variables specifying, for example, when a President can and cannot affect Congressional behaviour. It is one thing to observe that uncertainty makes a difference (yes, we knew that anyway), but it is another to say when it does, when it does not. what it does affect, and what it does not Kenneth Shepsle’s monograph, like Banks's, appears in a series called ‘Fundamentals of Pure and Applied Economics’. As the series title implies, these books are not for the mathematically faint-hearted, but merit persever- ance. Shepste surveys the voluminous literature on spatial competition (with, tures of * T. Gilligan and K. Krehbie": ‘Asymmetric information and leeslative rules with heterogeneous committees, Americas Journal of Political Science, 33 (1989), 589-90. 24 Ale R. Calvert and B. Humes. “Reputation and hegemonic stability: gametheoretie analysis, American Pottical Science Review 82 (19R8), 445-66 >, Ordeshook and T. Palfrey. "Agendas. strategic voting, and signaling with incomplete information’. Amecican Jonrnal of Patitcal Science. 32 (1988), 441-66, * S.Matthews, "Veto thicats: sherorie ina bargaining eame'. Quorterly Journal of Economies. 10 (1989), 247 69: D. Austen-Smith, “Information transmission in debate’. Americun Journal of Poitical Science, 4 (1990), 124-2: R. Powsl. Crisis bargaining escalation and MAD, merican Politcat Science Review, 8) (987), 717 36.3. Morrow. “Capabilities, uncertainty and sesolve: 2 limite information model of crisis bargaining’, American Jounal of Political Science, 33 (1989), 941 72, «Por States Asotin Copyright © 2001. All Rights Reseved.74 Review Section refreshingly, some empirical examples from outside the Anglo-American two- party tradition). One of the most notable features of his text is the presentation of recent advances in theories of spatial economic competition alongside those of political competition. This enables Shepsle to explore some interesting discrepancies between the logics of firm and party competition (making explicit the implicit argument of Cox and MeCubbins) in structurally similar contexts. As an example: the profit motive implies maximizing profit share, but the office- winning motive does not imply maximizing votes (at least in plurality electoral systems). Rather. the objectives of parties should be seen as functions of electoral rules. As Shepsle says. “this issue is of central importance and deserves high priority in subsequent work’ (p. 61) In the course of discussing extensions of the basic Downsian model, Shepsle is, frank about the merits of competing approaches. Multiparty electoral competi- tion is more realistically captured, he contends, by models which examine the behaviour of firms in the knowledge of future entry (Palfrey, Greenberg- Shepsle). rather than by models which seek to endogenize the entry decision in terms of an individual calculus (d la Black. and Riker and Ordeshook).2> More generally, equilibrium results in multiparty competition have proven too sensitive to the specification of the model. making generalizable statements about the equilibrium number of parties in different electoral systems. for example, hard to sustain, Such models also generally rely on the unrealistic assumption of sincere voting. These ‘conceptual complications’ (p. 94) are particularly frustrating in a field which manifests such striking empirical regularities in need of explanation such as Duverger’s Law. In short, Shepste's ext points to one of the basic problems of the rational choice research programme its tendency to produce highly complex models of great internal rigour whose results are too closely tied to model-specific assumptions, and which signally fail to account for what happens in the “real” political world George Tsebelis’ professed interest in Nested Games is to explain actions that seem irrational. His answer is that the observer is usually mistaken, either because she does not understand that the actor is ‘innovating’ to change the rules, of the game, or (more commonly) because the actor is involved in more than one game at a time. The book’s title, however, is misleading ~ its subtitle more aptly Captures the range of issues explored in this impressive book. The first half of the book can be read as an introduction to the basic elements of a game-theoretic approach. At another level. however, it is a sophisticated critique of some ‘common misconceptions within the field, and deserves reading by the novice and expert alike, The central idea revolves around the transformation of games affected by introducing iteration, incomplete information and contingent strategies (B bases her etions ins: on what A did in 1), Where multiple equilibria exist in iterated games, the likelihood of co-operation increases when the payofis from co-operation increase and those from defection decrease irrespective of what sort of game it is. In other words, the magnitude rather than the ordering of the payoffs is of prime importance in determining which 207, Palfrey: “Spatial equiibsium with entry’, Review of Bevsanie Studies, $1 (1984), 139.56: J. Greenberg and K. Shepsle: The elects of electoral rewards in multiparty competition with entry Americas Political Seience Review, 79 (1987), 693-703; G. Black. "A theory of political ambition career choices and the role of structural incentives’, American Political Science Review, 66 (1972 146-64: W. Riker and P, Ordeshook: “A theory of the eileulus of voting’ Ameren Political Scionec Review, 62 (1968), 25 43, Copyright 63007 All Rights Reseved.Review Section equilibrium will obtain, Equilitird are sustained’ By tie vireat of punisiment should one’s opponent defect. Such threats are credible because iteration makes it possible that one’s opponent will suffer more from punishment in subsequent rounds than she will gain in the present one from defection The three cases explore these and related issues of players’ behaviour in iterated contexts. The most stimulating empirical chapter asks why British Labour Party activists elect extreme constituency candid fe bound to lose the seat. In the one shot game with complete information their actions are irrational, for the National Executive (NEC) will simply exercise veto power over constituency Labour parties (CLPs). In the long run, however (i.e. where the game bel the NEC and CLP is iterated), activists may create a reputation for toughness through such behaviour. The extent to which CLPs may cash in on this reputation depends upon the electoral game ~ a close race at the national level enhances the ability of cach constituency to twist the party leadership's arm. Tsebelis analyses consociationalism as a co-operative equili brium between pillarized lites requiring certain behavioural constraints, Unlike conventional accounts it makes sense of élite intransigence and initiated confrontation as signalling devices to discourage conflict. Tsebelis also shows 1 alternating compromise and intransigence may actually be the only way (0 get to the Pareto frontier The concept of ‘nested games’ is neither central nor original to Tsebelis’ book However. if ever a demonstration of the utility of rational choice approaches were needed. this book provides it, Each chapier provides brilliantly clear and concise explanations of complex behaviour, illustrated by examples that match the knowledge of any area specialist. Tsebelis is a self-conscious champion of the rational-choice cause, consistently demonstrating the added value of his as opposed to other approaches (particularly in the consociationalism chapter). Tsebelis’ book shows that good game theory can provide both rich descriptions and powerful explanations of political behaviour. Michael Laver and Norman Schofield open their book more pessimistically by noting that “The European politics and game-theoretic approaches are by now so far apart in their styles of analysis that they have almost nothing to contribute to one another’ (p. 10). They attempt to build bridges between these paradigms. The latter half of the book surveys and evaluates various approaches to central questions in the field: which parties get in to coalitions; what factors determine coatition durability; how are “oflice spoils’ allocated? By far the more stimulating and original section, however, is their initial exploration of the assumptions underlying coalition theory. In conventional analysis. parties are assumed to t © seckers. “Winning” in this game is thus usually construed as participating in a majority legislative coalition. Theories of coalition formation premissed upon ofice-seeking motivation predict minimal winning coalitions of parties (which prefer fewer co-governots), and conceive of party policies purely in instrumental terms. Laver and Schofield dispute two tenets of the orthodoxy. Firstly. they argue following de Swaan” that parties may aim to influence government policies rather than to occupy office, and that there are many ways of exerting such influence other than participating in legistative coalitions ~ through normal parliamentary voting. votes of confidence, and legislative committees, for % A. de Suan, Coultion Theories and Cabinet Formation (Amsterdam, Elevier, 9731 Copyright © 2001. All Rights Reseved.716 Review Section example. Rational parties may therefore decide to stay out of governing coalitions if they occupy “pivotal positions’ in the legislature, or for strategic~ electoral reasons. Secondly. they question the theoretical and empirical primacy of legislative majorities. Governments, or executive coalitions, do not need permanent legislative coalitions to survive. Minimally, they require the additional support of some parties outside the governing coalition to survive votes of confidence in order to remain viable, The consequence of these two revisions is to suggest that minority governments are not deviant political forms. Parties outside a governing coalition comprising a legistative minority may have rational grounds for supporting it (both in confidence votes and in policy proposals). Indeed. in cases of bipolar opposition where a centrist minority party is flanked by two larger and more ideologically extreme party groupings — it may be nearly impossible to construct the winning coalition required to defeat an incumbent minority government The essential criterion for government survival is captured by the notion of ‘policy viability’ — a coalition will survive if no alternative executive coalition’s policy position is preferred by a legislative majority. It may strike the informed reader that ‘policy viability’ looks a lot like the notion of the ‘core’ in a bargain- ing game. The conclusions of authors within the game-theoretic approach reveal that when only one dimension of policy is important the policy position preferred by the party controlling the median legislator dominates. But when there exists more than one salient dimension, any policy position can be beat: by another commanding majority support within the legislature (McKelvey ‘chaos’ theorem).” How then can policy viable governments exist in multi- dimensional policy spaces? More simply. how do governments remain stable when game theory demonstrates that all policy positions are beatable? The most common explanations (from studies of the Congressional committee system) suggest that certain rules and institutions negate the effects of the chaos theorem, by imposing constraints on bargaining (generating, following Shepsle. a “structure induced equilibrium’ (SIE) Laver’s edited volume with lan Budge picks up these themes by examining coalition bargaining in multidimensional policy spaces in eleven national ease studies. The volume focuses on the relationship between the policies and manifestos of parties and coalition governments. As edited volumes go. this is ‘one of the more rigorous and consistent, Each author is asked to test (both through expert intuition and statistical analysis) a number of policy-based theories of coalition formation and of coalition policy. employing a mapping of party systems in both one- and 20-dimensional policy spaces. The conclusion however. are by the authors’ own admission not as robust as they would have hoped. Despite demonstrating that nearly all coalitions include the median legislator’s party (irrespective of the number of dimensions), the success and efficiency levels of the models is around 50% (with the more difficult cases already removed). Laver and Budge gloomily conclude: “it seems that policy on its own just cannot bear the weight put on it by coalition theory" (p. 420). Pethaps so, but it is still indispensable, and as a starting point for future research, the book is invaluable. The volume elucidates general ‘side constraints’ on coalition bargaining which, following the American “New “ R. McKelvey, “General conditions for global intransitivities in Formal voting models Econometrica, 47 (1979), 108-11 ‘Coauraht'® 9007 Ail Rights Reseved.Review Section aq Insiitutionatism’ literature, serve to induce stability where McKelvey predicts chaos. These consiraints may be de facto (e.g. the effective prohibition of Communist participation in government after 1948), or may follow from certain constitutional provisions (e.g. electoral systems which induce pre-election coalitions, the requirement of incoming governments to survive an investiture vote}. The volume provides a sound methodological example of how to use case studies theoretically. Furthermore, Laver and Budge’s ‘cluster’ model of coalition formation promises to be a powerful and generalizable tool of statistical analysis in this field, and one which is easily adaptable for use in multidimensional policy space ‘These books rebut Green and Shapiro’s claim that there is no empirical verification of rational-choice models. The real problem lies elsewhere. Theoretical advances in the consequences of incomplete information have yielded the conclusion that credible bargains can be struck (0 sustain almost any outcome as an equilibrium, This isa consequence of what game theorists call the Folk Theorem (because it has been common knowledge among them for a long time, and nobody is sure who first proved it)“! Therefore story about the ways in which a state of the world could have come about. The Folk Theoret: has thus turned out to be a mixed blessing for rational choice. Now that we know that anything can be an equilibrium outcome we need a theoretical criterion to explain why «and when some equilibria get selected and others do not. In the phrase so mocked hy Green and Shapiro but none the less true, further research is needed. © R.Githons, 4 Prins in Guine Theor (London, Harvester Wheatsheaf, 1992; published in the USA is Game Theory Jor Applud keonamists. Princeton University. Press). pp. 89 10: 1D. Pudeaberg ind E. Maskin: “The Folk Theorem in repeaied games with discounting or incom: plete iaformation’. Feonomczriea, $4 (1986). 533. St Tssbelis, Nested! Games. pp. PE. «Pots! Sra Aswwiaton, HS Copyright © 2001. All Rights Reseved.