Bureaucracies and Veto Players

1. Bureaucracies and Veto Players • Both the judiciary (when making statutory interpretations) and the bureaucracies can be legislatively overruled if they make choices the (legislative) veto players unanimously disagree with. • Both the judiciary and the bureaucracy will try to interpret the law according to their point of view (or perhaps interests) while eliminating the possibility that they will be overruled. • High policy stability will thus give more discretion to both bureaucrats and judges.

2. The game Overrule Interpret the existing laws Legislative Veto Players Bureaucracy or Courts Not overrule

3. The triangle 123 that the Veto players 1,2,3 define is their unanimity core (Pareto set), If the first (Bureaucracy or Courts) mover selects one of the points of the core, there will be no legislative overrule. Two different possibilities. a) The first movers’ ideal points J and K are outside the legislative core and they select the closest core point to them (J’ and K’ respectively). Despite the fact that these two choices are significantly different from each other, the veto players are incapable of changing either of them. 3) the first mover is located inside the legislative core but changes her mind and moves from point L1 to point L2. Since the first mover is inside the core she can select her own ideal point. 1 L1 J J’ 2 L2 K K’ 3

4. Criticisms • There are two objections concerning the above simple game-theoretic account raised in the literature: 1) Given that the first movers in the game presented above will be able to select a policy close or identical to their own ideal point, the legislation will be more restrictive when there are many veto players (McCubbins, Noll and Weingast (1987), (1989), Moe (1990), Moe and Caldwell (1994), Epstein and O’Halloran (1999)etc). 2) There may be significant differences between parliamentary and presidential systems with respect to delegation of powers: veto players in presidential systems, according to some (Moe (1990), Moe and Caldwell (1994), Strom (2000), Ackerman (2000)), have explicit assignments to oversee the bureaucracy, while veto players in parliamentary systems practice oversight collectively. As a result, this view contends that political systems differ from each other not because of the number of veto players but because of regime type.

5. McNollGast viewpoint • (McCubbins, Noll and Weingast (1987), (1989)) (henceforth “McNollgast”) focus on how legislatures create administrative law that effectively restricts the bureaucracy to performing the duties prescribed by the enacting coalition. • As the basic problem is the moral hazard, the possibility for bureaucracies to choose policies that differ from the preferences of the enacting coalition, the legislatures can create administrative law with three major characteristics: 1) The enacting coalition should create for the bureaucracy an environment that mirrors the politics at the time of enactment. 2) It should stack the deck in favor of the groups that are the most affected and the most favored by the coalition. 3) Agency policies should exhibit an autopilot characteristic: they should enable policy changes as the preferences of the interested groups change.

6. McNollGast followers • (On the basis of the previous arguments and findings, Terry Moe (1990) and David Epstein and Sharyn O’Halloran (1999) have argued that legislation will be more cumbersome when the legislative body is more divided because they will try to lock into the legislation the intents of the coalition that produced it, leading to a reduction of the independence of bureaucracies.

7. Tsebelis rejonder • Veto players argument is based on what may happen after the bureaucratic decision (ex post), while the McNollgast arguments are based on what the legislature will do beforehand (ex ante). • According veto players approach keeping legislation constant, bureaucrats and judges will be more independent from government when there are many veto players. • McNollgast’s “deckstacking” argument does not keep legislation constant; different kinds of legislation are compared under different veto player configurations. In addition, the “deckstacking” argument concerns independence of bureaucrats from the coalition enacting legislation. • the deckstacking argument is about bureaucratic independence from the enacting coalition, while in Veto Players approach crucial is the independence from government, or from the political principals at the time of the decision.

8. Connection between the two groups of theories • Given the freedom of courts and bureaucrats to interpret legislation when there are multiple veto players, these veto players will prefer to restrict them ex ante (exactly as McNollgast argue). • Would they be able to do so? It depends on their preferences for this kind of legislation. If their preferences are similar then they will be able to do so. • In case of multiple veto players the actual prediction depends on the preferences of the existing veto players. A single veto player can overrule bureaucrats (or judges) at any time. As a result, such governments would not care about introducing additional restrictions into legislation. • This argument expects cumbersome bureaucratic legislation to be sometimes the outcome of multiple veto players, while simple legislation to be always the outcome of single veto players. Multiple veto players are a necessary but not sufficient condition for cumbersome bureaucratic legislation. • As a result, on average, one would expect more cumbersome legislation in the case of multiple veto players (as McNollgast predict), but would also expect higher variance in the case of multiple veto players

9. As a result, on average, one would expect more cumbersome legislation in the case of multiple veto players (as McNollgast predict), but would also expect higher variance in the case of multiple veto players Law “Details” and “complexity” Veto players ideological distance

10. Empirical evidence • There is then a significant amount of evidence that deckstacking occurs, and that countries with multiple veto players have more cumbersome bureaucratic legislation. Is there any evidence that when legislation is fixed, bureaucrats interpret it in a more independent way when the number of veto players increases? • Very difficult proposition to demonstrate, because Identifying the preferences of bureaucrats on different issues is almost impossible. There is one case where we can assume the preferences of bureaucrats as known and see whether results approximate more or less such preferences: the central bank independence. • Central banks have been assigned duties related to monetary policies, exchange rates, and inflation. A series of articles in economics have measured the independence of this particular branch of the bureaucracy. Can central banks exercise more independence when there are many (and more distant) veto players?

13. The judiciary • The usual distinction in comparative law is between countries with traditions of common law and civil law. • In common law countries (UK, and all its ex-colonies such as US, Australia, New Zealand, Ireland, Malta etc) "laws" are seen less as the acts of parliament and more as the accumulation of decisions and interpretations of the judges. The central rule in common law countries is stare decisis (let the decision stand), As a result, judges create the law as well as apply and interpret it. • In countries that follow the civil law tradition, the foundation of law is a comprehensive and authoritative legal code. It is upon this code that legislatures build a superstructure of statutes. The most frequently used of such codes is the Napoleonic Code (used in France, Belgium, Greece, Luxembourg, Netherlands, Italy, Spain, and Portugal). A second such code is the German Civil Code (used in Germany, Norway, Sweden, Finland, Denmark, Iceland). In civil law countries the judges interpret the law; they do not make it.

14. The judiciary • According to the classic distinction, the role of the judiciary should be more important in common law countries. • More recent analyses indicate convergence of the two systems. • According to the veto players theory what matters for the independence and significance of the judiciary is not the legal system of a country, but whether courts are constitutional or not and the difficulty of the political system to overrule a statutory or constitutional interpretation. Statutory interpretation is logically similar to implementation of Bureaucracy. Constitutional interpretation is different…

15. The constitutional interpretation • If courts can interpret the constitution and base their decisions on it, they cannot be overruled by the political system. The only exception would be by a modification of the constitution, • The judiciary of a country would be a veto player, since a decision by the judiciary could invalidate a law

16. Stone Sweet (2000) argues that the introduction of scrutiny by constitutional courts has altered the role of both courts and legislatures, and has introduced a constant interaction between the two institutions. According to this interaction the legislatures are always aware that their actions can be overruled by constitutional courts, and sometimes even ask the courts for instructions in order to immunize their decisions from judicial abrogation. As a result, we would be in the process of the formation of a government of judges… The constitutional interpretation

17. Imagine that in a political system the Constitution can be changed only by a qualified majority of 2/3.A, B and C form a government and D is the Opposition party. The Status quo SQ is located in the same position of the Constitutional court J. Any attempt to change the status quo will be frustrated as J can re-establish the initial situation by nullifying the law. D=40 C (30) J SQ W(SQ) A=5 B (25) To react to the Constitutional court sentence also D would be necessary but it is against any move of the SQ toward the W(SQ). J plays as a real veto player as it is outside the government Pareto Set (unanimity core)

18. According To Tsebelis however while constitutional judges are veto players, most of the time they are absorbed. Constitutional Courts very often are located inside the unanimity core of the other veto players. The main reason is the appointment process to the highest positions. D=40 C (30) SQ W(SQ) J A=5 B (25)

19. However if the Constitutional Courts could not only veto but also change positively by interpretation an existing legislation, they could play a “deterring” role. If the creative sentences (corresponding to J position) are easier after an initial legislative change, then this legislative change can be vetoed since the beginning by C for whom U(SQ)>U(J) D=40 C (30) SQ W(SQ) J A=5 B (25)