The essence of voluntary exchange is that any of the parties can walk away and do
something else or do nothing. Bargaining, in the sense of identifying, negotiating,
and implementing mutually beneficial cooperative agreements, is the core of rational
choice theory. The market version of rational choice theoryeconomicsshould
be about bargaining because, as I have argued repeatedly (e.g., Michael Munger,
The Good, the Wise, and the Just, American Institute for Economic Research,
October 27, 2021), every agreement or contract logically requires a disagreement about value.
One of the founders of Public Choice, James Buchanan, argued that one should
judge the quality of any economics textbook by the page number on which the
indeterminacy of bargaining is mentioned (James M. Buchanan, interviewed by
H. Geoffrey Brennan in The Intellectual Portrait Series: A Conversation with James M.
Buchanan [Indianapolis, Ind.: Liberty Fund, 2021]). The correct answer is the first page; quality goes down from there.
Bargaining in politics is much more complicated because the dimensions of
value are potentially manifold. The political version of rational choice theory should
embrace that complexity and likewise be about bargaining and the indeterminacy of
agreements. To be fair, there is an important Public Choice tradition, arising from the
work of Kenneth Arrow and William Riker, that would highlight the generic contingency
or, in the absence of institutions, the literal impossibility, of predicting outcomes
in settings that are multidimensional or in which the preferences of a substantial proportion
of the choosers are not single-peaked. This problem was forcefully stated
by Gordon Tullock when he asked, Why so much stability? (Gordon Tullock and
Geoffrey Brennan, Why So Much Stability, Public Choice 37, no. 2 : 189202).
The simple answer is that institutions, or the rules of the game chosen by
participants to narrow the set of alternatives and produce outcomes predictably and
quickly, are of great value to a society. The fact that different institutions produce
different outcomes is a problem, of course, because then the incoherence of choices
over alternatives will be inherited in the form of an incoherence over institutions
because participants can look down the agenda tree and backward induce preferences
But the game, or stylized strategic interaction with substantial rewards
for enforceable cooperative arrangements, is repeated. That fact is substantively
important for the survival of the society because participants want the rule of law and order to survive, and they recognize the value of reaching an agreement that
everyone accepts. The simplest version of this argument was intuited by Thomas
Hobbes in Leviathan, of course: even a bad ruler is better than chaos and constant
war, where war might be nothing more than constantly preparing to defend ones
turf without actually fighting. But most collections of people choosing in groups
(Michael Munger and Kevin Munger, Choosing in Groups [New York: Cambridge
University Press, 2015]) can do much better than the Hobbesian absolute monarch.
As Geoffrey Brennan and James Buchanan point out in The Reason of Rules (Indianapolis, Ind.: Liberty Fund, 2001), choosing a constitution or accepting
common law-like norms that have become conventional through repetition can
constitute a government, even if no one specifically consents.
From a theoretical perspective, there is a paradox: it is impossible to make a determinate
choice among rules, but almost any rule is better than the chaos, delay, and
possible revolutionary violence that results from a breakdown of governance rules that
are accepted as legitimate. The importance of the background threat of violence as
a mechanism for making almost any existing governance system self-enforcing has
been the subject of important work in political science (see Douglass North and Barry
Weingast, Constitutions and Commitment: The Evolution of Institutions Governing
Public Choice in Seventeenth-Century England, Journal of Economic History 49,
no. 4 : 80332, and work that cites it). But since such nonnegotiated-but-stillbinding
institutional conventions exist, and survive, precisely to limit opportunities
for ex post recontracting and renegotiation of bargains, can my earlier claim about the
centrality of actual intentional bargains be sustained?
The answer is yes, because at the core of governance, at least of democratic
governance, is the constant opportunity for renegotiation a orded by elections. Elections
are an exogenous readjustment of the relative strengths of di erent coalitions
in the legislature, through nonviolent institutionalized takeovers of power. In first
past the post systems, with two effective parties, this can be a knife-edge phenomenon,
with the power to organize the legislature being a knife-edge of majority status.
But the real action for bargaining theory lies in the process of forming government
in parliamentary democracies, with some form of proportional representation.
Or ... so one might think. As Scott de Marchi and Michael Laver show in their
new book, The Governance Cycle in Parliamentary Democracies, in fact game theorists
in political science have, by unspoken but nearly universal consensus, avoided
taking up the actual problems, and theoretical promises, of analyzing real bargains
and adopted a grossly simplified and strategically impoverished version of the problem
that would seem laughably abstract to political insiders.
The cover of the book is clever, showing two men engaged in the partly competitive,
partly cooperative sport of logrolling. Large trees were easy enough to fell
andbeing woodreasonably easy to float down a river. However, moving a log from where it was felled to the river, where it could be tied into rafts and transported,
was extremely hard work and required many hands. But this was a peak-load problem
because it was expensive to attract a large group of sturdy workers to the site where
the logs had been felled but then have them work for only two days to roll enough
logs to the river, where the rafts were constructed.
An obvious solution was for smaller crews, who could handle the felling and
the rafting on their own, to logroll cooperatively: today we will roll crew As logs to
the river, tomorrow crew Bs, and so on. There is a holdup problem, of course, since
the first crew might break its agreement and say So long, suckers! But since this
business was repeated annually, and indefinitely, the crews could trust one another
and punish cheaters and shirkers by word of mouth and reputation.
The first application of the metaphor of logrolling to politics appears to have
been made by Davy Crockett (An Account of Col. Crocketts Tour to the North
and Down East,). Crockett is recorded as having said, My people dont like me to logroll
in their business, and vote away pre-emption rights to fellows in other states
that never kindle a fire on their own land. The metaphor is now common for the
custom of exchange in voting, in a setting where there are multiple dimensions
and di erent values for di erent participants: Ill vote for the legislation you really
want, and youll vote for the legislation I really want, and well both get our first-best
outcome at the small price of accepting a law we would have opposed but dont care
In The Calculus of Consent (Ann Arbor: University of Michigan Press, 1962),
James Buchanan and Gordon Tullock argued at length that difference in values is
the very essence of bargaining and that logrolling was the means by which otherwise
unobtainable mutual gains could be captured. The problem that created a
setting in which no equilibrium in voting existed could be converted to an equilibrium
by bargaining, if by bargaining we understand the exchange of multiple
dimensions of value resulting in an overall Pareto improvement of participants in
Buchanan and Tullock were wrong about this claim, however: far from creating
a setting in which equilibrium exists, logrolling can transform a stable issue by
issue setting in which equilibrium is achievable into a multidimensional quagmire
(Munger and Munger  discuss this literature). Logrolling is always a divide
the dollar game, with no equilibrium.
And yet ... and yet. Tullock and Brennan (1981) really were right: actual legislative
processes are much more likely to be stable than to exhibit wild, chaotic fluctuations.
The standard answer is that institutions did it, as I have described here.
In the United States, this explanation might work for the House of Representatives,
but the rules of the Senate do not actually create a setting where an equilibrium outcome is required by institutions. Famously, the answer is norms, or courtesy,
as Mr. Dooley tells us:
Aside frm th arjoos duties iv lookin afther th prisidints health, is th
business iv th vice-prisidint to preside over th deliberations iv th Sinit.
Ivry mornin between ten an twelve, he swings his hammock in th palachial
Sinit chamber an sinks into dhreamless sleep. [At times] th vice-prisidint
rises frm his hammock an says: Th Sinitor will come to ordher.
He wont, says th Sinitor. Oh, very well, says th presidin officer; he
wont, an dhrops off again.
It is his jooty to rigorously enforce th rules iv th Sinit. There are-ah
none. Th Sinit is ruled by courtesy, like th longshoremans union. . . . It wud
be a breach iv Sinitoryal courtesy fr him to step down an part th Sinitor
frm Texas an th Sinitor frm Injyanny in th middle iv debate undher a
desk on whether Northern gintlemen ar-re more gintlemanly thin Southern
gintlemen. shuddent wondher if he thried to do it if he was taught his place
with th leg iv a chair. (Finley Peter Dunne, Dissertations by Mr. Dooley
[New York: Harper, 1906]; spelling as in original, emphasis added)
Thats really quite good. The vice presidents job is to enforce the rules of the
Senate. But there are none because the Senate is ruled by norms. Its not really surprising
that this kind of governance occasionally breaks down; whats surprising is
that it ever works at all.
Or perhaps not. As de Marchi and Laver rightly point out, the generic prediction
of the first wave of social choice theory is for generic instability; thats simply
not observed, however, in the actual world of legislatures and governance. The second
wave of social choice theory focused on institutions (see Kenneth Shepsle and
Barry Weingast, Structure-Induced Equilibrium and Legislative Choice, Public
Choice 37, no. 3 : 50319, and work that cites it). The third wave refocused
(correctly, to be fair) on bargaining and the ability of negotiation models to produce
consistent and persistent predictions.
That should be all to the good, given that bargaining is (or should be) the
focus of rational choice theory. But the form of bargaining being modeled, according
to de Marchi and Laver, was stylized and largely unconnected to real-world processes
of coalition formation. The set of assumptionsnamely, a single formateur, or
entity empowered to make a single take it or leave it proposal for the allocation of
ministries or power in the collation, with a reversion point of chaos, not further
negotiationswould have been laughably unfamiliar to anyone who had spent even
twenty minutes in a legislative building.
But that assumption generated predictions of equilibrium, which was the goal,
because equilibrium and not chaos was what was being observed. Since this (nonsensical)
assumption generated the desired prediction, that meant the dominant model was correct. Sure, it sounds dumb when I put it that way, but the level of exaggeration is
not large. Seriously, thats really how the problem was approached by game theorists.
The problem is that this is not the way actual politics, conducted by experienced,
motivated professionals in a setting with high stakes, is carried out. As de
Marchi and Laver put it, in a rather salty description:
We do not think it is in any way reasonable to assume the most seasoned
and sophisticated politicians in the business, doing the thing they care
most about, sit quietly on their hands waiting for the talking stick to be
passed in their direction. In contrast, we believe thatwhether this happens
in the cold light of day or in the dark shadows of what we think of
as backstageno senior politician can be banned from making any proposal
to anyone at any time. (p. 2)
The alternative approach advocated, and then presented, by de Marchi and
Laver is to highlight the significance of two background conditions: complexity of the
strategic context and the effectiveness of optimal conventions that, though not provably
optimal through the technique of backward induction and subgame perfection,
nonetheless work well and, once established, are likely to be honored.
The case would be stronger if de Marchi and Laver took more advantage of
their obvious precursors and intellectual allies David Hume, Friedrich Hayek, and
Thomas Schelling (to be fair, they do cite Schelling). In any case, the conclusion is
persuasive: in complex systems, no individual possesses the information about mapping
actions into outcomes that would be required for the process to be rational.
But the system, using relatively salient and simple rules, exhibits an emergent order
that persists, and constitutes a predictable framework for decision making.
Strikingly, applying this approach to actual coalition formation contexts in parliaments
shows that (1) there are in fact a large set of circumstances in which, far from
predicting chaos, the theory identifies Condorcet winning configurations of party
power allocation, and (2) these configurations or coalition bargains are frequently,
and consistently, discovered and implemented by actual political agents.
An impressive lagniappe is the prediction of bargaining duration that falls out
of the model the authors specify. The likelihood (I would say transaction cost, but
then of course I would) of finding a Condorcet winner is dependent on the complexity
of bargaining setting. Overall, there are three specific empirical questions with
which the authors confront the theory:
Which governmenta particular configuration of parties, with specific
portfolios of powerforms after an election?
How long do the parties negotiate and bargain before implementing the new
What is the duration or life of that government?
From my perspective, one of the most interesting and important aspects of this
book is that it resurrects logrolling from the intellectual grave to which it was prematurely
assigned. In fact, just as Tullock intuited, side payments in the form of allocating
power are votes that can help solve bargaining impasses, and the impossibility
result is just a problem to be solved by institutions. Experienced, motivated agents
who have diverse interests can use bargaining to create a setting in which politics as
exchange is put back at the forefront of our understanding of politics. I recommend
The Governance Cycle highly.