Who rules Japan? A public choice analysis of the courts and the bureaucracy
14 Oct 2014 Leave a comment
in organisational economics, personnel economics, Public Choice Tags: agent principal problems, Eric Rasmusen, GRIPS, Japan, Mark Ramseyer, political science, public choice
Gullible gaijin (外人), especially those in the foreign media, foreign ministries and academia think that the bureaucrats rule Japan. Nothing could be further from the truth.
I’ll illustrate this first with the way in which the ruling Liberal Democratic Party (LDP) in Japan exercises a tight control over the courts.
Judges in Japan are career judges starting straight out of a specialised Law School for trainee judges in their late 20s as an assistant judge with various promotions all the way to the top to various courts with different jurisdictions in different places in Japan.
Control over transfers between courts in different parts of Japan as well as over promotions is the key to making sure judges know what is required of them and punishing those judges who step out of line.
Japanese lower court judges are reassigned every three years to different courts in different parts of the country. Most Japanese judges find administrative duties prestigious and branch office assignments embarrassing.
The judicial secretariat supervised by the Supreme Court can moves judges up and down the hierarchy from the High Courts (the courts of appeals) to the District Courts (the trial courts) to the Family Courts and to the branch offices of the District and Family Courts. It routinely sends judges to less prestigious postings. Supreme Court judges are appointed directly by the government in their 60s and must retire at the age of 70.
- Like the vast majority of other professionals, Japanese judges want to live in Tokyo if possible, and in Osaka if not.
- If a difficult judges is posted to the north of Japan, which is next to Siberia, they must leave their family behind because of the need to go to good schools and universities.
Every Japanese judge knows that when they are reassigned, the next reassignment is not necessarily as prestigious as the last, depending on how they rule in contentious cases.
J. Mark Ramseyer and Eric B. Rasmusen have written several very good papers and a book on this topic of judicial independence, or more correctly, the lack of judicial independence in Japan.
Lower court judges defer to the wishes of the LDP on sensitive political questions because they will do better in their careers. Japan has a judicial career structure that rewards and punishes judges according to their work product, including their rulings in sensitive political cases.
Ramseyer and Rasmusen reviewed the quality of the assignments of 400 judges after deciding politically charged cases, holding constant proxies for effort, intelligence, seniority, and political bias. These political sensitive cases involve judges:
- who held the Self-Defence Force or U.S. bases unconstitutional;
- rejected national electoral apportionment schemes advantageous to the LDP; and
- enjoined the national government in administrative law suits.
Ramseyer and Rasmusen found that judges who defer to the LDP in politically disputes do better in their career assignments than those who do not. Similarly, judges who grant injunctions against the national (but not local) government have less successful careers.
This distinction is important because the national government wants to keep local governments in line with the laws they pass. This differentiation between issuing injunctions against local governments, but not the national government, shows the detail at which judicial decisions are controlled by the ruling party through favourable assignments and promotions.
Ramseyer and Rasmusen also found that:
- judges who joined a communist-leaning bar organization in the 1960s had fewer administrative postings than those who did not join;
- judges who consistently convicted criminal defendants spent less time in branch offices than those who occasionally acquitted;
- judges who found their tax opinions reversed on appeal had fewer administrative assignments and more branch office postings than those without such reversals; and
- judges who held a ban on door-to-door canvassing unconstitutional suffered in their careers.
If the national government, the ruling LDP, exercises such close control over the courts, it would be surprising that they let the bureaucracy tell them what to do.
The LDP controls the bureaucracy, even though it isn’t apparent, as explained by Mark Ramseyer.
The most reliable agent for your interests is the agent who thinks he in charge because the face has grown to fit the mask. Ramseyer as pointed out that a bureaucracy would act the same whether
- it were completely independent or
- it were doing only what the LDP wants (i.e. observational equivalence).
Ramseyer and Rosenbluth argue that the institutional framework of government – the rules of the game among political players – decisively shapes the character of political competition and incentives in Japan.
The ruling LDP works within Japanese electoral rules to maximize its success with voters, and within constitutional constraints to enforce its policies on bureaucrats and judges.
The LDP has several ways of keeping the bureaucracy under control:
- They can easily veto any bureaucratic actions;
- They have control over promotion;
- They encourage dissatisfied constituents to report complaints to the LDP;
- Would-be politicians work in the bureaucracy and have to please the party if they want to run;
- Ministries compete for policy influence;
- The LDP requires “large portions of [bureaucrats’] lifetime earnings as bonds contingent on faithful performance” through their control of post-retirement jobs.
The LDP keeps bureaucratic action closely in line with its preferences through the control of promotions and three yearly transfers and by encouraging intense rivalry between ministries.
Bureaucrats who do as they are told and anticipate the needs of their political masters in the LDP get the best transfers and are promoted to the top and then win the best post-retirement positions.
Japanese bureaucrats start retiring in their mid 40s so having a favourable post retirement job is vital. The Japanese system is based on back loading of pay. This is a well-known system for ensuring fidelity of agents where effort and performance is more difficult to monitor.
The main payoff been a bureaucrat in Japan is the prize at the end of the road. This prize will be denied for you if you step out of line, don’t do as you’re told and don’t know what is required of you.
My political science professor in Japan at the National Graduate Institute of Policy Studies (GRIPS) introduced me to the work of Mark Ramseyer in 1996. Ramseyer is completely fluent in Japanese and writes in Japanese as well as English on law and economics.
My New Report on Corporate Welfare in New Zealand
10 Oct 2014 Leave a comment
in politics - New Zealand, rentseeking Tags: corporate welfare, New Zealand, rent seeking, Taxpayers Union
The Taxpayers’ Union today launched my report, Monopoly Money, which examines the cost and case for New Zealand’s extensive corporate welfare programmes.
Figure 1: Corporate welfare, Budgets 2008/09 to 2014/15
My report, which examines the cost of corporate welfare examines government spending since the 2007/2008 budget, shows:
- Since National took office, corporate welfare has cost taxpayers $1-1.4 billion ($600 – $800 per household) per year
- If corporate welfare was abolished, enough money would be saved to reduce the corporate tax rate from 28% to 22.5%
- If applied to personal income tax rates, the saving would allow the 30% and 33% income tax rates to be lowered to 29%
Figure 2: Corporate welfare, Budgets 2008/09 to 2014/15 by Vote
Figure 3: Distribution of total corporate welfare across votes, 2008/09 to 2014/15
Henry Simons on the rising burden of voter knowledge in modern democracies
09 Oct 2014 Leave a comment
Can millionaires buy their way into Parliament? Lessons from the recent New Zealand election
07 Oct 2014 Leave a comment
in applied price theory, election campaigns, politics - New Zealand, politics - USA, Public Choice Tags: 2014 New Zealand general election, campaign finance reform, Leftover Left, median voter theorm, public choice
Two millionaires, one on the left and one on the right, set up parties to get into Parliament in the recent New Zealand election. The millionaire of the left failed abysmally. The millionaire on the right made progress towards getting into Parliament in the 2017 election.
Each spent vast sums of money by New Zealand standards on their party:
- Kim.com gave $4.5 million to his Internet – Mana party; and
- Colin Craig gave about $1.5 million to his Conservative party with another millionaire giving $750,000 to the Conservative party.
By way of context, the maximum that a political party can spend on campaign expenses in the three months prior to the election is $1.1 million, plus $25,000 per electorate seat It is contesting. None of this is spent on radio and television advertising because this is allocated for free by the electoral commission based on previous election performance.
One of the major rationales for election finance regulation is to stop the rich buying elections by flooding the airways and billboards with their call to arms and buying politicians short of campaign donations:
Conventional wisdom holds that money plays a central and nefarious role in American politics.
Underlying this belief are two fundamental assumptions:
(1) elective offices are effectively sold to the highest bidder, and
(2) campaign contributions are the functional equivalent of bribes.
Campaign finance regulations are thus an attempt to hinder the operation of this political marketplace.
John Milyo
New Zealand is a good example of how difficult it is to buy votes if you’re underlying message does not work. This is a key point to remember.
The millionaire of the left, Kim.com, gave money to a far left party in New Zealand, recycled a couple of middle-aged lefties, ran a hard left campaign, and won all of 2000 extra party votes over last time out of electorate of about 2 million.
He came unstuck because his sitting electorate MP lost 3000 votes and lost his seat. If he had kept his seat, his party would have been also entitled to a List MP seat because his party won 1.3% of the party vote. Under the New Zealand system of mixed member proportional representation, if you win a seat in Parliament, you’re entitled to list seats to ensure that your representation in Parliament is equal to your party vote.
The millionaire of the right, Colin Craig, ran a socially conservative, economic nationalist campaign and won 4% of the vote. A party needs 5% of the party vote to get into Parliament if your party does not win an electorate seat.
Both of these parties that did not get into Parliament outspent the winning national party which won 60 of the 121 seats in Parliament.
The failure of Kim.com and Colin Craig to buy their way Parliament should be no surprise. Most systematic studies find no effect of marginal campaign spending on the electoral success of candidates.
For example, see Steven Levitt, “Using Repeat Challengers to Estimate the Effects of Campaign Spending on Electoral Outcomes in the U.S. House,” Journal of Political Economy 102 (1994): 777–798.
Levitt noted that previous studies of congressional spending have found a large positive effect of challenger spending, but little evidence for effects of incumbent spending. Those studies did not adequately control for inherent differences in vote-getting ability across candidates.
- His paper examined elections in which the same two candidates face one another on more than one occasion; differencing eliminates the influence of any fixed candidate or district attributes.
- His estimates of the effects of challenger spending are an order of magnitude below those of previous studies. Campaign spending has an extremely small impact on election outcomes, regardless of who does the spending.
Jeff Milyo also found that a more systematic analysis of the electoral fortunes of wealthy candidates found no significant association between electoral or fund-raising success and personal wealth. For example, see Jeffrey Milyo and Timothy Groseclose, “The Electoral Effects of Incumbent Wealth,” Journal of Law and Economics 42 (1999): 699–722.
A range of rich candidates have attempted to buy Senate seats and gubernatorial posts with little success if they were themselves unappealing candidates.
The best explanation to date for the minor effect of campaign spending on electoral success is competent candidates are adept at both convincing contributors to give money and convincing voters to give their vote.
The finding that campaign spending and electoral success are highly correlated exaggerates the importance of money to a candidate’s chances of winning.
Campaign donors give more money to the expected winners because they want to be on the winning side. What lobbyist doesn’t want to be that the best new friend of the incoming minister?
Legislators tend to act in accordance with the interests of donors, but this is not because of a quid pro quo. Instead, donors tend to give to like-minded candidates. See Steven Levitt, “Who are PACs Trying to Influence with Contributions: Politicians or Voters?” Economics and Politics 10, no. 1 (1998): 19–36.
It is a much surer thing to give donations to a party that already agrees with you, rather than persuade someone to change their minds with campaign donations. That is a much less certain bet.
Studies of legislative behaviour indicate that the most important determinants of an incumbent’s voting record are constituent interests, party, and personal ideology. These three factors explain nearly all of the variation in incumbents’ voting records. See Steven Levitt, “How Do Senators Vote? Disentangling the Role of Party Affiliation, Voter Preferences and Senator Ideology,” American Economic Review 86 (1996): 425–441.
As an aside, the hard left campaign was instructive in another regard. The hard left honestly believes that there is a large number of people out willing to vote hard left if only their message was properly funded and got a hearing. These would be hard left voters are currently parking their vote elsewhere, such as with the right wing parties, apparently.
A massively funded hard left campaign in New Zealand won 1.2% of the party vote. In the 2011 election, the same hard left party, when woefully underfunded, won 1.1% of the party vote. Getting the message out appears to have absolutely no effect on the party vote of the hard left. The median voter theory rules.
The Conservative party was much more successful because the Christian parties in New Zealand usually get about 4% of the vote, except when they’re fighting with each other over who was following the Word of God better, which is rather common.
Furthermore, about 10-15% of the New Zealand election is both socially conservative and economically nationalist. They used to be called working-class Tories. Much of this vote currently votes for the New Zealand First Party– a one-man party – and its leader will be 72 at the next election.
HT: Jeff Milyo
Development economics in a nutshell: Gordon Tullock developed his rent seeking insight when he was a diplomat in China
06 Oct 2014 Leave a comment
Deirdre McCloskey on the axiom of goodwill in public policy making in left-wing circles
06 Oct 2014 Leave a comment
IOC diva-like demands on Norway for its now scuttled Winter Olympics bid
05 Oct 2014 Leave a comment
in economics of media and culture, politics, Public Choice, rentseeking Tags: Olympic Games, rent seeking
- They demand to meet the king prior to the opening ceremony. Afterwards, there shall be a cocktail reception. Drinks shall be paid for by the Royal Palace or the local organizing committee
- Separate lanes should be created on all roads where IOC members will travel, which are not to be used by regular people or public transportation.
- A welcome greeting from the local Olympic boss and the hotel manager should be presented in IOC members’ rooms, along with fruit and cakes of the season. (Seasonal fruit in Oslo in February is a challenge…)
- The hotel bar at their hotel should extend its hours “extra late” and the minibars must stock Coke products.
- The IOC president shall be welcomed ceremoniously on the runway when he arrives.
- The IOC members should have separate entrances and exits to and from the airport.
- During the opening and closing ceremonies a fully stocked bar shall be available. During competition days, wine and beer will do at the stadium lounge.
- IOC members shall be greeted with a smile when arriving at their hotel.
- Meeting rooms shall be kept at exactly 20 degrees Celsius at all times.
- The hot food offered in the lounges at venues should be replaced at regular intervals, as IOC members might “risk” having to eat several meals at the same lounge during the Olympics.
Utopia, you are standing in it! 
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