Calculating Political Support for Financial Law Reform

Did you ever write large-scale amendments to law — only to find your boss (or the Parliament) strike down all your hard work? The POLITICAL ECONOMIC ANALYSIS of financial law can help. Such an analysis consists of 5 steps:

1. identify the various groups affected by your legal draft,

2. estimate the financial impact on these groups (you will need to make some assumptions, like members are all homogeneous), etc.

3. assume that any positive change leads to votes for (and any negative change for votes against)

4. for executive rather than legislative analyses (looking at incentives for an agency head for example of head of ministry if administratively assigned), focus on the groups the agency serves.

5. start with a simple headcount measure and majority rule win (so if 2 groups [A and B] such that A=20 members, B=40 members, and benefit to each group of a policy results in A=$20 and loss to each B=-$4, then the policy FAIL politically (as 40 exceeds 20), but PASSES the design test (the policy generates a surplus of $240 dollar adjusted votes). In this situation, your goal consists of reorganising the Bill (Proposed Rulemaking) to get votes.

These are two illustrations from a recent paper of mine:

3. temp temp


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