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APPLICATION FOR RESEARCH GRANT

General information

The attached forms should be completed in conjunction with the G.I.F. booklet “Guidelines for Grant Applicants”, which contains information on Foundation policy and procedures, essential for filling out these forms properly.

This application consists of:

Cover page and personal details of investigators

Section 1: Abstract and project time schedule

Section 2: Detailed description of the research plan

Section 3: Budget details and justification

Section 4: Curriculum vitae of P.I.s and co-P.I.s

Section 5: List of publications

Section 6: Letters of cooperation

Section 7: Budget distribution among the groups

Note: Appendices are not accepted!

Applications should be typed on the official GIF forms or computer-formatted exact copies of the forms.

Instructions:

Fifteen complete hard copies, including the original, and five copies of the cover page and abstract only

(pages 2(a) and 3) are required.

To enable prompt evaluation of your application please answer all questions in full detail.

GERMAN ISRAELI FOUNDATION FOR SCIENTIFIC RESEARCH AND DEVELOPMENT

THE GERMAN ISRAELI FOUNDATION
FOR SCIENTIFIC RESEARCH AND DEVELOPMENT (G.I.F.)
APPLICATION FOR RESEARCH GRANT - COVER PAGE

1. TITLE

Theoretical and Empirical Economic Analysis of the Doctrine of Separation of Powers

2. KEY WORDS

Constitutional Law and Economics, Delegation of Powers, Independence of the Judiciary.

FOR GIF USE ONLY

3. PROJECT PERIOD (YEARS) / 4. BUDGET REQUESTED FOR PROJECT PERIOD (EURO) / 5. BUDGET DISTRIBUTION
(EURO)
2004 / 1st year
2005 / 2nd year
2006 / 3rd year
6. Names Addresses and Affiliation of Cooperating Scientists (see also P 2(b)).
Name
(Last, First, Academic Position) / Role
(P.I., C.I.) / Name of Institute and Department / Signature
1) Salzberger Eli, Senior Lecturer / P.I. / Law Faculty, University of Haifa
2) Voigt Stefan; Full Professor / P.I / Economics Faculty, University of Kassel
3) Feld, Lars; Full Professor / C.I. / Economics Faculty, University of Marburg
4)
5)
6)
7. ADMINISTRATION ENDORSEMENTS
Name
Title
Sign.

P. 2(a)

PERSONAL DETAILS OF INVESTIGATORS

For G.I.F. use

No. of Proposal:

Israeli Group / 1. / 2. / 3.
Family Name: / Salzberger
First Name: / Eli
Date of Birth: / 12/3/1960
Academic Position: / Senior Lecturer
Institution: / University of Haifa
Department (FB): / Law
Street: / Mount Carmel
City & Zip Code: / Haifa 30900
Telephone: / 04 8240005
Telefax: / 04 8240681
E-mail: /
German Group / 1. / 2. / 3.
Family Name: / Voigt
First Name: / Stefan
Date of Birth: / 19/8/1962
Academic Position: / Full Professor
Institution: / University of Kassel
Department (FB): / Economics
Street: / Nora-Platiel-Str. 4
City & Zip Code: / 34127 Kassel
Telephone: / 0561 804 3089
Telefax: / 0561 804 2818
E-mail: /

P.2(b)

SECTION 1

for G.I.F. use

No. of Proposal:

FULL TITLE:

Theoretical and Empirical Economic Analysis of the Doctrine of Separation of Powers

PRINCIPAL INVESTIGATORS:

Eli Salzberger and Stefan Voigt

ABSTRACT:

An abstract of about two hundred words should describe the (1) objectives, (2) methods and plan of operation, (3) significance of the proposed research. (Uniqueness, innovative aspects).

The aim of this project is to deal with the separation of powers both normatively and positively by drawing on the toolkit of economics. With regard to normative analysis, the object is to find novel justifications for the separation of powers by choosing a fresh look at the topic, namely that informed by economics. With regard to positive analysis, both theoretical and empirical work will be carried out. On the theoretical side, models will be created that explicitly take the judiciary into account (different from the current ones that almost exclusively focus on the interactions between legislature and executive). Still, more emphasis will be on the empirical side. The economic effects of the judiciary, of domestic agencies such as competition authorities as well as of the membership in international organizations will be estimated.

Some novel indicators concerned with domestic agencies as well as international organizations will be created. These will inform the econometric estimates, but they also form the basis for empirically sound institutional and policy device with regard to the creation of independent agencies domestically as well as the membership in supra-/international organizations internationally.

P.3

PROJECT SCHEDULE

WORK PLAN / PROPOSED TIME TABLE / RESPONSIBLE PI / LOCATION
Research Tasks / Beginning
Month Year / End
Month Year / (Research Institute
and Department)
1) Normative Aspects of the Sep. of Powers / Jan 2005 / June 2006 / Eli Salzberger / Haifa
2) Positive Aspects of the Sep. of Powers I (theoretical aspects) / Jan 2005 / June 2006 / Stefan Voigt / Kassel
3) Positive Aspects of the Sep. of Powers II (empirical aspects) / Jan 2006 / Dec 2006 / Stefan Voigt / Kassel
4) Synthesizing Normative and Pos. Aspects / July 2006 / Dec 2007 / Eli Salzberger / Haifa
5)
6)
7)
8)
9)

Explanatory Notes (if necessary):

Signatures:

P.I. / P.I. / P.I. / P.I. / P.I. / P.I.
Inst. / Inst. / Inst. / Inst. / Inst. / Inst.

P.4

SECTION 2

DETAILED DESCRIPTION OF THE RESEARCH PLAN

The description should be detailed but comprehensive.

Please mark the headings according to the following numbered list:

1. Brief description of the subject and the scientific and technological background.
2. Objectives and expected significance of the research.
3. Comprehensive description of the methods and plan of operation: see guidelines.
4. Distribution of the research tasks between the groups.
5. Preliminary (unpublished) results relevant to the proposal.
6. Detailed account of available resources, including all personnel and equipment.
7. Relevant bibliography on the research subject.

1 Brief description of the subject and the scientific and technological background.

Until recently, economists did not pay much attention to the analysis of public and political institutions. Over the last decades, this has radically changed. Public Choice scholars analyse politics by drawing on the tool kit of economists (Mueller 2002 is an overview). New Institutional Economics is interested in the economic consequences of various institutional rule sets (Voigt and Engerer 2002 is an overview), and Positive Constitutional Economics scholars ask, more specifically, about the consequences of the most basic set of institutions, namely constitutional rules (Voigt 1997 is an overview). Empirical tests of the various models have begun to be carried out.

Within the economic analysis framework, little attention has been given to the doctrine of separation of powers. We propose to begin to fill this gap, providing both normative and positive analyses, combined with empirical data and tests.

2. Objectives and expected significance of the research.

The two principle researchers submitting this proposal began collaborating in the area four years ago, focusing on various aspects of the separation of powers. This collaboration produced several publications, both theoretical and empirical (e.g. Salzberger and Voigt 2002 and Voigt and Salzberger 2002). Our aim is to expand our research and to emphasize empirical work, which will enable better understanding and evaluation of different systems of government and provide a tool for policy-makers faced with constitutional and post-constitutional institutional design.

The potential relevance of the research results can hardly be exaggerated: there are many concrete ways in which the separation of powers as well as checks and balances are implemented. On some institutional details (e.g. presidential vs. parliamentary systems), the economic implications are already quite well understood. On others (e.g. the independent judiciary), economic implications are still open to speculation. We hope to be able to establish some solid empirical findings concerning not only the effects of judicial independence on economic growth, but also on the specific channels through which it affects the functioning of an economy. This would enable us to give solid advice concerning constitutional design.

We believe the recent discussion about the optimal avenues for the re-construction of post-war Iraq can serve as a good example. The emphasis given by many commentators and policy-makers to the establishment of an independent judiciary as the highest priority in this process (even before the conduct of free elections) fits our past research conclusions (Salzberger 1993, Salzberger and Voigt 2002. Voigt and Salzberger 2002) and might be even influenced by it.

Our proposed research focuses on the constitutional political economy of the separation of powers, from both normative and positive perspectives. This is a very broad topic indeed and in the coming years we wish to concentrate on a few aspects of it: (i) the role of the judiciary in the context of separation of powers and the theory of the state, and better understanding of de-jure and de-facto judicial independence across different systems of governments; (ii) the role of other internal agencies independent from government, such as central banks, competition agencies, audit courts, and the interplay between them and an independent judiciary; (iii) the role of super-national and international institutions in the context of delegation of powers and separation of powers. These topics will be analyzed on normative and positive levels with a strong emphasis on empirical work.

1. Comprehensive description of the methods and plan of operation
2. Normative framework

The first step of our research will clarify the normative framework for separation of powers and within it we will offer fresh analysis in the context of the topics we propose to focus on.

The economic theory of the state finds its roots in Thomas Hobbes' Leviathan (1651) and the social contract tradition (from Hobbes to Rawls 1971). These philosophical arguments were rephrased in economic language in the second half of the 20th century by, among others, Black (1948), Arrow (1951), Downs (1957), Buchanan and Tullock (1962), Buchanan (1975), Mueller (1996) and Barzel (2003). It is founded upon the contractual view of the state, i.e. on Pareto optimality or unanimous decision-making in justifying the exercise of collective power. The Republican view of the state à la Jean Jacques Rousseau (1762) or the Anti-Federalist Papers (edited by Ketcham 1986) American Founding Fathers is usually regarded as outside the scope of the economic theory of the state. It can, however, be analyzed in the context of the economic approach and yield interesting insights (for such an initial attempt see Elkin-Koren and Salzberger, forthcoming 2004). It is our intention to broaden the economic theory of the state to incorporate Republican thinking.

The contractual view of collective action and central power leads to the distinction between the constitutional stage and post-constitutional stage (Voigt 1997), the latter of which shifts collective action, due to high transaction costs, from unanimity to majority decision-making conducted by representatives. This shift is the basis for the first type of separation of powers, the more important but less discussed, between the protective state and the productive state. It is our intention to re-examine this type of separation of powers also in the light of the technological revolution of Cyberspace, which has significant effects on decision-making costs and collective organization (for initial analysis in this direction see Salzberger 2004 forthcoming). It is our intention to analyze constitutions of different countries and demonstrate the deficiencies in their separation of powers of this type.

The second type of separation of powers is within the post-constitutional state. It comprises the separation of functions, agencies, persons, and a recipe for the inter-relations between the branches - the most controversial element in doctrines dealing with the structure of government (Salzberger 1996). We will highlight the desirable mode of relations from an economic analysis perspective – the checks and balances approach, and offer new distinctions within the mode of relation between the personal and functional separation of powers. This will enable a better understanding between the American style presidential system and the European parliamentary system. It will also enable us to derive some norms concerning the policy functions that should remain with elected officials, those that should be delegated to independent agencies domestically and those that should be delegated to the international level.

This normative analysis will be accompanied by a thorough investigation into different existing constitutions and constitutional changes (such as the move to direct election of prime minister in Israel and its reverse). Within this analysis, special attention will be given to the judiciary as one of the principle three branches of government (the different roles of the judiciary within the constitutional and post-constitutional spheres, the optimal degree of judicial independence, a possible level of independence where the “least dangerous branch” (Hamilton) could turn into a dangerous one etc.). We will also pay attention to other agencies, which are not part of the three major branches but might have an important role in the state, such as central banks and state prosecution agencies (Aaken, Salzberger and Voigt 2002). We will offer a normative analysis of the delegation of powers.

3.2 Positive analysis

Our positive analysis will focus on three aspects, namely (i) the role of the judiciary as one of the three traditional branches of government according to the separation of powers à la Montesquieu, (ii) the role of agencies independent from government such as central banks and (iii) the interplay between (i) and (ii).

The theoretical part will be based on recent models (e.g. Persson et al. 1997, Maskin and Tirole 2001, Padovano, Sgarra, and Fiorino 2003). These models are often very limited in the number of actors that they explicitly model and it is thus one strategy to expand the number of actors whose interactions are taken into account. A natural way of doing this is to incorporate the judiciary as an additional actor (for a simple spatial model, see Voigt 1999).

There is an extended literature on the economic effects of central banks, yet very little on the economic effects of other independent agencies such as competition authorities, audit courts, prosecutorial agencies, and even military command. Additionally, competence can also be delegated to international organizations. The decision between domestic and international delegation as a strategic choice of government was discussed in Voigt and Salzberger 2002. In modeling the possible effects of these agencies, our theoretical focus will be on the effects that delegation has on the capacity of government to pronounce credible commitments. This might be a problem in cases in which the government is subject to time-inconsistent preferences, i.e. in situations in which government’s short-term interest might deviate from its own long-term interests.

The role of the judiciary for the (factual) independence of independent government agencies has rarely been discussed in the literature (a very first attempt to discuss the possible impact of an independent judiciary on the factual independence of central banks is Voigt 2002).

Purely theoretical advances will, however, not be sufficient. Therefore, the aim is also to gain empirical insights concerning the separation of powers. Over the last couple of years, quite a number of new datasets have been generated and made publicly available. Since no such indicator proxying for the independence of the judiciary was available, one of the authors set out to construct one indicator on de jure judicial independence and another on de facto judicial independence. First empirical studies (Feld and Voigt 2003, 2004) show that de facto JI is highly significant in explaining economic growth. It is also quite robust as the authors have controlled for a host of potentially competing explanatory variables.

The next steps in empirical research are straightforward:

find out more concerning the specific channels through which JI influences economic growth;

construct similar indicators concerning competition authorities, audit courts etc.

regress income levels and changes thereof on those indicators;

estimate the effects of JI on the factual independence of other independent agencies;

regress the credibility of a country (e.g. proxied by its creditworthiness) on the degree to which a country has delegated competencies to international organizations;

determine the factors that explain delegation of competence from legislatures to domestic agencies and to international organizations.

3.3. Economic Analysis between normative and positive endeavors

One of the soft points of the Economics analysis of Law project is the inner equilibrium between normative and positive analyses. Normative analysis tries to tell us what is the desirable legal or constitutional arrangement. Positive economic analysis tries to explain why things are as they are or to describe legal phenomena in economic language. The distinction between these two levels is crucial in law and economics, because both positive and normative analyses are founded upon specific assumptions regarding human behavior, and what is the use to construct a normative theory if the same assumptions which are in its bases direct us to predict that the recommended solution does not stand a chance to be selected.[V1]

So far the question of equilibrium between normative and positive analysis has hardly been dealt with, maybe because this problem is less acute in the realm of private law, which was the main focus of most scholars. Thus if normative analysis points to the desirable rule regarding remedy for breach of contract, or to the desirable rule regarding contingency fees or any other substantive or procedural rule, there is a fair chance that legislators, who do not have direct stakes in the selected solution will vote for such an arrangement. Lack of equilibrium between normative and positive analysis is a much more acute problem in the realm of public law and especially in economic analysis of constitutional law. If one assumes self-interested politicians, than its very difficult to present the positive analysis of separation of powers as falling in the same line as the normative argument which is usually used by legal theorist to describe the concept, unless one can point at an equilibrium in which the normative goal of consensus building fits politician’s self interested goals. The positive theory of separation of powers, which we propose to develop in this project, is very much aware of this question, as will become apparent below.

NOTE: Text of items 1 through 5 is limited to a total of 10 pages.

Note: Replace this page with pages of identical size for headings 1 to 5.

P.5

SECTION 3

BUDGET DETAILS

Instructions:

1. The budget should be presented in EURO.
2. List all personnel participating in the project and the time they will devote to the project, including principal investigators.
3. Principal investigators and scientists on the paid staff of the applicants’ institutions are not entitled to receive salaries from the G.I.F.
4. Indicate role and salary of personnel not yet appointed.
5. Months of employment should be specified for each person employed. Hours per month should be specified when students are employed on an hourly basis.
6. In calculating salaries include social benefits. Multiply the yearly salary and social benefits by the percentage of research time (time on project).
7. Give detailed budget breakdown for first, second and third years.
8. Anticipated increases in costs should be calculated for second and third year budgets.
9. Fellowships do not include any social benefits.
10. The Foundation will not consider V.A.T. taxes on salaries, or any other indirect costs (overhead).

SALARIES