Copyright (c) 2008 All rights reserved. http://works.bepress.com/roger_lagunoff Recent documents in Roger Lagunoff en-us Thu, 08 May 2008 02:43:30 PDT 3600 http://works.bepress.com/roger_lagunoff/12 http://works.bepress.com/roger_lagunoff/12 Tue, 06 May 2008 12:00:12 PDT We study the intergenerational accumulation of knowledge in an infinite-horizon model of communication. Each in a sequence of players receives an informative but imperfect signal of the once-and-for-all realization of an unobserved state. The state affects all players' preferences over present and future decisions. Each player observes his own signal but does not directly observe the realized signals or actions of his predecessors. Instead, he must rely on cheap-talk messages from the previous players to fathom the past. Each player is therefore both a receiver of information with respect to his decision, and a sender with respect to all future decisions. Senders' preferences are misaligned with those of future decision makers. We ask whether there exist "full learning" equilibria -- ones in which the players' posterior beliefs eventually place full weight on the true state. We show that, regardless of how small the misalignment in preferences is, such equilibria do not exist. This is so both in the case of private communication in which each player only hears the message of his immediate predecessor, and in the case of public communication, in which each player hears the message of all previous players. Surprisingly, in the latter case full learning may be impossible even in the limit as all players become infinitely patient. We also consider the case where all players have access to a mediator who can work across time periods arbitrarily far apart. In this case full learning equilibria exist. Roger Lagunoff New Working Papers http://works.bepress.com/roger_lagunoff/11 http://works.bepress.com/roger_lagunoff/11 Tue, 06 May 2008 11:38:45 PDT This paper examines the Faustian dynamics of policy and power. We posit a general class of dynamic games in which current policies affect the future distribution of political power, resulting in the following ``Faustian trade off": if the current ruler chooses his preferred policy, he then sacrifices future political power; yet if he wants to preserve his future power, he must sacrifice his present policy objectives. The trade-off comes from the fact that the current political ruler/pivotal voter cannot un-couple the direct effect of his policy from its indirect effect on future power.A Policy-endogenous (PE) equilibrium describes this endogenous transfer of power, and the resulting evolution of policy and political power over time. We show that the Faustian trade-off in a PE equilibrium is decomposed into two basic rationales. The "political preservation effect" induces more tempered policy choices than if one's policy choice did not affect one's political fortunes. However, the "reformation effect" induces ``more aggressive" policies in order to exploit the productivity gains from policies chosen by even more aggressive successors. We distinguish between political systems that give rise to monotone Faustian dynamics --- political power that progressively evolves toward more fiscally liberal types of leaders, and cyclical Faustian dynamics --- political power that oscillates between liberal and conservative types of leaders. In each case, we show that the Faustian trade off moderates the choices of each type of leader. Roger Lagunoff New Working Papers