Dynamics and Stability of Constitutions, Coalitions, and Clubs
Massachusetts Institute of Technology (MIT) - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)
Northwestern University - Kellogg School of Management; NBER
University of Chicago - Irving B. Harris Graduate School of Public Policy Studies; Higher School of Economics; Centre for Economic Policy Research (CEPR)
August 4, 2008
MIT Department of Economics Working Paper No. 08-15
A central feature of dynamic collective decision-making is that the rules that govern the procedures for future decision-making and the distribution of political power across players are determined by current decisions. For example, current constitutional change must take into account how the new constitution may pave the way for further changes in laws and regulations. We develop a general framework for the analysis of this class of dynamic problems. Under relatively natural acyclicity assumptions, we provide a complete characterization of dynamically stable states as functions of the initial state and determine conditions for their uniqueness. We show how this framework can be applied in political economy, coalition formation, and the analysis of the dynamics of clubs. The explicit characterization we provide highlights two intuitive features of dynamic collective decision-making: (1) a social arrangement is made stable by the instability of alternative arrangements that are preferred by sufficiently many members of the society; (2) efficiency-enhancing changes are often resisted because of further social changes that they will engender.
Number of Pages in PDF File: 64
Keywords: commitment, constitutions, dynamic coalition formation, political economy, stability, voting
JEL Classification: D71, D74, C71
Date posted: August 7, 2008
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