71 Pages Posted: 27 Feb 2015 Last revised: 5 Nov 2015
Date Written: February 25, 2015
Institutions and the incentives they create can be designed or redesigned to produce desired outcomes. But design does not work if social and economic dynamics are “creative.” If it is impossible to know in advance how an institution will change behavior and incentives — and what interests it may serve or harm in the future — then it is impossible to “design” optimal institutions. Like organisms, institutions are adaptive functional wholes that change in unpredictable and unprestateable ways.
We examine the history of interpretations of the U.S. Constitution to illustrate the unpredictable and unprestateable dynamics of institutional change. We highlight how innovative interpretations of the Commerce Clause crafted in the civil rights context of the 1960s provided legal support to the Controlled Substances Act of 1970, which has been used to disproportionately target African Americans in the “War on Drugs.” Further, we explain how judicial expansion of procedural due process rights for criminal defendants created unintended consequences that ultimately undermined safeguards against overzealous prosecution. Our analysis suggests that two leading theories of constitutional interpretation, originalism and living constitutionalism, are both unsatisfactory. Originalists do not adequately recognize that the present differs from the past. Novel situations unimaginable to the framers make it possible to have multiple, inconsistent, but equally originalist interpretations of the Constitution. Living constitutionalists do not adequately recognize that the future will differ from the present. Present interpretations enable entirely new and unforeseen laws, which may produce outcomes opposite to those intended by the crafters of present interpretations. For this reason, both theories have morphed over time and become more similar, showing that theory itself defies design.
We argue that governance must be considered in the light of creative dynamics. Given creative dynamics, it may not be helpful to ask which institutional arrangements are best. We must think beyond the design of optimal institutions and even, perhaps, beyond institutions entirely. Because institutions change in unpredictable and unprestateable ways, it is impossible to ensure fairness by striking a one-time bargain from behind the Rawlsian veil of ignorance. Rather than attempting to engineer optimal institutions, we should explore methods of institutional cultivation and adaptation, viewing institutions as webs of enabling constraints that may create rich or poor adjacent possibilities for agents in the system. Attributes such as redundancy, degeneracy, adaptivity, diversity, and resilience may better predict performance in unforeseen situations. Generating desired aggregate outcomes indirectly through the learning and adaptation of multiple interacting agents allows the system to adapt to novelty and leverages the combinatorial explosion that defeats Rawlsian institutional design.
Keywords: constitution, design, law and economics, institutions, innovation
JEL Classification: K00, K1, K2
Suggested Citation: Suggested Citation