Optimal Checks and Balances Under Policy Uncertainty

32 Pages Posted: 26 Apr 2021

See all articles by Gabriele Gratton

Gabriele Gratton

UNSW Australia Business School, School of Economics

Massimo Morelli

Bocconi University

Multiple version iconThere are 2 versions of this paper

Date Written: April 23, 2021

Abstract

Political checks and balances are certainly among the most debated desiderata in the construction of democratic systems and their evaluation. This paper suggests a conceptual framework that could be useful to inform this debate. We propose a model where the pros and cons of a strengthening of checks and balances are respectively the reduction of type-I errors and the increase of potential type-II errors in policy decision-making. Political checks and balances are less desirable for intermediate levels of competence of the political class when in conjunction with high accountability. In policy areas where the welfare effects of a reform are harder to evaluate and effective accountability is low, political checks and balances are always desirable. Positive constitutional design unfortunately reveals the possibility of constitutional traps, with politicians choosing or defending the less desirable regime.

Keywords: Checks and balances, Information, Uncertain policy quality, Effective accountability, constitutional design

Suggested Citation

Gratton, Gabriele and Morelli, Massimo, Optimal Checks and Balances Under Policy Uncertainty (April 23, 2021). BAFFI CAREFIN Centre Research Paper No. 2021-161, UNSW Business School Research Paper Forthcoming, Available at SSRN: https://ssrn.com/abstract=3832572 or http://dx.doi.org/10.2139/ssrn.3832572

Gabriele Gratton

UNSW Australia Business School, School of Economics ( email )

High Street
Sydney, NSW 2052
Australia

Massimo Morelli (Contact Author)

Bocconi University ( email )

Via Roentgen 1
Milan, 20136
Italy

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