Critical Decisions and Constitutional Rules

Cambridge Economics Working Paper No. CWPE 0523

45 Pages Posted: 12 Aug 2005  

Toke Skovsgaard Aidt

University of Cambridge - Faculty of Economics and Politics

Francesco Giovannoni

University of Bristol - Department of Economics

Date Written: May 2005

Abstract

Many constitutions specify procedures that allow critical decisions to be made with a different rule than day-to-day decisions. We propose a theory of constitutional rules that explains why. The theory is based on the assumption that the type of a decision can be observed, but not verified. We characterize two classes of second-best constitutions, both with clear analogues in real world constitutions: i) incentive scheme (IS) constitutions that elicit information about the type of a decision through a costly decision rule switching procedure, and ii) linking scheme (LS) constitutions that grant limited veto powers to interested parties. We explore how the relative performance of the IS and the LS constitution depends on the economic environment.

Keywords: Constitutions, social contracts, majority rules, vetoes, referenda

JEL Classification: H10, H11

Suggested Citation

Aidt, Toke Skovsgaard and Giovannoni, Francesco, Critical Decisions and Constitutional Rules (May 2005). Cambridge Economics Working Paper No. CWPE 0523. Available at SSRN: https://ssrn.com/abstract=773986 or http://dx.doi.org/10.2139/ssrn.773986

Toke Skovsgaard Aidt (Contact Author)

University of Cambridge - Faculty of Economics and Politics ( email )

Austin Robinson Building
Sidgwick Avenue
Cambridge, CB3 9DD
United Kingdom
+44 1223 33 5231 (Phone)
+44 1223 33 5475 (Fax)

Francesco Giovannoni

University of Bristol - Department of Economics ( email )

8 Woodland Road
Bristol BS8 ITN
United Kingdom
+44 117 928 8430 (Phone)
+44 117 928 8577 (Fax)

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