Constitutionalism and credibility in reforming economies1

There has been relatively little investigation of the effect of constitutional transformations on the economic transition in post‐communist countries. We develop a simple signalling model in which constitutionalism – a commitment to limit political power and provide judicial defence of basic rights – reinforces the credibility of pro‐market candidates’ electoral promises and boosts public support for economic reforms. These findings are tested using opinion poll data on public support for reform in Central and Eastern Europe, and in the former Soviet Union, in the 1990s. In a two‐stage procedure we show that public support for market reforms is higher in countries where incumbents have taken deliberate steps to increase political accountability and judicial independence. Public support also spurs actual economic reform.     

From contract to mental model: Constitutional culture as a fact of the social sciences

This paper develops the concept of constitutional culture—the attitude, thoughts, and feelings about constitutional constraints and the nature, scope, and function of constitutionalism. Constitutional culture is approached as a complex emergent phenomenon bridging Hayekian cognitive and institutional insights. It can be studied as a mental model, a series of expectations and understandings about the constitutional order, how it is, and how it ought to be. The “map” and “model” approach from Hayek’s Sensory Order (1952) is employed to understand how individuals and (cautiously) groups of individuals at the national level approach constitutionalism. This paper goes beyond the more traditional one-size-fits-all approach where all individuals respond uniformly to incentives, as provided by the constitution qua contract. Instead, constitutionalism is tied up in the individual’s vision of the world, that is, what Hayek (1948) labels “the facts of the social sciences.” The paper concludes with four areas where constitutional culture can further the insights of constitutional political economy: comparative political economy, constitutional stickiness, constitutional maintenance, and the new development economics.     

自然权利·政治正当性·宪政——西方宪政民主政体的理念脉络探析

本文从政治哲学角度考察自然权利、政治正当性与宪政三要素的基本涵义及其逻辑关系，意在探析西方宪政民主政体的理念脉络。文章的基本论点是，在西方政治体系中，自然权利理念不仅为统治与被统治关系的政治正当性提供根本依据，更作为宪政民主政体的基本规范为宪政、民主及法治的正当程序奠定基础。     

We start from here

As James Buchanan often asserted, in constitutional design “we start from here” which is to say we design a constitution to fit the institutions, social practices and so forth that we already have. Comparison of the complicated case of the US constitution and the failed attempt at constitutionalism in contemporary Egypt suggest that many societies are not yet ready for serious constitutional design. The English civil wars were about religion; the US constitution ignores religion and thereby avoids the grim conflict of church and state.     

The Nature of the State and the State of Nature: a Comment on Grady & McGuire's Paper

In 'The Nature of Constitutions', Mark Grady & Michael McGuire provide a model of the evolution and purposes of constitutions as arising to minimize appropriation by dominants of subordinates. This Comment builds on Grady & McGuire's article in three ways. First, it supplements their analysis by operationalizing a model of constitutional evolution that views constitutions as arising out of the conflict of competing high-ranking individuals to preserve their own authority. From this clash of self-interest of dominant individuals, constitutions are born. This predicts that constitutions will not simply tame all forms of appropriation, but will also hard-wire some forms of appropriation behavior into the permanent constitutional structure. Second, it examines the American constitution in light of this model to show how that constitution reflects the mixture of appropriation and appropriation-taming behavior. Third, this Comment argues that the breakdown of constitutionalism in the United States this century can be explained by a failure to fully appreciate the purposes of constitutionalism in a biological framework.     

Islamic constitutionalism and rule of law: a constitutional economics perspective

This study investigates the relationship between Islamic constitutionalism and rule of law. Al Azhar, one of the most respected Sunni religious institutions in the world, developed a model of an Islamic constitution. This study uses Al-Azhar’s constitution as a model of Islamic constitutionalism and examines its stance in regard to the rule of law. We find the Al-Azhar’s constitution to be incompatible with essential concepts of rule of law. For example, the powers vested in the head of the Islamic state are enormous, making the executive branch of government far superior to the legislative and judicial branches. Women and non-Muslims are explicitly discriminated against throughout the constitution. Moreover, laws stemming from this constitution are not stable since many differences exist among schools of Islamic jurisprudence (fiqh). Consequently, we show that state-of-the-art Islamic constitutionalism lacks essential components needed in any constitution based on rule of law.     

Constitutionalism,prosperity, democracy: Transition in Eastern Europe

Eastern Europe is now undergoing three distinct transitions: to markets, to democracy, and to constitutionalism. Under current conditions, the transition to constitutionalism is a logical precondition for the transitions to markets and democracy. To protect both of these, it is especially necessary to develop an “economic bill of rights” for inclusion in the new constitutions. This bill of rights should include the rule of law, protection of private property, freedom of contract, occupational liberty, the right to travel within and without the nation, and a prohibition on government monopolies; other similar provisions should be considered as well. The new constitutions should not include general aspirations, duties, or positive rights. The eventual development of an economic bill of rights—a precommitment strategy designed to promote prosperity and democracy—could constitute a new and important contribution to the theory and practice of constitutionalism. In light of the rapid changes in Eastern European constitutional affairs it should be noted that the final draft of this paper dates from August 1991. Karl N. Llewellyn Professor of Jurisprudence, Law School and Department of Political Science, University of Chicago; Co-Director, Center on Constitutionalism in Eastern Europe, University of Chicago. I am grateful to Jon Elster and Stephen Holmes for valuable discussion, and to Richard A. Epstein and Stephen Holmes for helpful comments on a previous draft.     

The Formation of Economic Policy: A Cognitive-Evolutionary Approach to Policy-Making

This essay proposes a cognitive-evolutionaryapproach to economic policy making where the entire process ofpolicy-formation and implementation is analyzed as a collectiveprocess of mobilization and problem-solving that extends fromthe individual level over the level of collective decision makingto the constitutional level. In the procedural view proposed,many issues or problems of economic policy are not fully solvedbecause of four main filters or barriers that filter out certainissues while letting others through. The main task for politicalentrepreneurs is to surmount these barriers. Important aspectsof the politico-economic process are cognitive processes of perceptionand interpretation by the individual; processes of interpretation,mobilization, and negotiation at the collective level; and evolutionarydynamics at the constitutional level.—This interdisciplinaryoriented approach provides a framework that suggests new categoriesfor analyzing policy-making in a systematic way by linking thebehavior and thinking of the individual with the ongoing politicalprocess at the collective and constitutional level, and leadsto conclusions for advising politicians.     

Competence Catalogues and the Principle of Subsidiarity in a European Constitution

The purpose of this paper is to compare two instruments—the principle of subsidiarity and competence catalogues—which can be used in order to define a balance between powers vested in the European Union and those vested in the member-states. These instruments will be evaluated in the context of constitutional economics. The goal is to clarify the constitutional problem of dual jurisdictions in Europe. The principle of subsidiarity will be criticized because of the static nature of that device: the three main problems in making use of competence catalogues are to find criteria for deciding which competences should be allocated on which level, to protect the system against judicial erosion and to adapt it to changing environments.     

Participation, decision aggregation and internal information gathering in organizational decision making

This paper proposes a stylized theory that focuses on the determination of the structure of decision making within teams. This structure consists of two elements: the allocation of decisional power among the team members, and the degree of information acquisition on their quality. The suggested approach is applied in the special context of pairwise organizational choice for evaluating the performance of a class of decision rules, the value of participation in organizational decision making, the value of information on the quality of the available decision makers, and the efficiency loss associated with common restrictions on the design of the corporate's structure of decision making.     

On the governmental use of multi-criteria analysis

Public decision making, especially about our natural environment, is inherently exposed to a high conflict potential. The necessity to capture the complex context has led to an increasing request for decision analytic techniques as support for the decision process. Multi-criteria analysis (MCA) is deemed to overcome the shortcomings of traditional decision-support tools used in economics, such as cost-benefit (CBA) or cost-effectiveness analysis (CEA). This is due, among other, to its ability of dealing with qualitative criteria (e.g. sensitive ecological factors), as well as with uncertainties about current or future impacts. Unlike CBA or CEA, MCA is rarely required by national laws or directives. Nonetheless, a number of recent MCA applications were supported by public authorities who either initiated or directly participated in such analyses. Given the theoretical assumptions about MCA's potential to support complex decision problems, as is often the case for environmental or sustainability policies, the key concern in our paper is to evaluate whether this potential has already been recognised in public decision making. For limitation purposes, the present work focuses on real-life case studies reported during the last decade with an insight in the initiation, the actors involved and the importance of the MCA results in the decision process. We argue that the significance and role played by MCA so far reaches beyond its current legal requirements.     

Uncertainty of Governmental Relief and the Crowding out of Flood Insurance

This paper discusses the problem of crowding out of insurance by co-existing governmental relief programs—the so-called ‘charity hazard’—in the context of different institutional schemes of governmental disaster relief in Austria and Germany. We test empirically whether an assured partial relief scheme (as in Austria) drives a stronger crowding out of private insurance than a scheme promising full relief which is subject to ad-hoc political decision making (as in Germany). Our general finding is that the institutional design of governmental relief programs significantly affects the demand for private natural hazard insurance.     

DO PEOPLE (WANT TO) PLAN?

This paper makes a modest contribution to investigating whether people, when tackling dynamic decision problems, formulate plans and then implement them. Assumed behaviour of this form is central to many theories of economic decision‐making, yet much direct empirical evidence (from economists and particularly from psychologists) suggests that it has rather dubious empirical support. The paper begins by discussing the importance and centrality of planning to economic theories of dynamic decision‐making, and then examines the difficulty of empirically investigating whether planning occurs. It then describes a simple experiment that sheds some light on this phenomenon. The findings from the experiment, although only directly relevant to the context of the experiment, do suggest that people do (want to) plan when the circumstances are appropriate. The paper concludes by discussing alternative designs.     

Bounded interpersonal inferences and decision making

Summary. Individual decision making is based on predictions about other players' choices as well as on valuations of reactions to predictions. In this sense, a player has a prediction-decision criterion for decision making. We develop a theory of prediction-decision criteria, which enables us to capture new phenomena on individual decision making in games. The decision making situation is described in the epistemic logic GL of shallow depths. There, each player considers his and other players' decision making down to some shallow depths. It is a point of our theory to investigate inferential complexities of interpersonal introspections. In particular, we can discuss a minimal epistemic inferential structure for prediction-decision making. We will find parallel structures in decision making and prediction making, which is called an inner parallelism. The climax of the paper is the consideration of inner parallelisms of prediction-decision making. Received: August 31, 2000; revised version: April 9, 2001     

Which type of producer organization is (more) inclusive? Dynamics of farmers’ membership and participation in the decision‐making process

Producer organizations (POs) provide benefits to smallholders by alleviating market access challenges. However, whether all farmers benefit from a PO is still a question. Limited evidence is available on whether POs are inclusive of poor farmers. Even if the poor join, do they participate in decision‐making? We conducted interviews with 595 smallholder dairy farmers in Kenya. We distinguish three groups; members of a bargaining PO, members of a processing PO and non‐members. We show that membership is related to the structural characteristics of the organization: processing POs favor membership of farmers that are wealthier, more educated and more innovative. As to participation in the decision‐making process: older, male and specialized farmers have a higher chance of being involved than poor farmers. Factors distinguishing farmer participation in decision‐making between bargaining and processing POs are highlighted. We find that a bargaining PO is more inclusive of all groups of farmers, while women and poor farmers are excluded from decision‐making in a processing PO. Our findings contribute to policymaking on inclusive development.     

Tests of Income Pooling in Household Decisions

Using the Progresa data from Mexico, we investigate intrahousehold decision making using a variety of outcomes. We exploit both the experimental nature and the (short) panel dimension of the data to measure the impact of exogenous changes in the intrahousehold distribution of resources on household decisions. We test for global pooling of resources within households, which would correspond to the unitary model of household decision making. We also exploit a set of questions about power and the decision making process in the household to investigate aspects of strategic interactions between household members. Our findings confirm previous rejections of income pooling. We also cannot reject that the wife's relative income share is a significant determinant of the wife's decision making power in the household, with a higher share of income associated with more decision making power. Journal of Economic Literature Classification Numbers: J12, D13, H31.     

Rationality and intertemporal choice

The alleged problems associated with self-control, hyperbolic discounting and other examples of seemingly irrational intertemporal choice are examined in the context of an evolution-based neurobiological model that emphasizes the role of the biological evolution of big brains and language and the cultural evolution of institutions. There is no utility function in the brain; it has no central-planner, in fact, the brain is a self-organized complex system, a decentralized spontaneous order. This spontaneous order is coordinated, much like an economy, by a distributed network that maintains and makes available the discounted net value of various options to decentralized and specialized areas in the brain when making decisions. Further, that decision making is embodied and embedded in the decision making environment. For humans, an important part of that environment is the social environment consisting of institutions and other components of culture. It was, in part, the evolution of this environment that made long-range planning possible. Additionally, it is very often the lack of embedded experience with the environment that leads to what seems to be irrational intertemporal choices. In fact, under close examination the evidence for consistent irrational intertemporal choice is weak.     

Experimental evidence that quorum rules discourage turnout and promote election boycotts

Many democratic decision making institutions involve quorum rules. Such rules are commonly motivated by concerns about the “legitimacy” or “representativeness” of decisions reached when only a subset of eligible voters participates. A prominent example of this can be found in the context of direct democracy mechanisms, such as referenda and initiatives. We conduct a laboratory experiment to investigate the consequences of the two most common types of quorum rules: a participation quorum and an approval quorum. We find that both types of quora lead to lower participation rates, dramatically increasing the likelihood of full-fledged electoral boycotts on the part of those who endorse the Status Quo. This discouraging effect is significantly larger under a participation quorum than under an approval quorum.     

Constitutional renegotiation: Impediments to consensual revision

In a post-constitutional context, restructuring of constitutional rights often fundamentally alters the role and scope of government. It is therefore important to assess the extent to which consensuality is likely to characterize the process of constitutional revision. This article provides theoretical and empirical grounds for concluding that nonconsensual constitutional revision is often the rule rather than the exception. The endogeneity of politically relevant transaction costs and their manipulation by self-interested political actors in a post-constitutional environment are central to the analysis. I wish to thank Robert Higgs and this journal's referee for helpful comments on an earlier draft.