Between the constitution and the deep blue sea: Contractual controls on opportunism aboard pirate vessels

When contracting is costly, members of a production team will seek assurance that the transaction-pecific investments they make will be protected. The institutional framework created by a firm in such a setting can be considered a constitution. Under some circumstances, firms will create explicit written constitutions. The constitutions of pre-1850 privateer and pirate vessels provide two examples of actual written constitutions. These constitutions were designed to resolve the problems of contractual opportunism created by the specific investments of the crewmembers. Privateering was a legal and state-sanctioned activity whereas pirates engaged in illegal activities; aside from this difference their activities were virtually identical. This contrast allows for the examination of an interesting question: specifically, what effect does the constitutional backup provided by the state have on the constitutional structure of the firm?     

Organizational reputation and constitutional constraints: An application to religious denominations

Constitutional economics may be defined as the study of constraints chosen by cooperative groups. In this paper, the scope of constitutional economics is extended by an examination of the constitutions and rules that govern seven of the eight largest U.S. Christian denominations. This examination of church constitutions reveals constitutional provisions and church rules that protect denominational reputation by preserving doctrinal integrity and constraining the behavior of local churches, clergy, and individual members. By protecting their reputations, religious denominations may increase their appeal to current or prospective members or both.     

European influence and economic development

The development accounting literature identifies political institutions as fundamental development determinants. Forms of government or executive constraints are thought to shape economic institutions (e.g., property rights) that provide necessary incentives for economic growth. One strand of the literature suggests that European influence is a crucial economic development determinant, presumably through the adoption of European institutions. But how exactly did European influence in the distant past induce positive economic outcomes today? Previous approaches rely on “language,” “settler mortality,” “legal origins” or the “number of European settlers” as indirect proxies of European influence. We propose a direct and quantifiable mechanism: the adoption of European constitutional features. We construct a dataset of all constitutional dimensions from 1800–2008 for all countries and find that nations experience growth accelerations after adopting features of European constitutions. The growth effects are influenced (negatively) by periods of political turmoil, but they are independent of colonial backgrounds. These results show how European influence may have fostered growth, and they imply that countries were able to overcome adverse initial conditions over the last 200 years by adopting European constitutional features. Our constitutional dataset is sufficiently detailed to identify the specific dimensions of European constitutions that matter most for development: legislative rules and specific provisions that curtail executive powers.     

State provision of constitutional goods

This paper investigates the impact of constitutional rights on the level of public expenditure in a large sample of countries. To do so, we construct a panel of 73 countries from 1960 to 2011. We first investigate factors that drive constitutional changes regarding constitutional rights. To address potential endogeneity concerns in the choice of constitutional rules, we rely on an instrumental variable within estimation (country and time fixed effects) to estimate the impact of constitutional rights on government size. We find that larger governments tend to inscribe fewer rights in their constitutions, but we do not detect any impact of constitutional rights on the government size.     

Constitutions as Commitment or Coordination Device? Comment on C. Azariadis and V. Galasso: Constitutional “Rules” and Intergenerational Fiscal Policy

In a recentcontribution to Constitutional Political Economy, Azariadis andGalasso argued that due to the fact that constitutions allowfor a partial precommitment of the individuals, constitutionalrules are a good means to guarantee an efficient level of redistributionbetween generations. I argue that constitutional rules have noinherent advantage with respect to commitment compared to otherrules. However, the beneficial role of constitutions stems fromtheir ability to create a focal point that helps to solve theequilibrium selection problem.     

Empirical constitutional economics: Onward and upward?

Empirical constitutional economics has made a huge leap forward over the last decade. Interesting insights into the effects of constitutions have been discovered. Rather than summarizing the state of the art, this paper identifies some of the current shortcomings and proposes a number of extensions. It calls for recognizing additional constitutional institutions as explanatory variables, as well as the incorporation of additional dependent variables. Its major emphasis is, however, on calling for the next logical step in this field, namely to endogenize constitutions.     

Post-socialist constitutions: The de jure–de facto gap,its effects and determinantsa

The aim of this paper is to contribute to the debate on constitutional rules and their economic effects by extending focus to the de jure–de facto constitutional gap. First, evidence is provided that size of this gap matters as higher gaps lower the effectiveness of the constitutional commitment mechanism. Second, several explanations of this gap are identified, in particular relating to the democratization process, political conflict, age and comprehensiveness of the constitution. The conclusions are based on an empirical study for the unique setting of the post-socialist countries of Europe and Asia, which all enacted new constitutional frameworks after 1989 and it is shown that in some of these countries constitutions acted as blueprints.     

Do longer constitutions corrupt?

Tsebelis and Nardi (2016) and Tsebelis (2017) report that constitutional length correlates with lower levels of GDP per capita. They argue that this may be the case because longer constitutions lead to greater corruption. However, uncovering a causal relationship between constitutional length and corruption is difficult. On the one hand, political elites may pressure drafters to include specific provisions that facilitate their rent-seeking efforts. On the other hand, constitutional drafters may be responding to corruption by including a large number of specific safeguards. Our aim in this paper is to explore whether there is a causal effect of constitutional length on corruption. We utilize data from the Comparative Constitutions Project (CCP) to identify 5 cases when a country experienced a ≥50% increase in constitutional length. For each of those cases, we compare the subsequent change in corruption to that of a synthetic control. We report evidence of a significant post-treatment increase in corruption for 3 out of 5 cases (Ecuador in both 1997 and 2008; Venezuela in 1999). However, the 2008 Ecuador result is not robust to a placebo test; and in the case of Venezuela it is difficult to distinguish a constitutional length effect from a “Chavez effect” (Grier and Maynard 2016). The evidence that longer constitutions corrupt is weak.     

Is there a self-enforcing monetary constitution?

A self-enforcing monetary constitution has rules that agents acting within the system will uphold even in the presence of deviations from ideal knowledge and complete benevolence. It thus does not require external enforcement. What would such a constitution look like? I show that two regimes—a version of nominal gross domestic product targeting that relies on market implementation of monetary policy, and free banking—meet these requirements for self-enforcing monetary constitutions. The analysis draws insights from political economy, and from constitutional political economy in particular.     

On the inevitability of divided government and improbability of a complete separation of powers

This paper provides a tightly written overview and modest extension of the constitutional exchange and evolution model developed in Perfecting Parliament and uses that approach to analyze the division of authority that one would expect to see in contemporary constitutional governments. The analysis suggests that constitutions tend to be written, based on the king and council template, and buttressed by a more or less independent court system. Moreover, it suggests that constitutions change at the margin through time as constitutional bargaining takes place. This suggests that a complete separation of power is unlikely to be observed in the long run. Empirical evidence developed from the IAEP data base is consistent with these predictions.     

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.     

Lessons from Constitutional Culture and the History of Constitutional Transfer: A Hope for Constitutionally Limited Government?

The literature shows a clear correlation between sound constitutional environments and human flourishing. However, the path to adoption of sound constitutions is much less clear. This paper turns to the history of constitutional transfer to propose an alternative to taxonomies offered in the literature, which typically classify constitutions either by governmental structure (presidential v. parliamentary, or centralized v. federalist) or by source of influence (e.g. US 1787, Spain 1812, France 1958). These classifications are found wanting; instead, this paper proposes a new taxonomy based on the origin of the constitutional ideas and adoption. Formal constitutional parchment must match informal constitutional culture, so a constitution’s likelihood of success is greatest when the ideas are indigenous; the source of adoption is ultimately secondary. The paper closes with four case studies of constitutional transfer and adoption.     

Fiscal Constitutions

In this paper we examine how taxes, subsidies and the design of constitutional agendas should be regulated in order to allow for an efficient allocation of public goods and a limitation of tax distortions. We show that if public goods are socially desirable, the simple majority rule, combined with taxation constrained to majority winners or a ban on subsidies, can achieve several desirable objectives. Equal treatment regarding taxes and subsidies is undesirable. Super majority rules and equal treatment of all citizens with respect to taxes and subsidies, however, are first-best provided public goods are socially undesirable. Finally, we suggest that constitutions with amendments eliminate excessive taxation and allow treatment rules to universally improve welfare.     

Club governments versus representative governments

The paper compares the legal rules for private clubs with the constitutions of representative governments. Though both institutions are designed to provide public goods for their members they are organized quite differently. In clubs the power to grant power must not be delegated to the agents, while in representative governments it usually is. The design of representative governments is shown to be inconsistent with a contractarian view of the constitution. A nearly perfect laboratory case for a club government can be found in the example of Switzerland. In this country citizens are absolute sovereigns over their constitution. The Swiss do not have a constitutional court, but have developed instead a system of popular voting rights serving as a substitute for a judicial review by a constitutional court. Though this system does not work perfectly, it has relative advantages compared to a constitutional court which often tends to become a political decisionmaker. The author is indebted to Pio Baake, Peter Moser, and Richard E. Wagner for helpful comments.     

Fiscal Constitutions

We study the impact of fiscal constitutions on intergenerational transfers in an overlapping generation model with linear technology. Transfers represent outcomes of a voting game among selfish agents. Policies are decided one period at a time. Majoritarian systems, which accord voters maximum fiscal discretion, sustain all individually rational allocations, including dynamically inefficient ones. Constitutional rules, which give minorities veto power over fiscal policy changes proposed by the majority, are equivalent to precommitment. These rules eliminate fluctuating and dynamically inefficient transfers and sustain weakly increasing transfer sequences that converge to the golden rule. The golden rule allocation is the unique outcome of Markov constitutional rules. Journal of Economic Literature Classification Numbers: D72, H55.     

Buchanan’s constitutional political economy: exchange vs. choice in economics and in politics

This article discusses the methodological foundations of Buchanan’s constitutional political economy. We argue that Buchanan is a constitutional economist because he is an economist or a political economist. In other words, Buchanan is a constitutional economist—he insists on the necessity of focusing on constitutions and to analyze the “rules of the social game”—because he defines economics as a science of exchange. Buchanan’s definition of economics is not only specific, it is also opposed to the definition of economics that other economists retain and, above all, opposed to the definition of economics that many public choice theorists use. The latter have, in effect, adopted the Robbins 1932 definition of economics as a science of choice that Buchanan criticizes and rejects. Buchanan’s constitutional economics can be a branch of public choice only under certain conditions.

Constitutional safeguards against centralization in federal states: An international cross-section analysis

This paper contains an international cross-section analysis of the share of central government expenditure in total government expenditure for a sample of about 50 countries and a subsample of 23 industrial countries in 1989–91. The expenditure shares, their changes and the unexplained residuals for each country are reported in Table 1. As the analysis demonstrates, the share of central government is significantly lower, if income per capita and the country's area are large and if it is a federal state. The explanatory power of the equation rises considerably if the binary dummy for federalism is replaced by quantitative constitutional variables. The most powerful single explanatory variable is the age of the constitutional court in the complete sample or the constitutional court's independence of union institutions in the sample of industrial countries. The equation's explanatory power (adjusted for degrees of freedom) can be raised by allowing also for the degree of control which provincial institutions have over the constitution and over the second chamber and by taking into account whether an increase in federal tax rates requires a popular referendum. Other types of constitutional referenda and the relative age of the federal constitution do not seem to matter. Among the federal states, the share of central government is much larger than predicted in the United States and Mexico, and it is much smaller than predicted in Argentina and Canada. The constitutional variables are particularly helpful in explaining the relatively small share of central government in Switzerland, Malaysia, Germany and Austria. The last section draws conclusions for the design of constitutions with some special applications to the European Union.     

The role of constitutions on poverty: A cross-national investigation

We construct and use a new historical data set on economics and social rights from the constitutions of 195 countries and an instrument variable strategy to answer two important questions. First, do economic and social rights provisions in constitutions reduce poverty, measured as headcount income and health outcomes? Second, does the strength of constitutional language of the economic and social rights matter? Constitutional provisions can be framed either more weakly as directive principles or more strongly as enforceable law. Our results suggest three findings. First, we do not find an association between constitutional rights generally framed and poverty. Second, we do not find an association between economic and social rights framed as directive principles and poverty. Third, we do find a strong negative association between economic and social rights framed as enforceable law and poverty when we use legal origins as our IV. These results persist for indices of constitutional rights and also when we restrict the sample to non-OECD countries. The policy implication is that constitutional provisions framed as enforceable law provide effective meta-rules with incentives for policymakers to initiate, fund, monitor and enforce poverty reduction policies.     

Political entrepreneurship,emergent dynamics,and constitutional politics

Constitutional political economy mostly distinguishes between rules and actions, with rules selected prior to actions within those rules. While we accept the coherence of this distinction, we pursue it within an open rather than closed scheme of analysis. Doing this entails recognition that societies rarely exhibit universal agreement about constitutional provisions. Recognizing the incomplete character of constitutional agreement points to the existence of margins of contestation. Along those margins, political entrepreneurship will be active in promoting support for alternative constitutional interpretations. Within open systems of creative and entrepreneurial action, constitutional reinterpretation is continually injected into society. Acquiescence in the presence of power does not imply agreement about its use. Rather, acquiescence means the constitutional contestation becomes an element of ordinary politics and not an activity that is prior to ordinary politics. It also means that emergent dynamics supplements comparative statics as a method of analysis.     

Stability of Constitutions

Constitution is a pair of rules   ( s ,  S )   that are used in a voting situation. The rule  s  is used to vote about the existing alternatives and the rule  S  is used to vote about changing the rule  s  to some other rule    s '  . We consider what kind of constitutions are likely to emerge as prominent ones if the constitutions contain more than just two rules. In a constitution that contains any number of rules the  n th rule is used to decide about the    n  − 1 th   rule. We define a notion of stability for the constitutions and show that all stable constitutions roughly contain the same rule from    n  = 2   onwards. This is one explanation to the casual observation that the constitutions have usually only two rules.