Scandinavian Working Papers in Economics

Ratio Working Papers,
The Ratio Institute

No 3: Constitutionalism, Division of Power and Transaction Costs

Niclas Berggren and Nils Karlson
Additional contact information
Niclas Berggren: The Ratio Institute, Postal: P.O. Box 5095, SE-102 42 Stockholm, Sweden
Nils Karlson: The Ratio Institute, Postal: The Ratio Institute, P.O. Box 5095, SE-102 42 Stockholm, Sweden

Abstract: According to many democracy theorists, there is an unavoidable trade-off between constitutionalism and the need for political action. This paper criticizes that belief. Rather, it argues that a division of power, while sometimes entailing high political transaction costs, can nevertheless be beneficial and that it is not necessarily the case that a division of power does entail high transaction costs. The analysis expands the framework of Buchanan and Tullock (1962). Constitutionalism is thus defended against one of its main perceived deficiencies: its bringing about gridlock. This does not always happen, and when it does, it is often a good thing.

Keywords: Political transaction costs; Constitutionalism; Political institutions; Division of power; Quality of political decision-making

JEL-codes: D70; H11

26 pages, September 11, 2002

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