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A Positive Theory of Discretionary Policy, the Cost of Democratic Government and the Benefits of a Constitution

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journal contribution
posted on 01.08.2013, 00:00 authored by Alex Cukierman, Allan MeltzerAllan Meltzer

We offer an explanation of government's preference for discretionary policy action. The main elements are asymmetric information and the ability and desire of governments to maximize reelection prospects. Discretionary policy imposes a social cost. We show that the cost is eliminated if all voters have the same information as the government. An optimal, state contingent policy rule that precommits government through a constitution eliminates the cost by removing government's opportunities to exploit its informational advantage. Rules of this kind, and constitutional restrictions, are difficult to enforce in the presence of uncertainty and different information available to government and the public.


Publisher Statement

This is the author’s version of a work that was accepted for publication in Journal of Research in Personality. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication.



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