The full paper is available as PDF file.
New York University
To survive inter-societal competition, each society must have certain basic institutions that offer security against internal uprising and external aggression, and that specify the underlying political-economic structure. These institutions cannot be decentralized because of free riding, economies of scale, and the need for credible commitment. It seems proper to treat such institutions as primitives at par with individual preferences. Once installed, these institutions help generate stability of two types. The first is the stability of the regime against aggression, and the second is collective rationality (transitivity) arising from the centralization of power. Letting constitutions represent systems of government with the associated basic institutions, the dominant constitutions tend to be those that support a relatively strong economy and defense. This paper argues that depending on the internal and external threats and potential for economic prosperity, a stable constitution can display varying levels of centralization including democracy. The constitution, however, is not arbitrary, as some sort of majority cycle over institutions would imply. Surviving constitutions, much like competing firms, have two key features: they have goals and they represent knowledge accumulated over centuries. The goals of the U.S. Constitution, for example, are to "establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty." The knowledge of a constitution is contained in its constraints and procedures. Assuming that the procedures help attain the goals, there is no obvious sense in which a Condorcet winner in the absence of the basic institutions, even if it exists, should take precedence over a constitutionally determined outcome.