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Constitutional democracy and the theory of agency

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  • Larry Merville
  • Dale Osborne

Abstract

A unanimously adopted democratic constitution is a contract between the people as principal and the government as agent. However, none of the incentive devices employed in private principal-agent contracting assure enforcement of a constitution. Under majority voting, candidates for the job of agent cannot win the job without promising tobreak the contract, and the agent cannot be re-elected unless he keeps that promise. Copyright George Mason University 1990

Suggested Citation

  • Larry Merville & Dale Osborne, 1990. "Constitutional democracy and the theory of agency," Constitutional Political Economy, Springer, vol. 1(3), pages 21-47, September.
    • Handle: RePEc:kap:copoec:v:1:y:1990:i:3:p:21-47
    DOI: 10.1007/BF02393239
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    References listed on IDEAS

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    1. Bengt Holmstrom, 1979. "Moral Hazard and Observability," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 74-91, Spring.
    2. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    3. Ross, Stephen A, 1973. "The Economic Theory of Agency: The Principal's Problem," American Economic Review, American Economic Association, vol. 63(2), pages 134-139, May.
    4. Telser, L G, 1980. "A Theory of Self-enforcing Agreements," The Journal of Business, University of Chicago Press, vol. 53(1), pages 27-44, January.
    5. Peltzman, Sam, 1985. "An Economic Interpretation of the History of Congressional Voting in the Twentieth Century," American Economic Review, American Economic Association, vol. 75(4), pages 656-675, September.
    6. John, Kose & Nachman, David C, 1985. "Risky Debt, Investment Incentives, and Reputation in a Sequential Equilibrium," Journal of Finance, American Finance Association, vol. 40(3), pages 863-878, July.
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    Cited by:

    1. Ludwig Van den Hauwe, 2005. "Constitutional Economics II," Chapters, in: Jürgen G. Backhaus (ed.), The Elgar Companion to Law and Economics, Second Edition, chapter 13, Edward Elgar Publishing.
    2. Thomas Tobias & Heß Moritz & Wagner Gert G., 2017. "Reluctant to Reform? A Note on Risk-Loving Politicians and Bureaucrats," Review of Economics, De Gruyter, vol. 68(3), pages 167-179, December.
    3. Oluwafemi Senu, 2020. "A critical assessment of anti‐corruption strategies for economic development in sub‐Saharan Africa," Development Policy Review, Overseas Development Institute, vol. 38(5), pages 664-681, September.
    4. Martin Kolmar, 2000. "Constitutions as Commitment or Coordination Device? Comment on C. Azariadis and V. Galasso: Constitutional “Rules” and Intergenerational Fiscal Policy," Constitutional Political Economy, Springer, vol. 11(4), pages 371-374, December.

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