Dynamic stability and reform of political institutions

When are political institutions stable? When do they tend toward reform? This paper examines a model of dynamic, endogenous institutional change. I introduce a class of dynamic political games in which the political aggregation rules used at date t+1 are instrumental choices under rules at date t. A political rule is stable if it selects itself. A reform occurs when an alternative rule is selected. It turns out that the stability of a political rule depends on whether its choices are dynamically consistent. For instance, simple majority rules can be shown to be dynamically consistent in many common environments where wealth-weighted voting rules are not. More generally, the result applies to an extended class of political rules that incorporate private activities such as extra-legal protests, threats, or private investment. The model makes use of an interpretation of rules as “players” who can strategically delegate future policy-making authority to different institutional types. The approach can be viewed as a comprehensive way of understanding various explanations of institutional change proposed in the literature. A parametric model of dynamic public goods provision gives an illustration. JEL Codes: C73,D72, D74