Political Institutions and Policy Competition

The theme of this year’s WDR is how to structure institutions to bring about an e¤ectively functioning market economy. There is no question that political institutions play a key role here. In most countries political institutions determine the rules of access to considerable discretionary coercive power. Political institutions determine the context in which key functions of government are undertaken. These include redistribution of income and assets between citizens, correcting market failures and promoting the provision of collective goods. It is widely agree that the nature political institutions is critical to having these functions performed e¤ectively. The key question is how to design decision making institutions that guarantee that these functions are performed adequately. In these notes, I will focus primarily on the role of political institutions as promoting e¤ective policy competition. Policy competition is the process by which society is confronted with alternative solutions for achieving policy ends. Policy competition has three broad dimensions.