Crises, investments, and political institutions
| DOI | 10.1177/0951629818791032 |
| Published date | 01 October 2018 |
| Date | 01 October 2018 |
| Subject Matter | Articles |
Article
Journal of Theoretical Politics
2018, Vol.30(4) 410–430
ÓThe Author(s) 2018
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DOI: 10.1177/0951629818791032
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Crises, investments, and
political institutions
Per F Andersson
European UniversityInstitute, Florence, Italy
Johannes Lindvall
Lund University,Lund, Sweden
Abstract
On the basis of a game-theoretic model, this paper argues that governments typically manage
crises more effectively in systems where political power is concentrated in a single party, but they
are more likely to make investments in future welfare in systems where political power is shared
among several parties. The paper makes two contributions. First of all, it shows that both crisis-
management failures and investment failures can be explained by a common mechanism: an inter-
temporal commitment problem that arises from the inability of political agents to commit to
future policy choices. Second, it shows that power-sharing institutions are often associated with
more effective government than power-concentration institutions, in contrast to much of the
normative literature in comparative politics, in which power-sharing institutionsare often justified
on other grounds, such as representativeness, responsiveness, or social cohesion. In a world
where crises dominate, power-concentration institutions typically perform better; in a world
where investment problems dominate, power-sharing institutions typicallyperform better.
Keywords
Commitment; constitutions; crises; investments
1. Introduction
Governments sometimes confront urgent problems that require them to adopt new
policies swiftly to avoid harm. At other times, governments confront long-term
Corresponding author:
Per F Andersson,European University Institute, Via dei Roccettini 9, Fiesole,Florence 50014, Italy.
Email: per.andersson@eui.eu
problems, requiring them to take costly actions to increase future welfare. When
they deal with the first type of problem, governments engage in ‘crisis manage-
ment.’ When they deal with the second type of problem, governments make ‘politi-
cal investments.’
1
On the basis of a simple game-theoretic model, this paper argues that govern-
ments often manage crises more effectively in systems where political power is con-
centrated in a single party, but they are more likely to make investments in systems
where power is shared more widely. In other words, whereas the ‘majoritarian’
vision of democracy is typically associated with more effective crisis management,
the ‘proportional’ vision is associated with better long-term policies.
2
Our paper makes two contributions. First, we show that both crisis-
management failures and investment failures can be explained by a common
mechanism: an inter-temporal commitment problem that arises from the inability
of political agents to commit to future policies. Second, we show that power-
sharing institutions are often associated with more effective government than
power-concentration institutions, in contrast to much of the normative literature in
comparative politics, where power-sharing institutions are justified on other
grounds, such as representativeness, responsiveness, or social cohesion.
3
The most important implication of the paper’s argument is that constitution-
making involves a crucial trade-off: institutions that enable governments to respond
to crises are typically inferior when it comes to solving long-term political prob-
lems, and vice versa. The optimal constitution is therefore context-specific. In a
world where crises dominate, power-concentration institutions often perform bet-
ter, but in a world where investment problems dominate, power-sharing institutions
are superior. The precise nature of this trade-off depends on the other parameters
of our model, notably the level of political polarization and the magnitude of the
policy changes that are required to avert a crisis. Interestingly, for some parameter
values, power-sharing institutions perform betterin both worlds.
2. Crises and investments
According to an important literature in political science, governments may become
unable to respond effectively to changes in the economic, social, and political envi-
ronment if political power is shared among several parties. George Tsebelis has
argued, for instance, that having many ‘veto players’ leads to high ‘policy stability,’
making ‘the change of even an undesirable status quo difficult’ (Tsebelis, 2002:
443). According to another important literature, however, concentrating power in a
single party may itself have pernicious consequences, since the possibility of oppor-
tunistic behavior by future governments renders governments unwilling to make
policy changes that have short-term costs. Besley and Persson (2011) argue, for
instance, that more inclusive political institutions increase the likelihood that gov-
ernments invest in ‘state capacity’ (the capacity to collect revenue andprotect prop-
erty rights).
Andersson and Lindvall 411
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