Società Italiana di Diritto ed Economia, SIDE - ISLE 2015 - 11TH ANNUAL CONFERENCE

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Ex Post Stability of Constitutions: an Endogenous Explanation
Virginia Cecchini Manara, Lorenzo Sacconi

Last modified: 2015-12-15

Abstract


In Buchanan’s Constitutional Political Economy, a two-stage social contract is envisaged: a constitutional contract that defines a structure of rights, and a second stage where contractual negotiations become possible (post constitutional contracts). One must then recognize the necessity of an enforcing agent for the protection of individual rights, including the making of valid contracts. The Constitution must ex ante commit the State to punish any ex post transgression of rights.
But then we face the problem of the abuse of authority: no formal commitment can prevent the State from abusing such a power. If we model the pre-agreement state of nature as a Prisoners’ Dilemma, we may explain why the social contract is necessary, but for the same reason we entail that the agreement is not stable, since non-compliance is the only equilibrium. Also the agent in the position of an authority will hence defect, by abusing his power. How does it happen, then, that we observe citizens acting against the abuse of authority by those who hold political power, even if this behavior is not in their own material interest?
In this paper we provide a game theoretical model of the interplay between the State and the citizens in terms of a repeated Trust Game (Kreps, 1990) with psychological Nash equilibria (Geanakoplos, Pearce and Stacchetti, 1989; Rabin, 1993) and according to the theory of conformist preferences (Grimalda and Sacconi, 2005; Faillo, Ottone and Sacconi 2015).
The model shows that the inclusion of social norms in the preference structure of players reduces the possibility of the abuse of authority by excluding reputation equilibria that are included in standard treatments (Fudenberg and Levine, 1989, 1992).

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