Critical Decisions and Constitutional Rules

Abstract

Many constitutions specify procedures that allow critical decisions to be made with a different rule than day-to-day decisions. We propose a theory of constitutional rules that explains why. The theory is based on the assumption that the type of a decision can be observed, but not verified. We characterize two classes of second-best constitutions, both with clear analogues in real world constitutions: i) incentive scheme (IS) constitutions that elicit information about the type of a decision through a costly decision rule switching procedure, and ii) linking scheme (LS) constitutions that grant limited veto powers to interested parties. We explore how the relative performance of the IS and the LS constitution depends on the economic environment.