Optimal Checks and Balances Under Policy Uncertainty

Abstract

Political checks and balances are certainly among the most debated desiderata in the construction of democratic systems and their evaluation. This paper suggests a conceptual framework that could be useful to inform this debate. We propose a model where the pros and cons of a strengthening of checks and balances are respectively the reduction of type-I errors and the increase of potential type-II errors in policy decision-making. Political checks and balances are less desirable for intermediate levels of competence of the political class when in conjunction with high accountability. In policy areas where the welfare effects of a reform are harder to evaluate and effective accountability is low, political checks and balances are always desirable. Positive constitutional design unfortunately reveals the possibility of constitutional traps, with politicians choosing or defending the less desirable regime.