The way out

Gordon Tullock, in his paper Why So Much Stability? (1981), asked why we observed so much stability in the world even though the general theorems about cyclical preference discussed previously suggest otherwise. In other words, what explains relative stability in various political institutions in the real world such as the legislatures, committees, governments and the judiciary? Some answers were provided even before the Tullock paper was written, such as McKelvey's analysis. The Borda rule where voters rank options by giving points thereby leading to a clear winner and Duncan Black who arrived at an equilibrium outcome of the median voter were other instances where stable outcomes were obtained. Most of these solutions were speaking directly to Arrow's Impossibility Theorem.

Later in the 70s and 80s, many political scientists proposed two ideas viz., Universalism proposed by Weingast and Structure Induced Equilibrium proposed by Kenneth Shepsle. These ideas led to an escape from the instability of majority rule and arrived at an equilibrium. Universalism in the legislature is simply a norm that takes up projects and policies which are beneficial to all the members. Kenneth Shepsle, in his 1986 essay, Institutional Equilibrium and Equilibrium Institutions, sought to answer Tullock's question. Institutional Equilibrium is basically one that has been induced by the underlying structure of the market. It has also been called Structural Induced Equilibrium (SIE) and was discussed in papers by Shepsle (1978) and Shepsle & Weingast (1981).

Applied to legislatures, this means that the committee structure with special rules such as agenda-setting powers, etc., can lead to a stable outcome and an escape from cyclicity. In a sense, the final decision taken by the legislature through the Committee system will be robust and enduring. This is referred to as Institutional Equilibrium or Structure Induced Equilibrium.

Later, in the 80s and 90s, more scholars found a number of other aspects of legislative choice that led to stable outcomes and equilibrium. Political parties have a structure to the behaviour of legislators and led to stable outcomes. Krehbiel, whose work we have discussed above found that the Committee system, political parties and specialisation led the legislatures to voting coherence or voting stability. Cox and McCubbins also pointed out that the majority party by its control over plenary time decided the agenda in the legislature which leads to a firm and stable outcome.

Baron and Ferenjohn in an article in 1989 also suggested that sequential rationality exhibited by the legislators as a bill or policy moves through various stages in the legislatures, ensuring a stable outcome.

Finally, the distinct rules of the legislature, executive and the judiciary and the constant interaction between these institutions ensure that stable policy outcomes are generated.

Towards Endogeneity of Institutions

In contrast with most of the discussion above where institutions are exogenous or given, we often find that institutions, in fact, evolve from within the system. In other words, institutions are endogenous to the system. In the aforementioned paper of Shepsle (1986), the key idea of 'Equilibrium Institutions' asked the question, "which Institution among several alternatives would be best placed to achieve desirable legislative outcomes?" Shepsle argued that institutions are endogenous and any institutional arrangement that arises (for example, the Committee system), does so within the system.

Another study which underlined that institutions are endogenous i.e., they arise within the system, was a paper by Douglas North and Berry Weingast written in 1989. The authors distinguished between rules that the sovereign can easily revise and those that are not subject to revision so easily. When the rules are not subject to revision so easily, the sovereign has the public interest in mind and makes a credible commitment to the citizens that all rules and contracts will be honoured. Typically, a contract is like the constitution of a newly independent country where founding fathers give credible commitments to their citizens that their fundamental rights will be protected and all policies and government action will be within the framework of the constitution. Giving the example of the power of the Crown in England in the 17th century, they illustrate how institutions governing the division of power between the Crown and Parliament evolved after the Glorious Revolution of 1688-89. In particular, before the revolution, the Crown had wide-ranging powers to confiscate resources, which were heavily constrained after the revolution. The new institutional arrangements after the revolution evolved endogenously by restricting the Crown's power and leading to a balance of power between the Crown and the Parliament.

Application to Parliamentary system

It is evident that the above discussion was centred on the US Congress. In the US system, the committees are well-organised structures and have well-defined policy jurisdictions. Not only that, they have 'property rights' over agenda-setting. Moreover, the US is a two-party democracy. These conditions do not obviously exist in a parliamentary democracy, which can have many political parties. Not only that, the assumption of Weingast and Marshall in the 1988 paper referred to above, that parties place no constraint on the behaviour of legislators does not hold in a parliamentary democracy (e.g. Australia, Canada, Britain, India). However, as Weingast and Marshall have themselves argued, strong political parties can influence the behaviour of the members through distribution of resources, giving tickets in various elections, awarding ministerial positions, awarding seats on various legislative committees, etc. Hence, parties can be an alternative means of enforcing agreements. The stable and cooperative outcome that was ensured by the committee in the US system can now be ensured by political parties in a parliamentary structure.

In terms of Krehbiels' classification, it would seem that the Parliamentary system adheres more to the distributive perspective since policies and outcomes are one and the same. Moreover, since political parties hold the reins of power, legislators have little incentive in specialising. A legislator's assignment to a committee is decided not by his expertise but by the political party.

Conclusion

In the above discussion, we have captured the contributions of the New Institutional Economics and Social Choice Theory and their implication for legislative design. We have covered seminal contributions and seen how the instability of majority rule, which was the norm in social choice research (Arrow, Black, McKelvey etc.) was addressed by various institutional features. In other words, stability was achieved by the following:

Universalism;

Structure Induced Equilibrium;

Agenda control by committees of legislatures;

Political parties;

Sequential Rationality;

Separation of powers.

Hence, if a newly independent country were to design its legislature or its constitution today, the above discussion has given enough pointers so that it escapes the cyclicity and instability of majority rule. The New Economics of Organisation can also inform this exercise by ensuring credible commitments to citizens and overcoming the reneging problem so that ex-post reneging is not possible. Both Social Choice Theory and New Institutional Economics converge on the interventions listed above. Of course, the specific design will vary from country to country: a smaller and more homogenous country with fewer states would be better served by a strong unitary government, this will ensure no cyclicity since the 'Non-Dictator' assumption of Arrow wouldn't be fulfilled. On the other extreme, a country with many sub-federal units and many social and ethnic divisions would be best served by a federal structure with a strong committee system and clear separation of powers between the legislature, executive and judiciary. Between these extremes, one can think of many types of legislative structures and constitutions depending on the social, political, cultural and economic settings and the size and heterogeneity of the country.

The writer is an IAS officer, working as Principal Resident Commissioner, Government of West Bengal. Views expressed are strictly personal