06. Colomer - Institutional Design

Institutional Design Overview

• Definition: Institutional design refers to the framework of rules used for collective decision-making.

• Key Questions: Two primary questions guide institutional design:

  • Participation: Who is entitled to participate in decision-making?

  • Decision-Making: How are decisions made?

Community Design

• Collective Decision Enforceability:

  • Effective decisions depend on individuals’ acceptance of shared interests.

  • Participation is maintained even if some individuals become minority losers.

• Diversity in Political Communities:

  • The Western European model has historically dominated political thought.

  • Current global trends require a more diversified approach to institutional design.

Power Distribution and Decision-Making

• Decision-Making Power:

  • Determination of the issues or policies up for decision.

  • The allocation of powers among government branches.

• Voting and Electoral Rules:

  • They play a critical role in transforming individual preferences into collective decisions.

Insights from David Hume

• Self-Interest: Hume's perspective suggests that institutional designers must consider the self-interest of individuals to ensure cooperation in pursuing public good.

• Power Concentration vs. Cooperation: Effective institutional designs often emerge when no single actor dominates the process.

The "invisible hand" concept, originally coined by economist Adam Smith, refers to the self-regulating nature of the market, where individuals pursuing their own self-interests inadvertently contribute to the overall economic well-being of society. However, this concept is not without its drawbacks. In political and institutional design, the application of the "invisible hand" can lead to suboptimal outcomes, particularly when there is an excessive concentration of power or interests among a few actors. Such dominance can stifle diversity and limit the range of voices and aspirations represented in decision-making processes. Therefore, it is critical that institutional designers implement mechanisms that ensure a balance of power and encourage the participation of diverse groups and interests. This diversification acts as a counterbalance, fostering collaborative efforts that align individual interests with the collective good, ultimately contributing to more equitable and effective governance.

Community-Building Approaches

• Types of Political Structures:

  • Nation-States vs. Empires vs. Cities: Recognition of various political structures beyond the traditional nation-state is critical in political studies.

• Changing Dynamics:

  • The notion of the sovereign state is being questioned due to diverse forms of governance emerging globally.

Challenges of Sovereign States

• Historical Context: Sovereignty took approximately 300 years to stabilize in Europe, and many other global regions have seen less success.

• Failure of Statehood: Concepts like 'fragile states' illustrate the difficulties in establishing successful political units.

Trends in Political Community Size

• Emergence of Small States: There has been a proliferation of small, independent countries, some lacking traditional sovereignty.

  • Statistics:

    • About 70 mini-states: populations of 1-10 million.

    • About 40 micro-states: populations less than 1 million.

• Decentralization: Larger states are increasingly decentralizing authority, allowing for more democratic governance structures.

Advantages of Small Communities

• Democratic Efficiency: Smaller communities often demonstrate higher potential for democratic practices.

  • Advantages in deliberation, aggregation, and enforcement.

  • Homogeneity may foster shared values and priorities, making decision-making more cohesive.

• Large vs. Small Scale Dynamics:

  • Larger political units tend to face challenges in achieving consensus among diverse interests.

Empirical Evidence for Size and Democracy

• Comparison of Democratic Success Rates:

  • All recognized micro-countries exhibit some form of democracy; higher rates in smaller countries vs. larger nations.

  • About twice as many small democracies compared to large democracies.

Institutional Choices and Division of Powers

• Regulatory Frameworks: The section evaluates institutional design choices, including division of powers among governments.

• Types of Regimes:

  • Parliamentary: Merges legislative and executive powers.

  • Presidential: Promotes checks and balances, emphasizing separation of powers.

  • Semi-Presidential: Combines features of parliamentary and presidential systems.

• Electoral Systems Impact: Decisions on electoral structures can significantly influence regime stability and representation.

Electoral Rules and Representation

• Major Options: Electoral rules can favor majoritarian systems or proportional representation, impacting party dynamics and governance.

• Micro-Mega Rule: Larger parties often favor systems that exclude smaller parties, while minor parties often seek more inclusive electoral frameworks.

Conclusion

• Institutional designs evolve from self-interest but often lead to frameworks that support shared governance and democratic principles.

• Growth in small countries, increased democratization, and the necessity for power-sharing highlight the changing landscape of political institutions.