Commenters have decried the erosion of democratic norms over the past several years in various countries around the world. The discussion raises interesting related questions: Why do norms matter? Should norms substitute for rule and enforcement of codified law? If norm violations are not legally sanctioned, what compels officials to ever follow norms at all? Microeconomic theory offers a useful lens for thinking about all of these questions.
Imagine a brand new country just being born that needs to draft a constitution. For the sake of argument, assume the drafters of the constitution are all totally benevolent social planners who are all aligned in wanting what is best for the welfare of all future generations. They are not self-interested individuals looking to loot the state or consolidate power. The constitution they draft will codify the laws that govern the country for all future time periods. One way to think about the constitution is as a contract that governs the allocation of rights in future disputes that may arise. For example, the First Amendment of the United States states that “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.” In any future time when a dispute over freedom of religion or speech or the press may occur, the First Amendment specifies the allocation of property rights in the dispute–each citizen owns the right to follow whatever religion they want, etc., and the ownership of this right supersedes other claims of legal ownership.1
The drafters of the new constitution want to create the best possible constitution to foster the well-being of citizens. To think about this problem, it is first useful to define a state of the world. For my purposes, a state of the world is all of the information that describes what is happening at a given time and place that is pertinent to resolving a dispute over ownership of political rights. For example, in a dispute over freedom of religion, the following information may constitute the state of the world: who are the parties involved in the dispute; where and when is the dispute taking place; which of the interested parties most benefits from their rights superseding the others’; what does the public think about the dispute; what precedent has been established in previous years on related disputes; what are the consequences of the decision on future disputes; how did the relevant parties register their grievances; etc. The state of the world can at least in theory incorporate infinitely many factors that a benevolent arbiter might find remotely pertinent to resolving the dispute.
Returning to the problem of drafting the best possible constitution, if the drafters are all-powerful, all-knowing beings, then constructing the optimal constitution is actually relatively straightforward, conceptually if not practically. The optimal constitution is just a document that lists the correct allocation of rights in any possible state of the world. Concretely, one such line in the document may say, “if the year is 2020, and there is a global pandemic, and it rained the previous day in Barcelona, and in three days hence a baby will be born at 1:15pm in Singapore, then Bharat has ownership of the right to practice whatever religion he chooses that supersedes any other claims that deny his right to do so.” The constitution maps all possible states of the world to an allocation of rights.
The first-best, optimal constitution is of course not possible, for many, many reasons. The benevolent drafters face constraints in drafting their document. For simplicity, suppose we can summarize those constraints by saying that the constitution has a word limit. I still assume that the drafters are all-knowing for now, but now they have to do the best they can given their document has to be short enough to be useful.
When going from the optimal unconstrained constitution to the optimal constitution with a word limit, the drafters lose something. They can no longer exactly specify the correct allocation of rights in any possible state of the world; they can only specify a short and finite set of rules that apply generally and approximate a good outcome to the extent possible.
As the world evolves over time, there will inevitably be some point in the future in which the rules of the constitution poorly approximate the state of the world and fail to offer enough guidance. The constitution can only include finite information when there is a word limit, but the world is infinitely complex and evolving. When the rules fail to provide guidance, citizens of the state will have to decide what to do. The rule of law fails to offer a solution in such states of the world because of incomplete contracting that arises from constraints on the complexity of the codified law.2
Norms of behavior matter when the constitution does not have much to say about how to resolve a dispute in some state of the world. If formal laws cannot constrain behavior, people rely on informal codes of conduct. But why would anyone feel compelled to adhere to norms? Altruistic intentions are an important motivator. Another incentive to follow appropriate behavior follows from a beautiful result in game theory called the Folk Theorem.
As mentioned, when the constitution has a word limit, there will eventually be a gap in formal legal boundaries. Going one step further, gaps will happen repeatedly. There will always be another time when the constitution fails to legally constrain behavior. Every time the legal doctrines fail to be useful, the citizens of the state will have to informally decide what to do. The problem of resolving these disputes repeatedly over time is called a repeated game in game theory.
The Folk Theorem gives conditions under which cooperation can be sustained between self-interested parties in a repeated game. Informally, if the individuals involved in the repeated game care enough about future outcomes relative to the present, then mutually beneficial cooperation is possible. As an example, consider a standard Prisoner’s Dilemma problem. Two prisoners are separately approached by authorities and asked to betray the other. If both betray, they both get 10 years in prison. If neither betray, they both get two years in prison. If one betrays and the other does not, the betrayer gets one year in prison, while the betrayed gets 15 years. If the game is played only once, then the famous result is that purely self-interested actors must betray each other, even though they would both be better off if neither betrayed. If the game is played repeatedly infinitely many times, then the Folk Theorem shows that cooperation in all periods is possible. The logic behind the result is that if initially the agents cooperate, but at some point one of the agents betrays, then the other one punishes them in the future by also betraying in all subsequent periods. The repeated play enables agents to punish each other for bad behavior by withholding future rewards. If the agents care enough about those future rewards, fear of retaliation causes them to cooperate.
The Folk Theorem is one way to understand how norms can substitute for a fully specified written rule of law. When imperfect constitutions fail to guide behavior, we have to rely on informal structures like future punishments or altruism to sustain a well-functioning state.
Why do norms break down? There are many possible explanations. One reason could be that political agents may not be sufficiently invested in the future functioning of the state to care about possible punishment for bad behavior. Some research suggests that term limits on holding political office may result in worse politician behavior because the long-term consequences of losing an election are lower when politicians can only hold office one or two times anyway.3 However, if norm violations have indeed gotten worse over the past several years, disinterest in future outcomes is not the most obvious explanation. It is not clear why politicians might care less about the future now than in past years. Another possible explanation is that the world may have become more complex, and it has become murkier to figure out whether something actually is or isn’t a norm violation. In a similar vein, there could be intense disagreement between different citizens about what proper norms are, and these disagreements could erode cooperation.
I do not hope to give a definitive explanation for the cause of norm violations here, but the microeconomic theory is at least one useful frame for thinking about these problems, their causes, and possible solutions.
P.S.
Institutions, Institutional Change and Economic Performance by Douglass North touches on many of these themes. He discusses limitations of interpreting norm-adherence through tools like the Folk Theorem and instead presents a theory of institutions and institutional change.
- Obviously I am not a lawyer, so please forgive any ignorance or mischaracterization of legal doctrine.
- Constitutions can evolve over time through additional amendments. The process by which amendments can be added can even be codified in the original constitution. However, if future politicians are not as benevolent or as all-knowing as the original drafters of the constitution, the initial drafters may purposely choose to make it hard to make large changes.
- Two relatively recent papers are James Alt, Ethan Bueno de Mesquita, and Shanna Rose (2011) and Claudio Ferraz and Frederico Finan (2011).