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Nonmajoritarian Institutions and the Limits of Democratic Governance: A Political Transaction-Cost Approach

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  • Giandomenico Majone

Abstract

This paper is a first step towards a positive theory of nonmajoritarian institutions. Delegation of powers to such institutions is best understood as a means of reducing certain political transaction costs. The precise nature of the relation between political sovereign and independent delegate has not been carefully investigated. Both economists and political scientists tend to rely on the available results of principal-agent theory. This paper shows why this approach is not entirely satisfactory. While the key problems of agency theory - hidden action and hidden information - are present in any relation based on specialisation and the division of labour, they are not central to the context investigated here. Instead, I argue that the fiduciary principle should be recognised as the central element in the governance structure of nonmajoritarian institutions.

Suggested Citation

  • Giandomenico Majone, 2001. "Nonmajoritarian Institutions and the Limits of Democratic Governance: A Political Transaction-Cost Approach," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 157(1), pages 1-57, March.
  • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200103)157:1_57:niatlo_2.0.tx_2-v
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    1. de Haan, Jakob, 1997. "The European Central Bank: Independence, Accountability and Strategy: A Review," Public Choice, Springer, vol. 93(3-4), pages 395-426, December.
    2. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-491, June.
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    Cited by:

    1. Dreher, Axel & Voigt, Stefan, 2011. "Does membership in international organizations increase governments' credibility? Testing the effects of delegating powers," Journal of Comparative Economics, Elsevier, vol. 39(3), pages 326-348, September.
    2. Xosé Carlos Arias & Gonzalo Caballero, 2003. "Instituciones, costos de transacción y políticas públicas: un panorama," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 5(8), pages 117-146, January-J.
    3. Tamer Çetin & M. Zahid Sobacı & Mehmet Nargeleçekenler, 2016. "Independence and accountability of independent regulatory agencies: the case of Turkey," European Journal of Law and Economics, Springer, vol. 41(3), pages 601-620, June.
    4. Voigt, Stefan & Ebeling, Michael & Blume, Lorenz, 2007. "Improving credibility by delegating judicial competence--the case of the Judicial Committee of the Privy Council," Journal of Development Economics, Elsevier, vol. 82(2), pages 348-373, March.
    5. Antonio Afonso & Carla Scaglioni, 2006. "An Assessment of Telecommunications Regulation Performance in the European Union," Working Papers Department of Economics 2006/07, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    6. Stefan Collignon & Sebastian Diessner, 2016. "The ECB's Monetary Dialogue with the European Parliament: Efficiency and Accountability during the Euro Crisis?," Journal of Common Market Studies, Wiley Blackwell, vol. 54(6), pages 1296-1312, November.
    7. Giandomenico Majone, 2002. "International Economic Integration, National Autonomy, Transnational Democracy: An Impossible Trinity?," EUI-RSCAS Working Papers 48, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
    8. Voigt, Stefan & Gutmann, Jerg & Feld, Lars P., 2015. "Economic growth and judicial independence, a dozen years on: Cross-country evidence using an updated Set of indicators," European Journal of Political Economy, Elsevier, vol. 38(C), pages 197-211.
    9. Anja Zorob, 2007. "The Potential of Regional Integration Agreements (RIAs) in Enhancing the Credibility of Reform: The Case of the Syrian-European Association Agreement," GIGA Working Paper Series 51, GIGA German Institute of Global and Area Studies.
    10. repec:onb:oenbwp:y::i:133:b:1 is not listed on IDEAS
    11. Abbott, Malcolm & Ma, Xiaoying, 2013. "The regulatory governance of the telecommunication and electricity industries in small, island nations," Utilities Policy, Elsevier, vol. 26(C), pages 7-16.
    12. Gonzalo Caballero Miguez, 2006. "The industrial organization of Congress in USA and Spain: a comparative institutional analysis," Revista de Analisis Economico – Economic Analysis Review, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines, vol. 21(2), pages 105-123, December.
    13. Richard Bellamy, 2010. "The Liberty of the Post-Moderns? Market and Civic Freedom within the EU," LEQS – LSE 'Europe in Question' Discussion Paper Series 01, European Institute, LSE.
    14. Voigt, Stefan, 2005. "Membership has its Privileges: On the Effects of Delegating Powers Internationally," Volkswirtschaftliche Diskussionsbeiträge 73, University of Kassel, Faculty of Economics and Management.

    More about this item

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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