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Supermajority Voting Rules: Balancing Commitment and Flexibility

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  • Ernesto Dal Bo

Abstract

When optimal policymaking is subject to dynamic inconsistencies (Kydland and Prescott, 1977), but shocks hit the economy after private agents form expectations, there is a trade off between the need to commit to a policy, and the need to retain discretion so as to respond to shocks. Rogoff (1985) shows that a way to strike the right balance between commitment and flexibility in monetary policy is to appoint a conservative central banker. I show that a rationale for using a committee to make decisions through voting is that a commitment device can be created out of it, without totally renouncing flexibility to respond to unexpected contingenices. Appropriate voting procedures and a well chosen supermajority rule can make a randomly sampled committee behave like Rogoff`s optimally conservative central banker. The model is developed for the case of monetary policy but these insights are more general (extending to capital taxation and patent protection). Supermajority rules can mitigate time inconsistency by introducing a status quo bias. When voting institutions (ie. the committee`s constitution) are endogenously chosen by simple majority voting, the emerging majority rule is the supermajority yielding the mix of commitment and flexibility preferred by the median voter. A corollary to this provides a theory of why constitutional reform typically requires the approval of a supermajority.

Suggested Citation

  • Ernesto Dal Bo, 2002. "Supermajority Voting Rules: Balancing Commitment and Flexibility," Economics Series Working Papers 132, University of Oxford, Department of Economics.
  • Handle: RePEc:oxf:wpaper:132
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    File URL: http://www.economics.ox.ac.uk/materials/working_papers/paper132.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    supermajorities; committees; commitment versus flexibility; voting; endogenous institutions; endogenous constitutions;

    JEL classification:

    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government

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