IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Supermajority Voting Rules: Balancing Commitment and Flexibility

  • Ernesto Dal Bo

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.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.economics.ox.ac.uk/materials/working_papers/paper132.pdf
Download Restriction: no

Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 132.

as
in new window

Length:
Date of creation: 01 Nov 2002
Date of revision:
Handle: RePEc:oxf:wpaper:132
Contact details of provider: Postal: Manor Rd. Building, Oxford, OX1 3UQ
Web page: http://www.economics.ox.ac.uk/
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Lohmann, Susanne, 1992. "Optimal Commitment in Monetary Policy: Credibility versus Flexibility," American Economic Review, American Economic Association, vol. 82(1), pages 273-86, March.
  2. Azariadis, Costas & Galasso, Vincenzo, 2002. "Fiscal Constitutions," Journal of Economic Theory, Elsevier, vol. 103(2), pages 255-281, April.
  3. Philippe Aghion & Albero Alesina & Francesco Trebbi, 2002. "Endogenous Political Institutions," Harvard Institute of Economic Research Working Papers 1957, Harvard - Institute of Economic Research.
  4. Alan S. Blinder, 1999. "Central Banking in Theory and Practice," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522608, June.
  5. Salvador Barbera & Matthew O. Jackson, 2002. "Choosing How to Choose: Self Stable Majority Rules," Microeconomics 0211003, EconWPA.
  6. Robert J. Barro & David B. Gordon, 1981. "A Positive Theory of Monetary Policy in a Natural-Rate Model," NBER Working Papers 0807, National Bureau of Economic Research, Inc.
  7. Andrew Atkeson & Patrick J. Kehoe, 2001. "The Advantage of Transparent Instruments of Monetary Policy," NBER Working Papers 8681, National Bureau of Economic Research, Inc.
  8. Taylor, John B, 1981. "Stabilization, Accommodation, and Monetary Rules," American Economic Review, American Economic Association, vol. 71(2), pages 145-49, May.
  9. Barro, Robert J. & Gordon, David B., 1983. "Rules, discretion and reputation in a model of monetary policy," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 101-121.
  10. Christopher J. Waller, 2000. "Policy Boards And Policy Smoothing," The Quarterly Journal of Economics, MIT Press, vol. 115(1), pages 305-339, February.
  11. Matthias Messner & Mattias K. Polborn, 2004. "Voting on Majority Rules," Review of Economic Studies, Oxford University Press, vol. 71(1), pages 115-132.
  12. Thompson, Earl A, 1981. "Who Should Control the Money Supply?," American Economic Review, American Economic Association, vol. 71(2), pages 356-61, May.
  13. Waller, Christopher J, 1992. "The Choice of a Conservative Central Banker in a Multisector Economy," American Economic Review, American Economic Association, vol. 82(4), pages 1006-12, September.
  14. Calvo, Guillermo A, 1978. "On the Time Consistency of Optimal Policy in a Monetary Economy," Econometrica, Econometric Society, vol. 46(6), pages 1411-28, November.
  15. Alesina, Alberto & Drazen, Allan, 1991. "Why Are Stabilizations Delayed?," American Economic Review, American Economic Association, vol. 81(5), pages 1170-88, December.
  16. Rogoff, Kenneth, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, MIT Press, vol. 100(4), pages 1169-89, November.
  17. 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 473-91, June.
  18. Walsh, Carl E, 1995. "Optimal Contracts for Central Bankers," American Economic Review, American Economic Association, vol. 85(1), pages 150-67, March.
  19. Fernandez, Raquel & Rodrik, Dani, 1991. "Resistance to Reform: Status Quo Bias in the Presence of Individual-Specific Uncertainty," American Economic Review, American Economic Association, vol. 81(5), pages 1146-55, December.
  20. Gradstein, Mark, 1999. "Optimal taxation and fiscal constitution," Journal of Public Economics, Elsevier, vol. 72(3), pages 471-485, June.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:oxf:wpaper:132. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Caroline Wise)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.