DP14745 Optimal Checks and Balances Under Policy Uncertainty

Author(s): Gabriele Gratton, Massimo Morelli
Publication Date: May 2020
Keyword(s): Checks and balances, effective accountability, Information, Uncertain policy quality
JEL(s):
Programme Areas: Public Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=14745

Political checks and balances are certainly among the most debated desiderata in the construction of democratic systems and their evaluation. This paper suggests a conceptual framework that could be useful to inform this debate. We propose a model where the pros and cons of a strengthening of checks and balances are respectively the reduction of type-I errors and the increase of potential type-II errors in policy decision-making. Checks and balances are less desirable for intermediate levels of competence of the political class and more desirable when the bureaucracy is slower or when the political system involves frequent turnover, and in policy areas where the welfare effects of a reform are harder to evaluate and effective accountability is low.