Persson, Torsten, and Guido Tabellini. The Economic Effects of Constitutions.

AuthorFoster, Burgess Dwight
PositionBook Review

Persson, Torsten, and Guido Tabelfini. The Economic Effects of Constitutions. Cambridge, MA: MIT Press, 2003. viii + 320 pp. Cloth, $35.00.

Persson and Tabellini set out to redefine the nexus between political institutions and economic outcomes. They begin by describing Europe's political structure and its observed policies and outcomes. They argue that if a country's governmental structure is parliamentarian or presidential in make-up, this will determine or influence how economic markets behave. This at first seemed elementary because various forms of an executive branch will operate differently based on controls. The argument at hand becomes more complex when the authors argue that, on the whole, political scientists have not broached the topic of the "economic effects of constitutions" because institutional detail has been treated with languor--e.g., referenda and budgetary procedures have not percolated into a better understanding of fiscal policy.

That seems hardly possible while economic scholars subject their data to quite a bit of quantifiable formulae to remove subjectivity. The authors thus pose to the reader the questions they really want to answer. Their thesis seems to be: How would a revamped constitution play out in an economy? For example, assume that an electoral system of "one person--one vote" is transformed into a system in which only landed property owners cast ballots. How would this affect government spending and rent extraction? The reader begins to see that, indeed, a constitution has ramifications on the economy of the country and is not a stagnant artifice. As Persson and Tabellini note, "Drawing inferences about causal effects from cross-country comparisons is a treacherous exercise, and much of the book revolves around the question of how to draw robust inferences about causation from observed patterns in the data" (p. 7).

The review of the literature makes it apparent that the authors are really addressing a mixture of John Maynard Keynes with Adam Smith, sprinkled with purely political postures. The authors take a fairly complex proposition of Keynesian economics of government stimulus and the policies that would allow it and try to show the reader that the so-called "invisible hand" is not so imperceptible. Their aim seems to be to understand the contingencies of macroeconomics as opposed to considering the relevance of the "sub-national level" of the individual or microeconomics. They try to show...

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