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Abstract:
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"Why are certain issues addressed by markets, others by politics, and others by courts? Why do hybrid
institutions such as independent regulatory agencies, judicial review, and private arbitration courts also
exist? Why are certain issues addressed at the local levels, while others at the federal level? This paper
explains how to use the calculus of consent model to answer such questions, and argues that the calculus
of consent provides the general framework for explaining all institutional diversity. Institutional effciency
is dened as the dierence between the de facto decision rule, as it exists thanks to actual institutions,
and the optimal calculus of consent rule. To analyze institutional change and political reform, one looks
at whether various available collective choice mechanisms can in fact change the de facto decision rule,
bringing it closer to the optimal rule."
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