Nov 2005 – May 2005
Transitional institutions are the political institutions that emerge in a society when the status quo is unsustainable. Such situations can arise after a civil war (with the defeat of the government or a negotiated change in governance), defeat in an interstate war, withdrawal of an occupying force, the collapse of an authoritarian regime, or the end of colonial rule. Transitional institutions may or may not be explicitly designed to be temporary. These institutions can be imposed or negotiated or something in between. They can stem from an external power or may be completely indigenous in origin. They might reflect the old order to a high degree (as often is the case in de-colonialization) or, alternatively, constitute a revolutionary departure from the past. They might also be more or less democratic by design, though in this project our focus will be on institutions that are intended to be at least minimally democratic.
Transitional democratic institutions exhibit some particularly interesting problems. Given that they are created immediately after the dissolution of the old order, they typically cannot initially be established by democratic means. Consequently political executives and legislators are not elected, nor have elected officials selected anyone to serve in judicial or administrative capacities. Perhaps even more than other democratic institutions, transitional institutions are faced with problems of agency loss as well as transaction costs. Agency loss in representative democracies is the difference between what a democratic majority (the principal) wants and what a political agent delivers, evident in policy drift (or policy-shirking) or rent-seeking activities. Adverse selection and moral hazard are two generic and pervasive forms of agency loss. Transaction costs, including search costs, bargaining and decision costs, policing and enforcement costs, come into play when it comes to institutional design issues.
The framers of transitional institutions often face several forms of agency loss and transaction costs at the same time. Indeed, there may be an inherent trade-off between agency loss and transaction costs, or between different forms of agency loss (such as adverse selection vs. moral hazard). Our conference will begin to explore such challenges and conflicts. We are especially interested in papers that explore the trade-offs between agency loss (either moral hazard or adverse selection) and transaction costs in the design of different institutions that are essential to liberal democracies.