Institutions and Commitment

Abstract

The thrust of this paper is that to understand the roles institutions play in society, a deep analysis of opportunism and its implications is necessary. For that purpose, a transactions costs-cum-positive political theory approach is developed, with a focus on the role of institutions and their implications for regulatory commitment. A major issue is restraining political opportunism. Countries that have succeeded in developing a healthy private sector are those that have developed institutions that restrain governmental decision-making. But such restraining is itself a political choice. Countries with electoral and legislative systems that bring about decentralized government have stronger chances of developing equilibria where government discretion is restrained.