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Constitutional Judicial Review and Political Insurance

George Tridimas

Abstract Considering constitutional judicial review of policy, the power of courts to annul legislation, as a political insurance mechanism to protect against losses from adverse election outcomes, the paper analyzes three questions: First, under what circumstances a political ruler, who wins an election and the right to propose measures of policy, subjects those measures to the checking powers of an independent judiciary. Second, the net expected gains of a political ruler from granting binary choice to the reviewing judiciary rather than open choice. Third, the equilibrium degree of policy review power granted to the judiciary. Differences in the policy preferences of competing politicians, the judiciary and the status quo, the probability of winning an election and the probability that the judiciary confirms legislation passed by the incumbent emerge as the main determinants of judicial review and its political independence. JEL classification: Key words:

D72, D74, D78, K40, K41

judicial dispute resolution; constitutional judicial review; judicial independence; political insurance; binary choice / closed agenda

Published in: EUROPEAN JOURNAL OF LAW AND ECONOMICS January 2010, Vol. 29: 81-101, DOI 10.1007/s10657-009-9112-z

Correspondence address: University of Ulster, School of Economics, Shore Road, Newtownabbey, Co. Antrim, BT37 0QB, UK. E-mail address: [email protected]

I wish to thank an anonymous referee for various constructive comments. An earlier version of the paper was presented to the 2008 European Public Choice in Jena. I am indebted to Moriki Hosoe, Peter Nannestad, Martin Paldam and Takis Tridimas for their comments. The usual disclaimer applies.

Constitutional Judicial Review and Political Insurance I


A most important function of the judiciary is the resolution of constitutional disputes, that is, disputes regarding the interpretation and application of the constitution. Constitutional review of policy is the authority of courts to check whether or not laws and policy measures passed by the legislature and other public acts implemented by administrative agencies are in accordance with the constitution, or other relevant statutes like declarations of "basic rights", and have been enacted according to the stipulated procedures. Measures which are found to violate those conditions are annulled. As it is concerned with the powers of political rulers to decide and implement policy, constitutional review has always been considered as the most politically controversial part of judicial power. Recourse to courts, both domestic and international, to resolve political conflicts of this type has increased substantially over the last half century, a trend which has become known as the "judicialization of politics". 1

Constitutional review of policy by an independent judiciary amounts to granting important decision power to an appointed body. But allowing the judiciary to settle constitutional and public policy disputes, raises fundamental normative and positive questions about majority rule, the benefits from delegation to independent agents and political accountability. Not surprisingly, generations of scholars have wrestled with the challenge to reconcile judicial independence and democratic rule. The delegation to the judiciary to apply the rule of law is subject to the classic principal  agent problem that the agent, the judiciary, may implement policies which serve its own interests rather than those of its creators, the citizens and their political representatives.


A number of

institutional structures are established in practice to balance the demands of review by an independent judiciary on the one hand, and accountability of the judiciary, which requires 1

See amongst others Shapiro and Stone Sweet (2002) and Ferejohn (2002). These questions reflect Plato’s well-known problem of "ποίος φυλάττει τους φύλακες" epitomised as "quis custodiet ipsos custodes?" by the Roman poet Juvenal, and translated as "who will guard the guards?", or "who watches the watchmen?" 2


judges to explain their behaviour, rein on wayward courts and minimise agency losses, on the other.


These relate to the form and conduct of constitutional judicial review, the

arrangements governing the appointment, deliberations and disciplining of judges, the nature and restrictions on judicial rulings and their implementation by the other branches of government.

Leaving aside normative issues regarding the justification of judicial independence and using the methodology of political economy, the present inquiry analyzes three questions, namely, the benefits of judicial review as a political insurance mechanism, the binary nature of judicial review rulings, and the politically optimal degree of review power granted to the judiciary. The first of the above examines the circumstances under which a political ruler, who has won the election contest and therefore the right to pursue his preferred policies as promised to the electorate, subjects his proposed policy measures to the checking powers of an independent judiciary. The binary nature of review relates to the constraint that often the judiciary can either enforce or strike down the policy measure proposed, but cannot enact a new measure of its own choosing, an issue which has been left unexplored in the literature. This closed decision rule allows the judiciary to check the legality of the actions of the executive and legislative branches but still constrains it to stay within the limits set by the proposals of the elected authorities. The third question investigates the equilibrium degree of policy review granted to the judiciary by the political ruler.


The literature is vast and still growing and the present study can only offer some selective pointers. In analyzing judicial accountability Cappelletti (1983) distinguishes between political (that is, to the political branch), societal (to the general public) and legal (based on violations of the law by the judges, which is further divided into the obligation of the state towards the citizens harmed by the wrongdoing of the judges and the personal liability of the judges and how these relate to judicial independence). Seidman (1988) reviews the arguments for a normative justification for judicial independence and argues that in the end “the search is … fruitless and pointless” (p. 1599). With regard to the US, Ferejohn (1999) argues that judges are individually independent but collectively the judiciary as an institution is susceptible to political control. A similar point is also made by Stevens (1999) for the UK judiciary. Further, Ferejohn and Kramer (2002) rather than focusing on the tension between judicial independence and accountability maintain that they are the means for securing the more fundamental goal of constructing a well-functioning judiciary, that is, one which is “capable not only of deciding particular disputes in light of their facts, but also of interpreting and even creating law, including constitutional law”, p. 964.


A number of mutually compatible explanations for judicial independence have been offered in the literature. Several of them are based on the benefits of delegation. That is, delegation of decision making powers by uninformed principals, citizens (or their political representatives as the case may be) to a specialised agent the judiciary – helps to resolve problems of information asymmetry and coordination between the citizens and the government, increases decision making efficiency, focuses on the long-run interests of citizens and enhances the credibility of policy commitments. 4

However, the present study dwells on an additional reason for constitutional judicial review which has been the focus of recent work, namely its role as a political insurance mechanism.5 In essence the argument runs as follows. Constitutional judicial review implies that courts may prevent the political party which won the election contest from implementing its favoured policy measures, if found to violate the constitutional arrangements and the rights of citizens. 6 However, in exchange for this constraint, when the same party is out of office its opponent may also be prevented from implementing its favoured policy. Hence, the losers of the political contest can use the review process as a mechanism to minimize the losses inflicted to them from the measures taken by the electoral winner. When politicians anticipate that they will not win every election and therefore they will be out of power, constitutional judicial review is a useful mechanism to restrain those in control of government. It therefore emerges as a form of political insurance against the risk of the losses suffered when out of office. Constitutional review


For recent surveys of the literature on judicial independence using the delegation relation and based on the economic analysis of institutions and game theory see amongst others Law (2009), Tiede (2006), Padovano et al. (2003), Stephenson (2003), Voigt and Salzberger (2002) and Mueller (1996). 5 This approach builds and extends the famous thesis of Landes and Posner (1975), that a judiciary independent of the current legislature adds permanence to the distributive gains of the original winning political coalition enacting a piece of legislation. See Ramseyer (1994), Ramseyer and Rasmussen (1997), Ginsburg (2002), Stephenson (2003), Hansen (2004a and 2004b) and Tridimas (2004, 2005 and 2006). 6 Mueller (1991) identifies two conditions under which citizens wish to protect certain individual rights – freedoms of action: (a) The cost to someone denied that right is very large relative to the gain secured by others when the right is denied, and (b) the framers of the founding charter, who grant the right, are uncertain whether they will be protected or harmed by the right.


by an independent judiciary lowers the risks associated with the uncertain outcomes of collective choice. Further, on this reasoning, one expects judicial review to be more pronounced in polities where political competition is strong and parties alternate in office. 7

The study proceeds as follows: Section II offers a selective summary of various aspects of constitutional judicial review including a discussion of binary decision rules. Section III introduces a spatial decision model of review of policy in a setting of policy making under uncertain electoral outcomes and investigates the benefits of granting closed as well as open agenda power to the reviewing judiciary and the equilibrium degree of political independence. Section IV concludes.


Institutional aspects of constitutional review by an independent judiciary

The institutional arrangements for judicial independence include amongst other attributes the method of selecting judges, by appointment or election, the length of their term of service, their financial autonomy and procedure for their removal; the requirement that judges give the reasons underpinning their rulings; the need for the cooperation of other branches to enforce judicial ruling and the ease by which court rulings can be reversed.


In general, judges are more independent the larger the legislative majorities needed for their confirmation 9, the longer their term of service and the smaller the risk of reduction of their budgets. Impeachment is probably the most potent measure for disciplining serving judges and removing them from office, but it can also be directed against judges with views different from those of the political rulers. As a result, it is a “cumbersome,


See in particular Hayo and Voigt (2007) for an empirical investigation of the determinants of de facto judicial independence, that is, political independence of judges as it is implemented in practice. 8 Feld and Voigt (2003) and La Porta et al. (2004) have published empirical indices of judicial independence and constitutional review from international cross-sections. 9 Recent research supports the view that judges appointed for long periods of time are more independent than elected judges, since the latter are more sensitive to electoral considerations and as a result will attach greater weight to the interests of litigants from groups who are presumed to have large electoral power, see Hanssen (1999) and (2000) and Besley and Payne (2003).


costly and visible process that exposes [legislators] to electoral danger” (Ferejohn, 1999, p.358) and is only rarely used. Judicial independence is stronger the more difficult it is for the government to overturn judicial rulings it does not like. Rulings can be overturned by introducing new legislation or changing the status and power of courts whose pronouncements go against the interests of the incumbent political ruler. The ability of the government to reverse court rulings decreases when courts are bound to follow legal precedent and when the independence of courts is provided for in the constitution which, contrary to ordinary legislation, requires super-majorities to revise. Nevertheless, courts rely on the willingness and cooperation of other branches of government to implement their rulings, as their decisions may often require a legislative or administrative response. Assuming that in common with all actors, the judiciary would like to see its decisions implemented, it will exercise a degree of self-restraint, or “auto-limitation”, in pronouncing its rulings. The higher the public respect and support for the judiciary, and the easier to detect the administrative and legislative responses to judicial rulings (that is, the more transparent the environment), the more difficult for the political rulers not to implement the rulings of the courts; see Vanberg (2001) for a formal game theoretic treatment of the latter point.

The conduct of judicial review focuses on the institutions which exercise review, its type and timing, the standing rights for review and the nature of the judicial rulings, characteristics which differ from country to country, and which in practice constitute the solutions to a trade-off between judicial independence and judicial accountability.


Specifically, in the diffused system of the USA any ordinary court can check the constitutionality of a law which is applicable in a case which is actually litigated in front of the court. On the contrary, following the model of the Austrian legal theorist H. Kelsen, review in continental Europe is conducted by a specialised constitutional court, which occupies a “constitutional space which is neither political nor judicial” (Stone Sweet, 2002, p.80), can be abstract, that is, it determines the constitutionality of a law even though there is no specific litigation which involves the particular law, and can take place a priori, that is, before the promulgation of the law, so that laws which are rejected 10

See Epstein & al (2001) and Ginsburg (2002) for extensive discussions.


may then be changed to satisfy the criteria set by the court.


Standing rights, or

accessibility, relates to who has the right to initiate review proceedings. Such access can be very limited (as originally envisaged by Kelsen) when only specified government actors can bring a claim, or at the other extreme very wide when both public bodies and private citizens have direct access to the constitutional court (as in the case of Germany and Hungary), or in between. It may be argued that a system of easy and wide access allows better protection of constitutional rights, but the argument is finely balanced. Easy access may encourage trivial applications for annulments frustrating the exercise of the will of the majority but also increasing the judicial workload and therefore the cost of the system.

Conceptually, judicial independence and judicial review of policy are different. Judicial independence means that the judiciary enforces the law and resolves disputes without regard to the power and preferences of the parties appearing before it, including those of the legislative and executive branches of government with an interest in the case (La Porta et al, 2004). Its value is obvious in resolving disputes between private parties, between the state and a private party and between different state actors. As already said, judicial review of policy examines the legality of policy measures passed by the legislature and enacted by the executive branch of government for their compatibility with the constitution. A court may be politically independent but have only limited rights to review the policy measures of the executive; English courts, at least until the recent incorporation of the European Convention on Human Rights, were a good example of this case (see Shapiro 2002a). Of course, policy review is meaningful only when conducted by an independent court. Nevertheless “…the stakes in the debate about judicial independence are perceived to revolve mainly around the Constitution… partly because… everyone is interested in it … For many then, the question of judicial review and the question of judicial independence are one and the same”, (Ferejohn and Kramer,


In general, abstract and a priori review is more limited, as it is not based on a real case but on a hypothetical conflict and is conducted with less information about “facts”. On the other hand, it has the advantage that it can eliminate unconstitutional legislation before it actually does any harm. See Shapiro (2002a) and Ginsburg (2002)


2002, p. 1033). This explains why issues of judicial independence and judicial review are often analyzed jointly. 12

A particular restriction on the power of the judiciary to conduct constitutional review is the binary nature of the rulings, but its role has been left unexplored in the literature (Spiller and Spitzer, 1992 and Stephenson, 2004, are important exceptions, but they do not deal with the political insurance aspect of review). Specifically, the operation of many legal doctrines in administrative law accords better with the view that the judiciary can either enforce a policy measure introduced by the government or annul the measure, in which case the status quo remains, but cannot offer a new measure. In other words, the judiciary lacks agenda-setting power and is limited to a closed-agenda in the form of a ‘yes-or-no’ decision. 13

Closed agenda decision rules have received a lot of attention in the literature on legislative decision making. One may distinguish three broad explanations for their use, namely the distribution, information and majority view. The distributive view argues that legislative committees are likely to comprise those members of the legislature who stand to gain most from the policies proposed by the committee. Legislators become members of committees responsible for matters that they perceive as vital for their re-election and committee membership gives them the right to pursue their preferred policies. As a result closed rules, which do not allow for the full house to amend the bills introduced by the various committees, facilitate the extraction of rents by the committee members; see Weingast and Marshall (1988). On the other hand, the information view contends that in a stochastic environment the role of specialised legislative committees is to collect information relevant to the legislation discussed and reduce uncertainty, implying that committee members will be better informed about the policy than the full house. A closed decision rule gives the committee members a stake in policy making and offers them the


Note also that judicial review of policy differs from disciplining of politicians who may be involved in outlawed practices and criminal activities and who may then be prosecuted accordingly. 13 On account of its power to overturn legislation, the judiciary emerges as a “negative legislator”, as opposed to the parliament which is a positive legislator.


incentive to develop policy expertise and propose legislation which improves the policy outcome; see Gilligan and Krehbiel (1987, 1989 and 1990), see also Krishna and Morgan (2001) for a synthetic view and a detailed comparison of the informational efficiency of the closed and open agenda decision rules. The majority view focuses on the advantage of restrictive decision rules as a means to advance the goals of the legislative majority. The majority of voters delegates policy making to a political ruler and provides him with powers and resources in order to pursue their interests. This is better accomplished when the legislation proposed is passed without amendments (Sinclair, 1994).

Both the distribution and the information views are of relevance to the closed decision rule characterising judicial review. Not allowing the judiciary to amend policy measures introduced by the government facilitates the extraction of rents that the winner of the political competition wants to appropriate. Moreover, if the court is not allowed to modify the policy proposed by the government, it is forced to uncover more information from the government (which proposed the policy measure) and the opposition (which is against it) in order to reach its verdict. But richer information reduces uncertainty which benefits everyone concerned. However, some conceptual problems remain: The legislative committee which proposes a bill is typically seen as subordinate to the full legislature, which votes on the bill, but in the case of judicial review the government which passes a policy measure is not subordinate to the judiciary which rules on the constitutionality of the government act. Nor is there a strict equivalent of the expropriation of rents by different committees. In the committee system each politician – member of a committee reciprocates: the full house does not amend the bill of “his” committee in exchange for him not to amend the bills of other committees. This reciprocity has no equivalent in the interaction between politicians and judges. From the point of view of the present inquiry the closed decision rule serves the purpose of respecting the majoritorian outcome of politics, where the winner of the electoral contest acquires the right to decide policy. That is, the closed rule allows a political ruler who represents the majority of the electorate to pursue the policies which serve that majority, provided they do not infringe inviolable rights of the citizens. Fundamentally, this forces


the judiciary to deliberate on the decision of the elected politicians and limits its ability to select and enforce its own most preferred policy.14 Nevertheless a cautionary note about a court’s closed choice is in order. In practice disputes and annulments often regard specific provisions of a bill, while total annulment of a bill is less frequent. Moreover, courts often provide guidelines as to what constitutes an acceptable policy measure – compatible with the interpretation of the constitution.


A model of judicial review with binary choice

This Section presents a formal account of the binary judicial choice and compares it first with a setting where there is no judicial review and second with a setting of open judicial choice, where the judiciary decides the policy measure; a third sub-section inquires how much review power is granted to the judiciary. The model assumes that political rulers choose the institutional set-up which maximises their expected pay-off. The analysis examines the role of the judiciary in a setting of competitive party politics, where two parties compete for office and the right to decide policy. This is different to other approaches found in the literature, which focus on the possible conflict between government and citizens and consider the judiciary as a mechanism to force the government to adopt policies for the benefit of citizens (as for example in Vanberg, 2001; Rogers, 2001; Maskin and Tirole, 2004; and Stephenson, 2004).

A spatial decision model is considered with two political parties, A and B, competing to win an election and therefore the right to set policy, and a judiciary, C. The game of policy making is one of incomplete information where it is not known (a) who wins the 14

Romer and Rosenthal (1979) have analysed the theoretical and empirical implications of a closed rule for a monopoly agenda setter, like a bureau which aims to maximise expenditure and offers voters a choice between its proposed size of expenditure and some predetermined, reversion, level which will prevail if the proposal is voted down. A key insight is that expenditure will exceed the median voter’s ideal level. This model has been employed to investigate how introducing “structure” to the process of collective choice ensures stable outcomes, rather than to explain the rationale for closed agenda rules.


election and (b) whether the constitutional court enforces or annuls the policy measure proposed by the office holder.


That is, uncertainty in the present model arises from

unknown political outcomes rather than a stochastic economic environment. All players are assumed to have quadratic utilities over policy outcomes. Let A and B denote the ideal policy points of politicians A and B respectively (as we abstract from the collective choice issues inside political parties, the terms political party and politician will be used interchangeably). Let P be the probability that A wins the election and therefore earns the right to decide policy, and let X denote the policy measure enacted. The probability that B wins the election and decides policy is 1P; let Y denote the policy measure enacted by B. However, whether or not the policy decided by the election winner is actually enforced depends on the ruling of the judiciary, approximated by the highest court, which is determined by judicial ideology, the “deeply internalized notions of justice” held by judges.

The judiciary can either ratify or annul the policy measure voted by the legislature, in which case the status quo stands, but it cannot decide a new policy. Note also that in common with the literature the judiciary, a collective body, is treated as a unitary actor.

Let QA be the probability that the judiciary enforces the policy measure decided by A, and 1QA the probability that the policy measure is annulled, in which case the status quo S remains. Similarly, let QB be the probability that the judiciary enforces the policy measure decided by B, when B wins the election and 1QB the probability that the policy measure is annulled, in which case the status quo S survives. As there is no compelling reason to believe that the two probabilities of judiciary enforcement are the same, it is assumed that, in general, QA  QB. The probabilities P, QA and QB are treated as stochastic variables. The structure of outcomes under constitutional judicial review, are shown in Figure 1.

The expected (loss in) utility from the electoral game with judicial review for A and B, UAR, and UBR, are written as


For previous analysis of constitutional review games with incomplete information see amongst others Epstein & al (2001), Rogers (2001), Vanberg (1998) and (2001), Stephenson (2003), Hanssen (2004a), Maskin and Tirole (2004) and Tridimas (2004) and (2005)


URA = E{P[QA(XA)2+(1QA)(SA)2]+(1P)[QB(YA)2+(1QB)(SA)2]}


URB = E{(1P)[QB(Y)2+(1QB)(S)2]+P[QA(X)2+(1QA)(S)2]} (1.B)

Figure 1: Structure of outcomes under constitutional judicial review Probabilities of outcomes in brackets Court enforces A’s proposed policy (QA) A wins (P) A proposes policy X Court annuls Status quo remains (1QA) Elections B wins (1P) B proposes policy Y

Court enforces B’s proposed policy (QB) Court annuls Status quo remains (1QB)

Manipulating the expression in (1.A) we obtain URA


E(PQA)[(XA)2+(SA)2] P(SA)2

E((1P)QB)[(YA)2(SA)2] (1P)(SA)2


It is next assumed that the covariance of the probability of winning the election and the probability of the court enforcing the policy proposed by the election winner is the same for both A and B. That is Covariance (P, QA) = Covariance ((1P), QB)   2 PQ  0


This is to say that the judiciary shows the same “bias”, if any, to the incumbent, irrespective of who the incumbent is; if the court is completely unbiased towards the incumbent and the opposition,  2 PQ  0 . Denoting the mean values of the P, QA and QB probabilities by P , Q A and Q B respectively, the Nash equilibrium is found by maximization of (2.A) and its equivalent for B. The optimal policies are respectively X* = A



Y* = B


That is, the proposed policies of the two parties coincide with their ideal points. This result is due to the simplifying assumptions of the model; its value is that it clarifies without any algebraic complexity the important point that the two parties pursue different policies. Further, let the status quo be a weighted average of the ideal points of A and B, with weight 0   1, that is S = A + (1)B


Obviously, the closer is  to 1 the less “extreme” is the ideal point of A in comparison to the status quo. Substituting from (4) and (5) into (3) we find the expected utility of A from the election  judicial review game is URA

 A  B 1.



 1     P 1  Q   1  P 1  Q   1  P  Q 2




2   2 PQ  2 1     1  


Constitutional judicial review V No policy review

In the absence of constitutional judicial review the two parties maximize the following expected utility functions UWA = E{P(XA)2+(1P)(YA)2}


UWB = E{(1P)(Y)2+P(XA)2}


The equilibrium policies are again as in equation (2), namely X* = A and Y* = B. The corresponding level of utility of A without review is then

U W A   1 P  A  B



Comparing (6) and (7), we observe that irrespective of whether or not there is constitutional review, the parties choose to pursue the same policies; only the respective levels of losses change. This simplifying set-up allows comparison of the levels of utility under the two different systems of policy making without adjusting for possible policy changes, and is justified by our interest in exploring the nature of judicial review rather than the ramifications for final policy outcomes. The political ruler A (B’s problem is symmetric and not pursued further) will establish constitutional judicial review when 12

utility from review exceeds utility from policy making without review, URA > UWA, and vice versa. When URA = UWA, A is indifferent between policy making with and without judicial review.

Subtracting (7) from (6) and rearranging we have D  URA  UWA =

 A  B


 1    P 1  Q   1  P 1  Q  1  1       2




2 PQ

 2 1   2  1  


However, the latter formula cannot be signed unambiguously at this level of generality. Probing further into it, D can be understood as the product of the (squared) difference of the ideal points of the competing politicians (AB)2>0 and the term in the braces which is

broken down to three components. First, the expression  1    P 1  Q A  0 shows 2

A’s disutility when the status quo survives even though he won the election. Second, the


2 expression 1  P 1  Q B 1  1      0 shows A’s utility gain when the status quo  

2 survives even though A lost the election. Finally, the term  2 PQ 2 1     1 , whose  

sign is ambiguous, shows the net effect on A’s utility from the incumbency bias of the 2 judiciary (if any). It can easily be shown that  2 PQ 2 1     1  ()0 for values such  

that   (>) (1 − 1 ⁄ √2)  0.29. Thus, a political ruler chooses to introduce constitutional judicial review in the game of policy making when the expected gain from retaining the status quo after losing the election is greater than his expected loss from retaining the status quo after winning the election, adjusted for the effect of judicial bias for the incumbent (if applicable). This inequality captures the fine line which separates the political action from the judicial function in the context of constitutional policy review. In order to examine the effects of the various factors identified by the model on A’s utility and therefore the attractiveness of judicial review we investigate the comparative static properties of D.


dD d  A  B


 


2 2 2   1    P 1  Q A  1  P 1  Q B 1  1       2 PQ  2 1     1 (8.1)    

As already explained the sign of the latter is ambiguous. However, it is also clear from the previous discussion that when the expected gain from retaining the status quo after losing the election is greater than the expected loss from retaining the status quo after winning the election, adjusted for the incumbency bias of the judiciary, then the greater the differences in preferences of the political parties the more attractive judicial review becomes.

dD  ( A  B)2 1  Q B  (1   )2 (Q A  Q B )   0 dP


The latter is negative because (1)2 Q A  Q B . Analytically, as the probability that A wins the election rises, his utility from granting review powers to the judiciary declines. This result formalizes the argument made above that when political competition is weak, so that one party expects to dominate the electoral contest, it has little incentive to grant review powers to an independent judiciary. At the extreme if P=1, that is, there is no chance that A loses office, as in a dictatorship, he will not establish a judiciary with the power to challenge his authority. On the other hand, the smaller the probability that A wins the election, as it is the case with minority interests, the better off A is by the presence and practice of independent judicial review of policy.

dD  2( A  B) 2 (1   )  P(1  Q A )  (1  P)(1  Q B )  2 2 PQ  d


When the judiciary is unbiased for or against the incumbent, the above is unambiguously positive, implying that the closer the status quo is to A’s preferred policy, the higher the utility that A derives from judicial review. As a result, judicial review becomes more attractive from the perspective of A. The same is true for “low” values of the bias 2PQ (those which keep the inequality in 8.3 positive). This formalizes the argument that the judiciary may consist of “conservative” judges, who share the same preferences as the ruling political “elite” and rule in its favour. However, for very “large” values of the judicial bias in favour of the incumbent, the inequality is reversed, and judicial review


becomes less attractive for A. The reason is that a court with the ability to review policy may change the status quo (which is close to A’s ideal point) after B wins the election and so inflict losses on A.

dD  ( A  B)2 (1   )2 P  0 dQ A


As intuition suggests, the higher the probability that the judiciary enforces A’s preferred policy, the greater A’ utility from granting review power to the judiciary.

dD 2    A  B  1  P 1  (1   )2   0 dQ B


This is the opposite result of the previous case, that is, the more likely that the judiciary enforces B’s preferred policy the less attractive judicial review becomes for A.

dD d

2 PQ

2 2   A  B   2 1     1  


As already explained in the context of equation (8), the sign of the above is ambiguous. For a “small” , i.e., < 0.29, the derivative is positive, meaning that when the distance between the status quo and A’s ideal point is large, then as judicial bias for the incumbent rises A finds judicial review attractive. However, if the distance between the status quo and A’s ideal point is small (the value of  is “high”), A does not want to invest the judiciary with review powers and the consequent ability to change the status quo.


Binary constitutional judicial review V judicial setting of policy

We now turn to compare the outcome of binary judicial choice with open judicial choice, that is, the case where the judiciary is not constrained to a confirm  annul ruling but can actually decide the policy measure as in the standard study of the delegation relation from principals to agents.


In other words, politicians are assumed to appoint a judiciary


As already said, this is the setting adopted by some of the most influential studies which applied the rational choice model to investigate how the effect of the judiciary on the


which has then the power to “make policy” and decide the exact content and size of policy measures. Let C denote the ideal policy point of the court and Z the size of the policy measure decided; its utility then takes the form UC = E(ZC)2


Maximization of the above yields Z* = C


From the viewpoint of the politicians, C is the weighted average of the ideal points of A and B according to the formula C = kA + (1k)B


The coefficients k and 1 k, with 0  k  1, denote the weights that the independent agent  court attaches to the ideal points of A and B. Since politicians do not control the judges, they perceive k as a stochastic variable with mean 0  k  1 and variance k2 > 0. When the judiciary decides policy, A’s utility is written as UCA = E(Z)2 which upon substituting from (10) yields UCA = = E[(kA+(1k)B] 2. Manipulating the above we obtain UCA = (AB)2[(1 k )2+k2]


Subtracting (12) from (6) we have   U R A U C A 

 A  B




2 2  2k  1  1    1  PQ A  Q B 1  P 1  1       2 k  


Solving the quadratic expression in the braces for k we find

k  1   O   2k



 

2 where  O  1  P Q B  1     1  P 1  Q B  P 1  Q A  . The latter expression is the  

sum of the probability that A loses both the election and his application to the court to outcome of the collective choice game; for example Ferejohn and Shipan (1990), McNollGast (1990), Gelly and Spiller (1990), Ferejohn and Weingast (1992), Tiller and Spiller (1999), Epstein et al. (2001), Hanssen (2000), Tsebelis (2002), Padovano et al. (2003), Hanssen (2004a) and Maskin and Tirole (2004). In these models, the only discretion that the political ruler has is to set up an independent judiciary.


have B’s policy annulled, 1  P Q B , and the probability that the status quo remains,


 

 1  P 1  Q B  P 1  Q A  , adjusted by A’ “dislike” of the status quo, 2. Thus,  

O may then be interpreted as the probability that A’s preferred policy is not implemented.

It is now obvious that if uncertainty about judicial preferences, captured by the variance

k2, exceeds the critical value O, the term in the square root is negative, and therefore the quadratic expression in (13) is unambiguously positive. In this case UAR >UAC and A is unambiguously better off with binary judicial choices. On the other hand, if uncertainty about judicial preferences is below the critical value O then the quadratic expression has two roots k1 = 1   O   2k and k2 = 1   O   2k . Of the above, the latter is unambiguously greater than unity, while the former is unambiguously lower than unity. Although a priori we cannot rule out that k1 may be negative, only positive values make economic sense. Therefore we focus on the interval 0
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