On the optimal social contract: Agency costs of self-government

In the classical models of democracy, people are both the principals (citizens sharing the sovereign power) and the agents (subjects under the laws), and government is an intermediate body which helps people solve their self-control problem. * To better understand the dual nature of people, I analyze repeated games with a large population and incomplete information, in which players decide whether to sacrifice private consumption to provide public goods. * The analysis shows that the agency problems on people's and the government's sides exacerbate one another. * It is also shown that poor eco... Mehr ...