Government, clubs, and constitutions

This paper analyzes “constitutional effectiveness” – the degree to which constitutions can be enforced – in the system of government vs. the system of clubs. I argue that clubs have residual claimants on revenues generated through constitutional compliance, operate in a highly competitive environment, and permit individuals to sort themselves according to their governance needs. These features make their constitutional contracts self-enforcing. Government lacks these features. So its constitutional contract is not. Institutional augmentations that make government more club-like, such as federalism, democracy, and limited government scope, improve government's constitutional effectiveness. But constitutional effectiveness remains superior in the system of clubs.

► I investigate “constitutional effectiveness” – the degree to which constitutions are enforceable.
► Clubs’ constitutions are self-enforcing.
► Government's constitution is not self-enforcing.
► Federalism, democracy, and limited government scope improve government's constitutional effectiveness.
► Clubs’ constitutional effectiveness is superior to government's.