Constitutions As Relational Contracts: Explaining Procedural Safeguards in Municipal Charters

Abstract

This article analyzes constitutions as relational contracts designed to facilitate long-term relationships. We use transaction resource theory to model the decisions involved in contracting. It explains how rational actors will resolve among themselves three distinct but intertwined problems of cooperation: coordination, division, and defection. The theory identifies conditions, such as increasing population size and heterogeneity, under which demand arises among the principal parties for third-party governance. The potential problems of cooperation in the relationship between the governors and the governed take the form of instability, unresponsiveness, and inefficiency, from which derives the demand for a constitution. The parties have an incentive to craft procedural safeguards—such as allocating authority across decision makers in government—as with an executive veto; varying electoral rules, as with district versus at-large elections; and providing for direct democracy, as with initiatives, referenda, and recalls. Factor analysis, applied to a sample of 145 municipal charters in 1970, discriminates among procedural safeguards consistent with their predicted purposes in mitigating the problems. Regression analysis reveals the interdependence of charter provisions and their increased likelihood under conditions where contextual factors exacerbate the problems.