http://economics.mit.edu/files/4461
"Do societies choose inefficient policies and institutions? An extension of the Coase theorem to
politics would suggest the answer is no. This paper discusses various approaches to political economy
and develops the argument that there are strong empirical and theoretical grounds for believing
that inefficient policies and institutions are prevalent. We conclude that these inefficient institutions
and policies are chosen because they serve the interests of politicians or social groups that hold
political power at the expense of the rest. The theoretical case depends on commitment problems
inherent in politics; parties holding political power cannot make commitments to bind their future
actions because there is no outside agency with the coercive capacity to enforce such arrangements."
