Dundee Discussion Papers in Economics 151: Separation of powers and activism

We consider a model of constitutional (mechanism) design with separation of powers where different institutions are assigned different tasks. In this context, we define activism as an institution extending its mechanism of decision-making into domain of other institution’s tasks. When members of the institutions are likely to be benevolent as well as non-benevolent, such activism in a limited form reduces the cost of achieving collusion-proofness and raises welfare. But as the fraction of non-benevolent member increases, such activism turns excessive and reduces welfare. It is argued that developing economies are likely to get caught in the excessive activism trap because of the high levels of corruption and bribery.