Abstract

This essay explains how to use the calculus of consent framework to think more rigorously about self-governance, and applies this framework to the issue of evaluating federal regulatory agencies. Robust political economy is the idea that institutions should be designed to work well even under weak assumptions about decision-makers’ knowledge and benevolence. I show how the calculus of consent can be used to analyze both incentives and knowledge problems. The calculus is simultaneously a theory of self-governance and a tool for robust political economy analysis. Applying this framework to the case of public administration leads to the conclusion that private goods (such as medicine) tend to be over-regulated, public goods tend to be under-regulated (such as enabling too much pollution), and regulatory agencies tend to be over-centralized (and should in most cases either be replaced with certification markets or moved to state level).