Constitutional Judicial Review and Political Insurance
George Tridimas
Abstract
Considering constitutional judicial review of policy, the power of courts to annul
legislation, as a political insurance mechanism to protect against losses from adverse
election outcomes, the paper analyzes three questions: First, under what circumstances a
political ruler, who wins an election and the right to propose measures of policy, subjects
those measures to the checking powers of an independent judiciary. Second, the net
expected gains of a political ruler from granting binary choice to the reviewing judiciary
rather than open choice. Third, the equilibrium degree of policy review power granted to
the judiciary. Differences in the policy preferences of competing politicians, the judiciary
and the status quo, the probability of winning an election and the probability that the
judiciary confirms legislation passed by the incumbent emerge as the main determinants
of judicial review and its political independence.
JEL classification:
Key words:
D72, D74, D78, K40, K41
judicial dispute resolution; constitutional judicial review; judicial
independence; political insurance; binary choice / closed agenda
Published in:
EUROPEAN JOURNAL OF LAW AND ECONOMICS
January 2010, Vol. 29: 81-101,
DOI 10.1007/s10657-009-9112-z
Correspondence address:
University of Ulster, School of Economics,
Shore Road, Newtownabbey,
Co. Antrim, BT37 0QB, UK.
E-mail address: G.Tridimas@ulster.ac.uk
I wish to thank an anonymous referee for various constructive comments. An earlier version of
the paper was presented to the 2008 European Public Choice in Jena. I am indebted to Moriki
Hosoe, Peter Nannestad, Martin Paldam and Takis Tridimas for their comments. The usual
disclaimer applies.
Constitutional Judicial Review and Political Insurance
I
Introduction
A most important function of the judiciary is the resolution of constitutional disputes, that
is, disputes regarding the interpretation and application of the constitution. Constitutional
review of policy is the authority of courts to check whether or not laws and policy
measures passed by the legislature and other public acts implemented by administrative
agencies are in accordance with the constitution, or other relevant statutes like
declarations of "basic rights", and have been enacted according to the stipulated
procedures. Measures which are found to violate those conditions are annulled. As it is
concerned with the powers of political rulers to decide and implement policy,
constitutional review has always been considered as the most politically controversial
part of judicial power. Recourse to courts, both domestic and international, to resolve
political conflicts of this type has increased substantially over the last half century, a
trend which has become known as the "judicialization of politics". 1
Constitutional review of policy by an independent judiciary amounts to granting
important decision power to an appointed body. But allowing the judiciary to settle
constitutional and public policy disputes, raises fundamental normative and positive
questions about majority rule, the benefits from delegation to independent agents and
political accountability. Not surprisingly, generations of scholars have wrestled with the
challenge to reconcile judicial independence and democratic rule. The delegation to the
judiciary to apply the rule of law is subject to the classic principal  agent problem that
the agent, the judiciary, may implement policies which serve its own interests rather than
those of its creators, the citizens and their political representatives.
2
A number of
institutional structures are established in practice to balance the demands of review by an
independent judiciary on the one hand, and accountability of the judiciary, which requires
1
See amongst others Shapiro and Stone Sweet (2002) and Ferejohn (2002).
These questions reflect Plato’s well-known problem of "ποίος φυλάττει τους φύλακες"
epitomised as "quis custodiet ipsos custodes?" by the Roman poet Juvenal, and translated as
"who will guard the guards?", or "who watches the watchmen?"
2
1
judges to explain their behaviour, rein on wayward courts and minimise agency losses, on
the other.
3
These relate to the form and conduct of constitutional judicial review, the
arrangements governing the appointment, deliberations and disciplining of judges, the
nature and restrictions on judicial rulings and their implementation by the other branches
of government.
Leaving aside normative issues regarding the justification of judicial independence and
using the methodology of political economy, the present inquiry analyzes three questions,
namely, the benefits of judicial review as a political insurance mechanism, the binary
nature of judicial review rulings, and the politically optimal degree of review power
granted to the judiciary. The first of the above examines the circumstances under which a
political ruler, who has won the election contest and therefore the right to pursue his
preferred policies as promised to the electorate, subjects his proposed policy measures to
the checking powers of an independent judiciary. The binary nature of review relates to
the constraint that often the judiciary can either enforce or strike down the policy measure
proposed, but cannot enact a new measure of its own choosing, an issue which has been
left unexplored in the literature. This closed decision rule allows the judiciary to check
the legality of the actions of the executive and legislative branches but still constrains it
to stay within the limits set by the proposals of the elected authorities. The third question
investigates the equilibrium degree of policy review granted to the judiciary by the
political ruler.
3
The literature is vast and still growing and the present study can only offer some
selective pointers. In analyzing judicial accountability Cappelletti (1983) distinguishes between
political (that is, to the political branch), societal (to the general public) and legal (based on
violations of the law by the judges, which is further divided into the obligation of the state
towards the citizens harmed by the wrongdoing of the judges and the personal liability of the
judges and how these relate to judicial independence). Seidman (1988) reviews the arguments for
a normative justification for judicial independence and argues that in the end “the search is …
fruitless and pointless” (p. 1599). With regard to the US, Ferejohn (1999) argues that judges are
individually independent but collectively the judiciary as an institution is susceptible to political
control. A similar point is also made by Stevens (1999) for the UK judiciary. Further, Ferejohn
and Kramer (2002) rather than focusing on the tension between judicial independence and
accountability maintain that they are the means for securing the more fundamental goal of
constructing a well-functioning judiciary, that is, one which is “capable not only of deciding
particular disputes in light of their facts, but also of interpreting and even creating law, including
constitutional law”, p. 964.
2
A number of mutually compatible explanations for judicial independence have been
offered in the literature. Several of them are based on the benefits of delegation. That is,
delegation of decision making powers by uninformed principals, citizens (or their
political representatives as the case may be) to a specialised agent the judiciary – helps
to resolve problems of information asymmetry and coordination between the citizens and
the government, increases decision making efficiency, focuses on the long-run interests
of citizens and enhances the credibility of policy commitments. 4
However, the present study dwells on an additional reason for constitutional judicial
review which has been the focus of recent work, namely its role as a political insurance
mechanism.5 In essence the argument runs as follows. Constitutional judicial review
implies that courts may prevent the political party which won the election contest from
implementing its favoured policy measures, if found to violate the constitutional
arrangements and the rights of citizens. 6 However, in exchange for this constraint, when
the same party is out of office its opponent may also be prevented from implementing its
favoured policy. Hence, the losers of the political contest can use the review process as a
mechanism to minimize the losses inflicted to them from the measures taken by the
electoral winner. When politicians anticipate that they will not win every election and
therefore they will be out of power, constitutional judicial review is a useful mechanism
to restrain those in control of government. It therefore emerges as a form of political
insurance against the risk of the losses suffered when out of office. Constitutional review
4
For recent surveys of the literature on judicial independence using the delegation
relation and based on the economic analysis of institutions and game theory see amongst others
Law (2009), Tiede (2006), Padovano et al. (2003), Stephenson (2003), Voigt and Salzberger
(2002) and Mueller (1996).
5
This approach builds and extends the famous thesis of Landes and Posner (1975), that a
judiciary independent of the current legislature adds permanence to the distributive gains of the
original winning political coalition enacting a piece of legislation. See Ramseyer (1994),
Ramseyer and Rasmussen (1997), Ginsburg (2002), Stephenson (2003), Hansen (2004a and
2004b) and Tridimas (2004, 2005 and 2006).
6
Mueller (1991) identifies two conditions under which citizens wish to protect certain
individual rights – freedoms of action: (a) The cost to someone denied that right is very large
relative to the gain secured by others when the right is denied, and (b) the framers of the founding
charter, who grant the right, are uncertain whether they will be protected or harmed by the right.
3
by an independent judiciary lowers the risks associated with the uncertain outcomes of
collective choice. Further, on this reasoning, one expects judicial review to be more
pronounced in polities where political competition is strong and parties alternate in
office. 7
The study proceeds as follows: Section II offers a selective summary of various aspects
of constitutional judicial review including a discussion of binary decision rules. Section
III introduces a spatial decision model of review of policy in a setting of policy making
under uncertain electoral outcomes and investigates the benefits of granting closed as
well as open agenda power to the reviewing judiciary and the equilibrium degree of
political independence. Section IV concludes.
II.
Institutional aspects of constitutional review by an independent judiciary
The institutional arrangements for judicial independence include amongst other attributes
the method of selecting judges, by appointment or election, the length of their term of
service, their financial autonomy and procedure for their removal; the requirement that
judges give the reasons underpinning their rulings; the need for the cooperation of other
branches to enforce judicial ruling and the ease by which court rulings can be reversed.
8
In general, judges are more independent the larger the legislative majorities needed for
their confirmation 9, the longer their term of service and the smaller the risk of reduction
of their budgets. Impeachment is probably the most potent measure for disciplining
serving judges and removing them from office, but it can also be directed against judges
with views different from those of the political rulers. As a result, it is a “cumbersome,
7
See in particular Hayo and Voigt (2007) for an empirical investigation of the
determinants of de facto judicial independence, that is, political independence of judges as it is
implemented in practice.
8
Feld and Voigt (2003) and La Porta et al. (2004) have published empirical indices of
judicial independence and constitutional review from international cross-sections.
9
Recent research supports the view that judges appointed for long periods of time are
more independent than elected judges, since the latter are more sensitive to electoral
considerations and as a result will attach greater weight to the interests of litigants from groups
who are presumed to have large electoral power, see Hanssen (1999) and (2000) and Besley and
Payne (2003).
4
costly and visible process that exposes [legislators] to electoral danger” (Ferejohn, 1999,
p.358) and is only rarely used. Judicial independence is stronger the more difficult it is
for the government to overturn judicial rulings it does not like. Rulings can be overturned
by introducing new legislation or changing the status and power of courts whose
pronouncements go against the interests of the incumbent political ruler. The ability of
the government to reverse court rulings decreases when courts are bound to follow legal
precedent and when the independence of courts is provided for in the constitution which,
contrary to ordinary legislation, requires super-majorities to revise. Nevertheless, courts
rely on the willingness and cooperation of other branches of government to implement
their rulings, as their decisions may often require a legislative or administrative response.
Assuming that in common with all actors, the judiciary would like to see its decisions
implemented, it will exercise a degree of self-restraint, or “auto-limitation”, in
pronouncing its rulings. The higher the public respect and support for the judiciary, and
the easier to detect the administrative and legislative responses to judicial rulings (that is,
the more transparent the environment), the more difficult for the political rulers not to
implement the rulings of the courts; see Vanberg (2001) for a formal game theoretic
treatment of the latter point.
The conduct of judicial review focuses on the institutions which exercise review, its type
and timing, the standing rights for review and the nature of the judicial rulings,
characteristics which differ from country to country, and which in practice constitute the
solutions to a trade-off between judicial independence and judicial accountability.
10
Specifically, in the diffused system of the USA any ordinary court can check the
constitutionality of a law which is applicable in a case which is actually litigated in front
of the court. On the contrary, following the model of the Austrian legal theorist H.
Kelsen, review in continental Europe is conducted by a specialised constitutional court,
which occupies a “constitutional space which is neither political nor judicial” (Stone
Sweet, 2002, p.80), can be abstract, that is, it determines the constitutionality of a law
even though there is no specific litigation which involves the particular law, and can take
place a priori, that is, before the promulgation of the law, so that laws which are rejected
10
See Epstein & al (2001) and Ginsburg (2002) for extensive discussions.
5
may then be changed to satisfy the criteria set by the court.
11
Standing rights, or
accessibility, relates to who has the right to initiate review proceedings. Such access can
be very limited (as originally envisaged by Kelsen) when only specified government
actors can bring a claim, or at the other extreme very wide when both public bodies and
private citizens have direct access to the constitutional court (as in the case of Germany
and Hungary), or in between. It may be argued that a system of easy and wide access
allows better protection of constitutional rights, but the argument is finely balanced. Easy
access may encourage trivial applications for annulments frustrating the exercise of the
will of the majority but also increasing the judicial workload and therefore the cost of the
system.
Conceptually, judicial independence and judicial review of policy are different. Judicial
independence means that the judiciary enforces the law and resolves disputes without
regard to the power and preferences of the parties appearing before it, including those of
the legislative and executive branches of government with an interest in the case (La
Porta et al, 2004). Its value is obvious in resolving disputes between private parties,
between the state and a private party and between different state actors. As already said,
judicial review of policy examines the legality of policy measures passed by the
legislature and enacted by the executive branch of government for their compatibility
with the constitution. A court may be politically independent but have only limited rights
to review the policy measures of the executive; English courts, at least until the recent
incorporation of the European Convention on Human Rights, were a good example of
this case (see Shapiro 2002a). Of course, policy review is meaningful only when
conducted by an independent court. Nevertheless “…the stakes in the debate about
judicial independence are perceived to revolve mainly around the Constitution… partly
because… everyone is interested in it … For many then, the question of judicial review
and the question of judicial independence are one and the same”, (Ferejohn and Kramer,
11
In general, abstract and a priori review is more limited, as it is not based on a real case
but on a hypothetical conflict and is conducted with less information about “facts”. On the other
hand, it has the advantage that it can eliminate unconstitutional legislation before it actually does
any harm. See Shapiro (2002a) and Ginsburg (2002)
6
2002, p. 1033). This explains why issues of judicial independence and judicial review are
often analyzed jointly. 12
A particular restriction on the power of the judiciary to conduct constitutional review is
the binary nature of the rulings, but its role has been left unexplored in the literature
(Spiller and Spitzer, 1992 and Stephenson, 2004, are important exceptions, but they do
not deal with the political insurance aspect of review). Specifically, the operation of
many legal doctrines in administrative law accords better with the view that the judiciary
can either enforce a policy measure introduced by the government or annul the measure,
in which case the status quo remains, but cannot offer a new measure. In other words, the
judiciary lacks agenda-setting power and is limited to a closed-agenda in the form of a
‘yes-or-no’ decision. 13
Closed agenda decision rules have received a lot of attention in the literature on
legislative decision making. One may distinguish three broad explanations for their use,
namely the distribution, information and majority view. The distributive view argues that
legislative committees are likely to comprise those members of the legislature who stand
to gain most from the policies proposed by the committee. Legislators become members
of committees responsible for matters that they perceive as vital for their re-election and
committee membership gives them the right to pursue their preferred policies. As a result
closed rules, which do not allow for the full house to amend the bills introduced by the
various committees, facilitate the extraction of rents by the committee members; see
Weingast and Marshall (1988). On the other hand, the information view contends that in
a stochastic environment the role of specialised legislative committees is to collect
information relevant to the legislation discussed and reduce uncertainty, implying that
committee members will be better informed about the policy than the full house. A closed
decision rule gives the committee members a stake in policy making and offers them the
12
Note also that judicial review of policy differs from disciplining of politicians who
may be involved in outlawed practices and criminal activities and who may then be prosecuted
accordingly.
13
On account of its power to overturn legislation, the judiciary emerges as a “negative
legislator”, as opposed to the parliament which is a positive legislator.
7
incentive to develop policy expertise and propose legislation which improves the policy
outcome; see Gilligan and Krehbiel (1987, 1989 and 1990), see also Krishna and Morgan
(2001) for a synthetic view and a detailed comparison of the informational efficiency of
the closed and open agenda decision rules. The majority view focuses on the advantage
of restrictive decision rules as a means to advance the goals of the legislative majority.
The majority of voters delegates policy making to a political ruler and provides him with
powers and resources in order to pursue their interests. This is better accomplished when
the legislation proposed is passed without amendments (Sinclair, 1994).
Both the distribution and the information views are of relevance to the closed decision
rule characterising judicial review. Not allowing the judiciary to amend policy measures
introduced by the government facilitates the extraction of rents that the winner of the
political competition wants to appropriate. Moreover, if the court is not allowed to
modify the policy proposed by the government, it is forced to uncover more information
from the government (which proposed the policy measure) and the opposition (which is
against it) in order to reach its verdict. But richer information reduces uncertainty which
benefits everyone concerned. However, some conceptual problems remain: The
legislative committee which proposes a bill is typically seen as subordinate to the full
legislature, which votes on the bill, but in the case of judicial review the government
which passes a policy measure is not subordinate to the judiciary which rules on the
constitutionality of the government act. Nor is there a strict equivalent of the
expropriation of rents by different committees. In the committee system each politician –
member of a committee reciprocates: the full house does not amend the bill of “his”
committee in exchange for him not to amend the bills of other committees. This
reciprocity has no equivalent in the interaction between politicians and judges. From the
point of view of the present inquiry the closed decision rule serves the purpose of
respecting the majoritorian outcome of politics, where the winner of the electoral contest
acquires the right to decide policy. That is, the closed rule allows a political ruler who
represents the majority of the electorate to pursue the policies which serve that majority,
provided they do not infringe inviolable rights of the citizens. Fundamentally, this forces
8
the judiciary to deliberate on the decision of the elected politicians and limits its ability to
select and enforce its own most preferred policy.14
Nevertheless a cautionary note about a court’s closed choice is in order. In practice
disputes and annulments often regard specific provisions of a bill, while total annulment
of a bill is less frequent. Moreover, courts often provide guidelines as to what constitutes
an acceptable policy measure – compatible with the interpretation of the constitution.
III.
A model of judicial review with binary choice
This Section presents a formal account of the binary judicial choice and compares it first
with a setting where there is no judicial review and second with a setting of open judicial
choice, where the judiciary decides the policy measure; a third sub-section inquires how
much review power is granted to the judiciary. The model assumes that political rulers
choose the institutional set-up which maximises their expected pay-off. The analysis
examines the role of the judiciary in a setting of competitive party politics, where two
parties compete for office and the right to decide policy. This is different to other
approaches found in the literature, which focus on the possible conflict between
government and citizens and consider the judiciary as a mechanism to force the
government to adopt policies for the benefit of citizens (as for example in Vanberg, 2001;
Rogers, 2001; Maskin and Tirole, 2004; and Stephenson, 2004).
A spatial decision model is considered with two political parties, A and B, competing to
win an election and therefore the right to set policy, and a judiciary, C. The game of
policy making is one of incomplete information where it is not known (a) who wins the
14
Romer and Rosenthal (1979) have analysed the theoretical and empirical implications of a
closed rule for a monopoly agenda setter, like a bureau which aims to maximise expenditure and
offers voters a choice between its proposed size of expenditure and some predetermined,
reversion, level which will prevail if the proposal is voted down. A key insight is that expenditure
will exceed the median voter’s ideal level. This model has been employed to investigate how
introducing “structure” to the process of collective choice ensures stable outcomes, rather than to
explain the rationale for closed agenda rules.
9
election and (b) whether the constitutional court enforces or annuls the policy measure
proposed by the office holder.
15
That is, uncertainty in the present model arises from
unknown political outcomes rather than a stochastic economic environment. All players
are assumed to have quadratic utilities over policy outcomes. Let A and B denote the ideal
policy points of politicians A and B respectively (as we abstract from the collective
choice issues inside political parties, the terms political party and politician will be used
interchangeably). Let P be the probability that A wins the election and therefore earns the
right to decide policy, and let X denote the policy measure enacted. The probability that B
wins the election and decides policy is 1P; let Y denote the policy measure enacted by
B. However, whether or not the policy decided by the election winner is actually enforced
depends on the ruling of the judiciary, approximated by the highest court, which is
determined by judicial ideology, the “deeply internalized notions of justice” held by judges.
The judiciary can either ratify or annul the policy measure voted by the legislature, in
which case the status quo stands, but it cannot decide a new policy. Note also that in
common with the literature the judiciary, a collective body, is treated as a unitary actor.
Let QA be the probability that the judiciary enforces the policy measure decided by A,
and 1QA the probability that the policy measure is annulled, in which case the status quo
S remains. Similarly, let QB be the probability that the judiciary enforces the policy
measure decided by B, when B wins the election and 1QB the probability that the policy
measure is annulled, in which case the status quo S survives. As there is no compelling
reason to believe that the two probabilities of judiciary enforcement are the same, it is
assumed that, in general, QA  QB. The probabilities P, QA and QB are treated as
stochastic variables. The structure of outcomes under constitutional judicial review, are
shown in Figure 1.
The expected (loss in) utility from the electoral game with judicial review for A and B,
UAR, and UBR, are written as
15
For previous analysis of constitutional review games with incomplete information see
amongst others Epstein & al (2001), Rogers (2001), Vanberg (1998) and (2001), Stephenson
(2003), Hanssen (2004a), Maskin and Tirole (2004) and Tridimas (2004) and (2005)
10
URA = E{P[QA(XA)2+(1QA)(SA)2]+(1P)[QB(YA)2+(1QB)(SA)2]}
(1.A)
URB = E{(1P)[QB(Y)2+(1QB)(S)2]+P[QA(X)2+(1QA)(S)2]}
(1.B)
Figure 1: Structure of outcomes under constitutional judicial review
Probabilities of outcomes in brackets
Court enforces
A’s proposed policy (QA)
A wins (P) A proposes policy X
Court annuls
Status quo remains (1QA)
Elections
B wins (1P) B proposes policy Y
Court enforces
B’s proposed policy (QB)
Court annuls
Status quo remains (1QB)
Manipulating the expression in (1.A) we obtain
URA
=
E(PQA)[(XA)2+(SA)2] P(SA)2
E((1P)QB)[(YA)2(SA)2] (1P)(SA)2
(2.A)
It is next assumed that the covariance of the probability of winning the election and the
probability of the court enforcing the policy proposed by the election winner is the same
for both A and B. That is
Covariance (P, QA) = Covariance ((1P), QB)   2 PQ  0
(3)
This is to say that the judiciary shows the same “bias”, if any, to the incumbent,
irrespective of who the incumbent is; if the court is completely unbiased towards the
incumbent and the opposition,  2 PQ  0 . Denoting the mean values of the P, QA and QB
probabilities by P , Q A and Q B respectively, the Nash equilibrium is found by
maximization of (2.A) and its equivalent for B. The optimal policies are respectively
X* = A
(4.A)
11
Y* = B
(4.B)
That is, the proposed policies of the two parties coincide with their ideal points. This
result is due to the simplifying assumptions of the model; its value is that it clarifies
without any algebraic complexity the important point that the two parties pursue different
policies. Further, let the status quo be a weighted average of the ideal points of A and B,
with weight 0   1, that is
S = A + (1)B
(5)
Obviously, the closer is  to 1 the less “extreme” is the ideal point of A in comparison to
the status quo. Substituting from (4) and (5) into (3) we find the expected utility of A
from the election  judicial review game is
URA
 A  B
1.
2
=
 1     P 1  Q   1  P 1  Q   1  P  Q
2
A
B
B

2
  2 PQ  2 1     1


(6)
Constitutional judicial review V No policy review
In the absence of constitutional judicial review the two parties maximize the following
expected utility functions
UWA = E{P(XA)2+(1P)(YA)2}
(1.A)
UWB = E{(1P)(Y)2+P(XA)2}
(1.B)
The equilibrium policies are again as in equation (2), namely X* = A and Y* = B. The
corresponding level of utility of A without review is then


U W A   1 P  A  B
2
(7)
Comparing (6) and (7), we observe that irrespective of whether or not there is
constitutional review, the parties choose to pursue the same policies; only the respective
levels of losses change. This simplifying set-up allows comparison of the levels of utility
under the two different systems of policy making without adjusting for possible policy
changes, and is justified by our interest in exploring the nature of judicial review rather
than the ramifications for final policy outcomes. The political ruler A (B’s problem is
symmetric and not pursued further) will establish constitutional judicial review when
12
utility from review exceeds utility from policy making without review, URA > UWA, and
vice versa. When URA = UWA, A is indifferent between policy making with and without
judicial review.
Subtracting (7) from (6) and rearranging we have
D  URA  UWA =
 A  B
2
 1    P 1  Q   1  P 1  Q  1  1      
2
2
A
B
2
PQ

 2 1   2  1


(8)
However, the latter formula cannot be signed unambiguously at this level of generality.
Probing further into it, D can be understood as the product of the (squared) difference of
the ideal points of the competing politicians (AB)2>0 and the term in the braces which is


broken down to three components. First, the expression  1    P 1  Q A  0 shows
2
A’s disutility when the status quo survives even though he won the election. Second, the



2
expression 1  P 1  Q B 1  1      0 shows A’s utility gain when the status quo


2
survives even though A lost the election. Finally, the term  2 PQ 2 1     1 , whose


sign is ambiguous, shows the net effect on A’s utility from the incumbency bias of the
2
judiciary (if any). It can easily be shown that  2 PQ 2 1     1  ()0 for values such


that   (>) (1 − 1 ⁄ √2)  0.29. Thus, a political ruler chooses to introduce
constitutional judicial review in the game of policy making when the expected gain from
retaining the status quo after losing the election is greater than his expected loss from
retaining the status quo after winning the election, adjusted for the effect of judicial bias
for the incumbent (if applicable). This inequality captures the fine line which separates
the political action from the judicial function in the context of constitutional policy
review.
In order to examine the effects of the various factors identified by the model on A’s
utility and therefore the attractiveness of judicial review we investigate the comparative
static properties of D.
13
dD
d  A  B
2

 


2
2
2
  1    P 1  Q A  1  P 1  Q B 1  1       2 PQ  2 1     1 (8.1)




As already explained the sign of the latter is ambiguous. However, it is also clear from
the previous discussion that when the expected gain from retaining the status quo after
losing the election is greater than the expected loss from retaining the status quo after
winning the election, adjusted for the incumbency bias of the judiciary, then the greater
the differences in preferences of the political parties the more attractive judicial review
becomes.
dD
 ( A  B)2 1  Q B  (1   )2 (Q A  Q B )   0
dP
(8.2)
The latter is negative because (1)2<1and 1 Q B > Q A  Q B . Analytically, as the
probability that A wins the election rises, his utility from granting review powers to the
judiciary declines. This result formalizes the argument made above that when political
competition is weak, so that one party expects to dominate the electoral contest, it has
little incentive to grant review powers to an independent judiciary. At the extreme if P=1,
that is, there is no chance that A loses office, as in a dictatorship, he will not establish a
judiciary with the power to challenge his authority. On the other hand, the smaller the
probability that A wins the election, as it is the case with minority interests, the better off
A is by the presence and practice of independent judicial review of policy.
dD
 2( A  B) 2 (1   )  P(1  Q A )  (1  P)(1  Q B )  2 2 PQ 
d
(8.3)
When the judiciary is unbiased for or against the incumbent, the above is unambiguously
positive, implying that the closer the status quo is to A’s preferred policy, the higher the
utility that A derives from judicial review. As a result, judicial review becomes more
attractive from the perspective of A. The same is true for “low” values of the bias 2PQ
(those which keep the inequality in 8.3 positive). This formalizes the argument that the
judiciary may consist of “conservative” judges, who share the same preferences as the
ruling political “elite” and rule in its favour. However, for very “large” values of the
judicial bias in favour of the incumbent, the inequality is reversed, and judicial review
14
becomes less attractive for A. The reason is that a court with the ability to review policy
may change the status quo (which is close to A’s ideal point) after B wins the election
and so inflict losses on A.
dD
 ( A  B)2 (1   )2 P  0
dQ A
(8.4)
As intuition suggests, the higher the probability that the judiciary enforces A’s preferred
policy, the greater A’ utility from granting review power to the judiciary.


dD
2
   A  B  1  P 1  (1   )2   0
dQ B
(8.5)
This is the opposite result of the previous case, that is, the more likely that the judiciary
enforces B’s preferred policy the less attractive judicial review becomes for A.
dD
d
2
PQ
2
2
  A  B   2 1     1


(8.6)
As already explained in the context of equation (8), the sign of the above is ambiguous.
For a “small” , i.e., < 0.29, the derivative is positive, meaning that when the distance
between the status quo and A’s ideal point is large, then as judicial bias for the incumbent
rises A finds judicial review attractive. However, if the distance between the status quo
and A’s ideal point is small (the value of  is “high”), A does not want to invest the
judiciary with review powers and the consequent ability to change the status quo.
2.
Binary constitutional judicial review V judicial setting of policy
We now turn to compare the outcome of binary judicial choice with open judicial choice,
that is, the case where the judiciary is not constrained to a confirm  annul ruling but can
actually decide the policy measure as in the standard study of the delegation relation from
principals to agents.
16
In other words, politicians are assumed to appoint a judiciary
16
As already said, this is the setting adopted by some of the most influential studies
which applied the rational choice model to investigate how the effect of the judiciary on the
15
which has then the power to “make policy” and decide the exact content and size of
policy measures. Let C denote the ideal policy point of the court and Z the size of the
policy measure decided; its utility then takes the form
UC = E(ZC)2
(9)
Maximization of the above yields
Z* = C
(10)
From the viewpoint of the politicians, C is the weighted average of the ideal points of A
and B according to the formula
C = kA + (1k)B
(11)
The coefficients k and 1 k, with 0  k  1, denote the weights that the independent agent
 court attaches to the ideal points of A and B. Since politicians do not control the judges,
they perceive k as a stochastic variable with mean 0  k  1 and variance k2 > 0.
When the judiciary decides policy, A’s utility is written as UCA = E(Z)2 which upon
substituting from (10) yields UCA = = E[(kA+(1k)B] 2. Manipulating the above we
obtain
UCA = (AB)2[(1 k )2+k2]
(12)
Subtracting (12) from (6) we have
  U R A U C A 
 A  B
2
k
2




2
2
 2k  1  1    1  PQ A  Q B 1  P 1  1       2 k



(13)
Solving the quadratic expression in the braces for k we find
k  1   O   2k


(13)


 

2
where  O  1  P Q B  1     1  P 1  Q B  P 1  Q A  . The latter expression is the


sum of the probability that A loses both the election and his application to the court to
outcome of the collective choice game; for example Ferejohn and Shipan (1990), McNollGast
(1990), Gelly and Spiller (1990), Ferejohn and Weingast (1992), Tiller and Spiller (1999),
Epstein et al. (2001), Hanssen (2000), Tsebelis (2002), Padovano et al. (2003), Hanssen (2004a)
and Maskin and Tirole (2004). In these models, the only discretion that the political ruler has is to
set up an independent judiciary.
16


have B’s policy annulled, 1  P Q B , and the probability that the status quo remains,


 

 1  P 1  Q B  P 1  Q A  , adjusted by A’ “dislike” of the status quo, 2. Thus,


O may then be interpreted as the probability that A’s preferred policy is not
implemented.
It is now obvious that if uncertainty about judicial preferences, captured by the variance
k2, exceeds the critical value O, the term in the square root is negative, and therefore the
quadratic expression in (13) is unambiguously positive. In this case UAR >UAC and A is
unambiguously better off with binary judicial choices.
On the other hand, if uncertainty about judicial preferences is below the critical value O
then the quadratic expression has two roots k1 = 1   O   2k and k2 = 1   O   2k . Of
the above, the latter is unambiguously greater than unity, while the former is
unambiguously lower than unity. Although a priori we cannot rule out that k1 may be
negative, only positive values make economic sense. Therefore we focus on the interval
0<k1<1. We then have (see also Figure 2 for a graphical illustration):
Figure 2: Range of judicial preferences and A’s preferred choice of judicial review
For k2 > O:
k
For k2 < O:
k
1.
0
1
______|____________________________________|__________
| A grants the judiciary binary choice  |
0
1
1   O   2k
1   O   2k
______|________________________|____________|_________|______
A grants the judiciary  A grants 

binary choice
the judiciary 
|
| |open choice |
For 0< k <k1 UAR>UAC; A is unambiguously better off with binary judicial
choices.
17
2.
For k1< k <1 UAR<UAC; A is unambiguously better off with open judicial
choices, that is, with the judiciary “making policy”. The reason is that values of
k in this interval represent judicial policy preferences which are sufficiently close
to those of A, so that A’s expected utility is higher by deferring decision making
to the judiciary.
The conclusion from the above is that open judicial choice cannot be a priori ruled out as
the chosen institutional solution by the political ruler, since there are circumstances
where it yields more utility than the binary choice. Probing further into the determinants
of the difference in (13), we examine its comparative static properties:
d
 (k  k1 )(k  k2 )
d ( A  B)2
(14.1)
As discussed above (14.1) is positive for 0< k <k1, and negative for k1< k <1. Thus, when
the difference in the preferences of the parties increases (that is, the distance between the
ideal points A and B increases), A is better off when the judiciary has only review powers
for “small” values of k , that is, 0< k <k1, but more extensive policy making powers for
“large” values of k , k1< k <1. In the latter case, the judiciary has preferences which are
very similar to those of A and hence its choice of policy will be similar to that of A.
d
 2( A  B)2 (k  1)  0
dk
(14.2)
As the policy preferences of the judiciary move closer to those of A (i.e. as k rises), A’s
utility from judicial review with binary choice falls in comparison to judicial policy
making. The reason is that when judicial preferences are close to those of A, judicial
policy making is more likely to choose policies that benefit A than B. This result reflects
the “ally principle” of delegation (see e.g. Bendor & al. 2001), which states that a
18
politician chooses to delegate to agents which share his policy goals, for such
appointments increase his expected utility from delegation. 17
d
 ( A  B)2 (1   )2 Q A  [1  (1   ) 2 ]Q B   0
dP
(14.3)
When party A is more likely to win the election, its utility increases more by granting
binary choice to the judiciary rather than policy making power. Intuitively, other things
being equal, if the probability of winning the election is high, the election winner stands a
better chance to implement his preferred policy measures when the judiciary has only the
power to confirm or annul, and not the authority to set the policy measure.
d
 2(1   ) 1  PQ A  Q B (1  P)   0
d
(14.4)
The sign of the latter is identified by recalling that with Q A , Q B , and P < 1, it is
1  PQ A  1  P  QB (1  P) . Analytically, as the value of  increases (implying that the
preferences of A are closer to the status quo) the attractiveness of judicial review
increases. The reason is that when A’s preferences are close to the status quo, it does not
make sense for A to grant sweeping policy making powers to the judiciary which may
then be used to move policy radically away from the status quo. The supporter of the
status quo therefore has no reason to grant decision powers to those who may wish to
change the status quo.
d
 ( A  B)2 (1   )2 P  0
dQ A
(14.5)
As intuition would have led us to expect, the higher the probability that the judiciary
enacts A’s preferred policy, the greater the utility from endowing the judiciary with
binary choice.
17
As Ramseyer (1994) put it “American federal politicians … try to shape judicial
ideology only at the stage of appointment”, p.728.
19
d
 ( A  B)2 (1  P)[1  (1   ) 2 ]  0
dQ B
(14.6)
In strict analogy to the previous case, the higher the probability that the judiciary enacts
B’s (A’s opponent) preferred policy, the less attractive judicial review becomes from A’s
viewpoint. In this circumstance A is better off when the independent judiciary has the
power to set policy, because this increases the chances that A, who has lost the election,
will suffer fewer losses when C rather than B sets policy.
d
 ( A  B)2  0
2
d k
(14.7)
That is, the higher the uncertainty regarding the preferences of the judiciary, as measured
by the variance of k, the more attractive it becomes to grant the judiciary binary choice
rather than policy-making power. Otherwise, the greater power of the judiciary may be
used to pursue objectives which reduce A’s utility. This inequality formalizes the
argument that providing the judiciary solely with binary choice acts as an effective
restriction on the discretion of an appointed court (that is, unelected agent), which
therefore is forced not to stray too much from the preferences of the political parties
(which in turn are assumed to represent the preferences of citizens).
3
The equilibrium level of judicial review
As already indicated, the literature suggests that judiciaries of different countries enjoy
different degrees of review power, for details see amongst others Shapiro (2002b) and La
Porta et al (2004). This section examines the determination of the degree of constitutional
review. It does so by modeling the probability of confirming or rejecting the policy
measure proposed by the incumbent, QA or QB, which in the present framework captures
the discretionary power of the reviewing court. In order to focus on the problem at hand,
all variables in the model are now treated as deterministic rather than stochastic.
Assume that if the incumbent has no influence over the rulings of the judiciary, the
probability that the judiciary confirms the legislation passed by A is , and the
20
probability that it confirms the legislation passed by B is . For example,  and  may be
thought as depending on the effort expended by the litigants and the merits of their legal
arguments put forward by them as described in success functions of litigation contests,
see for example, Rubin et al. (2001), Tridimas (2004), or more generally Garfinkel and
Skaperdas (2007). The probability that the judiciary confirms the policy measure passed
by the incumbent, I = A, B, may then be written as QI = 1 – J (1 – i), i = , ; where 0  J
 1 is the degree of independence of the reviewing judiciary. A judiciary without any
review powers is characterized by J=0, in which case we have that QA = QB = 1; that is,
the judiciary always rules in favour of the incumbent government and never annuls
legislation passed by the incumbent. At the opposite extreme, a completely independent
judiciary, that is without any restriction on its review power is one with J=1, in which
case QA =  and QB = . We then have,
QA = 1 – J (1 – )
(15.A)
QB = 1 – J (1 – )
(15.B)
Setting up a judicial system requires resources and we assume that the resource cost of
operating an independent judiciary, R, rises with the degree of independence according to
the cost function
R = (/2)J 2;
 >0
(16)
In other words,  is the marginal cost of independent judicial review. Using equation
(1.A) the net pay-off from subjecting policy making to judicial review is
UA = –[PJ(1–)+(1–P)J(1–)](1–)2(B–A)2–(1–P)[1–J(1–)](B–A)2–(/2)J2 (17)
At the stage of designing policy institutions, the political ruler A decides how much
review power to grant to the reviewing court by maximising the pay-off in (17) with
respect to J. Setting dUA/dJ=0 yields
𝐽∗=
(𝐵−𝐴)2
𝛾
{(1 − 𝑃)(1 − )[1 − (1 − 𝜃 2 )] − 𝑃(1 − )}
(18)
21
The latter makes sense only if the bracketed term is positive, a condition that we assume
it holds. It is immediately observed that granting full independence, J*=1, to the judiciary
can be politically optimal only under specific circumstances, so that in general J*1.
Checking the comparative static properties of (18) it is easy to establish that
dJ*/dJ*
(19.1)
That is, in accordance with economic intuition, the higher the resource cost of the
reviewing judiciary the lower the degree of independence granted.
dJ*/d(B–A)2J*/d(B–A)2





(19.2)
That is, the higher the difference in the policy preferences of A and B the higher the
politically optimum degree of independence. This finding reflects the political insurance
value of independent judicial review.
𝑑𝐽∗
𝑑𝑃
=−
(𝐵−𝐴)2
𝛾
[(1 − )[1 − (1 − 𝜃 2 )] + (1 − )] < 0
(19.3)
The higher the probability that A wins the election, the less power A is prepared to grant
to the judiciary for review purposes.
𝑑𝐽∗
𝑑𝜃
=2
(𝐵−𝐴)2
𝛾
(1 − 𝑃)(1 − 𝛽)(1 − 𝜃) > 0
(19.4)
The closer are the policy preferences of the incumbent A to the status quo, the smaller his
loss if an independent judiciary annuls the legislation passed, and hence, the higher
degree of independence he is prepared to grant to the judiciary.
𝑑𝐽∗
𝑑𝛼
𝑑𝐽∗
𝑑𝛽
=
(𝐵−𝐴)2
=−
𝛾
𝑃>0
(𝐵−𝐴)2
𝛾
(1 − 𝑃)[1 − (1 − 𝜃 2 )] < 0
(19.5)
(19.6)
The higher the probability that the judiciary enforces the legislation proposed by A
because of A’s efforts, expenses and quality of legal argument rather than his
incumbency (), the higher the degree of independence A grants to the judiciary, and
vice versa for B. Clearly therefore, the comparative static properties in (19) reflect those
discussed in relation to equation (8).
22
Note finally that the model explored in this subsection implies that the degree of
constitutional review may fluctuate from case to case examined by the court. The latter
finding (a) echoes the argument made by Tiede (2006) and McNollgast (2006) that the
judicial discretion exercised by judges fluctuates by policy measure, point in time and the
balance of political power, and (b) offers a theoretical explanation of the empirical
observation that the degree of constitutional review varies from country to country.
V
Conclusions
Constitutional judicial review, the authority of the judiciary to review legislation and
other acts of the administration, and declare void those found in conflict with the
constitution, or other declarations of basic rights, is a fundamental component of a
modern constitutional democracy. The present study sought the explanation of this
function in the political insurance role of judicial review. That is, because election
outcomes are uncertain, those defeated may suffer severe losses as a result of the policy
measures pursued by the election winners. Politicians and the voters whose interests they
represent, realise that they will not hold on permanently to office. They are then prepared
to see some of their desired policy measures struck down by the independent judiciary in
exchange for overturning some of the measures proposed by their opponents, which
allows them to avoid some of the consequent losses when out of office. However,
granting review powers opens the question of how to restrict the discretionary power of
an appointed judiciary.
Formally, the paper modeled the probability of the judicial enforcement of a policy
measure as dependent on the behaviour of the reviewing judiciary. Three questions were
then examined. First, the benefits expected by a political ruler in office when he subjects
his proposed policy measures to the checking powers of an independent judiciary in
comparison to a setting where there is no mechanism of judicial review. Second, the
benefits expected by the political ruler from granting closed–binary choice to the
reviewing judiciary to either confirm or annul a measure proposed by the political
23
authority, in comparison to a setting where the judiciary is given open–unrestricted
choice to decide policy measures. Third, the equilibrium degree of policy review granted
to the judiciary by the political ruler in the face of electoral uncertainty.
The distance between the policy preferences of the competing political parties, the
probability that the reviewing court will confirm the policy measure proposed by the
incumbent, the position of the status quo in comparison to the ideal points of the
competing political parties, the probability that a party wins the election, the extent to
which the reviewing judiciary may be inclined to side with the incumbent executive
(independently of the preferences of the judges), and the ideal position of the judiciary
regarding the policy under consideration, as well as its variance, emerge as the key
variables in determining the expected net benefits from judicial review in the form of
binary choice. Similarly, the probability of winning the election, the probability of
winning a court case without the incumbent exercising any political influence, policy
preferences and the required resource costs to run politically independent courts
determine the equilibrium level of judicial review of policy that the political ruler is
prepared to grant to the judiciary.
The above analysis represents a first step towards a formal modeling of constitutional
judicial review. Several extensions are possible. An interesting question is to inquire
judicial decision making in more detail and explore how judges who may hold different
views aggregate their opinions and reach their collective verdict to confirm or void
legislation. A second important extension of the present framework is to include
economic uncertainty in addition to electoral uncertainty, an extension which would
result in a more complex pattern of comparative static properties. Another promising
direction is to investigate the additional role of the judiciary as a mechanism to discipline
politicians who (contrary to what it was assumed in the previous analysis) may not act as
faithful agents of the voters and attempt to extract rents and divert resources for their own
use.
24
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