A transaction cost theory of constitutional change

Andrew T. Young

Journal of Institutional Economics, 2026, vol. 22, e35

Abstract: How does a constitutional order change over time? What are the implications of such a change? Furthermore, how do answers to these questions inform de jure (‘Big-C’) Constitutional design? Virtually every country today has a written Constitution. However, formal Constitutional design is only one avenue through which a constitutional order can change. There are also, e.g., changes in constitutionally relevant norms and conventions, judicial review, and executive orders. In a zero-transaction costs world, whether constitutional change occurs via one avenue or another makes no difference. However, with positive transaction costs, the implications for one avenue versus another can be significant. I propose a theory of constitutional change rooted in the transaction costs approach. Changes will occur whenever (a) the benefits to creating new bundles of political property rights exceed the costs of creating them and/or (b) the same is true regarding the exchange of existing bundles of those rights. When it is efficient for constitutional change to occur, it will occur via the lowest-cost avenue. Furthermore, the relative transaction costs are endogenous to the use of certain avenues vis-à-vis alternatives. Specifically, avenues that are used more frequently become relatively cheaper. This has important implications for real world Constitutional design.

Date: 2026
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