The Rule of Law, Economic Constitutions and Institutional Balance

Economic constitutions may be ‘substantive’, seeking to implement fundamental economic policies or ‘the will of the people’ in relation to economic management, or ‘communicative’, establishing institutions for economic organisation and holding these accountable. In the context of fiscal policy there have been recent important successes for the ‘substantive’ model through the use of balanced budget rules, but a more ‘communicative’ approach can be seen in the development of fiscal councils. Similar moves to a more ‘communicative’ model can be found in monetary policy and in the regulation of public utilities, including in EU liberalization. If such a move is to be successful, the institutions involved need independence, though this should not be confused with complete autonomy of decision-making as decisions will often need to be taken within a broader framework of government policy. The ‘communicative’ model is the most appropriate one for an economic constitution in complex modern economies.