Today in #crediblecommitments :
Kenneth Shepsle's excellent chapter, "Discretion, Institutions, and the Problem of Government Commitment" (1991) http://14.139.206.50:8080/jspui/bitstream/1/1403/1/Bourdieu%26Coleman%20-%20Social%20Theory%20for%20a%20Changing%20Society.pdf
Kenneth Shepsle's excellent chapter, "Discretion, Institutions, and the Problem of Government Commitment" (1991) http://14.139.206.50:8080/jspui/bitstream/1/1403/1/Bourdieu%26Coleman%20-%20Social%20Theory%20for%20a%20Changing%20Society.pdf
It's really incredibly good and at only 20 pages, it's a must-read for anyone interested in smart contracts (looking at you, lawyers). Here are some highlights:
1) The ability to commit often (not always) gives a person *more* opportunities, even though they are limiting their own behavior by committing. 
2) The problem of commitment can arise in self-management (a focus of Schelling's), between individuals (contract), and between individuals and governments (policy-making).
3) Making a credible commitment often involves disabling discretion - i.e. taking the possibility of reneging out of your hands.
4) Shepsle differentiates between two types of credibility- motivational and imperative. In motivational credibility, you're going to keep your promise because you want to; in imperative, because you are forced to.
5) Why does this matter? Bad things happen when you can't make credible commitments. The prisoner's dilemma is a common example
6a) Kyland and Prescott provide another example: government flood policy. If individuals build houses in a flood plain, they can force the government to reengineer the flood control measures to accommodate them, even if that's worse than them not building.
6b) But, if the government can credibly commit to not do the expensive reengineering, the individuals lose this power and are incentivized not to build in the flood plain.
The paper goes on to explain how governments make credible commitments (committees apparently are one way, mandatory delays when deciding legislation another)
But the really interesting thesis is that what we take to be bureaucratic, slow, and wasteful institutional structure may actually be incredibly necessary for allowing the government to create commitments.
As Jon Elster put it, by comparison, "a direct democracy... will tend toward zig-zag policies and constant reevaluation of past plans; it will be incontinent, vacillating, and inefficient." End
(Oh also, check out the references! Thomas Schelling, Douglass North, Anthony Kronman, Oliver Williamson, Richard Epstein, Jon Elster - all are fantastic)
