Are governmental institutions necessary? If so, our pursuit of better designsought to consider the biggest concern for any acceptable political process:the taming of the great violence associated with political competition. Toget a handle on how important, or central, this relation is to politics weconsider the structure of political competition and how it differs fromcompetition in the market. But wild and violent political competition is notthe only sort of political failure we will want to examine.

When competition is constrained, there usually remains a deep problem ofgetting the behemoth of government to take into account the needs of itscitizens: a problem often considered to be a special sort of principal-agentproblem. One aspect of this problem will be pulled out for more extensivetreatment: the problem of credible commitment. Indeed the nature ofpolitical competition can be shown to frame the principal-agent problem in amanner that makes it more acute in politics than in economics. Theprincipal-agent problem manifests itself in politics as a problem bestlabeled as a constituent-beneficiary-agent problem.

Seeing the problems of tethering political institutions to the citizens’interests leads one to muse on the benefits of democracy. So in a finalsection of this chapter we examine the leverage rational choice theory hasgiven us regarding the struggle for establishing democracy.