Cognitive Biases and Institutional Design: Why Rational Actors Build Irrational Institutions

Most of the literature on institutional design, from Moser (2001) to Drake and Skovgaard (2024), implicitly assumes that institutional designers are rational, utility-maximizing actors. But what if they're not? This idea draws inspiration from interdisciplinary work like Bardhan's (2024) analysis of how populists exploit feelings of "insecurity" and applies it to the architects of institutions themselves. I'm proposing a study that examines how cognitive biases—like overconfidence, confirmation bias, or the availability heuristic—lead political elites to design flawed institutions. For example, did Yeltsin's team in Russia suffer from overconfidence, leading them to believe they could control the complex dynamics of a mixed electoral system? Do policymakers today overreact to recent crises (availability heuristic) when designing counter-terrorism institutions, leading to unintended consequences for civil liberties? This would be a novel synthesis, combining the institutional puzzles of comparative politics with the psychological insights of behavioral economics. It would challenge the rationalist foundations of much of the formal-informal institutions literature (e.g., Helmke & Levitsky, 2004) and offer a more psychologically grounded explanation for why smart people so often design institutions that fail in spectacular ways.

References:

1. Unexpected Outcomes. R. Moser (2001).
2. Do Political Institutions Influence the Dismantling of Fossil Fuel Subsidies? Lessons from the OECD Countries and a Comparative Analysis of Canadian and German Production Subsidies. Evan Drake, Jakob Skovgaard (2024). Journal of Comparative Policy Analysis.
3. Informal Institutions and Comparative Politics: A Research Agenda. Gretchen Helmke, S. Levitsky (2004). Perspectives on Politics.
4. Informal Institutions and Comparative Politics: A Research Agenda. Gretchen Helmke, S. Levitsky (2004). Perspectives on Politics.