Are governmental institutions necessary? If so, our pursuit of better designs ought to consider the biggest concern for any acceptable political process: the taming of the great violence associated with political competition. To get a handle on how important, or central, this relation is to politics we consider the structure of political competition and how it differs from competition in the market. But wild and violent political competition is not the only sort of political failure we will want to examine.

When competition is constrained, there usually remains a deep problem of getting the behemoth of government to take into account the needs of its citizens: a problem often considered to be a special sort of principal-agent problem. One aspect of this problem will be pulled out for more extensive treatment: the problem of credible commitment. Indeed the nature of political competition can be shown to frame the principal-agent problem in a manner that makes it more acute in politics than in economics. The principal-agent problem manifests itself in politics as a problem best labeled 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 final section of this chapter we examine the leverage rational choice theory has given us regarding the struggle for establishing democracy.