Sovereign power, credible commitments, and constitutional limits

Can someone with unlimited legal power make a binding promise to give some of that power up? The opening presents a puzzle. If the sovereign can legally do anything, limiting its own power should be an option. But once it has imposed a real limit, its power is no longer unlimited. That's the paradox of omnipotence as the author introduces it.

Keep legal power separate from the ability to make anything happen. An all-powerful sovereign in this discussion isn't someone who can control the weather. It is someone whose legal authority has no outside limit. The next paragraphs show why that can create problems even for the person who holds the power.

The practical problem is trust. A sovereign may want others to believe a promise, but why should they believe it if the sovereign can legally disregard it later? Imagine lending money to a ruler who can refuse to repay you and override any legal commitment to do so. A promise on paper doesn't give you much protection if the borrower can undo the promise whenever it becomes inconvenient.

The ruler might gain by refusing to repay one loan. But that freedom can hurt the ruler when it comes time to borrow again. Creditors have to consider whether they will get their money back. They may demand a higher interest rate or refuse to lend as generously. The ability to escape a commitment makes it harder to obtain the benefits of a credible commitment.

That is what North and Weingast describe in England and France. The monarchies need large amounts of capital to expand their empires, yet neither can credibly promise to repay debts or respect property rights. The monarchs can unmake laws and disregard commitments, and they acquire reputations for doing so. Creditors consequently charge them higher interest rates than their wealthy subjects. The problem isn't that no lender ever gives a monarch money; the terms are less favorable because repayment is less trustworthy.

Then comes an apparent solution in England. After the Glorious Revolution, Parliament controls the Crown's finances. Parliament represents commercial interests that won't tolerate disregard for property rights. The Crown can no longer simply do whatever it likes with its financial commitments.

Losing that freedom actually helps it borrow. Lenders expect repayment, borrowing increases, and interest rates fall. That's the counterintuitive practical lesson: a legal restraint can make the ruler more effective by making its promises believable. The change in incentives matters, not whether someone has studied the philosophical name for the problem.

But the author doesn't stop with that success story. The final paragraph challenges the conclusion that constitutional arrangements necessarily solve the problem. In England, the Crown has been restrained, but Parliament now holds the unlimited authority. The problem has moved to another branch rather than disappearing.

This distinction keeps us from going too far in either direction. The author doesn't deny the improvement in the Crown's borrowing. Nor does the author show that Parliament will inevitably break every promise. The remaining problem is its inability to bind itself legally: it retains the authority to change or disregard a commitment. Different incentives can improve conduct without removing that underlying feature of sovereign power.

So our main-point prediction needs the practical difficulty and the author's qualification of the apparent solution. Unlimited legal power can undermine credible commitments, and a constitutional change can improve particular outcomes while leaving the fundamental problem in place.