How Reforms Fail
This chapter shows that political decision-makers need to solve two difficult problems when they build support for reforms by compensating losers. First of all, compensation can be economically and politically costly, and political decision-makers take four types of costs into account when they decide whether a reform is worth pursuing: dilution costs, deadweight costs, internal costs, and audience costs. Second, winners cannot always commit to compensation, which matters greatly to a political system's level of reform capacity since promises of compensation ring hollow if the losers believe that those promises will not, in fact, be fulfilled. The empirical examples discussed in the chapter include a comparative case study of reforms in Belgium and the Netherlands, a comparative analysis of government debt in parliamentary democracies, and a discussion of democratic paralysis in the United States since the 1980s.