Economic theory has long treated the channel between decision and outcome as frictionless — assuming that whatever is decided arrives without loss, distortion, or reversal. This paper formalises the variable that assumption suppresses: decision sovereignty, denoted S, the structural capacity of an institutional system to transmit decisions into outcomes without blockage, attenuation, or reversal. Three axioms — transmission necessity, decision necessity, and separability — establish the multiplicative identity Y = d (P) · S as a continuous, monotone specification consistent with the formal requirements; alternative specifications require relaxing at least one axiom. S decomposes into governance capacity G (operationalised through the Decision Sovereignty Index DSI = (A · C · E) ^ (1/3) · (1 − V) ), decision load ρ = d (P) /K, and alignment T. A Shannon channel extension adds a hard throughput ceiling and a noise floor below which increases in resources cannot recover output. The framework generates three theorems: that the sign of outcomes is determined by alignment; that when S is negative, raising d (P) amplifies harm rather than improving outcomes; and that capability investment increases load, implying an investment switch threshold beyond which governance investment yields higher marginal returns than capability investment. Empirical evidence across 38 organisations is consistent with the framework’s predictions: d (P) alone explains R² = 0. 023; adding S raises this to R² = 0. 871 in a subsample with fully independent data sources. Five explicit falsification conditions are specified. This paper extends the foundational article Fritz, Fritz-Kalish and Bodrova (2025), published in the Journal of Behavioural Economics and Social Systems, Vol. 7, Nos 1–2 (DOI: 10. 54337/ojs. bess. v7i1-2. 11417).
Fritz et al. (Wed,) studied this question.