Explaining Orbán: A Political Transaction Cost Theory of Authoritarian Populism

Based on the theory of transaction cost economics, the paper argues that by vertically political exchange, populist regimes reduce market-type political transaction costs – primarily bargaining, enforcement and information costs – prevalent in democracy. , management-type political transaction costs – mainly organizational costs, partly from corruption – rise as populists in power leverage government control through organized clienteles. Operation of such clienteles is costly as maintaining them political and economic resources, including a corruption surcharge that government are allowed to appropriate while accessing public resources. Transaction cost suggest that a shift from democratic towards authoritarian populist regimes occurs formal and informal political institutions prove unable to maintain horizontal political , and society seeks to internalize market-type political transaction costs through government discretion. Institutionally, this is based on a majoritarian approach to , sidelining the system of checks and balances that constrain democratic governments. is demonstrated on the example of Hungary that has turned into a textbook case of populism under Viktor Orbán since 2010.