A master of two servants: lessons from the Israeli experience about the effect of separation of powers on public accountability and social welfare

History is abundant with authoritarian rulers who reluctantly delegated governance powers to other institutions. Nevertheless, the intriguing question is why would democratic powerful rulers delegate powers voluntarily to (probably) contrarian institutions and tolerate activism that impedes the implementation of their election commitments. I develop a principal-agent model based on Fiorina’s (Congress: the Keystone of the Washington Establishment, Yale University Press, UK, 1977; Public Choice 39:33–66, 1982) blame-deflection hypothesis that politicians use the separation of powers principle as a shield against public criticism and accountability and addresses Stephenson’s (Journal of Legal Studies 32:59–89. https://doi.org/10.1086/342038, 2003) criticism. I show that in subgame-perfect equilibrium, the agent manipulates the principal. The extended model embeds experience and impartial judiciary and shows that the equilibria are preserved, but social welfare is lower.