Democracy as an overall model for how societies should be governed must be seen as a remarkable success. Over the last centuries, several waves of democracy have swept over the globe, bringing representative democracy to places where it seemed inconceivable fifty, or even twenty-five years ago. More countries than ever are now considered to be democratic. There are certainly many reasons to be enthusiastic about this historically remarkable development. However, this enthusiasm is dampened by the fact that there is only a very weak, or none, or sometimes even negative, correlation between established measures the level/quality of democracy in countries and the standard measures of human well-being. The same results exist for the correlations between democracy and measures of economic prosperity, public finances and the level of corruption. This project will use an institutional approach to answer the question why some democracies perform better than others in producing human well-being, control of corruption and sustainable public finances. The starting point is that democratic systems can be institutionalized in innumerous ways given variation in for example party system, electoral system, type of public administration, judicial control and type of legal system, degree of lobbyism, degree of decentralization, rules for the public budget, possibilities to use referendums, the power of the executive and so on. This huge variation in the institutional configuration of existing democracies will be used for developing an empirically based theory for explaining the difference between dysfunctional and well-functioning democracies.