Abstract
Classic Public Choice theory has been very important in explaining various political phenomena. Incorporating insights from behavioral economics could possibly improve the analysis of the shape and function of political institutions.Even if institutions are fundamental in the analysis of policy-making they are often taken as given. Phenomena from behavioral economics such as self-servingbiases, loss aversion, encompassing sentiment coordination, status quo bias, endowment effect and framing should have good potential however provide an explanation for the shape of institutions. A common result of these phenomena on policy is Path Dependence, which is consistent with institutional theory. In this paper, the foundations of such a behavioral model are outlined and some areas in the domain of tax and welfare policy where the model can be applied are suggested.