New Economics Papers
on Collective Decision-Making
Issue of 2008‒06‒27
eight papers chosen by

  1. Protecting Minorities in Binary Elections. A Test of Storable Votes Using Field Data By Casella, Alessandra; Ehrenberg, Shuky; Gelman, Andrew; Shen, Jie
  2. Economics and Ideology: Causal Evidence of the Impact of Economic Conditions on Support for Redistribution and Other Ballot Proposals By Eric J. Brunner; Stephen L. Ross; Ebonya L. Washington
  3. "On the 'Faustian' Dynamics of Policy and Political Power," By Jinhui Bai; Roger Lagunoff
  5. Learning while voting: determinants of collective experimentation By Bruno Strulovici
  6. Positive and Negative Team Identity in a Promotion Game By Marion Eberlein; Gari Walkowitz
  7. The Talmud On Transitivity By Shlomo Naeh; Uzi Segal
  8. Defying the 'Juncker Curse’: Can Reformist Governments Be Re-elected? By Biroli, Pietro; Buti, Marco; Turrini, Alessandro Antonio; Van Den Noord, Paul

  1. By: Casella, Alessandra; Ehrenberg, Shuky; Gelman, Andrew; Shen, Jie
    Abstract: Democratic systems are built, with good reason, on majoritarian principles, but their legitimacy requires the protection of strongly held minority preferences. The challenge is to do so while treating every voter equally and preserving aggregate welfare. One possible solution is storable votes: granting each voter a budget of votes to cast as desired over multiple decisions. During the 2006 student elections at Columbia University, we tested a simple version of this idea: voters were asked to rank the importance of the different contests and to choose where to cast a single extra "bonus vote," had one been available. We used these responses to construct distributions of intensities and electoral outcomes, both without and with the bonus vote. Bootstrapping techniques provided estimates of the probable impact of the bonus vote. The bonus vote performs well: when minority preferences are particularly intense, the minority wins at least one of the contests with 15-30 percent probability; and, when the minority wins, aggregate welfare increases with 85-95 percent probability. When majority and minority preferences are equally intense, the effect of the bonus vote is smaller and more variable but on balance still positive.
    Keywords: minorities; referendum; storable votes; voting
    JEL: C9 D7 H1
    Date: 2008–06
  2. By: Eric J. Brunner; Stephen L. Ross; Ebonya L. Washington
    Abstract: There is a large literature demonstrating that positive economic conditions increase support for incumbent candidates, but little understanding of how economic conditions affect preferences for parties and for particulars of their platforms. We ask how exogenous shifts to the value of residents' human capital affect voting behavior in California neighborhoods. As predicted by economic theory, we find that positive economic shocks decrease support for redistributive policies. More notably, we find that conservative voting on a wide variety of ballot propositions -- from crime to gambling to campaign finance -- is increasing in economic well being. We further show that positive economic circumstances decrease turnout and have a mixed impact on candidate choice, highlighting a limitation of inferring policy preferences from party choice.
    JEL: D72 H0
    Date: 2008–06
  3. By: Jinhui Bai; Roger Lagunoff (Department of Economics, Georgetown University)
    Abstract: This paper examines the Faustian dynamics of policy and power. We posit a general class of dynamic games in which current policies affect the future distribution of political power, resulting in the following “Faustian trade off”: if the current ruler chooses his preferred policy, he then sacrifices future political power; yet if he wants to preserve his future power, he must sacrifice his present policy objectives. The trade-off comes from the fact that the current political ruler/pivotal voter cannot un-couple the direct effect of his policy from its indirect effect on future power. A Policy-endogenous (PE) equilibrium describes this endogenous transfer of power, and the resulting evolution of policy and political power over time. We show that the Faustian trade-off in a PE equilibrium is decomposed into two basic rationales. The political preservation effect induces more tempered policy choices than if one’s policy choice did not affect one’s political fortunes. However, the reformation effect induces “more aggressive” policies in order to exploit the productivity gains from policies chosen by even more aggressive successors. We distinguish between political systems that give rise to monotone Faustian dynamics — political power that progressively evolves toward more fiscally liberal types of leaders, and cyclical Faustian dynamics — political power that oscillates between liberal and conservative types of leaders. In each case, we show that the Faustian trade off moderates the choices of each type of leader. Classification-JEL Codes: C73, C61, D72, H11
    Keywords: Monotone and cyclical Faustian dynamics, policy-endogenous equilibrium, permanent authority, preservation and reformation effects, biased political system, distortion-adjusted Euler equation
    Date: 2008–08–02
  4. By: Ferreira, Paulo; Dionisio, Andreia
    Abstract: Entropy is a measure of information and uncertainty which has been used recently in different areas, besides of its original utilization in physics. Finance, microeconomics, macroeconomics, utility functions or even psychology are approached areas, using analogies between the areas physics and nature, creating a new research area: Econophysics (see, for example, Ausloos et al, 1999 or Bouchaud, 2002). This paper intends to explore the utilization of entropy through politics and election results, an area just slightly explored (Gill, 2005). It generalizes interpretation of entropy, considering it a measure of dissatisfaction and disillusion of populations in relation to politics. Some phenomena like the increase of abstention in a country, consequence of the dissatisfaction of population and of their alienation in relation to politics could be detected and analysed. This discontentment could result, for example, in the appearance of new political parties, with more division of votes and increasing entropy (result of the discontentment and uncertainty by electors). Absolute majorities, while imply less dispersion of votes, are synonym of more confidence in a given party, making a reduction of entropy. Electoral results could also be influenced by particular phenomena, like those terrorist attacks made in vespers of the two last elections in Spain, with consequences on the affluence to the polls by electors, and influencing levels of entropy. Elections' dates could also influence results: for example, elections on summer season suffer from more abstention. Elections' results could also be connected with aspects like safety feeling of citizens, with unpopular socio-economic policies taken by government or even with the economic performance of a country. One of the purposes of this paper is to find these types of phenomena and try to relate them with the concept of entropy. Another objective is to analyse the reality in different European countries.
    Keywords: Entropy; electoral results; satisfaction and dissatisfaction of population
    JEL: C10 D72
    Date: 2008–06–19
  5. By: Bruno Strulovici (Nuffield College, Oxford University)
    Abstract: This paper analyzes collective decision making when individual preferences evolve through learning. Votes are affected by their anticipated effect on future preferences. The analysis is conducted in a two-arm bandit model with a safe alternative and a risky alternative whose payoff distribution, or “type”, varies across individuals and may be learned through experimentation. Society is shown to experiment less than any of its members would if he could dictate future decisions, and to be systematically biased against experimentation compared to the utilitarian optimum. Control sharing can even result in negative value of experimentation: society may shun a risky alternative even its expected payoff is higher than the safe one’s. Commitment to a fixed alternative can only increase efficiency if aggregate uncertainty is small enough. Even when types are independent, a positive news shock for anyone raises everyone’s incentive to experiment. Ex ante preference correlation or heterogeneity reduces these inefficiencies.
    Date: 2008–05–30
  6. By: Marion Eberlein; Gari Walkowitz
    Abstract: Abstract: In this paper we experimentally investigate whether the so-called in-group/out-group bias leads to a favoring of own team members as candidates in promotion (by voting for them) relative to other teams and their members. In contrast to psychological approaches, mon- etary incentives for voting choices are implemented and objective performance criteria defined and thus the extent of the in-group/out-group bias is exactly measured. Our data show that face-to-face interaction with team members leads more subjects to favor own team-mates than in anonymous interaction. Moreover, not only the frequency but also the average extent of positive team identity is higher with face-to-face interaction according to objective performance measures. A further finding suggests that only anonymous team interaction often leads to substantial discrimination of own team members (i.e., negative team identity), which also is an interesting new finding and extends previous indings of psychologists on the in-group/out-group bias.
    Keywords: Team identity, promotion, experiments
    JEL: M5 L2 C9
    Date: 2008–06
  7. By: Shlomo Naeh (Hebrew University); Uzi Segal (Boston College)
    Abstract: Transitivity is a fundamental axiom in Economics that appears in consumer theory, decision under uncertainty, and social choice theory. While the appeal of transitivity is obvious, observed choices sometimes contradict it. This paper shows that treatments of violations of transitivity al- ready appear in the rabbinic literature, starting with the Mishnah and the Talmud (1st–5th c CE). This literature offers several solutions that are similar to those used in the modern economic literature, as well as some other solutions that may be adopted in modern situations. We analyze several examples. One where nontransitive relations are acceptable; one where a violation of transitivity leads to problems with extended choice functions; and a third where a nontransitive cycle is deliberately created (to enhance justice).
    Keywords: transitivity, Talmud
    Date: 2008–06–23
  8. By: Biroli, Pietro; Buti, Marco; Turrini, Alessandro Antonio; Van Den Noord, Paul
    Abstract: European policy makers, notably in the euro area, seem to take for granted that the electorate will punish them for bold reform in product and labour markets. This may explain why progress in the euro area has been comparatively limited. This paper posits and, using a dataset for 21 OECD countries, shows that this fear of electoral backlashes is unfounded, provided that financial markets work well. The mechanisms involved are relatively straightforward: well functioning financial markets "bring forward" future yields of structural reform to the present, thus permitting to overcome possible short-run costs. As a result, the electorate tend to reward, not punish, reformist governments. This has important implications for the design of structural reform packages, with financial market reforms being an essential ingredient beside product and labour market reforms.
    Keywords: Economic and Monetary Union; electoral cycle; financial markets; structural reforms
    JEL: E61 H30 H60 H70
    Date: 2008–06

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