nep-pol New Economics Papers
on Positive Political Economics
Issue of 2008‒06‒27
seven papers chosen by
Eugene Beaulieu
University of Calgary

  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
  4. Who is Against a Common Market? By Facchini, Giovanni; Testa, Cecilia
  6. What causes terrorism? By Tim Krieger; Daniel Meierrieks
  7. Learning while voting: determinants of collective experimentation By Bruno Strulovici

  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: Facchini, Giovanni; Testa, Cecilia
    Abstract: This paper develops a theory of the endogenous formation of a common market in a three-country, two-factor political economy model. In the status quo, Home and Foreign implement non-discriminatory policies towards international factor flows, as to maximize the domestic median voter's welfare. Each of the two countries simultaneously holds then a referendum on a Common Market initiative leading to the removal of the pre-existing policies for factor flows occurring between the member countries, while no coordination is imposed on policies vis-à-vis the rest of the world. Several interesting results emerge. In a common market, factors moving between the members are more likely to gain, the bigger is the import demand of one country as compared to the factor supply of the exporting partner. Factors which instead do not relocate are more likely to see their return decrease when flows are big and import demands are inelastic. Importantly, for the common market to emerge as an equilibrium, some factors must continue to experience enhanced protection when the integration process is completed. This result highlights the potential tension between social desirability and political feasibility of the integration process.
    Keywords: Economic Integration; Factor Mobility; Political Economy
    JEL: F1 F2 P16
    Date: 2008–06
  5. 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
  6. By: Tim Krieger (University of Paderborn); Daniel Meierrieks (University of Paderborn)
    Abstract: Popular beliefs link terrorism to economic, political and social under- development. In this contribution, we comprehensively review the related, most relevant cross-country analyses to ascertain the true determinants of terrorism. The related theoretical underpinnings are presented and com- mon analytical and methodological objections are discussed. In general, we nd that terrorism is closely linked to political instability, sharp divides within the populace, country size and further demographic, institutional and international factors. Sound counter-terrorism policies should work on these prominent root causes of terrorism. Evidence is only marginal that economic performance, structural economic conditions, democrati- zation, education or religious aliation signicantly interact with terror- ism. Thus, we are skeptical towards popular policy advice that focuses on poverty alleviation, a promotion of economic development, democratiza- tion, education or the like.
    Keywords: Determinants of Terrorism, Political Violence, Counter-Terrorism Policies
    JEL: D74 H56 K40 N40
    Date: 2008–06
  7. 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

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