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Question 1: What role does persuasion play in helping parties capture the median voter?
Andrew Hindmoor (2005) strongly believes that there is more to Anthony Downs (1957), An Economic Theory of democracy than merely the assumptions and predictive analysis relative to the median voter theorem. Although the median voter model has penetrated much of the political framework, the success in capturing the median voter and winning majority can be effectively measured relatively beyond the quantitative assumptions and calculated predictions highlighted by the theorem. Hindmoor (2005) in his 2005 Article Reading Downs: New Labour and an Economic Theory of Democracy – states that the actions and policies of the New Labor had a more stronger essence than the ones reflected by the voter theorem.
According to this theorem parties can capture the median voter and gain maximum votes by shuffling ideological priorities and influencing the voter's perception or mindset. The New Labor won the 1997 election after four consecutive losses under Thatcher government following a major political shift from a left-wing philosophy to a more moderate centrist approach. By shifting the electoral ground to a centrist or liberal approach the political party was able to achieve dominance, successfully harmonizing their policies with the voter’s beliefs. This suggests a broader perspective than the assumptions articulated by Downs for the median voter model which tends to reveal only a single dimension of the New Labor’s political approach.
Downs (1957) in his theory argues about the power of persuasion in gaining the voters confidence and the arguments though not too lucid can be further augmented to support the political trajectory of the New Labor. It is thus essential to first clarify the assumptions penned by Downs for the median voter theorem and how they Map onto the political ideology and strategy of the New Labor indirectly reflecting the significance of persuasion and its role in winning majority rule. Downs (1957) prime argument being that political parties and voters while operating in conditions of uncertainty and incomplete information are provided with an opportunity where parties can use persuasion and influence to bring about paradigm shifts and revision in the voter's ideological differences.
Today, the empirical and theoretical details highlighted by the median voter theorem are mapped onto political strategies and electoral contesting highlighting aspects like candidate convergence and proximity voting. Downs (1957) assumptions clearly signify the need for parties to harbor a more centrist approach to influence the voter’s mindset and change their priorities. According to him there are two parties in an electoral contest and Voters preferences can be mapped into a 1 dimensional left-right scale while political parties being vote maximizers can move to and occupy any point in this space. Voters generally tend to vote for the parties closest to them in the political space and based on the party policy and ideology information available to them, voters preferences are fixed.
This correlates with the more simplistic and optimistic Rational Choice model that provides assessment and prediction of political voting behaviour, very similar to defined economic models for assessing or predicting consumer behaviour. The aspects highlight the dynamics of the voter psychology and the use of influence of and persuasion by political parties to capture the median voter. A median voter thus is defined as a voter who has the same number of people to his “right” and to his “left”. As penned by Downs (1957: 114-141), the median voter model is a framework that relates to the political party and not competitor feasibility and therefore reflect areas of voter behavior and parties actions that can be used to enhance voting productivity. These core areas are highlighted through seven assumptions regarding party behavior and voter preference dynamics. The first assumption states that "A political party is a "team of men seeking to control the governing apparatus by gaining office in a duly constituted election." (Downs 1957: 25).
There is no individual choice as each member of the party will share common beliefs and goals. The second assumption reflects the voters behavioral trend for choosing a certain party and according to this the voters preferences are single-peaked deviating from the party's ideology monotonically. Their judgment of the parties is based on their belief's close proximity with the political parties’ policies and hence the voter's beliefs can be termed exogenous to the party's actions. Further assumptions state that the voter turnout is maximum relative to potential voters, parties are free to take up any space in the diaspora and that parties have access to complete information regarding voters preferences and voting trends. Lastly, parties assume space in parallel with the other political parties unaware of their location and that they are vote maximizers where their vote count defines their utilities.
Figure 1: Median Voter Theorem (G-static, 2015)
Based on these seven assumptions, the predictive result of a two-party election will be convergence at the median of the voter preferences diaspora.
Although Anthony Downs assumptions revealing elements like voter preferences, candidate policies and candidate location significance above have been disputed following his work, they however tend to highlight salient aspects of how political parties should behave and the actions to be undertaken for winning an electoral contest. According to Andrew Hindmoor (2005), the success of new labor in 1997 was attributed to their transition into a more centrist approach that bonded with the voters beliefs and significantly influenced voting preferences. This transition did not require a major shift in policy as opposed to Downs theory since they maintained most of their policies. Their persuasive acts and the application of the new ideology augmented through a successful electoral campaign facilitated shuffling of voters’ 1st and second level preferences. Hindmoor's (2005) preferences formation reflects three levels of prioritized voter’s preferences that the political parties can use to capture the median voter through persuasion and policy formation. Following is the order of the preferences:
- 1st order: ideology, conception of the good society
- 2nd order: preferences over policies
- 3rd order: preferences between parties
Parties can persuade voters regarding their policies and how they transcribe to societal goals and community welfare influencing their preferences between parties and preferences regarding policies. New Labor was able to persuade their voting pool about the merits of their Policy and achieved electoral success through the application of aspects from the median voter's theorem including the adoption of a more centrist approach coupled with persuasive strategies.
Although the approach is effective, Downs(1957) theorem nevertheless lacks predictive capacity and then there are aspects like Asymmetric information regarding the median voter, voter turnout not exactly 100%, rational ignorance by voters, exogenous change of values or moving voter preferences and vested party members interested that are more self-centered. Further, Hindmoor's (2005) arguments also tend to overlook some of the other aspects significant to electoral success like the role of media and the benefits of propagation relative to the election campaign. He also tends to overlook who the information supplier is and what are the vested interests.
Question 2: To what extent do formal constitutional rules affect government spending, taxation, and corruption?
When it comes to studying the influences of economic and political outcomes relative to the various underlying political institutional bodies in the community, the primary intention is to study and analyze the transformational impact of policies and related institutional legislation on the economic development or prosperity. This study specifically aims at outlining how the various forms of government and electoral rules have a direct impact on the economic dynamics. The empirical study by Persson and Tabellini (2003) emphasizes the effects of electoral rules and forms of government on fiscal policy (expenditure, taxation, deficits) and on corruption.
Using a calculated empirical strategy, the study focuses on the impact of the types of government forms and their policy formation on economic entities such as taxation, spending on development, community welfare including other arenas and the impact on corruption. The study uses a sample of 85 democracies and countries in the 1990s shedding light on the government spending and how the various electoral rules had an impact on the economic aspects surveying the public choice theory to support arguments. It also makes use of a data panel set to analyze how nations tend to change over time.
The study highlights the various voting systems with the primary being the Majority Election System and the Proportional representation system. To understand the impact of constitutional rules it's mandatory to get an insight of the forms of government and voting systems as they directly influence economic decisions.
Voting Systems
In the Parliamentary elections there are two types of voting systems.
- The Majority Election System
- The Proportional Representation System.
Each of the systems has its own advantages and weaknesses and hence the economic impact. The core elements, however, to be considered are the equality in the individual impact of each vote on the electoral consequence and the political framework stability.
Majority Election System
In this particular system, there is only one member who is elected as the member of the Parliament relative to each constituency where the voter count residing in the area and the location are considered as election system units. Generally the most apt and qualified candidate is selected to become the member parliament to represent the constituency.
Proportional Representation System
With the proportional representation system multiple members of the parliament are elected for each constituency. The process involves every political party presenting a candidates list and voters can choose a list, which technically means that they indirectly vote for a political party. Political Parties are then allotted parliamentary seats representation proportionally to the number of votes they obtain. In this particular form competing parties play a pivotal role in developing political concepts and defining situations (Bill et al. 2010).
Identification of political economies
Persson and Tabellini (2003) in their particular study have highlighted the causal effects of the various factors of constitutional rules that also tend to impact economic dynamics. The basic idea is to develop understanding of the differences in policies for each form of government and how they tend to influence government spending. This is because various political institutions will have differing policies and hence the economic outcome would vary depending on the decision-making and relative legislation. Hence it is desirable that political and economic agents or variables have transformational or induced preference over political institutes and policies clearly understanding the implications of both entities.
The study considers political parties as endogenous entities in political economies as supported by empirical theories and comparative politics. According to Charles Beards (1913) study, the constitutions and governments prime concern is to ensure economic harmony for entities holding political power.
Figure 3: Electoral Rules Measurement. (Ben Lockwood, 2015)
As highlighted by the figure above, the study took into consideration aspects like:
- How many candidates elected from each district? (District magnitude)
- How vote shares are converted into seat shares (electoral formula): plurality rule or proportional representation.
- With plurality, usually k=1: single-member district plurality or SMDP
- Also, plurality possible with k>1 member districts; candidates are sequentially elected based on number of votes.
- Pure PR; seat shares for parties in an electoral district are proportional to votes.
- Districts tend to be large to make this work, but still “integer problems”: various formulae to deal with this (e.g. D’Hondt method)
How voters cast their ballot e.g. single individuals, or for party lists (ballot structure), (Ben Lockwood, 2015).
Figure 3: Electoral Rules Measurement. (Ben Lockwood, 2015)
ANALYSIS of Presson and Tabellini's Study
Based on all four strategies, Presson and Tabelleni (2003) deciphered a number of results that highlight a broader and more consistent image. The most important results are:
- Majoritarian and presidential systems have comparatively small governments as compared to proportional and/or parliamentary representational systems. The Majoritarian systems, also termed as MAJ are considered to have lesser budget-deficits as well as state welfare spending
- Although the presidential (PRES) or majoritarian-systems typically may not have an aggressive impact on political-rents, corruption and collective productivity, certain aspects of the electoral-system, essentially, the amounts of the electoral-districts and whether or not the potential voters would cast their votes for individual-politicians or would they vote for the parties, do have important
- Nations with parliamentary-systems have higher consistent fiscal results than those having a presidential-system. Generally, in parliamentary-systems, enhancements in governmental budgets during downward trends are not upturned during the upward tends. There is a related, but a weaker trend, for countries with proportional representation (compared to those with majoritarian elections).
- Lastly, proportional-representation also tends to produce a higher increase in welfare-spending in the immediacy of elections which matches with the expected results of the political business-cycle-models. This is highlighted in the figure below.
Figure 5: Effects of Electoral Rules and forms of Government on Public Spending (Ben Lockwood, 2015)
Figure 6: Effects of Electoral Rules and forms of Government on Public Spending (Ben Lockwood, 2015)
Trends show that small districts plus plurality imply spending targeted at small groups (local public goods), where large districts plus PR imply spending targeted at large groups. Empirically, the study evaluates broad spending by analyzing social security and welfare spendings. Some theoretical models like Milesi-Ferretti et al (2002) predict smaller total spending with small districts plus plurality. As per the study following are the effects on Corruption:
- Corruption (specifically rent-extraction) are likely to be higher with party lists, as individual members of legislature are less directly accountable.
- Also highlights the Free-rider effect which reflects that winning is based on total number of votes for party list and not for the individual member.
If lists are defined by party leaders, then factors like party loyalty and nepotism will favor the presence of a name rather than competence.
Figure 7: Effects of Electoral Rules and forms of Government on Corruption (Ben Lockwood, 2015)
Predictions
Trends reflect that separation of powers (between president and legislature) is stronger in presidential forms of government because of the greater concentration of powers in parliamentary rules as it is easier for politicians to collude at the voters’ expense. When formally modelled, the prediction is that this will lead to higher overall expenditure, increased taxes and more corruption in parliamentary systems. (Bill Lockwood, 2015). Confidence requirement in parliamentary systems promotes party discipline and legislative augmentation or cohesiveness. The effect is that spending is directed towards broader programs for a majority of voters, such as social security programs. Comparatively, lack of legislative cohesion in presidential systems reflects trends like spending in the constituencies of dominant office-bearers e.g. heads of congressional spending committees in the US (An example is pork barrel spending).
Proportional representation vs Plurality Rule: Election Rules in a Downsian Model with Probabilistic Voting
Below is an explanation of the Proportional representation vs Plurality Rule for PR vs MAJ election rules as per PT's study.
The following scenario is to be considered:
- There are 2 parties.
- Downsian assumes that the parties compete based on platforms. Parties must implement what they promised when in office.
- There are three groups of voters i= L/M/R where each is 1/3 of the entire population.
- Group 1 gets party platform payoffs as highlighted below
- Group 1 has an ideological preference for party R that can be evaluated as
- Preference is group bias.
- A uniformly distributed individual level preference.
- An aggregated shock that is uniformly distributed on [-1,1].
The figures 8 below highlights the ideological preference and the distribution;
Figure 8: Ideological Preferences (Ben Lockwood, 2015)
Now considering the middle class or floating voters, it can be further characterized as;
Therefore, the probability calculations can be undertaken as below;
Figure 9: Distribution of Ideological Preferences within and across groups
(Ben Lockwood, 2015)
The following aspects are hence applicable in equilibrium:
Figure 10: Equilibrium Aspects (Ben Lockwood, 2015)
The figure below provides the algebraic dynamics relative to the Maximization of utilities by the party.
And;
Figure 11: Algebraic Explanation (Ben Lockwood, 2015)
Similarly, the relationship of political MRT, MAJ can be outlined as below;
Figure 12: Algebraic Explanation (Ben Lockwood, 2015)
Since now the parties are corrupt, they are concerned with winning the election as well as rent and D (diverted taxes) The objective is P (E+D) as they can only get rent when they win where E is Rogoff's Ego Rent. This evaluates intrinsic satisfaction from the office. Furthermore, the consideration is how P the probability of winning election decreases with D. The higher the response, the lower will be the rent in the political equilibrium. Moreover, it is also important to;
Figure 13: Algebraic Explanation (Ben Lockwood, 2015)
As per the figure above, in the M system there is more 'Bang for buck' relative to the tax revenue, hence it is more expensive to divert rent. .
Conclusion / Executive Summary
The study reveals that both PR and MAJ systems deliver too much targeted public goods, and too little global public goods compared to the defined effective benchmark. Highlighting government failure, the electoral returns to targeting benefits at the politically privileged median voters who exceed their shares in the population. This bias is worse for majoritarian system of governing. However, the trends show that MAJ system is likely to imply lower levels of corruption than the PR system. This is consistent with Presson & Tabellini’s (2003) evidence on electoral rules and corruption. Also, If we consider universal public good G as Presson and Tabellini’s SSW (social security and welfare spending), then SSW is predicted to be lower with the MAJ system, which is consistent with the study's empirical findings. This is stretching the model a little too far, but in their literature of Political Economics, P&T show that if G is replaced with an explicit model of the demand for unemployment insurance, the same conclusions persists. (Ben Lockwood, 2015)
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