Overview

1. An introduction to research on political institutions

2. Introduction to the key themes of the course

3. A brief primer on collective choice theory

Institutions

Definitions:

Douglas North: The humanly devised constraints that structure human interactions

Brennan and Hamlin: basic rules under which social orders operate.

Institutions

We will focus primarily (but not exclusively) on formal institutions that are relatively difficult to change, like constitutions.

Basic premise of this course: Institutions “matter,” they affect important social and economic outcomes.

Do institutions matter?

Perhaps not: Median voter theorem Perhaps democracies ultimately must implement the will of the median voter

Europe and the United States have very different profiles of policies. What explains this?

▪ Institutions?▪ Preferences?

A basic approach to institutions

There is some distribution of preferences among individuals, and individuals are clustered (non-randomly) into districts and regions

A basic approach to institutionsTaking those preferences into account office-oriented politicians try to adopt winning platforms They must appeal to geographic constituencies, but also:▪ Voters versus non-voters▪ Primary versus general election constituency

▪ Organized versus unorganized groups▪ Campaign contributors

A basic approach to institutions

Institutions matter in a variety of ways in shaping the platforms politicians offer in campaigns Examples:

▪ Geography of districts, federalism▪ Voter identification laws▪ Choice rules within parties

A basic approach to institutionsVoters then look at these platforms, past performance, and reputations of parties and politicians, and cast their votes.

Next comes the stage of post-election politics, at which legislators and the executive interact to produce policies Institutions can matter in a variety of ways:▪ Committee system, agenda control, rules, nature of relations between executive and legislature

A non-exhaustive list of ways in which institutions might matterThey might shape the choice of party platforms

They might shape the credibility of those platforms.

They might shape who votes. They might actually help shape who wins.

Then, they can have a variety of effects in the legislative process and at the implementation stage.

Institutions and the problem of causal inferenceWhy is it difficult to show that institutions matter?

Institutions and the problem of causal inferenceWhy is it difficult to show that institutions matter? Perhaps institutions merely reflect the interests of powerful groups▪ PR and a strong left▪ Restrictions on voting and a strong right

Perhaps they are reflections of the preferences of the median voter▪ Fiscally conservative voters institute balanced budget requirements

Interactive effects

Often we will encounter arguments about institutions that are contingent. Example 1: Institutional change that enhances turnout might have a bigger impact in Ohio than Massachusetts

Example 2: Classic story about proportional representation, social cleavages, and the number of parties

Federalist 10

Institutions discussed by Madison: Representation vs. more direct forms of democracy

Geography—the size and extent of a Republic.

Checks and balances Whether electoral districts should be large (PR) or small (SMD). How this relates to accountability vs. efficiency.

Federalism

Federalist 10 (continued)

Outcomes mentioned by Madison: Inequality and redistribution Public versus private goods, interest group politics and pork

Trade policy—manufactures versus agriculture, interests of consumers versus producers.

Federalist 10 (continued)Madison’s approach is similar to modern political economy: individuals are self-seeking, “men are not angels.”

If incentives are not properly structured, bad things can happen. Institutions have a big impact on whose interests are ultimately transformed into policy, and this has implications for normative questions and the stability of democracy

Federalist 10 (continued)

What is Madison’s main concern with democracy?

Federalist 10 (continued)What is Madison’s main concern with democracy? Faction Interest group politics Government in the interest of small groups rather than the public interest

Anticipates Mancur Olson▪ Democracies do not necessarily reflect the will of the median voter.

Madison and Aristotle

But is a “faction” always a small minority for Madison?

Madison and Aristotle

But is a “faction” always a small minority for Madison? The most dangerous faction: the poor

This introduces one of the key questions of the course. Why does income inequality not necessarily create redistribution? What is the role for institutions?

A brief introduction to collective choice theory with special attention to: Cycling majorities, social choice instability

The importance of institutions and agenda setters

Analytical tool: The median voter theorem

What meaning should we attach to democratic outcomes? What about constitutions?

Condorcet’s Paradox: A set of rational individual’s may not act rationally when they act as a group

Rational Individuals have complete and transitive preference orderings.

Let indicate that x is preferred to y by individual i in the sense that, given a choice between x and y the individual would choose x.

An actor has a complete preference ordering if she can compare each pair of elements (call them x and y) in a set of outcomes in one of the following ways – either the actor prefers x to y, y to x, or she is indifferent between them.

An actor has a transitive preference ordering if for any x, y, and z in the set of outcomes it is the case that if x is weakly preferred to y, and y is weakly preferred to z, then it must be the case that x is weakly preferred to z.

x i y

A class deciding what kind of pizza to order:

Pepperoni (P)

Mushroom (M)

Mixed Vegetable (V)

Vote over all sets of pair-wise comparisons using majority rule and the alternative that wins the most pair-wise contests is the group choice.

This example demonstrated that its possible for a set of rational individuals to form a group with intransitive preferences.

That is, individual rationality and majority rule does not guarantee that an alternative will arise as a Condorcet winner.

1. Who’s the majority? 2. Sometimes there is no decisive winner3. When the group’s preferences are

intransitive there is either no stable outcome or the outcome is determined by the rules of the game.

• Typically, the rule designating an agenda setter is decisive

Cyclical majorities are likely

Since many decisions in democracy involve either many "voters" or a large number of alternatives, thus, if decisions were made by round-robin tournament, we would expect to observe a great deal of policy instability.

What happens in the real world?

Do we see cycling majorities in politics all the time?

One reason why we fail to observe instability is that mechanisms other than round robin tournaments are used to make group decisions.

Changes the rules for a how a group decides, changes the decision.

Even within some decision rules (e.g. The Borda Count), arbitrary changes in the process (such as the introduction of an alternative no body wants) can change the outcome.

What if we allow some players to decide the order in which alternatives are pitted against one another?

Therefore, one reason policy may exhibit more stability than might be expected in light of the Condorcet Paradox is that some actor or actors have been given the ability to set the agenda.

If this is true, stability has been achieved at the sacrifice of fairness (since the agenda setter is acting like a dictator - their preferred outcome is always chosen)

Committee systemsOpen vs. closed rulesAgenda power for partiesWhat about the referendum process?

If, 1. In a contest between two

alternatives 2. arrayed along a single policy

dimension.3. There are an odd number of voters 4. With single-peaked preferences5. Who all vote sincerelyThen, the proposal matching the ideal

point of the median voter will defeat all other alternatives

In Black's (1948) version these were alternatives presented by a committee. Committee members were free to propose any change to the status quo, but eventually, if the median committee member's ideal point was presented, it would win and become the new status quo - and nothing could displace it.

In Down's (1957) the alternatives were thought of as policy proposals of 2 parties competing in an election. While parties could propose any point on the line, any party that chose a point other than the median voter's ideal point could be defeated by a competitor who did.

The stability found in Median Voter Theorem depends a great deal the assumption that politics is "unidimensional". If voters care about differences across more than one policy dimension we need to change the nature of the restrictions on assumptions to retain a unique solution.

This is a modeling convenience. Without it there is no "median voter".

Voters with single-peaked preferences have an ideal point in the policy space and experience declines in utility as policy moves away from that space.

This is really 2 assumptions: no abstentions no strategic voting

Note: while proposal A defeats SQ, and B, defeats A, a proposal equal to C's ideal

point is the only stable outcome.

If there are two or more issue dimensions and three or more voters with preferences in the issue space who all vote sincerely, then except in the case where the median voter on one dimension is the median voter on the other, there will be no Condorcet winner.

Majority rule creates practical problems in some situations - it doesn't produce a stable outcome

May not be normatively appealing in all situations in order to produce a clear outcome we must do something "undemocratic" such as restrict preferences, or give individuals agenda setting powers.

The pathologies of majority rule apply to “any” group decision procedure that meets some minimal standards of fairness.

1. Non-Dictatorship (D)2. Universal Admissibility (U)3. Unanimity (or Pareto Optimality) (P)4. Independence from Irrelevant

Alternatives (I)Arrow proved that it is impossible

to meet all 4 of these fairness conditions while simultaneously guaranteeing that the group be able to make rational decisions (that is, avoid the instability caused by group intransitivity)

His fairness conditions are "minimal" - we might demand much more from our institutions than these conditions. But if stable outcomes can not be guaranteed in these minimally fair institutions, then they can not be guaranteed under any more normatively ambitious institutions.

There is a tensions between stability, fairness, and the freedom of actors to form their own preferences. If you want stability you either have to:

Place restrictions on preferences (I.e. make sure actors don’t have the kinds of preferences that would lead to cycling) ….

Or ……Place restrictions on who is allowed to make proposals ….

Or …….Place restrictions on who gets to participate in the decision

If democracies aim to meet Arrow's fairness conditions, then there is a tension within democracy between fairness and "rationality" or "group transitivity".

In fact, there are many different ways to organize democracy and the large variety of democracies we will study can be thought of as alternative attempts to address tensions between fairness and decisiveness that all group decision mechanisms must confront.

“Populist” view of voting (Rousseau): Ascertain the “will of the people” and turn it into law. Group choice is meaningful.

“Liberal” view of voting (Madison): There is no such thing as the “will of the people.”

Elections are important because they allow us to throw out bad politicians and replace them with alternatives.

Original intent?