VI. MANAGING GOVERNMENT FAILURE Political Economy Approach What determines government choices? Rational Individuals responding to institutional rules

Policy Actors What they should do What they can do What they want to do What they need to do

Why do policy actors act the way they do? Because they are evil? Because they are self-interested Responding to Incentives Responding to Constraints What are the incentives and constraints that policy actors face?

Government oversees the Market but who oversees the government? Interest groups Other government agencies: separation of powers Institutional rules that provide incentives to act in an appropriate way: sunshine laws; campaign finance laws, etc. Voters: Leadership Selection Process

Who are the policy leaders? Public Officials Executive Legislators Bureaucracy Private Actors Interest Groups Voters

Political Economy Approach What are the “rules of the game”? Generally political science looks to the institutions of the political system Rational Individuals responding to institutional rules

What Institutions –Structure of Power Parliamentary/Presidential Checks and Balances Federalism –Elections Frequency Geographic boundaries

Elections Elected Officials are utility maximizing individuals. What are they trying to maximize?

In economics the utility function is usually based on money, but in elections it is maximizing votes. Elected officials want to get reelected. How do they do it?

Attractive Candidate Looks, speech Attractive Policies –Median Voter model Positive Media Attention –Name Recognition –Public made aware of policy position

DemocratRepublican Policy Position μ

Electoral pressure produces policies that gravitate toward the average voter. Democracy works! Sometimes? What goes wrong? The urge to shirk or institutional constraints

Pathologies of Congressional Elections Large districts/Drawn districts Low Voter Turnout Incumbency advantage Pork Barrel Politics –Short term local interest vs. long term national interest Special Interest Influence

Redistricting

Solutions? Changing institutional rules Term limits Campaign Finance Reform Nevada: full-time legislature Line-item veto Proportional Representation

Increase # of members in U.S. House Germany, Brazil, Russia, Japan, Mexico, Fance, Italy, UK, Poland, all have more members even though they have smaller populations Prior to 1915, the House grew in tandem with the population

Only India (a nation of over 1 billion people) has more constituents per representative than the U.S. Has the U.S. become the second most “under-representative” democracy in the world?

Voter Turnout More Parties (oh no!!!) More perspectives included More distinctive parties Party/Issue centered campaigns More descriptive representation Citizens more satisfied

How do we get more parties? Single member plurality (SMP) districts needs to go Need new voting mechanism –Proportional Representation –Single Transferable Vote –Cumulative Voting

Incumbent advantage Term limits (good) Creates more “open” seats Women and Minorities have found it easier to get elected Legislators more likely to support policies for the good of their state, not just their district

Term limits (bad) Only wealthy people can take time off of career and server for 2 terms. Do we want to make popular, hard working legislators leave?

Term limits (bad) How do you act when you know you are going to leave office? Weakens Parties, who becomes the party leader if you only stay on for 2, 3 terms. No one with institutional history of how things are done. Strengthens bureaucracy

Limiting the Influence of Money Transparency: Disclosure of sources of money and information Public subsidies to parties Limits on expenditures and contributions Force networks to give reduced cost/free TV time

Transparency Citizens need to know the source of money and info to judge the legitimacy of information or policies Non-profit groups (527 groups) not required to follow disclosure requirements. (this may be changing) Issue ads – Republicans for Clean Air, Coalition for Student Loan Reform

Public Subsidies Benefit: Reduce dependence on large contributions to individuals Example: Minnesota –53% of publicly funded candidates win –Citizen control –Helpful to third parties (Jesse “the body” Ventura)

Limits on Spending Bipartisan Campaign Finance Reform Act –No issue ads within 60 days of election –Disclosure of source of funds for ads –Limits contributions from certain PACs to candidates and parties Enforcement?

Free TV ads Networks made almost $1 billion in 2000 Charge candidates more than the standard rates. So? Senator Toricelli (D-NY) proposal approved by Senate to regulate prices Broadcasters donated over $1.5 million and the House kills the proposal.

If we want to fix the electoral system we need to change the incentive structure of candidates. Generally most of political science suggest higher voter turnout, stronger parties, and publicly funded elections equals more accountability. But to achieve this we need radical reforms to the current institutions