Weingast B.R., Wittman D. The Oxford Handbook of Political Economy
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42 voters, candidates, and parties
the members of a group the costs of voting vary. The way to maximize group utility,
then, is to coordinate the members of the group such that those with high costs know
that they don’t have to vote and those with low costs know that they do. The actual
level of voting within each group will depend on the size of the groups, the benefit
from the outcome, and the distribution of costs within each group.
The answer to the paradoxes of rational ignorance and rational non-participation,
then, lies in rethinking the individual’s calculus. Maximizing remuneration from
voting is a dead end. The two promising avenues for further enquiry are to assume
that the utility derived from electoral participation and electoral choice is strictly
“consumption” or to assume that there exist mechanisms for coordinating groups
of individuals to political action.
The consumption approach is most widely adopted today in models of electoral
competition and vote choice. The formal literature on political economy takes as
given that people vote and that competition is waged over a spatial dimension,
perhaps also with a valence component. This assumption allows theorists to derive a
wide range of predictions about economic and social policy-making, but it ultimately
restricts the political economy of elections to the analysis of vote choice, but not
participation. For many applications that may be adequate, but there is considerable
evidence that participation is not entirely separate from preference.
Mechanisms for coordination, such as churches, unions, political parties, and
other social organizations, present a more promising avenue of future enquiry. The
interesting questions from this approach are why people develop group identities
and how vote coordination occurs. While Coate and Conlin model group behavior
as a form of rule utilitarianism, it may be possible to treat social groups as serving
individual interest. Currently, the best explanation for why people form and join
organizations is that offered by Mancur Olson—political organizations are a by-
product of other social and economic activities. And membership in such groups
is thought to depend on the ability of the organization to devise selective benefits for
those who join. In essence, groups exist not for political ends but for private benefits
and income maximization. It remains to be seen whether a model with endogenous
group formation by income-maximizing individuals can sustain positive levels of
political action and turnout.
The overall response to the paradoxes of rationality, though, has been to assume
that voters are not motivated only by self-interest. Although subtle, this shift in inter-
pretation is profound. It certainly takes the teeth out of the paradoxes of rationality.
Something is also lost. The modern political economy of elections presents a funda-
mentally different idea about people’s motivations. This notion reduces elections to
differences of opinion, rather than differences of interests. The economic theory of
democracy and liberal democratic theory more generally began with the notion that
people pursue their self-interest. With self-interest as a starting point the paradoxes
of rationality still seem inescapable. The paradoxes of rationality, then, amount to
impossibility theorems. It is impossible for individual self-interest to drive mass
politics. Instead, mass politics is determined by citizens’ beliefs about what is morally
right or collectively best.
stephen ansolabehere 43
4 Learning and Communication
.............................................................................
Non-participation presents a conundrum because the logic leads to a prediction that
is evidently false. About half of the American voting age population turns out for
national elections even when the election is not close.
Rational ignorance has a somewhat different flavor. The logic leads to an appar-
ently correct prediction: most people don’t know much about politics and public
policies, even policies that affect them directly. Indeed, the first public opinion re-
searchers in the United States concluded that the public comes nowhere near the view
of the ideal citizen assumed in most theorizing about democracy. However, if this is
true, then democracy seems like something of an impossibility.
There are, in fact, two conundrums. First, if people know little, then their vote
choices may be virtually random. As a result, elections may have little meaning and
not be good mechanisms for controlling politicians and the government. Second,
voters may be fooled. If people are not attentive, they may not know enough to judge
the veracity of campaign advertising and may be swayed easily by false promises.
Again, the electorate may choose politicians who will not serve as good agents.
It should be noted that the informedness of the electorate represents another
notion of rationality and rational choice. Democratic theories begin with the notion
that people are informed about the policies their government has implemented and
about the state of the world. That information is assumed to be correct. People do not
act out of irrational or incorrect beliefs about the world that they have been fooled
into holding. Such a statement is a normative conjecture. Hence, V. O. Key begins his
book The Responsible Electorate with the simple assertion that “voters are not fools.”
This is a hotly contested assertion, especially because of the enormous survey research
literature showing that people don’t know many basic facts about government or the
candidates.
Yet, somehow people are able to form opinions and make autonomous decisions,
and it is generally thought that public policy drives public opinion. Individual-
level, in-depth studies of voter learning find that people are not readily deceived.
Experiments involving campaign advertising that I conducted with Shanto Iyengar in
1994 show that voters are most responsive to messages that touch on issues of highest
concern to them, such as the economy, that voters on the whole have strong and (on
average) correct prior beliefs about the ideological positions of candidates, and that
voters do not change their opinions in response to messages on which candidates
do not have credible positions. Indeed, this sort of finding is well established in
survey research dating back to the 1940s. Political communications generally reinforce
individuals’ predispositions rather than converting them to new ways of thinking.
Studies of aggregate public opinion, most notably Robert Erikson, Michael
MacKuen, and James Stimson, The Macro Polity, and Ben Page and Robert Shapiro,
The Rational Public, show that policy is responsive to public opinion. These studies
document that over a forty-year period aggregate public opinion is not highly volatile,
as one would expect if people randomly answered questions, and that, on issues where
44 voters, candidates, and parties
public sentiment has changed dramatically, such as race relations, public sentiment
generally leads public policy changes. Politicians do not, then, promise what people
want to hear and do whatever they, the politicians, want. Politicians and government
policy respond to the electorate.
The puzzle is why and how do voters gain the information they need? One possibil-
ity is that people become informed because they have high consumption value to pol-
itics and devote considerable effort to learning the issues—voters are political junkies.
But, in truth, they are not. Individuals generally score poorly on political knowledge
measures, but, in aggregate or on average, public opinion reflects and responds to the
basic facts about public problems, such as the state of the economy or war.
The answer, both social psychologists and political economists agree, is that a few
simple facts about candidates carry a great deal of information. Perhaps the most
important pieces of information are the incumbency of a candidate or party and
political party labels. Nearly all people know which party controls the presidency in
the USA and they have a sense of whether times are good or bad. These two pieces of
information are all that are necessary to reach a judgement as to whether to reward
the incumbent party.
As far as ideology is concerned, political party labels contain nearly all of the
relevant information. Analyses of the American National Election Study show that
people perceive the Democratic and Republican parties to be approximately located
at the median of the Democratic voters and the median of Republican voters (e.g.
Brady and Sniderman 1985; Page and Shapiro 1992). And the public opinion data
are consistent with the extensive literature on the partisanship of representatives
in the US Congress. Analysis of roll call voting data documents that the parties
consist of two pools of ideologically distinct candidates. While there is some degree
of responsiveness of candidates to voters’ preferences, that is slight compared to the
importance of party in representatives’ decision-making (Ansolabehere, Snyder, and
Stewart 2001). A rational voter can readily infer how a politician will vote on most
matters simply from the party label.
Other sorts of seemingly vacuous news can be extremely informative. For example,
Richard McKelvey and Peter Ordeshook study the effects of polls and endorsements
on people’s judgements about the ideological positions of competing candidates. In
a series of experiments and theoretical analyses they show that news about which
candidate leads in the polls can reveal to uninformed voters the knowledge held
by informed voters. Moreover, McKelvey and Ordeshook (1985, 1986)arguethat
democracy does not require a very high density of informed people in order to
produce election results that resemble those of an election in which all people are
fully informed. Endorsements from groups can also have the same effect. For further
discussion of information aggregation and signaling in elections, see Thomas Palfrey’s
chapterinthisvolume.
The upshot of this line of reasoning is that an individual’s rational ignorance may
not be a problem for democracy after all. The low levels of information that have
long concerned public opinion researchers are offset by the properties of information
aggregation across large numbers of people.
stephen ansolabehere 45
Polls and endorsements convey information from other citizens. A third form of
information comes from the candidates and parties themselves in the form of televi-
sion ads, direct mailings, speeches, door-to-door canvassing, and the like. Candidates
and parties and those who fund them bear the cost of gathering, distilling, and
disseminating information. How effective are campaign advertisements and expen-
ditures, and why?
Two research traditions show starkly different results. Studies of aggregate election
data find weak effects of campaign spending on election outcomes, such as vote shares
and probabilities of winning (e.g. Jacobson 1980). Particularly puzzling, there is a
negative correlation between House incumbents’ campaign expenditures and vote
shares. The methodological problem lies in untangling the simultaneous relationship
between spending and election chances. Donors may be more likely to give to a
“winner,” just as the funds that they give to a candidate are used to affect the chances
of winning.
Experimental studies of the campaign communications often find very large ef-
fects of exposure to campaign advertisements on voter turnout and voter intentions.
Shanto Iyengar and I (1996) found in a laboratory study involving approximately
3,000 subjects that exposure to a single advertisement on average increased individ-
uals’ intentions to vote for the candidate featured in the ad by 7 percentage points.
Alan Gerber and Donald Green have performed a set of field experiments of the
effectiveness of get-out-to-vote activities involving tens of thousands of people. They
find significant, and sometimes quite large, effects of canvassing, phone banks, and
direct mail. They estimate that it costs about $40 to persuade the marginal voter to
turn out.
10
Why do voters believe campaign appeals, such as mailings and television ads? They
don’t, it turns out, believe everything they hear. Consider, for example, position-
taking. Viewers of televised advertisements respond most favorably to candidate
positions when those positions are consistent with the ideologies of the party and
were on important issues. For example, when Democrats advertised that they were
tough on crime they received less of an increase in vote support than the Republicans
did. It was hard for candidates to change much what voters thought to be important
and what positions voters thought the candidates represented.
11
Is this rational behavior on the part of voters? Why might voters be able to sort
through the facts this way? I think that voters, though they are not very good at
probability calculations, do reason in ways that are captured by Bayesian and classical
inference models. If people have strong beliefs about what the parties represent,
then it is hard for individual candidates to deviate from those positions. In learning
models, voters are most responsive to biased information that comes from a source
they believe and gives information contrary to what one would expect that source to
state (see Calvert 1985).
¹⁰ They report a number of experiments in different papers. For estimates of the causal effects and
costs per vote of direct voter contact see Gerber and Green 2000.
¹¹ Ansolabehere and Iyengar 1994.
46 voters, candidates, and parties
More puzzling is the value of advertising that consists of little more than the
candidate’s name. Billboards and handbills often just state the candidate’s name and
office, and not always party and incumbency. A candidate’s name seems to be a fairly
minimal sort of information, except perhaps where race or ethnicity is clearly at
stake. Gary Jacobson (1997) finds that the incumbency advantage is due, in part, to
the higher name recognition of office-holders. Jacobson argues that knowledge of a
candidate’s name indicates that the candidate is willing to spend the effort to appeal
to and represent voters.
Alan Gerber suggests a further dimension to and a potential problem with this
reasoning. Candidates and parties must raise campaign funds to pay for political
communications. If donations come from interest groups in exchange for political
favors, then the fact that a candidate advertises his or her name or issue positions
ought to signal to voters that the candidate has made a large number of side deals
with special interests. In that case, the candidate whose name you see may be a
less good representative than the alternative.
12
Hence, it is unclear whether rational
voters should infer that the candidate whose name they recognize or whose positions
they have learned from advertising will be a better representative. Formal analyses by
Alan Gerber, Steve Coate, and others argue that voters must trade off the uncertainty
associated with an unknown against the utility loss from interest group contributions.
Hence, campaign financing is thought to be a necessary evil: voters must accept some
interest group influence in order to get the information that they would not collect
ontheirown.Rationalignorance,then,iscostly.
An alternative argument implies that campaign contributions may serve to aggre-
gate the information of other citizens, just as polls and surveys do. Most campaign
contributions come not from interest groups, but from other citizens.
13
James Snyder
and I have argued elsewhere that citizens’ donations reflect a “consumption motiva-
tion,” not unlike that assumed in much of the literature on electoral competition and
participation (see Ansolabehere, de Figuereido, and Snyder 2003). A well-financed
candidate, then, is one who appeals to his or her natural party base and is of suffi-
ciently high quality that the activists within the party are willing to donate to his or
her campaign. If campaign fundraising mainly reflects a participation in the form of
giving by others, then rational voters may be able to infer a candidate’s quality from
name recognition or levels of spending.
Which of these arguments is true is ultimately an empirical question. However,
they reflect two different versions of the political economy approach to elections. The
line of reasoning presented by Gerber, Prat, and others reflects a view that political
action is motivated by private benefit and narrow self-interest. The line of reasoning
beginning with Jacobson ultimately rests on the notion that participation—either in
the form of giving or voting—is driven by “consumption motivations.” While the
consumption argument may have less sharp predictions about voter learning, the
¹² Examples of this line of reasoning are Gerber 1999 and Prat 2001.
¹³ For a general discussion of the politics of campaign finance see Sorauf 1992.
stephen ansolabehere 47
narrow self-interest view leads us back, ultimately, to the paradox of rational non-
participation of voters.
5 Conclusion
.............................................................................
The economic theory of democracy has transformed political science and economics.
It has introduced a methodology for theorizing about political strategy, laid out the
logic of electoral competition, and distilled the implications for what government
does and how well democratic government represents the public.
The theory is not without problems. The implications of the rational pursuit of
self-interest in politics lead to results that are paradoxical (rational non-voting),
pessimistically true (rational ignorance), or empirically falsified (the median voter
theorem).
As contemporary political economy theorists have grappled with these difficulties,
asomewhatdifferent economic theory of democracy has emerged, one rooted not
in narrow self-interest but in individuals’ beliefs and ideologies. Ideology might be
rooted in self-interest, but it need not be. Voters’ preferences might as readily reflect
what they believe to be morally right or socially best.
14
People vote and vote the way
they do as a form of “consumption.”
This shift in thinking came about in reaction to the paradoxes of rational non-
participation and rational ignorance, but it has opened an entirely new vista for
enquiry. Where do people’s beliefs come from and what sustains voting on the basis of
belief and ideology in politics? These questions have long been the purview of social
psychology. However, in the quest for a coherent economic theory of democracy,
political economists have increasingly pushed into understanding social organization,
social groups, and the flow of information in mass societies. And our understanding
of such social institutions and behavior is in its infancy.
Even still, the political economy of democracy remains closely tied to the simple
model of Hotelling and Downs. The one-dimensional spatial model is the basic tool
of political economy and political science, and the median voter theorem has become
a convenient baseline case or null hypothesis. It is a handy interpretative guide to
politics in established democracies. Deviation from the median voter theorem indi-
cates that at least one of the simple spatial theory’s assumptions no longer holds. But
theorists are no longer stymied by such criticisms. The addition of valence issues,
candidate preferences, electoral institutions, interest groups, and political parties to
¹⁴ There is extensive evidence in the social psychology literature on economic voting that suggests
voters’ preferences indeed reflect their beliefs about what is socially just or in the collective interest,
rather than their own personal interest. Kinder and Kiewiet 1981 offer the seminal study of this question
in the area of economic voting.
48 voters, candidates, and parties
the simple spatial framework has yielded a rich set of models and predictions and a
more general and powerful economic theory of democracy.
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chapter 3
..............................................................
RATIONAL VOTERS
AND POLITICAL
ADVERTISING
..............................................................
andrea prat
1 Introduction
.............................................................................
Most political scholars agree that organized groups play a key role in modern democ-
racy. One aspect of special interest politics that has caught the attention of both
academic researchers and the public at large, especially in the USA, is campaign con-
tributions. Candidates to various federal and state offices receive monetary donations
from various corporations and pressure groups.
1
What do candidates do with the money they receive from lobbies? In Western
democracies, politicians appear to use contributions not mainly to increase their
personal wealth but rather to finance their electoral campaigns. While electoral
spending includes canvassing, the production of printed material, and organizational
costs, it is television advertising that gets the lion’s share of US campaign spending
(Ansolabehere and Iyengar 1996).
Given this observation, it becomes clear that any theory of special interest politics
must explain what political advertising does. Most existing models assume an ad hoc
influence function, which maps campaign expenditure into vote share (Grossman
∗
I am grateful to Scott Ashworth and Steve Coate for providing useful comments.
¹ For a discussion of campaign finance in the USA, see Levitt 1995.Inothercountries,thesituation
is heterogeneous because of the presence of limits on campaign spending (which are discussed
below). See Kaid and Holtz-Bacha 1995 for an overview of electoral campaigning in various Western
democracies.
andrea prat 51
and Helpman 2001,ch.10). The more a candidate spends (perhaps in relation to
the expenditure of his opponents), the higher the share of voters who vote for him.
The problem of modeling the influence function as a black box is twofold. First,
results depend on the functional form we choose, but it is unclear what the most
plausible form is. Second, we cannot perform welfare analysis. Unless we know what
advertising does to voter utility, we cannot evaluate the relative merit of alternative
regulatory regimes.
The lack of microfoundation for political advertising is a serious drawback because
it prevents us from making policy recommendations. There is no consensus on
how campaign finance should be regulated. Different countries have chosen radi-
cally different ways. The USA imposes some limits on contributions but leaves the
expenditure side unregulated. Some European countries impose draconian limits
on both contributions and expenditures, and may provide more or less generous
public funding.
2
The need to build a microfounded model of campaign finance has
been recognized for some time (e.g. Morton and Cameron 1992). However, it is only
recently that theorists have moved in that direction. The present contribution will
offeracriticalreviewoftheexistingliterature.
Microfounded models of campaign finance begin with the assumption that voters
are rational: they are not systematically fooled by advertising.
3
However, voters may
have limited information about the characteristics of candidates and the political
platforms they support. Candidates may use advertising to provide voters with posi-
tive information about themselves and negative information about their opponents.
There are two possible approaches to informative advertising, depending on how
information transmission is modeled.
First, one may assume that advertising conveys no direct information (Potters,
Sloof, and van Winden 1997;Prat2002a, 2002b).
4
Still, it can provide information
indirectly. The fact that advertising is intrinsically expensive (time on television and
space on newspapers are scarce goods) means that advertising is a way to burn money
publicly. The willingness and/or the ability to destroy a large amount of resources
may constitute a credible signal of some otherwise non-verifiable information. For
instance, in a model of repeated purchases, a new seller may burn money in order to
signal to potential buyers that he has a high-quality product and that he believes that
buyers will buy more of it after they experience its quality (a seller with a low-quality
product would not be willing to spend the same amount on advertising because he
knows that sellers will only buy from him once).
² The US Supreme Court ruled that campaign advertising constitutes political speech and cannot be
in any way limited (Buckley v. Valeo, 1976). This sets the USA apart from other Western democracies, in
which campaign advertising enjoys no such strong constitutional protection. For instance, in 1998 the
European Court of Human Rights ruled (Bowman v. UK) that limits on campaign spending do not
necessarily violate the right to freedom of expression as long as they are not unreasonably low.
³ A microfoundation of campaign finance need not have rational voters. However, it is natural to
begin by examining the case that is closer to the standard Bayesian paradigm. In the conclusion, we
discuss the possibility of developing a model that incorporates cognitive biases.
⁴ This approach is inspired by models of advertising used in industrial organizations, such as
Kihlstrom and Riordan 1984 and Milgrom and Roberts 1986.