Will Democracy Engender Equality?

Summary

Many suppose that democracy is an ethos which requires, inter alia, a degree of economic equality among citizens. In contrast, we conceive of democracy as ruthless electoral competition between groups of citizens with different interests, who are organized into parties. We inquire whether such competition, which we assume to be concerned with distributive matters, will engender economic equality in the long run. Society is modeled as OLG, and each generation competes politically over educational finance and tax policy; the policy space is infinite dimensional. A political equilibrium concept is proposed which determines the membership of two parties endogenously, and their proposed policies in political competition. One party wins the election (stochastically). This process determines the evolution of the distribution of human capital. We show that, whether the limit distribution of human capital is an equal one depends upon the nature of intra-party bargaining and the degree of inequality in the original distribution.

This article reports on a longer project, to be published as Democracy, Education, and Equality (Cambridge University Press). Here, I motivate the problem, explain one of the models, and state one of the principal results. Proofs of theorems are omitted, but will be available in the aforementioned monograph. Many individuals have provided valuable comments and help on this project, including Ignacio Ortuño-Ortin, Herbert Scarf, Roger E. Howe, Karine Van der Straeten, John Geanokoplos, and Colin Stewart.. A preliminary version of this work was delivered as the Graz-Schumpeter Lectures at the University of Graz in May 2003, and I am grateful to the Graz Schumpeter Society for their hospitality and comments. The general topic of this article has been, I believe, of keen interest to Birgit Grodal, a dear friend and staunch supporter of my unconventional work in economic theory since I embarked upon that path in the late 1970s. I will always be deeply grateful for her friendship, support and encouragement, and I am honored to contribute this paper to her festschrift.