Does Government in a Representative Democracy Follow a Majority of Voters’ Preferences? — An Empirical Examination

Abstract

There are essentially three economic approaches to government behavior in literature:

• (1) The orthodox approach assumes a benevolent, potentially efficient dictator, and is implicitly dominant in the conventional normative policy framework. How the political processes actually work is not considered, and many economists may claim that there is no need to do so, as the aim of this approach is to provide advice to governments grounded on ethical norms. However, as Brennan and Buchanan (1980, p. 14) argue: “Nonetheless, there is contained ... the implicit belief, or faith that the politicians-bureaucrats ... not only have the power to determine governmental-political outcomes, but also are likely to find the ethically based arguments compelling”. If the governmental processes would function along these ethical lines, there is indeed no need for an extensive positive analysis of government behavior. But if we assume — as we do for the individual in the market sphere — a selfish utility maximizing behavior in the political sphere, then the behavior of politicians-bureaucrats does not necessarily follow the advice grounded on ethical norms. We then explicitly need a positive analysis of government behavior.

• (2) Among those economists who feel that there is a need for analyzing governmental processes the great majority follow one line of public choice theory which — referring to Downs (1957) — emphasizes the similarities in the ways the market and the political spheres in a majoritan democracy behave. In both cases, it is argued, suppliers tend to adapt to the desires of the customers: in the perfect market, firms adapt to the desires of the buyers; and in politics, parties adapt to desires of the voters. In a two party system, the framework usually used, the outcome of government behavior is therefore not necessary and in a very real sense, there exists no government as such.

• (3) The following analysis, on the contrary, is based on the idea of dissimilarities between politics and the perfect market. Under the very best of circumstances, rarely attainable at all, politics may approach the perfect market in the extent to which the suppliers adapt to the customers’ desires. In reality, however, the supply side push may dominate the forces of the demand side pull in terms of the structure and pattern of the political outcomes¹: though in a democracy there are at least two parties, competing at the electoral level for the support of the voters, following an election there is only one majority for the duration of the legislative period. The elected government can be assumed to have a prominent position in comparison to the opposition party(s), and thus can to a large extent act accordingly. In this case a “government” as such does really exist — and so a need arises for a positive analysis of govermental processes.

The authors gratefully acknowledge the comments made on a previous version of the paper which was discussed at the Diessen Conference, and at the Universities of Bonn, Carleton, Harvard, Kingston, Munich and Vienna. Thanks are due especially to Peter Bernholz, Bernhard Bobe, James M. Buchanan, Giovanni Demaria, Bruno S. Frey, Guy Gilbert, Horst Hanusch, Gebhard Kirchgässner, Christian S. Palda, Richard E. Wagner and Peter Zweifel. The paper also benefits from painstaking comments by Jürgen Müller. The authors acknowledge the help of Wendy Freuler in editing the paper for English.