Political Entrepreneurs
What will individuals do? Inconsistencies of voting open new perspectives for political entrepreneurship. Anthony Downs (1957) has suggested that party leaders who maximize votes may contribute to general welfare in the same way as competitive private entrepreneurs who maximize profits under competition in private markets.
The analogy holds, however, only if the political process fulfils a number of restrictive conditions. Political issues can be arranged in a single left-right policy space consistent with Duncan Black’s condition of single-peakedness. Moreover, perfect information and permanent voting are required. Eventually two competing parties will meet in equilibrium at the programme which is most preferred by the median voter.Chance decides which party will come to government. If individuals, however, believe that parties’ positions are far off the median, the probability that an individual’s vote is decisive for the election outcome is very small and not worth the personal costs of voting. Nevertheless, people vote. This is the “paradox of voting” first pointed out by Downs (1957). The paradox of voting is an unexplained anomaly in economics.
The Downsian conditions of a voting equilibrium are, however, very restrictive. Peter Coughlin and Shmuel Nitzan (1981) asked the question: is it possible to find a voting equilibrium between two competing parties if preferences are more than one dimensional? They found that under deterministic preferences even small changes in a platform will motivate voters to reallocate their votes so that cycles again occur as soon as a party transgresses the yes/no threshold of a voter’s preferences. Cycles can, however, be avoided when voters and parties are both incompletely informed about each others’ reactions so that only the probability of a yes or no increases or decreases when a party modifies its programme, and voters therefore adjust their voting decisions probabilistically in every direction. Under these conditions again a stable median voter outcome may emerge.
In the more general case in which the equilibrium conditions are not fulfilled, vote competition generates an endless cycle. One majority beats the other without an improvement in sight. The danger increases that individuals get frustrated and find their hope in the autocracy of a powerful dictator.