Which Form of Democracy?
Citizens of an association of states, of a federal state and of a unitary state, may practice different forms of democracies. Some have direct democracies, some representative democracies and some two party systems, but which form of democracy should be chosen? In a direct democracy the voters vote on issues, in a representative democracy the voters elect representatives who vote on issues.
These two cases, however, need to be defined more closely. A direct democracy usually means that a representative democracy is supplemented by direct voting if required by a referendum or an initiative, and a representative democracy means that the parliament exclusively and definitely decides. In some representative democracies, the government is elected by the parliament, in others the government or the president is elected directly by the citizens. Though both democracies are representative, the latter are often called “presidential”.Direct and representative democracies differ in the way in which government and parliament are controlled. In a representative democracy members of parliament are confronted only at election time with voters’ preferences. During the mandate they are shielded from strict adherence to voters’ will. In a direct democracy, in contrast, government and parliament have less leeway. They are checked by referenda and popular initiatives during the mandate and in the elections. Therefore more compliance with voter preferences has to be expected in direct democracies than in representative democracies.
An important question is therefore who does benefit from the leeway, which is generated by voters’ incomplete control in representative democracies? Economists say that the leeway establishes a common pool for which interest groups compete. In equilibrium the total costs of competition for rents are equal to the total benefits and nothing is left over for interest groups (theorem of the dissipation of rents, Tullock 1980).
In so far as competition for rents is restricted, rents do not fully dissipate and result in benefits for staff and bureaucrats within the government (Luchinger et al. 2010). For these reasons interest groups have an important influence in representative democracies. However, what about rents in a direct democracy? In general it is said that the political influence of interest groups and bureaucrats is smaller in a direct democracy than in a representative democracy for it is more expensive to convince millions of voters than a handful of representatives (Kirchgassner et al. 1999: 31-2).Rent-seeking is not without social costs to voters: what interest groups gain is lost by voters. Especially vaguely defined and blurred voter interests such as disguised taxes, general expenditures and public debt are likely to be neglected by politicians in parliamentary democracies in favour of interest groups’ goals. Amilcare Puviani (1903) has observed this phenomenon more than 100 years ago. In empirical studies it has been corroborated later that taxes, expenditures and public debt are significantly lower in direct than in parliamentary democracies (Kirchgassner et al. 1999).
Rent-seeking occurs mostly in public production which cannot be easily controlled by voters. Quite a number of nineteenth-century French economists therefore advocated an outright privatization of state enterprises, the transformation of the state into a new organization designed on the model of a private company. The state should disappear into a new private company (see Faccarello 2010 for a survey). A well-organized private economy is always better than a corrupt public economy. In reality, however, a state which is run as a private company usually needs regulation.
Blankart and Mueller (2014) ask: what could be done to increase citizens’ influence in politics? In public choice, two models of democracies can be distinguished:
1. A pure representative democracy is established in two stages.
At the outset each citizen is by definition a member of the parliament. However, he or she does not have to take office. He or she may delegate his or her vote to a person he or she trusts. Under utility maximization, citizens choose the members of parliament who come closest to their personal preferences. Should the resulting parliament be too big to be operational a second vote is held in which only (say) the 100 candidates who have received most votes remain in the parliament. Traditional political parties may act as intermediators. The resulting parliament is truly representative because the nomination of representatives is free and unrestricted. No political party preselects the candidates. Preference formation, discussion and vote take place in the parliament.2. In a pure two-party democracy, the parties try to identify and to amalgamate voters’ preferences in their premisses. Party leaders then submit the chosen programme to the voters. After a run-off election among different party programmes, it is revealed which of the two remaining programmes attracts more votes. The government is formed by the leader who has won the election and hence the absolute majority of the votes.
There is a role for referenda in a pure representative democracy. Representatives may have missed the exact voter preferences in their debate that can be corrected in a referendum, but there is barely a scope for referenda in a pure two-party system. The election is about issues and not about the preferences generating the issues. Therefore it is logical not to allow direct democracy through referenda and initiatives during the election period, as they would blur government’s responsibility. It is preferable to have shorter election periods in order to keep the government under control.
It is often said that the so-called Westminster system inherited from the British democratic tradition is equivalent to the pure two-party system, but this is not the case. In the Westminster system candidates are elected in local districts by relative majority according to the first-past-the-post system. The overall majority of the votes is not necessarily reflected in the majority of the seats in parliament. If the voters shift from left to the right or vice versa, politics are not constrained to follow. The gap may be filled by preferences of interest groups (Blankart and Mueller 2014).