A Madison Theory of Political Capital

• In Event: Intra-Party Competition and Elections

Abstract

The democratic ideal of voters’ sovereignty over policy choice through the electoral process is subject to agency problems that may befuddle even well-established democracies. However, the commonly accepted view of such problems is that the electoral contest is the primary constraint on policy-making by the incumbents. However, this view assumes away a key ingredient of policy-making that ‘’the private power’’ of candidates (or parties) that influences how the policy choices turn into policy outcomes. In this paper, we develop an accountability model, in which two political rivals may setup political constraints on each other’s policy decisions. This model provides a theory of how the effects of private power may influence the electoral accountability and generates some interesting conclusions that help account for a number of otherwise puzzling empirical observations.

There are three players in the game, an incumbent, a challenger and a representative voter. At the beginning of the game, the incumbent and the challenger may choose to use their political capitals to setup political constraints on their rivals. Then the incumbent provides the public goods to the voter, but subject to the political constraint. After that the voter decides whether to keep the incumbent in the office. The winner of the election may provide the public goods again and subject to the political constraint.

The model indicates that the voter prefers the politician who is constrained by her rival but with more public resource. This result implies that not only the electoral accountability but also the political constraint may discipline politicians’ decision-making process. We also characterize the equilibrium results under different levels of political competition. We find that when the political constraint is tight and politicians’ types are ambiguous, both politicians prefer to setup the constraint to their rivals. Moreover, when the political constraint consumes a considerable resource, the voter’s welfare is even worse than that under a dictatorship (no election).

When the uncertainty of politicians’ types is small, only the challenger will setup the constraint to the incumbent but not vise verse. In this equilibrium, the challenger prefers to use the constraint to push the incumbent to provide more public goods, rather than take the office by herself.

Authors

• Congyi Zhou, New York University

• Catherine Hafer, New York University

• Scott Tyson, University of Rochester