Two Problems Can Be Better than One

• In Event: Multi-Dimensionality in Policy Problems

Abstract

Why are politicians perceived to rarely solve fixable problems? In this paper, we show how electoral forces can generate behavior that motivates this question. We study a game-theoretic model in which voters care about two issues and can use previous policy outcomes to learn about the incumbent’s ability on each issue. The incumbent can exert effort to deliver better outcomes on the two issues during their term. Crucially, however, the incumbent can also choose to permanently solve the second issue. We show that electoral concerns dampen the incumbent’s incentive to solve issues. Although it may be less costly in the long run to solve an issue today rather than merely treat it, politicians can benefit from keeping a diverse portfolio of ongoing issues. The incumbent faces a fundamental strategic tradeoff because voters cannot commit to rewarding her for solving an issue. Fully solving a problem takes away a signaling instrument, but can also provide information about the politician’s ability on the remaining issue. Unless voter beliefs about the incumbent’s ability are sufficiently positively correlated across issues, the incumbent prefers to keep both issues unresolved. Persistent problems can thus result from relatively benign voter-politician interactions with multiple issues.

Authors

• Zuheir Desai, IE University

• Gleason Judd, Princeton University