Why Delegate? Comparing Direct and Representative Democracy

The growing demand for referendums challenges the traditional model of representative democracy. Why may voters prefer to decide by themselves (direct democracy) rather than delegate on their representatives (representative democracy)? We propose a model in which voters select either a policy or a representative under uncertainty over the socially correct policy. Under direct democracy, the policy selected by voters is implemented, while under representative democracy the elected representative decides the policy. We assume that representatives have informational advantage. Our main result shows that a society in which the majority of voters are selfish may prefer a system of political representation when they are strongly ideologically polarized. If, instead of ideological confrontation, there is consensus among these selfish voters, referendum is the preferred instrument for making decisions. Non-selfish societies, however, always prefer to delegate on better informed representatives.