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The political business cycle under rational voting behavior

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  • Ulrich Lächler

Abstract

This essay argues that politically motivated business cycles could persist in a democratic society even if the electorate votes in a rational, fully informed manner, provided that government policymakers have the means to systematically generate macroeconomic fluctuations. This cyclic outcome reflects the pReferences of an electorate that is composed of imperfectly altruistic voters belonging to different overlapping generations. Since each generation has a different horizon over which it would like to have elected politicians provide an optimal economic policy plan, an intergenerational conflict of interests situation arises. This conflict is placed into an explicit political context, whereby cycles become generated under the institutional constraint of periodic elections. Copyright Martinus Nijhoff Publishers 1984

Suggested Citation

  • Ulrich Lächler, 1984. "The political business cycle under rational voting behavior," Public Choice, Springer, vol. 44(3), pages 411-430, January.
  • Handle: RePEc:kap:pubcho:v:44:y:1984:i:3:p:411-430
    DOI: 10.1007/BF00119690
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    References listed on IDEAS

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    1. repec:cup:apsrev:v:71:y:1977:i:04:p:1467-1487_26 is not listed on IDEAS
    2. Fair, Ray C, 1978. "The Effect of Economic Events on Votes for President," The Review of Economics and Statistics, MIT Press, vol. 60(2), pages 159-173, May.
    3. MacRae, C Duncan, 1977. "A Political Model of the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 85(2), pages 239-263, April.
    4. E. S. Phelps & R. A. Pollak, 1968. "On Second-Best National Saving and Game-Equilibrium Growth," Review of Economic Studies, Oxford University Press, vol. 35(2), pages 185-199.
    5. Kohlberg, Elon, 1976. "A model of economic growth with altruism between generations," Journal of Economic Theory, Elsevier, vol. 13(1), pages 1-13, August.
    6. Minford, Patrick & Peel, David, 1982. "The political theory of the business cycle," European Economic Review, Elsevier, vol. 17(2), pages 253-270.
    7. William D. Nordhaus, 1975. "The Political Business Cycle," Review of Economic Studies, Oxford University Press, vol. 42(2), pages 169-190.
    8. Fischer, Stanley, 1977. "Long-Term Contracts, Rational Expectations, and the Optimal Money Supply Rule," Journal of Political Economy, University of Chicago Press, vol. 85(1), pages 191-205, February.
    9. Anthony Downs, 1957. "An Economic Theory of Political Action in a Democracy," Journal of Political Economy, University of Chicago Press, vol. 65, pages 135-135.
    10. Kramer, Gerald H., 1977. "A dynamical model of political equilibrium," Journal of Economic Theory, Elsevier, vol. 16(2), pages 310-334, December.
    11. Phelps, Edmund S & Taylor, John B, 1977. "Stabilizing Powers of Monetary Policy under Rational Expectations," Journal of Political Economy, University of Chicago Press, vol. 85(1), pages 163-190, February.
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    Cited by:

    1. Janet Pack, 1988. "The Congress and fiscal policy," Public Choice, Springer, vol. 58(2), pages 101-122, August.

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