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Populism, the Backlash against Ruling Politicians and the Possible Malfunctioning of Representative Democracy

Author

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  • Mario Gilli
  • Elena Manzoni

Abstract

The aim of this paper is to investigate the links between lack of trust in ruling politicians and the functioning of a representative democracy. Within a standard principal-agent model of democracy, we show how lack of trust by citizens as reflected by passive beliefs updating may lead to the malfunctioning of representative democracy. We highlight how de facto accountability crucially depends on out-of-equilibrium beliefs, and that this is indeed descriptive of a substantive feature of public opinion that affects the functioning of democracy. Specifically, we show that effective accountability needs more than simple retrospective voting, as it requires voters to believe in the existence of good politicians that always choose according to voters’ interests, so that a deviation from bad policies can happen only because the leader is congruent. In this case, the unique equilibrium is an efficient one that maximizes voters’ welfare. However, if, on the other hand, the citizens share an overall lack of trust in ruling elites, then there is another inefficient equilibrium, where even the congruent politician behaves badly because of the adverse but rational voters’ behavior. This inefficient equilibrium does not depend on fake news or on distorted beliefs or, again, on voters’ heterogeneous preferences, since the voters' perfectly observe the quality of the policy implemented by the government, are fully rational and share the same interests. This result might contribute to explain the increasing negative perceptions on the working of democracy as due to a self-fulfilling equilibrium.

Suggested Citation

  • Mario Gilli & Elena Manzoni, 2019. "Populism, the Backlash against Ruling Politicians and the Possible Malfunctioning of Representative Democracy," Working Papers 417, University of Milano-Bicocca, Department of Economics, revised Aug 2019.
  • Handle: RePEc:mib:wpaper:417
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    References listed on IDEAS

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    1. Berganza, Juan Carlos, 2000. "Two Roles for Elections: Disciplining the Incumbent and Selecting a Competent Candidate," Public Choice, Springer, vol. 105(1-2), pages 165-193, October.
    2. Abhijit V. Banerjee, 1997. "A Theory of Misgovernance," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1289-1332.
    3. Stephen Morris, 2001. "Political Correctness," Journal of Political Economy, University of Chicago Press, vol. 109(2), pages 231-265, April.
    4. Timothy Besley & Stephen Coate, 2003. "Elected Versus Appointed Regulators: Theory and Evidence," Journal of the European Economic Association, MIT Press, vol. 1(5), pages 1176-1206, September.
    5. Smart, Michael & Sturm, Daniel M., 2013. "Term limits and electoral accountability," Journal of Public Economics, Elsevier, vol. 107(C), pages 93-102.
    6. John Ferejohn, 1986. "Incumbent performance and electoral control," Public Choice, Springer, vol. 50(1), pages 5-25, January.
    7. Eric Maskin & Jean Tirole, 2004. "The Politician and the Judge: Accountability in Government," American Economic Review, American Economic Association, vol. 94(4), pages 1034-1054, September.
    8. Scott Ashworth, 2005. "Reputational Dynamics and Political Careers," Journal of Law, Economics, and Organization, Oxford University Press, vol. 21(2), pages 441-466, October.
    9. Inglehart, Ronald F. & Norris, Pippa, 2016. "Trump, Brexit, and the Rise of Populism: Economic Have-Nots and Cultural Backlash," Working Paper Series 16-026, Harvard University, John F. Kennedy School of Government.
    10. Carrillo, Juan D. & Mariotti, Thomas, 2001. "Electoral competition and politician turnover," European Economic Review, Elsevier, vol. 45(1), pages 1-25, January.
    11. Besley, Timothy & Coate, Stephen, 1998. "Sources of Inefficiency in a Representative Democracy: A Dynamic Analysis," American Economic Review, American Economic Association, vol. 88(1), pages 139-156, March.
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    More about this item

    Keywords

    Government Performance; Democracy; Representation; Out-of-equilibrium Beliefs.;

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation

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