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Misconceptions and Political Outcomes

  • David Romer

A large recent literature shows that strategic interactions among actors with conflicting objectives can produce inefficient political decisions. This paper investigates an alternative explanation of such decisions: if individuals' errors in assessing the likely effects of proposed policies are correlated, democratic decision-making can produce inefficient outcomes even in the absence of distributional conflicts or heterogeneous preferences. Choosing candidates from among the best informed members of the population does not remedy the problems created by such errors, but subsidizing information and exposing representatives to information after their election do. Concentration of power has ambiguous effects. Finally, the presence of correlated errors tends to create multiple equilibria in political institutions.

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File URL: http://www.nber.org/papers/w6117.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6117.

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Date of creation: Jul 1997
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Publication status: published as Romer, David. "Misconceptions And Political Outcomes," Economic Journal, 2003, v113(484,Jan), 1-20.
Handle: RePEc:nbr:nberwo:6117
Note: EFG ME PE
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  1. Tim Besley & Stephen Coate, . "An Economic Model of Representative Democracy," Penn CARESS Working Papers ecf70d639d700dba5327ab0c8, Penn Economics Department.
  2. Christina D. Romer & David H. Romer, 1996. "Institutions for Monetary Stability," NBER Working Papers 5557, National Bureau of Economic Research, Inc.
  3. Tabellini, Guido & Alesina, Alberto, 1990. "Voting on the Budget Deficit," Scholarly Articles 4553030, Harvard University Department of Economics.
  4. Rubinstein, Ariel, 1993. "On Price Recognition and Computational Complexity in a Monopolistic Model," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 473-84, June.
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  6. Dani Rodrik, 1996. "Understanding Economic Policy Reform," Journal of Economic Literature, American Economic Association, vol. 34(1), pages 9-41, March.
  7. Andrei Shleifer & Robert Vishny, 1992. "Pervasive Shortages under Socialism," RAND Journal of Economics, The RAND Corporation, vol. 23(2), pages 237-246, Summer.
  8. Matsusaka, John G, 1995. " Explaining Voter Turnout Patterns: An Information Theory," Public Choice, Springer, vol. 84(1-2), pages 91-117, July.
  9. Kandel, Eugene & Pearson, Neil D, 1995. "Differential Interpretation of Public Signals and Trade in Speculative Markets," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 831-72, August.
  10. Feddersen, Timothy J & Pesendorfer, Wolfgang, 1996. "The Swing Voter's Curse," American Economic Review, American Economic Association, vol. 86(3), pages 408-24, June.
  11. Coate, Stephen & Morris, Stephen, 1995. "On the Form of Transfers in Special Interests," Journal of Political Economy, University of Chicago Press, vol. 103(6), pages 1210-35, December.
  12. Shleifer, Andrei & Vishny, Robert W, 1994. "Politicians and Firms," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 995-1025, November.
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