Lecture 07: Political Economy

Quick Overview

Representative democracy, under the assumptions of single-peaked preferences and vote-maximizing politicians, still yields the Median Voter Outcome, a finding demonstrated through a two-candidate spatial competition model, but this outcome is significantly undermined in reality by factors like non-universal voting, multiple candidates, ideology, money in politics, and especially the rise of partisan media creating echo chambers that reinforce confirmation bias.

Key Points: Representative democracy, assuming single-peaked preferences and vote-maximizing politicians, results in the Median Voter Outcome, meaning both candidates converge to the center position in a one-issue election. The Median Voter Theorem breaks down with three or more candidates because no Nash equilibrium exists, and it is violated if voting is non-selective (differential turnout based on preference intensity) or if candidates possess ideology. Lobbying, while potentially productive by providing expertise and representing preference intensity, often overcorrects, leading to policies like massive farm subsidies where small groups with large interests outweigh large groups with small interests, exemplified by the US spending $22.4 billion annually on farms. US political polarization has dramatically increased since the mid-20th century, with Republican and Democratic voting scores now being as far apart as they were in 1879, driven significantly by partisan media and social media echo chambers. Empirical evidence shows partisan media significantly influences outcomes; one study estimated that removing the 'Fox News effect' in 2004 would have resulted in John Kerry beating George Bush, and providing objective facts about the Affordable Care Act actually pushed partisans' opinions farther apart due to confirmation bias. Institutional changes exacerbate polarization, including gerrymandering, where politicians choose voters by 'cracking and packing' districts to maximize opposing party's 'wasted votes,' leading to an efficiency gap, and the Electoral College, which grants disproportionate power to smaller states. Voter tribalism is increasing, evidenced by Americans being 10 times more opposed to a child marrying someone of a different political party (50%) than they were opposed to interracial marriage in 1960 (10%).