• Recall the Median Voter Theorem: politicians are trying to get close to what they believe the median voter wants

• Politicians may have their own honest convictions about issues

• Tradeoff: honest convictions vs. winning (adopting median voter's preferences)

  • Leslie Knope/Josiah Bartlet vs. Frank Underwood
  • Only winners get to enact their policies!

• Rationally ignorant voters pay little attention to actual substance or policy-making; more to TV-friendly spectacles

• Big speeches, ribbon cutting ceremonies, attack ads on rivals, etc

• Platforms more about broad platitudes than substance "family values," "tough on crime," "change," "drain the swamp" etc.

• Special interests pay very close attention and are actively involved in policy-making and contribute to political campaigns

• Politicians allocate funds towards special interests

U.S. House of Representatives:

• Direct election of all representatives every 2 years

• All revenue (tax) bills must start in the House

• House votes for President in event of an electoral college tie, has power to impeach

See U.S. Constitution, Article I

U.S. House of Representatives:

See U.S. Constitution, Article I

• "Gerrymandering": drawing districts for political benefits

• Has been used to both dilute and strengthen the power of political minorities

• Also used to create "safe seats" for incumbents

See U.S. Constitution, Article I

U.S. Senate:

See U.S. Constitution, Article I

• Each Member of Congress represents a geographic district (or State, for Senate)

• Special interests are often distributed geographically

  • Farming in rural areas
  • Flooding in coastal areas
  • Urban areas
  • Military bases

• The function of each Member is to benefit their district

• Voters & special interests with strong geographic concentration tend to flock to those legislators

• But how can a legislator get their constituents' agenda passed if they are just 1/435 (or 1/100)?

• Recall the (simple) Coase Theorem with low transaction costs and clearly defined property rights, parties can bargain to reach the socially efficient outcome

• Does a legislature bargain to reach the efficient outcome?

• Consider politics as a market for votes

• Imagine two groups:

  • Group 1 prefers policy $A\succ B$
  • Group 2 prefers policy $B\succ A$

• In theory, $1$ can persuade $2$ to support $A$ in exchange for some side payment, i.e. 1 buys 2's vote

• That transaction would be a Pareto improvement! (Or at least, a Kaldor-Hicks improvement)

• Both groups are better off: 1 gets policy $A$, 2 is compensated by 1

• This is the Coase theorem in politics: parties can bargain to a socially efficient outcome

  • Like the doctor (or baker) paying off the baker (or doctor)

• However, in many cases in politics, this less likely to happen because of high transaction costs

• How would such a vote contract be enforceable?

  • No property rights in politics!
  • Public opinion could change between the votes
  • No way to credibly commit to upholding promise

• Easier for smaller groups with low transaction costs, like legislatures

• Votes in Congress are often publicly recorded

• This actually enhances the market for vote trading in Congress

  • provides verification that each side held up their end of the bargain

• Secret ballots raise transaction costs and prevent agreements or vote trades

  • no way to verify, easier to renege

• "Pork barrel" legislation: law that only benefits a narrow regional interest at taxpayer expense, solely for representative to bring money to their district

  • e.g. subsidies for "bridges to nowhere"
  • sometimes called "earmarks"

• This legislation would never pass as a bill on its own!

• One way these bills get enacted is logrolling or a quid-pro-quo: exchange of votes between legislators

"You scratch my back, I'll scratch yours"

• Congress organizes via Congressional Committees

• Note: this is not discussed in the U.S. Constitution!

  • Congress self-assembled these in the 19^th century

• Legislative agenda is a commons, easily congested!

• Committees create "property rights" to enclose portions of the agenda to exclusive committees

• Relevant committee must approve a bill to bring it to the full Congress to debate and vote
  • Most Committee members have similar interests
  • Easier for Committee to make amendments, attach "riders", that satisfy most members of Committee
  • i.e. easier logrolling to earmark money for each Member's district