Economic Models of Voting

Economic Models of Voting

It is generally believed that the more the economy grows (or slows down), the more all voters reward (or punish) the incumbent party for improving (or worsening) their economic situation. Presidential approval ratings often drive the results of the economic models of voting. These approval ratings are typically conceptualized as capturing both non-economic factors and other economic factors beyond near-election economic growth. This paper will discuss two major economic models of voting -- both of which show how economic outcomes may affect party choice.

Economic Models of Voting

The competency model holds that voters reward the present political party for favorable economic outcomes and punish him for unfavorable outcomes (Vanderzee, 1997). More than 25 years ago, this hypothesis was first tested (Kramer, 1970 and Mueller, 1970), and more recently have Rogoff and Sibert (1988) provided a choice theoretical foundation for it. The basic idea behind their model is that parties may differ in their ability to generate favorable (economic) outcomes: some parties are simply more competent than other parties.

Rogoff and Sibert assume two things about competency. The first assumption is that voters cannot observe competency directly. As a result, to assess the competency of political parties voters must rely on outcomes. The second assumption is that competency is partially lasting: politicians who are able to generate favorable economic outcomes today are likely to be able to generate favorable economic outcomes tomorrow. Together, these assumptions imply the responsibility hypothesis.

Application of the competency model to a two-party system with one party in office and one party in opposition is simple. The incumbent party benefits from favorable economic outcomes and the opposition party suffers from them.

Basically, according to the competency model of voting, voters reward administrations that generate high real output growth rates without increasing debt or inflation. On the other hand, voters reward administrations if they reduce inflation or debt without reducing economic growth.

The policy oriented voter model describes how changing economic conditions affect election outcomes when different political parties have opposing objectives. The basic idea behind the policy oriented voter model is that voters care about permanent economic growth and distributive policies.

According to this model, changing economic conditions, which jeopardize economic growth prospects, increase the utility voters receive from policy of one party relative to the utility he receives from another party. Thus, the costs of distributive policies in terms of utility decrease with permanent real output growth. As a result, unfavorable economic growth prospects decrease the demand for distributive policies, and support for political parties which supply relatively distributive policies reduces as economic growth prospects become less favorable to voters.

The relationship between economic outcomes and voting is a complicated one. The extent to which a political party benefits from favorable economic outcomes depends on many other variables, not just economic ones. Still, it is apparent that voters reward the government for favorable economic outcomes and punish it for unfavorable economic outcomes.

Case Study

Economic models of voting are widely recognized paradigms in political science.

In its original form, economic voting models assume that voters evaluate the current government in terms of the outcomes produced by its policies, with the economy being a policy outcome of popular interest. Basically, economic voting is a type of policy voting.

For instance, Kramer (1971) and Stigler (1973) state that voters hold governments responsible for their policies rather than simply reacting in an emotional way to changes in the economy.

Recent studies use the economic voting model to explain cross-national variation in democratic satisfaction (Anderson and Guillory, 1997) and public support for the European Union (EU) (Anderson and Kaltenthaler 1996). While these studies examine international results, they adopt "peripheral" economic voting models. In the case of EU support, it is questionable why voters hold the EU responsible for domestic economic outcomes when its policies affect those outcomes only indirectly and much more modestly than domestic politics and the world economy.

It is logical to expect public support for the EU, as a relatively new political system, to be more responsive to short-run policy outcomes than is public support for political institutions in mature democracies. In other words, EU institutions might not benefit from broad legitimacy. Thus, the European publics have a tendency to blame EU institutions rather than policy-makers for short-run policy failures. However, even if this is the case, only a weak theoretical connection exists between EU policy and domestic economic performance (Palmer 1995). Until very recently, the EU was responsible for neither fiscal nor monetary policies. And while EU membership represents a constraint on national economic policies, historically, this effect has been indirect.

Discussion

Economic models of voting assume that voters cast their votes instrumentally. Basically, these models assume that voters cast their votes solely to change the outcome of the referendum. On the other hand, the models of "expressive voting" challenge this premise. The starting point of these models is the fact that a voter is non-pivotal most of the time, and, therefore, an individual voting decision is inconsequential most of the time.

According to Brennan (2001), this implies that an individual voting decision depends on "the benefits and costs that derive from expressing support or opposition to the candidates as an end in itself... The analogy is with cheering at a football match. One cheers to express support for one's team and its athletic exploits; one does not (cannot rationally) believe that one's cheering actually brings about the outcome of the match..." (225f.)

The low-cost theory focuses on the cost side of expressive voting - unconditionally holding the benefit side constant - to obtain testable predictions about voting behavior. According to the low-cost theory, an expressive voter votes according to his material self-interest if the costs of voting for a morally worthy cause are high; but the expressive voter votes morally if the cost of doing so are low.