The Good, the Bad and the Populist: A Model of Political Agency with Emotional Voters

This paper attempts to extend existing models of political agency to an environment in which voting may be divided between informed and instrumental, informed and ‘expressive’ (Brennan and Lomasky (1993)) and uninformed due to ‘rational irrationality’ (Caplan (2007)). It constructs a model where politicians may be good, bad or populist. Populists are more willing than good politicians to pander to voters who may choose inferior policies in a large-group electoral setting because their vote is insignificant compared with those that voters would choose were their vote decisive in determining the electoral outcome. Bad politicians would ideally like to extract tax revenue for their own ends. Initially we assume the existence of only good and populist politicians. The paper investigates the incentives for good politicians to pool with or separate from populists and focuses on three key issues – (1) how far the majority of voter’s preferences are from those held by the better informed incumbent politician (2) the extent to which the population exhibits rational irrationality and expressiveness (jointly labelled as emotional) and (3) the cost involved in persuading uninformed voters to change their views in terms of composing messages and spreading them. This paper goes on to consider how the inclusion of bad politicians may affect the behaviour of good politicians and suggests that a small amount of potential corruption may be socially useful. It is also argued that where bad politicians have an incentive to mimic the behaviour of good and populist politicians, the latter types of politician may have an incentive to separate from bad politicians by investing in costly public education signals. The paper also discusses the implications of the model for whether fiscal restraints should be soft or hard.

Sharp Bounds on Heterogeneous Individual Treatment Responses

This paper discusses how to identify individual-specific causal effects of an ordered discrete endogenous variable. The counterfactual heterogeneous causal information is recovered by identifying the partial differences of a structural relation. The proposed refutable nonparametric local restrictions exploit the fact that the pattern of endogeneity may vary across the level of the unobserved variable. The restrictions adopted in this paper impose a sense of order to an unordered binary endogeneous variable. This allows for a uni.ed structural approach to studying various treatment effects when self-selection on unobservables is present. The usefulness of the identi.cation results is illustrated using the data on the Vietnam-era veterans. The empirical findings reveal that when other observable characteristics are identical, military service had positive impacts for individuals with low (unobservable) earnings potential, while it had negative impacts for those with high earnings potential. This heterogeneity would not be detected by average effects which would underestimate the actual effects because different signs would be cancelled out. This partial identification result can be used to test homogeneity in response. When homogeneity is rejected, many parameters based on averages may deliver misleading information.