Friday, March 28, 2008

Incentives in Elections

The logic in this post is slightly vague at at a few places. Though I am still searching for a few answers, I am convinced there are ways out. But it flags off an important dimension to future electoral reform policies.

It is commonplace in even informed circles to attribute all the ills facing our country to politicians. The middle class see the ubiquitous politician as the embodiment of all that is bad about our political system. They are perceived as corrupt, venal, rapacious in their plunder of the public resources, prevent honest officers from discharging their duties, and so on. My very firm belief is that this may be a very simplified and uncharitable judgement, which overlooks the incentives and disincentives facing a politician.

I shall assume that a politician is a rational economic agent, out to maximize his objectives. Edmund Burke famously said, "The duty of a politician is to win elections". A politician is therefore driven by the ultimate objective of winning over his electorate. This remains true even today and is the fundamental choice facing any politician. To this, we may also add that the politician also faces ample incentives to make money.

I will outline two broad strategies that can be applied to winning elections. There may be variants between Strategy I and Strategy II, but a typical electoral strategy falls somewhere in between the two. Strategy I is the regular stereotype of how a candidate fights elections.

Strategy I : The politician offers inducements or allurements like liquor or cash to win over the voter. Though the typical candidate spends a fortune in such transactions, these inducements are transitory. Even after spending this money, he is not sure of bagging the vote, since his oppponent can pay a little more and outbid him. There is a very real danger of the candidate losing his money and the election too.

Strategy II : In contrast, if the politician fulfills an important felt-need of the village, say a school building or drinking water bore or distribution line, the villagers feel gratified and owe him a debt. This translates into a more enduring and stronger relationship between the politician and the voters in the village. There is a greater probability of them voting for him than if he had resorted to the first strategy. Apart from striking a more durable contract with his voters, the politician benefits in two ways from this strategy.
1. He saves the huge amount he would otherwise have had to spend in buying off his voters.
2. He also pockets his share of commission from the contract awarded to execute the engineering work.

Quite often, this strategy runs into trouble as the executive machinery and administration are not able to deliver on the promise. At other times, the work executed is of very poor quality, and the school building develops leaks after six months. In both cases, the politician gets disrepute and loses his electoral appeal. He is then left with no choice but to return to his original strategy of buying off his electors. Therefore it needs to be kept in mind that the officials and the administration plays a critical role in helping or failing the political representative.

As can be seen, Strategy II is easily more beneficial to the incumbent. He can have the best of both worlds - minimize his expenditure, and increase his chances of victory. But implementing Strategy II requires the support of the bureaucratic and administrative machinery, who are responsible for delivering on the promises made by the politician. This is in turn gives them an incentive for posting capable officials (who are more likely to be reasonably honest) in important positions, thereby reducing cronyism and its attendent corruption.

What are the objections? The major argument against Strategy II is that it always favors the incumbent. Further, since the opposing candidates cannot use this approach, they fall back on Strategy I. Behavioural economists have documented that people tend to forget older gains and be more attracted to the latest gains (since cash and liquor inducements are made just before the voting process). Further, they also acknowledge personal gains more than social or civic gains. This makes the incumbent wary of the inducements offered by his opponents. There is therefore an unstable equilibrium about this arrangement. If the incumbent finds that his opponent gaining ground by resporting to unscrupulous vote buying strategies, he may be forced to defect.

The response to this objection is two-fold. One, if the incumbent is able to fulfill the felt needs of his electorate, then he surely deserves to be re-elected. After all, the whole process of democratic elections is to find out the candidate who can deliver on his promises. If we have a candidate who is able to deliver on his promises, which are in turn reflection of the electoral demands, then where is the need for a replacement? For any opposing candidate to succeed, he has to possess attributes and faith of his electorate that are superior to that possessed by the incumbent.

Two, the opponents should also adopt the same strategy as the incumbent and become rational agents. They should identify the most important felt-need of the village or locality, and make its fullfillment one of their major poll planks. They now benefit from the same advantages as the incumbent - saving the money spent buying voters and rents from contractors. Further, the opponent even gains an advantage over the incumbent, in that he is now promising something which the incumbent failed to deliver. All this will also incentivize candidates, especially in local body elections, to focus on important local issues and needs, thereby making elections more meaningul and issue oriented. And there are no shortage of important felt-needs in every area or village, for all candidates to espouse.

The benefits of such competitive populism on the society and polity are enormous. The challenge now is to make the politician a rational economic agent and get them to abandon Strategy I and adopt Strategy II! Or in other words, get all candidates to play the same game and not defect! More of this in a later post.

1 comment:

Gopi said...

it was a wonderful analysis about the present-day politician. the system is such that the older gains or social gains are given least importance at the time of voting. i strongly believe that bureaucratic system has to change first and then look for change in the political system. whatever is promised by a politician, its convertion into reality is performed by bureaucrat. how a bureaucrat - no matter he is in big post or small post - visualises his responsibilities and the needs of the society. if an official demands money for clearing a file, it is obvious that politician looks for his share. keeping all this in mind, people then, look for individual benefits at the time of voting. ultimately it is the bureaucrat who has to change himself and change the society not the politician. politician only promises. it is the responsibility of the bureaucrat to execute. i look forward to the next post on this issue.