The Myth of Bad Policy Choices: Why Democracies Choose Mediocre Policies

31 Pages Posted: 18 Nov 2008 Last revised: 15 Sep 2010

See all articles by Ivo Bischoff

Ivo Bischoff

University of Kassel

Lars H.R. Siemers

University of Siegen

Date Written: June 14, 2010

Abstract

In a game-theoretical approach of probabilistic voting, we introduce biased beliefs among voters and retrospective voting. In order to micro-found biased beliefs we introduce the psychological concept of mental models. We put into perspective the claim that biased beliefs lead to bad policy outcomes in democracy, as has been argued, for instance, by Bryan Caplan (2007: The myth of the rational voter). We show that there is a self-correction mechanism in democracy that may mitigate the problem of biased beliefs. Democracy is characterized by suffering from mediocre mixtures of populist and good policies, and less by purely populist policy. Even good policy outcomes remain possible in equilibrium.

Keywords: Voting behaviour, dynamic party competition, valence, VP-functions, biased voting

JEL Classification: D72, D78, D83, D90, P16

Suggested Citation

Bischoff, Ivo and Siemers, Lars H.R., The Myth of Bad Policy Choices: Why Democracies Choose Mediocre Policies (June 14, 2010). Available at SSRN: https://ssrn.com/abstract=1301592 or http://dx.doi.org/10.2139/ssrn.1301592

Ivo Bischoff

University of Kassel ( email )

Fachbereich 07
Nora-Platiel-Straße 4-6
34109 Kassel, 34109
Germany

Lars H.R. Siemers (Contact Author)

University of Siegen ( email )

Department of Economics
Hoelderlinstr. 3
Siegen, 57068
Germany

HOME PAGE: http://sites.google.com/site/lhsiemers/

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