First Proposal to Minorities or How to Channel the Say in Politics

Abstract

We examine optimal democratic procedures for public project provision, financing, and redistribution, and provide a game-theoretic foundation of how to channel the say in politics. We consider a large and heterogeneous political decision body and show that first-best outcomes are obtained by a procedure involving two proposal-making rounds, uniform taxation, the simple majority rule, fixed subsidies for agenda-setters, and the minority's right to move first. We explore the robustness of the result and consider applications of our procedure. For instance, the result rationalizes those rules of democracies granting minorities the right to initiate collective decisions. We further show that the above procedure constitutes the unique minimal form of political competition ensuring first-best outcomes under democratic constraints.

Keywords: constitutional design; public project provision; subsidies; majority rule

JEL Classification: D72, H40