Public Choice 50:5-25 (1986). 1986 Martinus N i j h o f f Publishers, Dordrecht. Printed in the Netherlands.

Incumbent performance and electoral control

JOHN FEREJOHN*

I.

INTRODUCTION

In the pure theory of preferred.

electoral

competition, citizens compare the are identified with promises about

platforms of the candidates and vote for the one whose platform is Candidate strategies future performance in office. Models of this sort have been developed

in both static [McKelvey (1975)] and dynamic [Kramer (1977)I settings, and all appear to have the property that i f the set of alternatives is "large enough" in some sense, equilibrium platforms rarely exist. instability. In the static setting discussed by McKelvey, l i t t l e attention ences may diverge from those of his constituents is paid to the possibility that, once in office, the politician's preferand that he may Instead i t is I t is sometimes therefore choose policies at variance from his platform. is congruent with the interest of the officeholder. But these models have another feature that is quite as disturbing as their

simply assumed that promises will be kept whether or not such behavior argued that an "enforcement" mechanism may exist to discipline politicians for failing to keep promises, but without a specification of the mechanism i t is not obvious that i t would be in the interests of the

tSenior Research Fellow at the Hoover I n s t i t u t i o n and Professor of P o l i t i c a l Science at Stanford U n i v e r s i t y . Special thanks are due t o David Baron, Joseph Greenberg, Tom P a l f r e y , and Tom Romer f o r c a r e f u l reading and c r i t i c i s m of e a r l i e r v e r s i o n s of t h i s paper.

electorate to carry out threatened punishments. In Kramer's dynamic model, the incumbent's platform is identified with his current record in office so that, assuming that voters would believe any proposed platform, incumbent knows that he w i l l a challenger will v i r t u a l l y always be able to propose a platform that will defeat the incumbent. But i f the

lose his reelection bid, he might as well

simply pursue his own private interest while in office rather than doing what he promised during the campaign (or doing whatever he did during his previous term); he will Clearly, that in this be turned out at the next election anyway. case, the voters have no reason to take challenger would ignore their preferences once in

platforms as anything other than pure rhetoric; voters would soon learn rational officeholders office. In both of these cases, there is no reason for voters to pay attention to the candidates' choice of platforms. For this reason, there I f there is no cause to believe that there w i l l be any predictable connection

between the profile of voter preferences and public policy. it. The pure theory of elections pays l i t t l e electorate.

actually is such a connection, neither of these theories can account for attention to the sorts of

strategies or decision rules that might be followed by members of the Instead, i t is usually hypothesized that citizens vote for Indeed, in two-candidate is contest, if candidates are the candidate whose platform they like best, ignoring further strategic considerations. assumed to implement their platforms, voting for someone other than the preferred candidate a dominated strategy. The only interesting question in this case is whether or not to vote. The purpose of this paper is to try to construct a coherent model in which voters have an incentive to base t h e i r choices on behavior of officeholders and in which officeholders choose their anticipation of this behavior. strategies in Such a model is necessarily dynamic.

Voters are assumed to base t h e i r evaluations of officeholders on t h e i r actual performance in office rather than on hypothetical promises they might make during a campaign. In this model, the key to the voting "But what have you decision is found not in the earnest pledges of the contenders but, rather, in the infamous remark of a Kansas farmer: done For me lately?"

I f voters vote on the basis of platforms or "issues," p o l i t i c i a n s have l i t t l e incentive to do what they promise. Thus, voters might be in office By the well-advised to pay attention to the incumbent's performance rather than to the hypothetical motivate electors. officeholders That to pay

promises of competing candidates. attention to the interests of

basing t h e i r votes on evaluations of performance, voters may be able to such a strategy may be a t t r a c t i v e has been most in o f f i c e ,

f o r c e f u l l y argued by V.O. Key (1966). or punish officeholders officeholders will use t h e i r i n i t i a t i v e

Key argued that i f voters reward but w i l l also be motivated to

on the basis of t h e i r performance

not only be d i l i g e n t

in the face of new or unexpected events that arise empirical evidence that the pure theory of phe-

between elections. There is abundant elections nomena. is, at best,

only a partial

description

of electoral

Much of recent data suggest that candidates

voters do respond to the (1981)I. all At

performance of incumbent candidates in office as well as to the platform promises of competing that effect there [Kramer (1971), Fiorina level and in v i r t u a l l y both the aggregate and individual have been studied, on the electoral is evidence that nations Moreover, performance-

the performance officeholders try

of the economy has a major to anticipate

fate of the incumbent executive.

oriented voting in t h e i r choice of policies while in o f f i c e . I Thus, i t appears that voters employ decision rules that are based, in part, on the past performance of the government in o f f i c e . incumbent administration has been successful it will in promoting Moreover, I f the economic the actual evidence for extensive issue voting is f a i r l y weak. growth and avoiding major wars,

tend to be rewarded at the

polls, no matter how a t t r a c t i v e the policy positions of the opposition. 2 This paper begins an investigation of the structure of electoral

ISee the poiltical business-cycle literature, especially Tufte (1978), Recent work on Congress [Mayhew (1974)] suggests that similar incentives structure the behavior of Congressmen. 21n splte'of the great quantity of statistical investigations of issue voting, the evidence for effects of candidate platforms on the vote is mixed. See Page and Jones (1979).

behavior that takes account of the motivations

of o f f i c e h o l d e r s .

We

wish to know how voters ought to behave i f they wish to get t h e i r representatives to pursue the interests of the e l e c t o r s . this question, we need to develop a formal ticians can be induced to act in the i n t e r e s t s In order to address The model within which p o l i of the electors.

natural mechanism to transmit such incentives is the fact that elections take place repeatedly and that officeholders the incentives of o f f i c e h o l d e r s in various is desire to r e t a i n o f f i c e . ways. We also insist on Under these circumstances, voters can adopt strategies that can a f f e c t separating the actions of the candidates in o f f i c e the performance of date. With t h i s "principal-agent" electors, facing well-being. The paper introduces an a l t e r n a t i v e theory of e l e c t i o n s , as pure in i t s own way as the classical office one exposited by McKelvey and Kramer. In t h i s model voters respond only to the performance of the candidate in and do not pay any a t t e n t i o n whatsoever to the promises of the All challenger or, f o r that matter, to the promises of the incumbent. tration. In the model, voters assume that a newly elected o f f i c e h o l d e r w i l l pursue his own i n t e r e s t s once in o f f i c e , the context of the campaign. because there them. that they is no way f o r As long as p o l i t i c i a n s have the no matter what he claimed in On t h i s view, promises play no role at a l l candidates to commit themselves to keep are a l l of the same "type," in the sense and a b i l i t i e s , the voter can behave in every circuma government which separation, the s i t u a t i o n from the notion of of the

led by an incumbent candibecomes a variant is an agent of the

problem in which the o f f i c e h o l d e r agent to

and voters

have the opportunity to structure the incentives induce him to act to enhance t h e i r

the o f f i c e h o l d e r

that counts f o r a voter here is how well he fares under a given adminis-

same preferences him.

correctly anticipate

how the o f f i c e h o l d e r w i l l

stance that may confront

No promise to do otherwise would be in o f f i c e , self-

credible and so none would be heeded. Given t h i s hypothesis about the behavior of p o l i t i c i a n s the voters w i l l subject interest. to the constraint that voters politicians choose a decision rule that maximizes t h e i r well-being are pursuing t h e i r in their are constrained choice of

Nevertheless,

decision rules to recognize that at any future time, prescribed voting

behavior must be in the i n t e r e s t of the electors at that time. the future that w i l l rules seem u n a t t r a c t i v e at that time. threats

They are

unable to bind or precommit themselves or t h e i r o f f s p r i n g to choices in Thus, those voting because o f f i c e based on " i n c r e d i b l e " are not available

holders would recognize that such threats would not be carried out.

2.

PREVIOUS RESEARCH

There has been some investigation of the incentives that certain types of performance-oriented voting rules confer on incumbents [Nordhaus (1975)}. myopic, years However, most of this work focuses on a r e l a t i v e l y specialized of performance-oriented voting: other times and therefore i f voters are s u f f i c i e n t l y in e l e c t i o n to t r y to create p o l i t i c a l incumbents have an incentive to behave d i f f e r e n t l y than at

implication

business cycles.

Whether or not incumbents are able to create p o l i t i c a l of incumbents through the if politically-

business cycles, however, depends on a v a r i e t y of other factors i r r e l e vant to our present concern with the control choice of voter-decision rules. induced business cycles may not Indeed, recent work suggests that occur [Chappell

voters are able to take account of economic constraints, Moreover, the formulation of p o l i t i c a l

and Keech (1985)].

business-cycle models does not

pay much a t t e n t i o n to the choice of optimal voter-decision rules, given the opportunities of incumbents. More relevant to the present paper is Robert Barro's (1973) seminal investigation of the control of p o l i t i c i a n s . Barro investigates the question of how much the f a c t of repeated elections may induce o f f i c e holders to act on the preferences of the electorate rather than t h e i r own objectives. spects. known horizon. Barro's Thus, in approach d i f f e r s their last from ours in several reF i r s t , he assumes that o f f i c e h o l d e r s have a f i n i t e and commonly

term of o f f i c e t h e i r behavior is

10

uncontrollable. 3

In light

of this

uncontrollability,

the electorate

would not return an officeholder seeking his last term; the p o l i t i c i a n would then see this and be uncontrollable in the penultimate term, and the process would unravel. The present model is formulated with an The i n f i n i t e horizon, so that such last-period effects are avoided. last

reader may think of the competitors for office as p o l i t i c a l parties that indefinitely and must solve the "last-period" problem for their Second, Barro's model is formulated in a world of perfect inforofficeholders through the use of internal incentives. 4 mation, whereas the present model contains an informational asymmetry: the electorate is not able to observe the actions of politicians directly. With perfect information the voter is able to extract most of in the transaction. In equilibrium, at each period, the Here the rents

electorate demands that the officeholder provide a quantity of e f f o r t that leaves him indifferent between leaving and staying in office. allows sitions. officials holding. Finally, identical, Barro's model contains only one "representative" voter. In effect, this formulation assumes not only that voter preferences are an assumption that may in some circumstances be j u s t i f i e d , issues at stake in p o l i t i c a l hypothesis. W h i l e we are surely a more controversial but also that there are no distributional competition, them opportunities Intuitively, we allow a natural informational asymmetry in favor of o f f i c i a l s , which to take advantage of their privileged poadvantage that the greater the informational

hold, the greater t h e i r a b i l i t y to earn rents from o f f i c e -

unable to provide a complete analysis of the general case, we do show that the introduction of distributional issues profoundly changes the nature of the relationship between the electorate and its o f f i c i a l s , vastly reducing the level of electoral control.

3The mechanism suggested t o overcome the l a s t - p e r i o d problem is the one introduced by Becker and S t i g l e r (1974)o Becker and S t i g l e r argue t h a t misbehavior can be c o n t r o l l e d i f o f f i c e h o l d e r s face the loss of a pension ( o r , e q u i v a l e n t l y , a posted bond) in the event of malfeasance in their last term, Barro suggests that political parties might offer future appointment t o o f f i c e as an inducement f o r good l a s t - p e r i o d performance. 4See previous note.

ii

In the next section we o u t l i n e a simple dynamic model of e l e c t o r a l competition that allows us to analyze the incentives of o f f i c e h o l d e r s and to see how they would respond to v a r i a t i o n s in e l e c t o r a l behavior. This model, electorate) val on the like Barro's, contains only one voter (or a homogeneous and two or more candidates. real line. In t h i s context, The "space" over which the the r e s t r i c t i o n to a one-

performance of the o f f i c e h o l d e r is defined is i d e n t i f i e d with an i n t e r dimensional outcome space is i t may not be. When we turn our a t t e n t i o n to a model in which there are several voters, the s i t u a t i o n changes s u b s t a n t i a l l y . electoral aggregate voting. control unless the voters index as In Section 4 we show that some sort of the the introduction of preference d i v e r s i t y permits the incumbent to escape "agree" to u t i l i z e criterion for performance their retrospective inconsequential, though in other settings

I f voters u t i l i z e

i n d i v i d u a l i s t i c or group-based c r i t e r i a ,

incumbent w i l l advantage. his that or her

have the opportunity to e x p l o i t voter d i v i s i o n s to his

The nature of such an agreement does not e n t a i l any precominterests at some future with a point in time, and so such an requires

mitments by the voters, in the sense of requiring anyone to vote against agreement would be c r e d i b l e . electoral control We may i n t e r p r e t t h i s r e s u l t as saying nonhomogeneous electorate

" s o c i o t r o p i c " voting - - that i s , voting based on an aggregate c r i t e r i o n - - rather than i n d i v i d u a l i s t i c voting [Kiewiet (1983)I.

3.

A SIMPLE MODELOF REPEATED ELECTIONS WITH A H M G N O S ELECTORATE O OEEU

Many of the a c t i v i t i e s of o f f i c e h o l d e r s are not d i r e c t l y observable by members of the e l e c t o r a t e . the effects of Further, activities governmental Instead, electors are only able to assess performance is on their own well-being. on the known to depend j o i n t l y governmental

performance

of officeholders as well

as on a v a r i e t y of exogenous and In other words, the o f f i c e h o l d e r is imperfectly monitored. in order to take adas to pursue t h e i r own

essentially probabilistic factors. an agent of vantage of

the electorate whose behavior is the perquisites of o f f i c e as well

Officeholders are assumed to desire r e e l e c t i o n ideas about p o l i c y .

I t is the desire to r e t a i n o f f i c e together with the

12

p o s s i b i l i t y of an indirect monitoring by the electorate which drive the incentive effects that we observe in the model. Before setting out the model, we should emphasize that we have assumed that candidates for office are a l l essentially the same in the sense that they have the same preferences and a b i l i t i e s , and that this is common knowledge among a l l the actors. capable of ~benevolent officeholders. officeholders in an appropriate aspects here. In this paper we take the liberty of working with explicit functional Forms that are r e l a t i v e l y easy to analyze. Some of the In other words, the voter's problem is to police moral hazard rather than to find and elect the more Rules of the sort we are addressing here may have the property of separating different types of setting, but we do not address those

arguments developed here might be generalized in other settings, but for now we have chosen to t r y to obtain clear results in the context of a very simple model in order to aid our i n t u i t i o n about the ways in which the behavior of electors might induce officeholders to pay attention to their preferences. The officeholder observes a random variable, e ~ ~ = [0, m], a subset of the nonnegative real numbers, and then takes an action, a [0,~), conditioned on that observation. bution Function of e and assume that entiable. as
v(a,e) = w ~(a),

W l e t F denote the d i s t r i e it is continuously differ-

The single-period preferences of the officeholder are written

where W is the value of holding office for a single term and is a positive monotone convex function and (0) = O. W may be thought of as the e x p l i c i t compensation of the officeholder plus any rents he may earn as a result of his tenure and (a) is the cost of action a. The voter is unable to distinguish the actions of the officeholder from exogenous occurrences. Rather than d i r e c t l y observing "policy," he is restricted to monitoring product of "performance," which is defined to be a T h u s , the elector's policy and exogenous occurrences.

single-period preferences are represented as

13

u(a,e) = ae. Lacking an a b i l i t y rule: office if is the u t i l i t y high enough, to observe the a c t i v i t i e s of the incumbent, the voting

e l e c t o r adopts a simple performance-oriented he votes to return

(or retrospective) the

received at the end of the incumbent's term in incumbent to o f f i c e ; induce the It

otherwise he removes the incumbent and gives the job to someone else. I t is clear that, is will also clear not find under certain conditions, the elector such a rule w i l l to incumbent to pay a t t e n t i o n to the requirements of retaining o f f i c e . that it must be careful it utility level appropriately, since i f

set the required and w i l l instead

is set too high the incumbent

worthwhile to t r y to r e t a i n o f f i c e

choose to take advantage of the opportunities c u r r e n t l y available to him as an o f f i c e h o l d e r . incumbent w i l l It will find o f f i c e that he w i l l On the other hand, i f the level is set too low, the it sufficiently easy to sustain his hold on the choose too low a level of a.

turn out that the incumbent's behavior depends c r i t i c a l l y In the following analysis we consider two in the event of a loss of o f f i c e , We think of the f i r s t has a r e l a t i v e l y of the the in-

on his l i k e l i h o o d of being able to return to o f f i c e in the future in the event that he is defeated. polar cases: (i) chance of returning; that (2) in the event of a loss of o f f i c e , the incumbent has no

cumbent is replaced by another agent and returns to o f f i c e i f and when other agent loses. assumption as correin sponding more or less to multiparty competition with small p a r t i e s , which a party out of o f f i c e gaining i t quite system. final from the at the next e l e c t i o n . standpoint also This case could

small p r o b a b i l i t y of reparty in such a as

The loss o f - o f f i c e would appear to be incumbent model the candidate's perspective

opposed to the party perspective in two-party system in which the comp e t i t o r s are party "teams" that a l t e r n a t e in o f f i c e . Several remarks about t h i s formulation seem important. model contains an extreme informational ficial while is the able to voter we could In resolve a l l introduce case, cannot. At the cost asymmetry. of uncertainty an additional the candidate before taking complicating disturbance would view First, his the the The incumbent o f action, notation

somewhat, of policy.

representing his election

uncertainty that the candidate is unable to resolve p r i o r to his choice this

14

prospects as uncertain. or voter strategies. Both o f f i c i a l s

While t h i s case is perhaps more r e a l i s t i c ,

it

does not permit us to gain any additional

insights into e i t h e r incumbent neutral. This

and voters are assumed to be r i s k I f the candidate and voter d i f f e r they would needlessly

assumption s i m p l i f i e s the analysis somewhat and also a f f e c t s the nature of optimal strategies. in t h e i r r i s k complicate the aversion, issues related to risk sharing would arise. cases may be more r e a l i s t i c , present analysis and so we leave them aside. F i n a l l y , for reasons alluded to in the introduction, plays no active role in the model. entirely incumbent. challengers. Given the one-period preferences outlined above, and assuming that the elector employs a retrospective voting r u l e , we can u t i l i z e techniques of dynamic programming havior. an action cutoff which Kt , maximizes Kt+l, his to determine optimal (discounted) utility Once the incumbent has observed a value of et, he w i l l from that standard betime choose candidate in their that availability. gives the voter officeseekers It is the the challenger of willing The importance of challengers l i e s existence whatever leverage he has on the Again, while such

For this reason, i t is important that the e l e c t i v e o f f i c e is

valuable enough r e l a t i v e to a l t e r n a t i v e sources of employment to a t t r a c t

onward, assuming that the voter employs a retrospective voting rule with levels, Kt+ 2 . . . . . stream. from time t Obviously, if forward. Under the conditions assumed above, t h i s amounts to choosing a(et) to maximize t h e present value of u t i l i t y et is so small that i t If it is not possible to be reelected, then he w i l l reelection constraint is just satisfied: choose a(et) = O.

is possible to be reelected, then the candidate may choose a(et) so the a(e) = Kt/e t . In no event would he be w i l l i n g to choose any a(et) that w i l l ensure his r e e l e c t i o n . In the remainder of t h i s section, we present a characterization of equilibrium voter and incumbent strategies Then, we examine control alternative (Proposition party 4). result electoral (Propositions from in the that i through 3). standpoint 5, of control of we inand systems Finally, that larger than the smallest amount

Proposition

present a comparative s t a t i c After each e l e c t i o n ,

implies

cumbents is greater f o r more valuable o f f i c e s . the o f f i c e h o l d e r observes the value et

15

chooses a(et) = Kt/e t i f and only i f w (KtJ0 t) + w+ I In ( i ) , VIt+l

(i)

and,n i f (i) is not s a t i s f i e d , he chooses a(et) = O.

and

V~+I stand for the expected values of staying in office or leaving o f f i c e , respectively, given optimal play by voters and candidates from the next election forward, and a represents the (common) discount factor
employed by all agents. I t is important to note that V~+ I-_ and V~+ I_ are independent of et and Kt . Re-arranging terms permits us to es{Kt}#=O, the

tablish the following characterization of optimal incumbent strategies: PROPOSITION 1: Given the retrospective voting rule optimal incumbent strategy is a(et) = Kt/e t i f f 8t ~ Kt/~-l(~(Vt+ I
I _

V0 t +l ) ).

(2)

PROOF: (1) implies that a(et) = Kt/8 t i f and only i f et ~ e~, I 0 The Inequality then where 0~ satisfies a(Vt+ 1 - Vt+l) = (Kt/e~) . " follows from the fact that ~ is positive monotone, convex, and (0) = O. In other words, the incumbent w i l l expend effort only i f he obNotice that this exserves a s u f f i c i e n t l y favorable value of et .

pression implies that i f the value of office is r e l a t i v e l y small, the incumbent may choose to accept defeat though he could have been reelected.
REMARK:

G i v e n the retrospective voting rule,

the incumbent's Thus an optimal

optimal strategies are optimal at each time t forward.

strategy is credible because the incumbent would actually carry i t out for each value of et that he could realize. Or, to put i t another way, they are equilibrium strategies in each subgame (e.g.,. subgame perfect). In order to characterize an equilibrium, we must determine the optimal retrospective rule. expressed as follows:
oo

The expected u t i l i t y

of the voter may be

U = Z atKtPr{e t _ Kt/-l(a ( Vt+l - V~+l))} I > t=O

(3)

We can give a characterization of optimal retrospective rules by maxi-

16

mizing (3) over all retrospective rules. PROPOSITION 2: f(.), If the et are independent, identically distributed voting rule satisfies the following random variables with cumulative distribution function F(-) and density an optimal retrospective

equality: Kt PROOF: [1 - F(e~ )] f(e~) #-i(~ ( VIt + l - V0+ l ) ) t This follows directly from the first-order

(4)
conditions

derived from equation (3). positively on The important thing to notice about equation (4) is that K depends t I 0 Vt+l-Vt+ 1. The larger is the value of remaining in In the

office to the incumbent, the more the voter can ask of him. obtain a clearer characterization.

special case in which F is uniform and is the identity function, we COROLLARY: If the et are independent, uniform, random variables on [ 0 , i ] , and i f (a) = a and a ~ [ 0 , I ] , an optimal retrospective rule must satisfy the Following equation: K = min{1/2,6(V~+I - V0+1)/2} for all t. t

(4') In each = 0 and

Equations (4) and (4') period, the elector cumbent of staying in o f f i c e accepting defeat. PROPOSITION 3: then e~
PROOF:

can be interpreted as follows. to the value of choosing a(et)

sets Kt to equate the expected value to the i n -

If

[l-F(x)]/f(x) for Kt

is monotone decreasing f u n c t i o n , in the following

is independent of 6, t , and W. Substitute using equation (4)

expression
e~ : Kt/-l(a(VI-vO)) yields the equation e~ : [1 - F(e~)]If(e~),

(5)
which has a unique so-

lution under the assumption of monotonicity. REMARK: An optimal retrospective voting rule is subgame perfect in the sense that its restriction to any subgame is an equilibrium strategy in that subgame. Assuming he is restricted to employing some retro-

17

spective voting rule, the elector can do no better than employing a rule that satisfies
COROLLARY: to l i e in [ 0 , i ] , REMARK:

(4).

For this reason, incumbents will

regard optimal

retrospective rules as credible.

I f F is uniform on [ 0 , 1 ] , then e~ = 1/2 and ~(a) = a and a is r e s t r i c t e d Pr({e t ~ e~}) = i / 2 . Kt = K f o r a l l t. To see t h i s ,

I t f o l l o w s from the f o r m u l a t i o n t h a t any s o l u t i o n to (3)

must be s t a t i o n a r y in the sense t h a t

note t h a t i f equation (3) i s r e w r i t t e n as f o l l o w s ,

U = KoPr(e0 z e~) + ~U1 0

(3')

U1 = U0 since s t r a t e g i e s and payoffs are the same at time i as at time O. Moreover, UI does not depend on KO. In the special implies case of Thus, i f K0 maximizes ( 3 ' ) , distributed K0 must maximize UI, too, and so on f o r each t . uniformly disturbances, the exstationarity pected u t i l i t y K: the f o l l o w i n g convenient expression f o r

of the v o t e r , using an optimal r e t r o s p e c t i v e v o t i n g r u l e ,

U : K/2(1-a) = min{I/2,6(V I - V0)/2}/2(i-6).

(3")

Thus, up to the point where the expected marginal value to the incumbent of continuing in office exceeds 1/2, the voter's expected u t i l i t y depends on this marginal value. anticipate. offices. receive The more attractive the present

value of office is to the incumbent, the more satisfaction the voter can However, this effect holds only~or r e l a t i v e l y unattractive from the officeholder. For more valuable instead, to the p o l i the Indeed, for very unattractive offices, the voter can expect to almost nothing of the

offices, the effects of increasing value do not accrue to the elector in increased control ticians. Having described optimal strategies, we may now calculate equilibrium payoffs to the game. Turning f i r s t to the incumbent we see that i f the voter is playing a stationary retrospective voting strategy with criterion K, we may write the expected value of being an incumbent, before observing e, as follows: incumbent but flow,

18

vl

m = : [W - ~( K / e ) e*

+ ~VI]dF(e)

e* + : [W + avO]dF(e) 0

(6)

The discounted expected u t i l i t y s i m i l a r l y written.

of a candidate out of office may be

o* V0 = : [x~V I + ( I - x ) s v O ] d F ( o ) 0

+ : ~vOdF(o) o*

(7)

where x is the probability of obtaining office i f the current incumbent is defeated at the next election, which is taken to be exogenously In this interpretation a pure two-party system corresponds so that V = a(VI+vO)/2. 0 At the other extreme, a "pure" determined. to x = i ,

multicandidate system would have x = O, and therefore, V = O. 0 Solving (6) and (7) we obtain the following expressions for VI and V0, m [W - : e . ~ ( K x / e ) d F ( e ) ] [ 1

I Vx =

- ~(1-xp)] - xa2p 2

(8)

[1-a(1-xp)][1-a(1-p)]

0
=

x~p[W -

fe,(Kxlo)dF(o )]
- xa2p 2 '

(9)

Vx

[l-~(l-xp)I[l-a(l-p)l

where p = F(e*) and where the subscripts indicate the dependence on x. W can now state our major results. e
PROPOSITION 4:

PO F R O:

An increase in x lowers the u t i l i t y of the voter. I 0 By i m p l i c i t l y differentiating Vx = Vx - Vx with respect aVx/Bx is negative and, from

to x and rearranging terms, we see that spect to x must be negative as well.

REMARK:

equation (4), this implies that the derivatives of Kx and Ux with reAs the number of parties is restricted, the welfare of the As the proof suggests, this occurs as the number of as x gets larger) and the incumbent's r e l a t i v e He becomes less concerned with losing (i.e.,

elector declines. parties f a l l s

valuation of office declines.

office and is, therefore, less controllable by the voter. An alternative interpretation of this result may be given i f we l e t : 0 depict the incentives of candidates rather than parties. In this by case we see that the voters can attain higher levels of control

19

holding candidates rather than parties responsible for poor outcomes. This is accomplished by refusing ever to reelect an officeholder who governed in a period of poor performance. Finally, essentially the same argument as above yields the following result: PROPOSITION 5: PROOF:
solving f o r ~V~/~W,

The u t i l i t y of the voter is increasing in W. V~ with respect to W and

This implies we see that Vx is increasing in W.

By implicitly differentiating

that U increases in W, too. Most of the conclusions that are drawn from t h i s simple model of repeated elections are in accord with i n t u i t i o n . that office office, voters is have more control relatively high over officeholders when the future and Like Barro, we find when the is less value of heavily

discounted.

To the extent that voters can d i r e c t l y a f f e c t the value of optimally. How t h i s should be done is

they should choose i t

discussed in Barro's paper, and we r e f e r the reader to his discussion. Roughly speaking, an increase in the value of o f f i c e can be expected not only to cost something but also to increase the level of competition f o r o f f i c e among nonincumbents ( t h i s is not e x p l i c i t l y modelled e i t h e r here or in Barro's paper). termined by the wish. To the extent that the value of o f f i c e is debehavior of incumbent p o l i t i c i a n s , (legal or i l l e g a l )

that value may tend to be set at a higher level than the voters would In e i t h e r case, however, we might expect systems to evolve in such a way that p o l i t i c i a n s desire to hold onto t h e i r o f f i c e s and in which, therefore, the electorate is accorded a modicum of c o n t r o l . Perhaps more surprising merits of party systems. is our conclusion about the comparative hold up in more While our depiction of the two systems is

s i m p l i s t i c , we believe that the basic conclusion w i l l f o r the development of party reputations.

sophisticated models of repeated elections as long as there is no motive As long as the p a r t i e s do not In d i f f e r in t h e i r c a p a b i l i t i e s or preferences in some unobserved way, they have no way of d i s t i n g u i s h i n g themselves in the minds of the voters. has the e f f e c t of decreasing the level of voter control holders. such a s e t t i n g , the r e s t r i c t i o n of e l e c t o r a l competition to two p a r t i e s over o f f i c e In a Voters are better o f f in t h i s model to the extent that they

can prevent the system from evolving into two-party competition.

two-party system the loss of o f f i c e is not as consequential as i t would

20

be in a pure candidate (or, indeed, a multiparty) system and so officeholders are not given a strong incentive to pay attention to the interests of the electors.

4.

ELECTORALCONTROLWITH A N N O O E E U ELECTORATE OH M GNOS the model of electoral control over was based on the government per-

The development of assumption formance. still of

homogeneous voter

preferences

While there is some empirical

evidence in favor of the hythere is of among

pothesis that voter evaluations of incumbents are correlated, reason to suspect that government performance. p o l i c i e s they pursue. f o r officeholders? We begin by considering Section 2 and extending i t only about the quantity, this case, xi a simple s p e c i a l i z a t i o n that he receives. Indeed, many of the real

voters may disagree in t h e i r ratings differences

parties and candidates may be due to d i s t r i b u t i o n a l

differences in the

How far may the results of our model be extended

in a world in which the voters maintain separate evaluative standards of the model in the value of

to the case of N voters, each of whom cares We l e t

o f f i c e be W, and the incumbent's objective is to maximize W - a; but, in the incumbent must also decide how to divide the output, Thus, his strategies are represented by an the voters announce t h e i r retroand Ba(6), among the voters.

(N+l)-vector (a,x), where x=(xl,x2,x 3 . . . . . XN) and where Zxi = ea(e). The game proceeds just as before: spective voting chooses (a,x). levels, Ki , and then the incumbent observes B t

Then each voter observes the output he receives and For the present, we r e s t r i c t our attention to This will not of this

votes to re-elect the incumbent i f and only i f i t is satisfactory in the sense that x i ~ Ki . stationary equilibria in order to economize on notation. entail any essential loss of generality. The following model: PROPOSITION 6: I f <K1,K2,K3. . . . . KN,(a,x)> is an equilibrium, i t is equal to zero in all i t s components. PROOF: Given the voters' choice of Ki , i = 1,...,N, the incumbent w i l l choose the majority coalition, ~, to minimize Zxi c subject to the proposition characterizes the equilibria

21

constraint that x i ~ Ki for all i ~ ~.

Obviously, this implies that x i I f this minimum is

= Ki for i ~ ~ and that ~ is a minimal majority.

positive, any j i c would have been better off to offer Kj<max{Kil i ~ } , which shows that Ki = 0 for all i, and, therefore, that a=O. In the face of heterogeneous preferences, then, the incumbent has both the opportunity and motivation to play off the voters against one another. The result is that the incumbent is entirely uncontrolled by Thus, in the distributive setting, retrospective voting Moreover, From the structure of the argument, i t seems arise in any model in which voter the electorate. of the electors.

appears to lead to a rather unsatisfactory outcome from the standpoint clear that similar phenomena w i l l exists. This rational office phenomenon may be seen as a sort of paradox: individual would prevent behavior the leads to a collectively this seemingly undesirable situation.

preferences are s u f f i c i e n t l y diverse that no majority-rule equilibrium

outcome. One might think that the presence of potential competitors for incumbent from exploiting AFter a l l , i f the incumbent is entirely uncontrollable, one would expect that the office would be very valuable and that challengers would compete vigorously for the opportunity to become incumbents. But challengers are unable to make precommitments to the voters and so any nonzero offer by a challenger to a majority would not be credible; once in o f f i c e , the challenger would be motivated to violate such a promise. Thus, whatever capacity challengers have to discipline incumbent performance lies entirely in their a v a i l a b i l i t y and not at all in any strategic offers they might make. The problem, therefore, is for the voters to choose a voting rule that allows the presence of challengers to discipline incumbent beIt is clear that i f the voters are able to coordinate t h e i r havior.

behavior successfully, they might hope to achieve the level of control exhibited in Section 3. The solution to that problem represents the highest attainable level of performance from incumbents. The potential for exploitation by incumbents may lead the voters to adopt what are sometimes called sociotropic rules: which individual electors base their performance [Kiewiet (1983)]. voting rules in vote on an index of aggregate

Clearly, i f voters base candidate evalu-

ations on an aggregate index of performance rather than on their indi-

22

vidual

shares of aggregate output, the incumbent's a b i l i t y to exploit among them w i l l If be reduced. voters Indeed, the following simple expected aggregate

divisions

proposition i l l u s t r a t e s this p o s s i b i l i t y . PROPOSITION 7: agree to u t i l i z e output as the c r i t e r i o n , they will be able to induce the incumbent to and the in the

provide the same level of service as was exhibited in Section 3. PROOF: The voter problem is represented as equation (3) incumbent's problem is unchanged. Of course, determination will try of the usual collective-action rule. problems arise will disagree a sociotropic Voters among

themselves as to which is the best one and candidates, for their part, to induce voters or groups of voters to "defect" from the But once sociotropic rule and vote, instead, on a distributional basis. vote " s e l f i s h l y " may be strong, voters will tations are not credible.

a sociotropic rule is agreed upon, though the temptations to defect and realize that these temp-

5.

DISCUSSION

W have illustrated the limits of the electoral control of incumbents in e a simple setting in which candidates are essentially identical to one another and where the voters' problem is to motivate them to act in a popular fashion. The limits of control are achieved, not surprisingly, in a setting in which the electorate can act in a unitary fashion and in which there is a set of challengers waiting to assume office should the incumbent f a i l to perform adequately. of o f f i c e . I f , however, we take account of the diversity of preferences in the electorate, the degree of popular control becomes problematic. Insofar as the electorate is able to agree on some performance standard, the incumbent may be subject to the same discipline as he is with a homogeneous electorate. From the standpoint of the electorate, then, we have seen that control of politicians requires more than simple retrospective voting. I t seems to require, as well, a refusal to vote selfishly. This result, In that case, popular control of incumbents rests on the structure of the party system and on the rewards

23

while

perhaps surprising

at

first

encounter, findings

may o f f e r

hope of

ex-

plaining literature

heretofore puzzling empirical

in the voting behavior Of course, t h i s remark

which suggest the widespread use of sociotropic rules rather

than more s e l f i s h forms of retrospective voting. sociotropic r u l e . Less v i s i b l e , assumed, that it

poses the question of how voters might come to agree on a p a r t i c u l a r in our model, is the role of challengers. that challengers and incumbents are We have unable to

throughout,

collude - - a plausible assumption when there are many challengers - - so was unnecessary to examine strategies that involved deliberate in o f f i c e by two collusive competitors and low performance is evident t h a t , adequate. if binding agreements could be arranged the solution concept employed case, we would have to examine the and consider the bargaining problem Perhaps officeholders, In that explicitly It not alternation levels. here i s

among the set of potential cooperative p o s s i b i l i t i e s among candidates.

Whether such a model is worth developing depends, of

course, on the presence of entry r e s t r i c t i o n s on o f f i c e h o l d i n g . Eastern Europe, or in various entry third-world of countries and, --

we should think of one-party states - - whether in the American South, as embodying maintain Of mechanisms that control politicians thereby,

c o l l u s i v e opportunities f o r officeholders of the established party. tition among themselves remains unresolved.

course, how these officeholders in the dominant party may prevent compe-

24

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Choice, 14:

An Economic Model. Public

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Becket, G. and S t i g l e r , G. (1974) Law Enforcement,

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Malfeasance,

and the Compensation of

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Journalof LegaIStudies, I:

Chappell, H. and Keech, W. (1985) A New View of Political Accountability for Economic Performance. American Political Science Review, 79: Fiorina, M. (1981) 10-27.

Retrospective Voting in American National Elections.

New

Haven: Yale University Press.

Key, V. (1966) Kiewiet, D. (1983) Kramer, G. (1977)

Macroeconomics and Micropolitics. Chicago: Chicago Press.
The Responsible Electorate. New York: Vintage Books.

A Dynamical Model of Political Equilibrium.

Economic Theory, 16:

Journal of

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(1971)

Short Term Fluctuations in U.S. Voting Behavior, 18961964. The American Political Science Review, 65: 131-143.

Mayhew, D. (1974)

Congress:

The Electoral Connection.

New Haven:

Yale

University Press.

25

McKelvey, R.
(1975) Policy Related Voting 815-843.

and

Electoral

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Political Control of the Economy.

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