The political economy of electoral over-investment

Posted: January 11, 2011 in Alberto Simpser, Boris Yeltsin, Electoral over-investment, Political economy, Russian politics, Vladimir Putin

This morning, I was invited by my good friend and colleague, Prof. Corina Gochoco-Bautista of the UP School of Economics (UPSE), and now senior economic advisor with the Asian Development Bank (ADB) to discuss a paper of  Prof. Alberto Simpser of the University of Chicago, a fellow political scientist who has degrees in economics and environmental science.


Boris Yeltsin

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I will not comment on Simpser’s formal model since I do not understand it fully. What I can promise is that I will carefully read the paper (and consult my neglected textbooks) at greater leisure so I may understand the model and could comment on it at great length later. Perhaps Albert should advise me re the texts necessary so I can grasp what Inada-like assumptions and Spense-style signaling are all about.

I see that Simpser’s model deviates from or modifies the usual marginal analysis usually done in neoclassical economics, which stipulates that investment in election manipulations would be done up to the point where the marginal benefits (or utility) would equal marginal costs and beyond that point, marginal costs would be greater than marginal benefits.  The singular insight is that the investment decision is arrived at by reckoning not only the direct but also the indirect benefits of electoral victory versus costs of securing victory.  And the benefits of such a deviation are quite apparent as the formal model helps Alberto arrive at his counter-intuitive insights re the benefits—thus the strong incentives—of electoral over-investment.

Alberto’s paper on the political economy of electoral over-investment is a welcomed addition to the literature and it singularly calls our attention to important political economy consequences of elections beyond just the identity of the victors. His two-pronged argument: that the conduct and results of elections—for instance, whether they are manipulated, and how decisively they are won—shape the subsequent behavior of a wide range of actors, including citizens, politicians, political parties, election campaign financiers, business elites, bureaucrats, and organizations; and that, in turn, these effects (which he deconstructed into direct and indirect effects, with the latter being the more interesting ones) creates incentives for parties and governments to over-invest in elections—is (quite) persuasive.  Election over-investment is understood to mean the expenditure of resources and efforts beyond the point that these can contribute to electoral success.

At first glance, over-investment is irrational since the expenditure of scarce resources beyond what is necessary to secure victory seems a waste. However, consideration of the payback that subsequently accrues to the winner will make us realize that over-investment is rational after all.Simpser insightfully points out that an overwhelming victory can shape the incentives of actors in ways that favor the winning party or coalition—discouraging defections and challenges and enhancing its bargaining power while in office.

On the other hand, a narrow victory may stimulate exactly the opposite.A fraudulently-obtained mandate can foster a general feeling that opposing the victor is a useless exercise. Thus, challenges are deterred and bureaucrats and allies are whipped into line.In the main, a large electoral margin today can both increase the value of incumbency over the course of a party’s term in office, and it can also deter challenges in a subsequent election, increasing the party’s chances of holding on to power for an additional term.These benefits provide strong reasons to over-invest in elections—manifested in the form of increased campaign spending, propaganda in media (esp. electronic), the excessive use of electoral manipulation (i.e. beyond the point sufficient for victory), the blatant use of electoral manipulation (when secrecy is what intuition would dictate), the use of physical intimidation and harassment of rivals, the modification of laws for partisan gain, and the capture of institutions such as the courts or the election bodies themselves.

Flag of the Russian Federation

Can Simpser’s analysis be tempered or nuanced a bit? He does mention scope conditions such as institutional settings. Where the rule of law is relatively strong, this limits the degree to which the returns to electoral over-investment are sensitive to the distribution of power. Thus the indirect effects are stronger in weakly-institutionalized jurisdictions. He also includes the impact of international pressures and the resources available to the incumbent.

However, I can add other more specific considerations. A key variable is the capacity of a political party to impose organizational discipline, which is obviously an indicator of the level of the party’s institutionalization.For instance, will these incentives for over-investment exist or be weakened when party discipline is weak or non-existent or if the capacity (or appetite) to sanction defectors or steel the resolve of the wavering and weak-kneed members is limited? When even if a party wins narrowly, the ruling coalition will get swollen after the elections by a flood of turn-coats attracted by the goodies only an incumbent party can dispense to its members and fellow travellers?

The crucial variable here is the fate of the defector. Will he be punished if the incumbent wins the electoral contest, especially if the margin of victory is quite huge? Or will he still be welcome into the post-election coalition albeit with lesser rewards.I guess the incentives for over-investment under these circumstances will palliated only by the capacity of the incumbent party leaders to ensure bigger rewards to those who kept the faith and still ensure enough largesse for the defectors to support the ruling party’s agenda, public-regarding or otherwise ( as Simpser has noted).

Vladimir Putin

How will it be affected by the existence of term limits on party standard bearers in presidential systems? I argue that these incentives will be at full play if the standard bearer does not face term limits. I also argue that they will be mitigated a bit if the standard bearer cannot stand for re-election. To the extent however that the outgoing head of government is interested to get a sympathetic party member get the highest post, then the incentives to over-invest still exist even if there are term limits to the presidency. And the incentives remain to be strong for party members who stand for sub-presidential posts.

The additional devices that Simpser resorts to—the case study of post-Soviet electoral politics that compares Putin and Yeltsin–strengthens his case.  The notion of an “electoral enhancement trap,” in which an initially powerful incumbent party further entrenches its hold on power and discretion by electoral over-investment together with the identification of both a low and high equilibrium state—is definitely an inspired one.  And it correctly leads to the conclusion that exogenous shocks to either of the scope conditions—concentration of power in the hands of government and state discretion—could undermine the low equilibrium state.


Boris Yeltsin



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