Keywords: Direct Democracy, Representative Democracy,
Constitutional Choice, Delegation, Asymmetric Information
JEL--Classification: D61, D78
The paper studies the
relative merits of direct and representative legislation by emphasizing
the importance of informational asymmetries between elected officials
and their constituents. We consider a setting where voters are
uncertain both with respect to the likely consequences of different
policies and with respect to the political preferences of their fellow
citizens. Under representative legislation, the latter translates into
uncertainty on the elected official's future policy intentions which
involves a loss of control. The resulting discretionary power, however,
also leads officials to endogenously acquire competence on the issues
they oversee and specialize in policy formation. Policies determined in
representative democracies are therefore better tailored to relevant
contingencies but less close to the preferences of a majority than
those determined in popular ballots. It is shown that the extent of the
resulting trade-off depends on the set of alternatives among which the
policy is to be chosen. Two extensions, referenda and the possibility
of re-election, are briefly considered.
Copyright © 2003 Anke Kessler