53 pages • 1 hour read
An Economic Theory of Democracy
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Part 4, Chapters 15-16Chapter Summaries & Analyses
Part 4: “Derivative Implications and Hypotheses”
Part 4, Chapter 15 Summary: “A Comment on Economic Theories of Government Behavior”
Chapter 15 compares the model presented in the book to traditional economics as well as to prevailing economic interpretations of politics.
Downs presents what he views as the failure of economic theory to engage meaningfully with political behavior. He argues that traditional economic theory tends to regard government as an intruder upon the organic operations of the market. If economic theorists talk about government at all, is in the normative sense of how it ought to behave, rather than analyzing how it behaves in fact. Others designate specific functions for government, such as the redistribution of wealth or achievement of full employment, thereby reducing its role to a single economic purpose. Economists have so far failed to apply their own theoretical principles to governments, due to a false distinction between private and public action as somehow constituting entirely different realms of behavior and motivation. They look only at functions, and make prescriptions based on how think government should operate. Part of this negligence is due to the assumption that politics is a separate field from economics, or to too readily embracing a view of government that poses no theoretical challenges to economic models. Even when economists reduce the role of government to a single purpose, such as the achievement of social welfare, they cannot define what that is, and so they fail to build upon that concept in a theoretically useful way. Equating government with the provision of social welfare turns government employees into a differentiated class of human beings, intrinsically more altruistic than their counterparts in the private sphere. This in turn requires the assumption that government personnel are automata responding to the will of citizens with no independent agency of their own. Alternately, economists distinguish how different governments improve the welfare of different aspects of society, but such approaches fail to take into account the interests of the actual government and its personnel.
Downs’s solution is to formulate a theory capable of explaining various forms of government. To this end, economists need to bring economics and politics together into a unified theory. There is already a relationship between the two fields based on their common assumption of actors seeking to maximize self-interest, and economists do not need to become experts in political theory. Self-interest does not represent the entirety for either economic or political actors, only a baseline assumption that will hold strong enough for theoretical purposes. Finally, government can play an active role in shaping economic forces, in addition to being susceptible to them. Governments can correct deficiencies in markets, even as government agents display characteristics similar to those of economic actors. In such a world, policy recommendations will focus on methods for changing voters’ minds about what they want, changing the government’s mind about how to satisfy voters, while taking into account the significant role of uncertainty and choice. Downs comments that his theory is far more applicable to democratic regimes than to nondemocratic ones, as free expressions of self-interested choice and decision-making are curtailed in autocracies.
Part 4, Chapter 16 Summary: “Testable Propositions Derived From the Theory”
Chapter 16 concludes the book by proposing a list of propositions which evidence from the real world may either confirm or refute. This is not easy to do in real-world conditions. In particular, the theory has assumed that that parties will communicate their platforms with relative honesty and so, if real-life parties do not act in this way, it is not obvious whether the parties or the voters are acting in defiance of the theory.
Some propositions are more amenable to a simple test of reality. In terms of how parties are motivated, Downs proposes that party members formulate policies with the primary intention of holding office. In a two-party system each party will seek majorities and conceal the significant policy overlaps with one another. In a multiparty system, it is harder for a government to solve social problems. New parties will arise in the wake of significant social events or a radical split from an overly moderate party.
Finally, he predicts that parties will tend to favor lower-income voters and consumers instead of producers. The assumption of a rational citizenry proposes that citizens will act in a number of ways: they will judge parties mainly based on their records; they will not always vote their top preference under certain circumstances; they may not be well-informed even though passionate; they will be incentivized to vote in reverse correlation with the increasing size of the electorate; their motivation will correlate with the direct impact political issues have on them; that some voters still vote because they regard it as a good unto itself; and that lower-income voters are more likely to abstain. Downs also holds that that producers will bear the most significant effects of policy.
These hypotheses about government and citizenry combine to propose that political parties do their best to fulfill their promises, that they generally maintain consistent ideological viewpoints unless forced to make significant changes, and that, in the case of coalition governments, voting tends to function as an expression of preferences rather than a strategic move.
Part 4, Chapters 15-16 Analysis
The title An Economic Theory of Democracy suggests that Downs’s mission will be to subordinate politics to the pure logic of the market, and the initial chapters of the book do not dispel that initial perception. As discussed, Parts 2 and 3 complicate the picture by adding real-world variables such as uncertainty and information costs. Still, all the driving principles come from economics, such as the primacy of individual self-interest and the calculation of marginal utility. The challenges of achieving a coherence theory to address real-world variable are significant: Downs’s book has acknowledged this throughout and has shown his workings in enfolding them into his universal theory. In the final section, this transparent and rational approach is taken to its ultimate conclusion: the presentation of testable propositions, testing his theory’s balance of Rationality and Uncertainty in the crucible of the real world.
One of the key difficulties which Downs addresses is the idea that politics is an expression of values and beliefs which cannot be meaningfully expressed simply through an economic variable. There is real wrongdoing and corruption that is morally unacceptable even if it is defensible on the grounds of complete rationality. A democracy relies on the moral principle that the greater good outweighs the expression of unbridled individual self-interest. Democracy is a community composed of smaller communities who perceive a collective interest that conflicts with individual interest and yet can retain moral priority.
Downs has anticipated these objections and enfolded them into his theory, as part of his handling of Structure and Incentives. His approach stands against those economists who are in fact trying to reduce politics to a form of economics, or disparage its study insofar as it fails to follow economic logic. While Downs’s background is in economics, he does not present economics as a superior science capable of corralling politics. Instead, he calls out those who “universally fail to assign any motives to the men in government,” (283), as though their role within a technically public agency turns them into pure functionaries. Downs’s book shows that both economics and politics are social activities which possess a unique set of structures and incentives while also exhibiting common features of rationality. Government agents might seem different because they represent the public interest rather than private interest, but putting a rational human being into a government office does not strip them of their basic motivations. One can hope for their basic integrity while assuming that like anyone else, their principal goal is advancing themselves, and that this goal does not preclude some kind of beneficial action toward others. Formal economic models have the power to repackage complex political reality into a discernible and coherent model, without leading to the reductive assertion that politics is sub-variation of economics. Downs’s book recognizes that unified theory of both, and of other fields, is necessary to build an overall body of knowledge on the social life of human beings.
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