Choosing Policy-Makers: Learning from Past Decisions in a Changing Environment

Abstract:     
A politician sets policy in a changing environment, while a voter learns about the ability of the politician in order to decide whether to reelect him or not. When the voter cannot observe which policies are optimal, policies are unresponsive to relevant information, and uninformative about the ability of the politician. When the voter can observe optimal policies with arbitrarily large noise and enough decisions by the politician, (i) the voter appoints good policy-makers and tosses out bad policy-makers almost always, (ii) the politician chooses policy as with no career concerns, and (iii) consistent policy records are indicative of ability when past information depreciates fast.

Number of Pages in PDF File: 42

Keywords: Political Agency, Changing Environment, Reelection, Posturing

JEL Classification: D72, D78

working papers series