Populism, the Backlash Against Ruling Politicians and the Possible Malfunctioning of Representative Democracy

26 Pages Posted: 19 Aug 2019

See all articles by Mario Gilli

Mario Gilli

Università degli Studi di Milano-Bicocca - Center for Interdisciplinary Studies in Economics, Psychology & Social Sciences (CISEPS); Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS)

Elena Manzoni

University of Verona - Department of Economics

Date Written: August 18, 2019

Abstract

The aim of this paper is to investigate the links between lack of trust in ruling politicians and the functioning of a representative democracy. Within a standard principal-agent model of democracy, we show how lack of trust by citizens as reflected by passive beliefs updating may lead to the malfunctioning of representative democracy. We highlight how de facto accountability crucially depends on out-of-equilibrium beliefs, and that this is indeed descriptive of a substantive feature of public opinion that affects the functioning of democracy. Specifically, we show that effective accountability needs more than simple retrospective voting, as it requires voters to believe in the existence of good politicians that always choose according to voters' interests, so that a deviation from bad policies can happen only because the leader is congruent. In this case, the unique equilibrium is an efficient one that maximizes voters' welfare. However, if, on the other hand, the citizens share an overall lack of trust in ruling elites, then there is another inefficient equilibrium, where even the congruent politician behaves badly because of the adverse but rational voters' behavior. This inefficient equilibrium does not depend on fake news or on distorted beliefs or, again, on voters' heterogenous preferences, since the voters' perfectly observe the quality of the policy implemented by the government, are fully rational and share the same interests. This result might contribute to explain the increasing negative perceptions on the working of democracy as due to a self-fulfilling equilibrium.

Keywords: Government Performance, Democracy, Representation, Out-of-equilibrium Beliefs

JEL Classification: Hll, D72, D78

Suggested Citation

Gilli, Mario and Manzoni, Elena, Populism, the Backlash Against Ruling Politicians and the Possible Malfunctioning of Representative Democracy (August 18, 2019). University of Milan Bicocca Department of Economics, Management and Statistics Working Paper No. 417, Available at SSRN: https://ssrn.com/abstract=3438897 or http://dx.doi.org/10.2139/ssrn.3438897

Mario Gilli (Contact Author)

Università degli Studi di Milano-Bicocca - Center for Interdisciplinary Studies in Economics, Psychology & Social Sciences (CISEPS) ( email )

Piazza dell'Ateneo Nuovo, 1
Milano, 20126
Italy

Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS) ( email )

Piazza dell'Ateneo Nuovo, 1
Milan, 20126
Italy

Elena Manzoni

University of Verona - Department of Economics ( email )

Via dell'Artigliere, 8
37129 Verona
Italy

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