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Rational Ignorance is Not Bliss: When do Lazy Voters Learn from Decentralised Policy Experiments?

29 Pages Posted: 1 Jun 2007 Last revised: 4 Mar 2008

Jan Schnellenbach

BTU Cottbus-Senftenberg, Institute for Economics, Chair for Microeconomics; Walter Eucken Institute

Date Written: February 27, 2008

Abstract

A popular argument about economic policy under uncertainty states that decentralisation offers the possibility to learn from local or regional policy experiments. We argue that such learning processes are not trivial and do not occur frictionlessly: Voters have an inherent tendency to retain a given stock of policy-related knowledge which was costly to accumulate, so that yardstick competition is improbable to function well particularly for complex issues if representatives' actions are tightly controlled by the electorate. Decentralisation provides improved learning processes compared to unitary systems, but the results we can expect are far from the ideal mechanisms of producing and utilising knowledge often described in the literature.

Keywords: federalism, collective learning, model uncertainty, fiscal competition, herding behaviour

JEL Classification: H73, O31, D83

Suggested Citation

Schnellenbach, Jan, Rational Ignorance is Not Bliss: When do Lazy Voters Learn from Decentralised Policy Experiments? (February 27, 2008). Available at SSRN: https://ssrn.com/abstract=990268 or http://dx.doi.org/10.2139/ssrn.990268

Jan Schnellenbach (Contact Author)

BTU Cottbus-Senftenberg, Institute for Economics, Chair for Microeconomics ( email )

Erich-Weinert-Str. 1
Cottbus, 03046
Germany

HOME PAGE: http://https://www.b-tu.de/fg-vwl-mikro/team/prof-dr-jan-schnellenbach

Walter Eucken Institute ( email )

Goethestr. 10
Freiburg, 79100
Germany

HOME PAGE: http://www.eucken.de

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