a political theory of populism
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A Political Theory of Populism
Daron Acemoglu (MIT and NBER)
Georgy Egorov (Northwestern-Kellogg and NBER)
Konstantin Sonin (New Economic School and CEPR)
NES 20th Anniversary Conference
December 15, 2012
Puzzle
Several policies that theory explains/predicts
policies favored by median voters
policies favored by the ruler/the powerful/the elite
first-best policies
combination of the above
But it falls short at explaining:
over-redistribution
over-provision of public goods (?)
generally, policies “too left” for the median voter
Common in populist regimes in Latin America and
elsewhere 3 Acemoglu, Egorov and Sonin "A Political Theory of Populism"
What is populism?
“If we define populism in strictly political terms–as the presence of […] a charismatic mode of linkage between voters and politicians, and a democratic discourse that relies on the idea of a popular will and a struggle between `the people’ and `the elite’–then Chavismo is clearly a populist phenomenon.”
Hawkins (2003)
“Populist regimes have historically tried to deal with income inequality problems through the use of overly expansive macroeconomic policies. These policies, which have relied on deficit financing, generalized controls, and a disregard for basic economic equilibria, have almost unavoidably resulted in major macroeconomic crises that have ended up hurting the poorer segments of society.”
Dornbusch and Edwards (1991)
Acemoglu, Egorov and Sonin "A Political Theory of Populism" 4
Our approach to populism
Definition of populism
Populism = {policies left of the median}
Questions
what explains these policies?
when should we expect to observe them?
Our approach
abstract away from particular implementations (over-redistribution, over-provision of public goods…)
focus on signaling character of political competition
Acemoglu, Egorov and Sonin "A Political Theory of Populism" 5
Main result
Populism is a way for politician to persuade
voters he is not pro-elite (right-wing)
Even right-wing politicians may become
populists if electoral concerns are strong enoug
More populism if
office-motivated rather than policy-motivated
moderate and honest politicians are rare
“soft” term limits
uncertainty about hidden agendas
Acemoglu, Egorov and Sonin "A Political Theory of Populism" 6
Literature
Signaling models of elections and prospective voting
Banks (1990), Harrington (1993), Besley (2005)
Recent models of “honest” (commitment-type) politicians: Callander and
Willkie (2007), Kartik and McAfee (2007)
our model: more tractable because signals are noisy
⇒ unique equilibrium, intuitive comp. statics
Models of “pandering”
Prendergast (1993), Morris (2001), Canes-Wrone, Herron, and Shotts
(2001), Maskin and Tirole (2004)
Left policies as fair response to corruption: Di Tella and MacCulloch
(2006)
Elite capture of democracy: Bates and La Ferrara (2001), Lizzeri and
Persico (2005), Padro-i-Miquel (2007), Acemoglu and Robinson (2008),
Acemoglu, Robinson, and Torvik (2010)
7 Acemoglu, Egorov and Sonin "A Political Theory of Populism"
Theory
Environment
One-dimensional policy space ℝ
Two groups of population
poor majority, ideal policy 𝛾𝑚 = 0 (median voter)
rich elite, ideal policy 𝛾𝑟 = 𝑏 > 0 (bias)
Two periods
Citizen 𝑖’s utility:
𝑢𝑖 𝑥1, 𝑥2 =
𝑢𝑚 𝑥1, 𝑥2 = − 𝑥𝑡 − 𝛾𝑚 22
𝑡=1, rich
𝑢𝑟 𝑥1, 𝑥2 = − 𝑥𝑡 − 𝛾𝑟 22
𝑡=1, poor
Acemoglu, Egorov and Sonin "A Political Theory of Populism" 9
Politicians
Large pool of two types of politicians
share 𝜇: moderate, ideal policy 𝛾 = 𝛾𝑚 = 0
share 1 − 𝜇: right-wing (pro-elite), ideal policy 𝛾 = 𝛾𝑟 = 𝑏
Type is politician’s private info
Utility:
𝑣 𝑥1, 𝑥2 = −𝛼 𝑥𝑡 − 𝛾 2 2
𝑡=1+
𝑊𝐈 in office at 𝑡 +
𝐵𝑡 − 𝐶 𝐈 accepted bribe 𝑎𝑡 𝑡
Acemoglu, Egorov and Sonin "A Political Theory of Populism"
Timing
1. Politician at time 𝑡 = 1 chooses policy
𝑥1 ∈ ℝ
2. Citizens obtain noisy signal 𝑠 = 𝑥1 + 𝑧
3. Elections take place (median voter chooses
to keep or replace the incumbent)
4. Politician at time 𝑡 = 2 chooses policy
𝑥2 ∈ ℝ
5. Payoffs are realized
Acemoglu, Egorov and Sonin "A Political Theory of Populism" 11
Assumptions
Noise 𝑧 has:
full support ℝ
c.d.f. 𝐹 𝑧 , p.d.f. 𝑓 𝑧
∀𝑧: 𝑓 −𝑧 = 𝑓 𝑧
𝑓 𝑧 cont. differentiable, 𝑧 > 0 ⟹ 𝑓′ 𝑧 < 0
Noise 𝑧 is sufficiently smooth: ∀𝑧:
𝑓′ 𝑧 <1
𝑏2
2+
𝑊2𝛼
Acemoglu, Egorov and Sonin "A Political Theory of Populism" 12
Analysis
2nd period
Moderate politicians choose 𝑥2 = 0
Right-wing politicians choose 𝑥2 = 𝑏
Median voter wants to have moderate in period 2
Reelection strategy: Keep incumbent if and only if
Pr incumbent is moderate ≥ 𝜇
Acemoglu, Egorov and Sonin "A Political Theory of Populism" 14
0 𝑏 𝑥2
1st period
Let moderate politicians choose 𝑥1 = 𝑚
Let right-wing politicians choose 𝑥1 = 𝑟
Then: In equilibrium, 𝑚 < 𝑟
Citizens’ equilibrium strategy:
Keep incumbent if and only if
𝑠 ≤𝑚+𝑟
2
Acemoglu, Egorov and Sonin "A Political Theory of Populism" 15
𝑚 𝑟 𝑚 + 𝑟
2
reelection replacement
1st period policies
Probability of reelection after choosing 𝑥1 = 𝑥
𝜋 𝑥 = Pr 𝑥 + 𝑧 ≤𝑚 + 𝑟
2= 𝐹
𝑚 + 𝑟
2− 𝑥
Moderate politician maximizes max𝑥∈ℝ
−𝛼𝑥2 + 𝑊𝜋 𝑥 − 1 − 𝜇 𝛼𝑏2 1 − 𝜋 𝑥
Right-wing politician maximizes max𝑥∈ℝ
−𝛼 𝑥 − 𝑏 2 + 𝑊𝜋 𝑥 − 𝜇𝛼𝑏2 1 − 𝜋 𝑥
Assumptions guarantee second-order cond.
Acemoglu, Egorov and Sonin "A Political Theory of Populism" 16
1st order conditions
Equilibrium is characterized by two equations:
−2𝛼𝑚 − 𝑊 + 1 − 𝜇 𝛼𝑏2 𝑓𝑟 − 𝑚
2= 0
−2𝛼 𝑟 − 𝑏 − 𝑊 + 𝜇𝛼𝑏2 𝑓𝑟 − 𝑚
2= 0
Denote 𝑝 = 𝑚 , 𝑞 = 𝑟 − 𝑏
Acemoglu, Egorov and Sonin "A Political Theory of Populism" 17
Equilibrium
Trade-off between:
proximity to preferred policy
electoral chances
Acemoglu, Egorov and Sonin "A Political Theory of Populism" 18
45°
moderate (m)
right-wing (r)
𝑏
0
Moderates’ reaction
Right-wing move left ⇒
easier for voters to confuse ⇒
moderates separate by moving left
Right-wings’ reaction
Moderate move left ⇒
harder to pretend to be moderate ⇒
right-wing give up and move right
CS: office and policy concerns
Trade-off between
proximity to preferred policy
electoral chances
Higher benefits from office ( 𝑊 ↑ ) or Lower policy concerns ( 𝛼 ↓ ):
both types move left
intuition: more important to get reelected
If 𝑊 = 0: 𝑚 < 0 < 𝑟, only moderates are populist
If 𝑊/𝛼 is large enough: 𝑚 < 𝑟 < 0, all populist
Acemoglu, Egorov and Sonin "A Political Theory of Populism" 19
CS: likelihood of types
Suppose moderates become rarer ( 𝜇 ↓ )
moderates are more concerned about reelection
another politician will likely choose 𝑥2 = 𝑏
right-wing are less concerned about reelection
losing elections has less impact on policy 𝑥2
Endogenous polarization:
moderates move left, right-wing move right
more populism by moderates
Acemoglu, Egorov and Sonin "A Political Theory of Populism" 20
First-period policy
Acemoglu, Egorov and Sonin "A Political Theory of Populism" 21
𝑚 𝑟 𝑏 𝑥1 0
𝑊𝛼
Reelection/policy
concerns
𝑚 𝑟 𝑏 𝑥1 0
Share of moderates 𝜇
Moderates/right-wings
ratio
1
Importance of office
(relative to policy)
Right-wing Moderates
Moderates Right-wing
Equilibrium: summary
There exists a unique equilibrium
Moderate politicians choose populist policies:
𝑚 < 0
Right-wing politicians move left of their
preferred policies:
𝑟 < 𝑏
Right-wing may choose populist policies
(𝑟 < 0), but only if 𝑊 is large enough
Acemoglu, Egorov and Sonin "A Political Theory of Populism" 22
Are the results driven by noise?
Consider normal distribution: 𝑧 ∼ 𝒩 0, 𝜎2
Then there exists 𝜎∗ such that:
if 𝜎 < 𝜎∗, then more noise ( 𝜎 ↑ ) increases biases (𝑚 and 𝑟 move left)
• too small 𝜎 ⇒ hard to confuse voters
if 𝜎 < 𝜎∗, then more noise ( 𝜎 ↑ ) decreases biases (𝑚 and 𝑟 move right)
• too large 𝜎 ⇒ very hard to influence signal voters get
Leftist biases are highest at 𝜎 = 𝜎∗
Noise makes model nice but does not drive results
Acemoglu, Egorov and Sonin "A Political Theory of Populism" 23
Which noise maximizes bias?
𝜎∗ =𝑏
41 + 1 + 1 − 2𝜇
8
𝜋𝑒
Acemoglu, Egorov and Sonin "A Political Theory of Populism" 24
Polarization and populism
Suppose bias of right-wing politicians
increases ( 𝑏 ↑ )
Then: if 𝑊 = 0 and 𝜎 is large, then
moderates choose more populist policies (𝑚
moves left)
higher 𝑏 increases the necessity to get reelected
As 𝑊 increases, this effect diminishes
𝑊 increases populism per se, 𝑏 adds little
opposite effect: easier to separate if 𝑏 is high
Acemoglu, Egorov and Sonin "A Political Theory of Populism" 25
Term limits
How will welfare change if we impose term limits?
poor’s or total (≈ poor’s if poor are very numerous)
Three effects:
moderate politicians will stop choosing populist policies (good for all)
right-wing politicians will remove left bias (good for elite, likely bad for poor)
right-wing politicians are more likely in period 2 (good for elite, bad for poor)
Term limits are better if 𝑊/𝛼 is high
No term limits are better if 𝑊/𝛼 is low
Acemoglu, Egorov and Sonin "A Political Theory of Populism" 26
Soft term limits
But: this only works if term limits are “hard”, not “soft”
If popularity helps overcome term limits ⇒
more incentives to gain popularity ⇒
populism may be higher, not lower
Soft term limits are very realistic:
Álvaro Uribe: changed constitution to run in 2006
Evo Morales: introduced new constitution in 2009
Hugo Chávez: amendment allowing him to avoid term limits in 2009
Daniel Ortega: constitutional court ruled term limits unconstitutional in 2009
In post-WWII Argentina, 1/25 presidents left because of term limits (as opposed to death or coups)
Acemoglu, Egorov and Sonin "A Political Theory of Populism" 27
Corruption
Endogenize bias of right-wing politicians
Simplifying assumption:
all politicians have moderates’ preferences: 𝛾 = 0
honest politicians cannot be bribed, share 𝜇
corruptible politicians may be bribed, share 1 − 𝜇
Bias = outcome of bargaining with elite
only elite can bribe
if politician accepts bribe, he bears cost 𝐶 ≥ 0
politician’s share of surplus: 𝜒 ∈ 0,1
Acemoglu, Egorov and Sonin "A Political Theory of Populism" 28
Corruption: timing
1. At time 𝑡 = 1, politician and elite bargain
and choose policy 𝑥1 ∈ ℝ
2. Citizens obtain noisy signal 𝑠 = 𝑥1 + 𝑧
3. Elections take place (median voter chooses
to keep or replace the incumbent)
4. At time 𝑡 = 2, politician and elite bargain
and choose policy 𝑥2 ∈ ℝ
5. Payoffs are realized
Acemoglu, Egorov and Sonin "A Political Theory of Populism" 29
CS: corruption
If 𝐶 > 𝐶∗ = 𝑏2/ 𝛼 + 1 , no corruption in either period
If 𝐶 < 𝐶∗, corruptible politicians are bribed in both periods
Majority wants to choose honest politicians
Populism of honest politicians is higher if:
more benefits of holding office ( 𝑊 ↑ )
corrupt politicians have bargaining power ( 𝜒 ↑ )
honest politicians are rare ( 𝜇 ↓ )
Acemoglu, Egorov and Sonin "A Political Theory of Populism" 30
Elite and corruption
Does elite benefit from ability to bribe?
Effects:
influence policy of corruptible politicians (+)
honest politicians become populists to show they are not corruptible (–)
corruptible politicians become more expensive to bribe, since electoral concerns push them into populist direction (–)
Elite may benefit from committing not to bribe (having 𝐶 prohibitively high)
Acemoglu, Egorov and Sonin "A Political Theory of Populism" 31
Extensions
Two extremist types
Reputation and uncertainty
Acemoglu, Egorov and Sonin "A Political Theory of Populism" 32
Two extremist types
So far: one extremist (pro-elite)
Consider three types of politicians:
moderate, prefers 𝛾 = 0, share 𝜇
right-wing extremist, prefers 𝛾 = 𝑏, share 𝜇𝑟
left-wing extremist, prefers 𝛾 = −𝑏, share 𝜇𝑙
Median voter prefers 𝛾𝑚 = 0
both extremist types are equally bad
Are the results robust?
Acemoglu, Egorov and Sonin "A Political Theory of Populism"
33
Two extremists types: strategy
Fix share of moderates 𝜇
Vary 𝜇𝑙 and 𝜇𝑟 holding 𝜇𝑙 + 𝜇𝑟 = 1 − 𝜇
fixed
Focus on case with 𝜎 sufficiently high
then we can prove existence and uniqueness
Acemoglu, Egorov and Sonin "A Political Theory of Populism" 34
Two extremist types: results
Acemoglu, Egorov and Sonin "A Political Theory of Populism" 35
−𝑏 𝑏 𝑥1
Only right-wing
extremists Moderates
Right-wing
Only left-wing
extremists
Left-wing
0
𝜇𝑟 − 𝜇𝑙
Two extremist types: summary
Symmetric case
moderates unbiased
extremists biased towards median
Asymmetric case
moderates: biased towards rare extremists
likely extremists: become more extreme
• freer to exercise their preferred policies
rare extremists:
• try to mimic moderates
• but if extremely rare, become super-extreme, as voters are not afraid of them
Limits are consistent with two-type case
Acemoglu, Egorov and Sonin "A Political Theory of Populism" 36
Reputation and uncertainty
So far: incumbent is taken from the same
pool
What if incumbent has a pre-existing
reputation?
Suppose that ex-ante,
Pr incumbent is moderate = 𝜈 ≠ 𝜇
How would such incumbents behave?
Acemoglu, Egorov and Sonin "A Political Theory of Populism" 37
Reputation and uncertainty: results Equilibrium: exists and unique
Reelection probability: increases in 𝜈
having reputation of a moderate helps get
reelected
Leftist bias is non-monotinic (⋂-shaped) in 𝜈
largest bias (populism) for intermediate 𝜈
smallest bias for both extremes
Populism is a consequence of uncertainty!
Acemoglu, Egorov and Sonin "A Political Theory of Populism" 38
Conclusion
Populism = left-of-the-median policies
We explain why populism is linked to
popularity
More populism if
office-motivated rather than policy-motivated
moderate and honest politicians are rare
“soft” term limits
uncertainty about hidden agendas
Acemoglu, Egorov and Sonin "A Political Theory of Populism" 39
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