Demand and Supply Curves in Political Markets : Understanding the Problem of Public Goods and Why Governments Fail Them
This paper brings the economic tools of demand and supply curves to better understand how political markets shape the selection of government policies. It does so to tackle a problem at the intersection of political science and economics: governmen...
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| Format: | Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2017
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| Online Access: | http://documents.worldbank.org/curated/en/688181507656703024/Demand-and-supply-curves-in-political-markets-understanding-the-problem-of-public-goods-and-why-governments-fail-them http://hdl.handle.net/10986/28548 |
| Summary: | This paper brings the economic tools of
demand and supply curves to better understand how political
markets shape the selection of government policies. It does
so to tackle a problem at the intersection of political
science and economics: government failure to pursue policies
on the basis of sound technical evidence. Too often, the
leaders who wield policy-making power within governments
deliberately and knowingly ignore sound technical advice, or
are unable to pursue it despite the best of intentions,
because of political constraints. The paper shows how the
prevailing dominant explanation for suboptimal policies and
weak institutions, of special interest and elite capture,
can be understood as the selection of a point on the
political demand curve by oligopolistic political
competition. Further, it shows how elite capture is only one
of many possible outcomes, and is endogenous to preferences
and beliefs in society. Preferences in society for public
goods (or the lack thereof), and beliefs about how others
are behaving in the public sector, are the primitive or
fundamental elements driving the shapes of political demand
and supply curves and thence the selection of public
policies and institutions. This framework highlights the
need for future research to understand where political
preferences and beliefs come from, which is essential to the
design of institutions that address problems of public goods. |
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