Political resource allocation, controlled agendas, and the status quo

Abstract

Economic analysis requires modelling political as well as market resource allocation. Voting institutions, in particular two-candidate majority rule elections and voting on motions, have been a primary focus of recent analytical developments. In the case of a single good to be allocated politically, standard assumptions lead to 'single-peakedness' of voter preferences over the set of alternatives. When, in choosing between a pair of available alternatives, every voter votes for his preferred alternative, the allocative equilibrium is the 'Condorcet point' or political allocation most desired by the median voter (Bowen, 1943; Black, 1958; Riker and Ordeshook, 1973). This result concerning the dominance of the median voter's ideal allocation depends importantly on the nature of competition in the allocation process. In the context of the political allocation of economic goods, the 'median voter' outcome is typically justified on the basis of an underlying but usually unmodeled process of political competition between two candidates for elective office, wherein the dominant strategy for each candidate is to offer to provide the level of public spending that corresponds to the median voter's ideal expenditure. Such a view of equilibrium under majority rule (when equilibrium exists) may be very unrepresentative of political processes. Many such processes, particularly those related to collective expenditure determination, may be more appropriately characterized as ones in which some group has the power to make a proposal to the voters, and thereby set the agenda. This group, which we call the agenda setter, by having monopoly power over the proposal placed before the electorate, can confront the voters with a 'take it or leave it' choice. Because 'competitive' substitutes to the setter's proposal are not offered, the median voter cannot simply 'hold out' until the Condorcet point is proposed. When the setter has monopoly power, voters are forced to choose between