Imperfect Information, Democracy and Populism

Johannes Binswanger () and Jens Prüfer ()

No 2008-040, Discussion Paper from Tilburg University, Tilburg Law and Economic Center

Abstract: The modern world is complex and difficult to understand for voters, who may hold beliefs that are at variance with reality. Politicians face incentives to pander to voters' beliefs to get reelected. We analyze the welfare e ffects of this pandering and show that it entails both costs and bene fits. Moreover, we explore optimal constitutional design in the presence of imperfect information about how the world works. We compare indirect democracy to direct democracy and to delegation of policy making to independent agents. We find that indirect democracy is often welfare maximizing. Keywords: Imperfect information, beliefs, democracy, populism, accountability, experts JEL Classifications: D72, D78, D83

Date: 2008

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Working Paper: Imperfect Information, Democracy, and Populism (2009)
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