Tying the Politicians’ Hands: The Optimal Limits to Representative Democracy

We study the optimal delegation problem which arises between the median voter (the writer of the constitution) and the (future) incumbent politician under the assumption that not only the state of the world and but also the politician's type (preferred policy) are the policy-maker's private information. [...] We establish two uncertainty principles: (a) the state-uncertainty principle, which states that the greater is the uncertainty about the state of the world, the wider is the delegation interval, and (b) the bias-uncertainty principle, which states that the greater is the uncertainty about political bias, the smaller is the delegation interval. [...] When the state of the world is = ", the most preferred policy of a voter with the extreme rightist preference, t = , is B + " + , and when the state of the world is = ", the most preferred policy of a voter with the extreme leftist preference, t = ", is B ". [...] We assume that the variance of the distribution of t is smaller than the variance of the distribution of the state of the world, , i.e., we assume < ". [...] 7 Conclusion In this paper we have analyzed a delegation game between the median voter (the writer of the constitution) and the elected representative (the incumbent politician) in which the latter is privately informed of the state of the world and the former is uninformed about both the state of the world and the politicians type.