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Rational ignorance, populism, and reform

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  • Prato, Carlo
  • Wolton, Stephane

Abstract

This paper studies how voters' demand for economic reforms affects the probability that successful or populist reforms are adopted. We study a model of electoral competition with rationally ignorant voters in which the success of a reform is tied to a politician's unobservable competence. We show that when voters' demand for reform is high, candidates engage in a form of populism and propose reformist agendas regardless of their ability to successfully carry them out. As voters are then faced with either risky reformers or policy inaction, the relationship between demand for reform and the probability that any (i.e., genuine or populist) policy change is implemented depends on how harmful botched reforms are. Our results help organize the mixed empirical evidence regarding the impact of crises on the likelihood of reform. They also suggest that the rise of populism may cause political disenchantment rather than the other way round.

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  • Prato, Carlo & Wolton, Stephane, 2018. "Rational ignorance, populism, and reform," European Journal of Political Economy, Elsevier, vol. 55(C), pages 119-135.
    • Handle: RePEc:eee:poleco:v:55:y:2018:i:c:p:119-135
    DOI: 10.1016/j.ejpoleco.2017.11.006
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    3. Gabriele Gratton & Barton E. Lee, 2023. "Drain the Swamp: A Theory of Anti-Elite Populism," Discussion Papers 2023-02, School of Economics, The University of New South Wales.
    4. Wysocki, Maciej & Wojcik, Cezary & Freytag, Andreas, 2024. "Populists and fiscal policy: The case of Poland," European Journal of Political Economy, Elsevier, vol. 83(C).
    5. Leyla D. Karakas & Devashish Mitra, 2021. "Electoral competition in the presence of identity politics," Journal of Theoretical Politics, , vol. 33(2), pages 169-197, April.
    6. Giray Gozgor, 2020. "The Role of Economic Uncertainty in Rising Populism in the EU," CESifo Working Paper Series 8499, CESifo.
    7. Tinghua Yu & Elliott Ash, 2021. "Polarization and Political Selection," BCAM Working Papers 2105, Birkbeck Centre for Applied Macroeconomics.
    8. Heckelman, Jac C. & Wilson, Bonnie, 2019. "The growth-maximizing level of regulation: Evidence from a panel of international data," European Journal of Political Economy, Elsevier, vol. 59(C), pages 354-368.
    9. Lucia Rossel Flores & Martijn Huysmans & Joras Ferwerda, 2024. "The political business cycle of tax reforms," Public Choice, Springer, vol. 200(1), pages 65-88, July.
    10. François Facchini & Louis Jaeck, 2021. "Populism and the rational choice model: The case of the French National Front," Rationality and Society, , vol. 33(2), pages 196-228, May.
    11. Giray Gozgor, 2022. "The role of economic uncertainty in the rise of EU populism," Public Choice, Springer, vol. 190(1), pages 229-246, January.
    12. Brad R. Taylor, 2020. "The psychological foundations of rational ignorance: biased heuristics and decision costs," Constitutional Political Economy, Springer, vol. 31(1), pages 70-88, March.
    13. Guido Merzoni & Federico Trombetta, 2021. "A Note on Asymmetric Policies: Pandering and State-specific Costs of Mismatch in Political Agency," DISEIS - Quaderni del Dipartimento di Economia internazionale, delle istituzioni e dello sviluppo dis2102, Università Cattolica del Sacro Cuore, Dipartimento di Economia internazionale, delle istituzioni e dello sviluppo (DISEIS).
    14. Karakas, Leyla D. & Mitra, Devashish, 2020. "Believers vs. deniers: Climate change and environmental policy polarization," European Journal of Political Economy, Elsevier, vol. 65(C).

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    More about this item

    Keywords

    Crises; Populism; Rational inattention;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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