Power of Haas Ideas

Bad Policies? Blame Voters

Study discovers why people dismiss policies with social benefits

Why do citizens vote against policies that would help overcome social dilemmas? Is it because media and schools haven’t properly educated them, or is it the fault of politicians pandering for votes?

The above may well be factors, but a novel experiment by Professor Ernesto Dal Bó and his co-authors pinpoints another cause: the inability of voters to distinguish between the direct effects of a policy and the indirect consequences that may take effect over time.

The research is described in the paper, “The Demand for Bad Policy when Voters Underappreciate Equilibrium Effects.”

“Our evidence suggests that unfamiliar policy options can be a challenge for voters when these policies contain hidden costs or benefits that will accrue once behavior changes,” says Dal Bó.

A tax cut, for example, has an immediate benefit—more money in a voter’s pocket—but may later result in a reduction in services such as street repair which may result in more potholes.

Voters have difficulty understanding that a change in policy will eventually change people’s behavior and thus the outcome of a given policy. Consider a tax on carbon versus regulations mandating more efficient automobiles, says Dal Bó.

Tougher miles-per-gallon standards have an immediate benefit—more efficient cars—but in the long run it encourages people to drive more and therefore add more carbon to the atmosphere.

A tax on carbon, however, offers immediate costs to voters but has a social benefit—lowering of carbon emissions. Failing to fully anticipate these equilibrium effects, Dal Bó says, presents hurdles for groups trying to resolve social dilemmas through democratic means. —Bill Snyder

[Back to top]

Prof. Ernesto Dal Bó Prof. Ernesto Dal Bó