Category Archives: Elected or Appointed

IS THERE A POLITICALLY OPTIMAL LEVEL OF JUDICIAL INDEPENDENCE?

IS THERE A POLITICALLY OPTIMAL LEVEL OF JUDICIAL INDEPENDENCE?

F.A. Hassen

A Summary 

In a Nutshell

By establishing an independent court (judges not subject to re-appointment at end of period one, in a two period model) incumbent policy makers make it more costly for a future regime to alter the policies passed today. A judge who cannot be penalized can more strictly enforce the constitution and statutory provisions, whereas a judge who can be punished is more likely to accede to the powers that be. At the same time however, independent judges are better able to make policy of their own thereby shifting policy in unpredictable directions. There are thus pros and cons for the incumbent regime.

 If a regime can choose between an independent or dependent judiciary (one that is subject to re-appointment in period 2), and the incumbent faces an exogenously determined probability of losing office at the end of period 1 then the incumbent is more likely to create an independent judiciary where electoral competition is high, and the opposing party is a significant distance away in terms of policy preferences. This assumes the incumbent wants to try to benefit from preventing a change to its enacted policy.

 The results of this empirical test are largely in line with this theory. The importance of good institutions is well recognized, but it is not clear why they are actually chosen in some circumstances but not others. The most independent institutions seem to exist in systems with closer competition and larger differences in political platforms. An independent court may be the most socially desirable, but there are political economy reasons to suggest that what is socially desirable may not be politically the most desirable from the point of view of incumbents.

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PROFESSIONALS OR POLITICIANS

PROFESSIONALS OR POLITICIANS: THE UNCERTAIN EMPIRICAL CASE FOR AN ELECTED RATHER THAN APPOINTED JUDICIARY

S.J. Choi, G.M. Gulati, E.A. Posner

The Journal of Law, Economics and Organization, Vol. 26, No. 2 (Nov., 2008)

A Summary 

In a Nutshell

Appointed judges write higher quality opinions than elected judges, but elected judges write more, and evidence suggests that the quantity makes up for lack of quantity. In addition elected judges are no less independent than appointed judges. Elected judges focus more on providing a service to voters (like politicians) whereas appointed judges care more about their long term legacy (like professionals).

 Theory

  • Traditional view is that voters are too unsophisticated to evaluate judges and candidates for judicial office, yet in an appointment system nothing forces electors to choose ability over cronyism.
  • Agency models warn that if not properly selected, monitored and rewarded, agents will not act in the interests of their principals. The judiciary needs to be selected so that it has preferences similar to those of the public. Elections may ensure people with mainstream views become judges, but if the public cannot properly evaluate a judge’s performance he can mislead them as to his fidelity to what is best for the public.
  • Judges should be rewarded for good behaviour, but if someone has the power to reward the judge may decide not on what is right, but on what will placate the agent.
  • New literature sees the relationship between the public and the judiciary as one of principal-agent. The optimal selection method minimizes selection costs. The optimal mechanism screens out judges who are lazy or ideologically self-indulgent and punishes those who are observably lazy or self-indulgent. What type of method is best?
  • Electoral – public select judges that appear neutral and motivated and can vote out those who appear to be otherwise.
  • Appointed – judicial choice is bundled among other potentially more salient issues, so it is hard to punish judges (as the candidate that appointed them would have to be removed). Yet if the elected official benefits from a good judicial system, and is better able to evaluate the performance of a judge, then appointed judges may be better. Theory is ambiguous.

 Judicial Quality and Selection Methods

  • Productivity – total number of opinions written. More opinions solve more disputes so this is a measure of quality.
  • Citations – more citations mean better opinions so this is also a mark of quality.
  • Independence – propensity of a judge to decide against his state party affiliation.
  • In certain states judges are elected on a partisan basis, elected without reference to party, committee appointed, or governor appointed.
  • If conventional wisdom holds appointed judges will have higher productivity, citation numbers and independence.

 Productivity

  • Partisan elected judges are the most productive followed by merit plan and nonpartisan elected. Appointed judges are the least productive.
  • Highly paid judges are more productive, as are more experienced judges, although productivity drops as they approach retirement.
  • Why? Productivity could be used by voters as a signal of competence, and indeed productivity is used in the electoral campaigns of judges.

 Citations

  • Judges subject to less partisan pressure write less frequently cited (higher quality) opinions. Appointed judges write the highest quality.
  • It is possible that opinion quality is not observable by the public and as such there is little pressure on elected judges to make high quality law. With less pressure to produce output, appointed judges may prefer to advance their influence and professional reputation by writing good opinions.

 Independence

  • Mixed results.
  • Elected judges dissent the most.
  • The propensity of the types of judges to write against co-partisans is roughly equal suggesting equal independence.
  • Conventional wisdom on this point needs to be reexamined.

 Explaining the Results

  • From the average litigants perspective elected judges provide more justice to more people. Fewer litigants receive better justice with appointed judges. They exhibit similar levels of independence.
  • The simple agency model did not have clear predictions. If an agent is given two objectives and one is harder to measure than the other, then he will shirk on the harder one. Judges in more partisan environments thus may write more opinions.
  • An alternative interpretation is one that focuses on selection rather than monitoring. Electoral systems attract politicians whereas appointment systems attract professionals. Politicians want to satisfy a voting public and this might mean deciding more cases. Professionals are more concerned with reputation among a group of like-minded peers, so they are interested in delivering well-crafted opinions. Politicians see their role as resolving disputes, whereas professionals advance the law.

ELECTED VERSUS APPOINTED REGULATORS

ELECTED VERSUS APPOINTED REGULATORS: THEORY AND EVIDENCE

T. Besley & S. Coate

A Summary 

In a Nutshell

Directly electing regulators leads to more consumer-oriented policies. This is explained in theory and observed in lower residential electricity prices in states where regulators are elected rather than appointed. This may seem intuitive, but if regulators are appointed by elected officials, then those officials surely have as much interest in promoting consumer interests as directly appointed regulators. The reason this expectation is frustrated is because where regulators are appointed, regulation comes bundled with other issues.

 The Model

There are two politically salient issues:

  1. Public spending
  2. Regulation

 There are two types of voters regarding regulatory issues

  1. Stakeholders – capitalists invested in regulated firms. They always prefer higher profits and therefore want higher prices.
  2. Consumers – always prefer lower prices. However, getting these prices is less important to them than having their preferred public spending outcome. There are numerically more of these than of the previous type.

 There are two types of voters regarding policy issues

  1. Rational voters – they elect candidates based on the payoffs they receive from their election
  2. Noise voters – respond to hair colour, sense of humour etc.
  • The government chooses the level of public spending and regulates monopolies.
  • There are two political parties and each contain both stakeholders and non-stakeholders, but a majority of the latter.

 Elected Regulators

  • Each party can field either a consumer-oriented or stakeholder-oriented candidate. As rational voters vote on regulatory stance, consumer-oriented candidates have an electoral advantage, and are also preferred by a party majority. Thus, both parties field such a candidate and the inner is determined by noise voters. Such a system yields a pro-consumer regulator.

 Appointed Regulators

  • Type of regulator is determined by the regulatory stance of the winning candidate. Both public spending and regulation are relevant for voters. However, consumers prefer the candidate that shares their public spending priorities irrespective of his regulatory stance. Stakeholders go with the regulatory stance irrespective of public spending priorities. Assuming the parties field candidates with different spending plans, they both have the incentive to offer pro-stakeholder candidates.
  • If both parties are offering pro-consumer candidates, one of them can switch to a pro-stakeholder candidate and steal all of the other parties stakeholder voters (for whom regulation is more important than public spending stance) whilst losing none of their consumer voters (for whom public spending is more important than regulatory stance). This means his chance of winning is increased. The other party has the same incentive.
  • This only works if their spending platforms are different, as if they are identical the election will be fought only on regulation.
  • Thus, in such a system the elected regulator is always pro-stakeholder. The regulator type is bundled with other issues, and regulatory policy is salient only for those who wish to secure a high price in the regulated industry. This means a party can gain by running candidates with a pro-stakeholder regulatory attitude.
  • By unbundling the issues by election the regulatory capture is not possible

 Evidence

  • Electors have lower residential prices than appointed.
  • Results could be endogenous.
  • Influence of regulators likely to be much larger in times of increasing input prices since rate reviews are more likely in such circumstances.

THE POLITICIAN AND THE JUDGE

THE POLITICIAN AND THE JUDGE: ACCOUNTABILITY IN GOVERNMENT

E. Maskin & J. Tirole

 A Summary

In a Nutshell

A study of when decision making powers should be exercised under direct democracy (DD), representative democracy (RD) (accountable officials), or judicial rule (JR) (non-accountable officials). In order to do so they posit a two-period game in two different systems. In the first system the voters do not discover whether the optimal policy was chosen before moving on to the second period (“no feedback”). In the second system, they do discover if the optimal policy was chosen (“feedback”).

 In the no feedback system DD results in the policies preferred by the electorate i.e. the decision is determined by the electorate’s prior beliefs about the best policy, so the popular action is selected in each period. JR results in the policies preferred by the judge as the official need not worry about reelection. The actions of the representative depend upon how much he values being in office. If he values it a lot he will pander to public opinion (choose the popular action) so the best form of government is DD of JR depending on how much the electorate know ex ante about the optimality of each action. When he values office holding little, he will act in order to protect his legacy and this provides the electorate with the possibility of weeding out noncongruent politicians. In this case RD is better than JR but may still be inferior to DD (depending on how much the electorate knows ex ante about the optimality of each action). This implies that decisions of great importance (where the legacy motive will dominate) should be taken by representatives not judges.

 In the feedback system there is some probability that the electorate find out if the period 1 decision was optimal before the second period. DD and JR result in the same outcomes as under the no feedback system. If the probability of feedback is sufficiently high the politician always chooses the optimal policy in the first period. If the feedback probability is only moderate noncongruent officials may pander, but otherwise officials act on their legacy motive.

 Accountability

  • Power is delegated to representatives as they are expected to make better decisions as they have experience, knowledge etc. and they have better incentives to decide well than the average citizen due to propensity to free-ride on effort of other citizens. Such delegation also can help to prevent the tyranny of the majority.

What motivates representatives to act in the public interest?

  1. Legacy – they want to be remembered for doing good things
  2. Power – they like office for its own sake 
  • The public can harness these motivations by making them accountable (i.e. by holding elections and reelections). Elections induce noncongruent officials (one’s with opinions different to the public) to act in the public interest. This is the “moral hazard” correcting element of accountability. Elections also allow the electorate to weed out noncongruent officials altogether. This is the “adverse selection” correcting element of accountability.
  • Yet there are problems. In order to get reelected the official may pander i.e. choose a policy that is popular rather than good for society. This conflicts with the rationale of representation being that representatives make better decisions. Also, if minority rights are a concern, such a system would give the majority too much power to shape the government.

 The Model

  • 2 periods and a pair of possible actions {a,b}
  • The optimal choice is not known by the electorate, but the probability of a=optimal has a probability p(>0.5). This is known by the electorate and hence a is the “popular” choice (i.e. it would be chosen if the electorate did the deciding). The parameter p is a measure of how much the electorate knows about the issue, and this is affected by its technicality and its familiarity.
  • Unless DD is specified, the decision is allocated to an official. With probability π(>0.5) the official is congruent (preference ranking is the same as voters would have if fully informed). With probability 1-π they are non-congruent. The official knows what decision is best for himself, and for society (reflecting the incentive to be better informed).
  • δ is a discount factor which measures eagerness to hold on to power. It is the ratio of the official’s payoff from remaining in office for period 2, to that from choosing her preferred action in period 1.
  • Officials will always choose their preferred policy in period 2, and this will be the optimal policy with probability π.
  • q is the probability that the electorate find out if the optimal decision was taken in period 1 before period 2 occurs.
  • Payoff to electorate is 1 if optimal policy chosen in 1st period, 2 if chosen in both, 0 if chosen in neither.

 No-Feedback

q = 0 

  1. DD – decision determined by prior beliefs so popular action selected at each period. Welfare: WDD = 2p
  2. JR – official selects his preferred policy as no need to worry about reelection. Welfare: WJR = 2π
  3. RD
    • Strong office holding motive (δ>1). The representative prefers to remain in office relative to selecting his preferred policy. He selects popular action a regardless of his preferences or what is optimal. Voters will only reelect if he chooses a. This is “full pandering”. Welfare: WRD = p + π. Note that WRD < max{WDD, WJR}. In other words RD is the same as DD in period one, and JR in period 2. RD is dominated by either DD or JP. Whether DD or JP is better will depend upon whether p > π or π > p.
    • Weak office holding motive (δ<1). The representative chooses his preferred policy in period 1. There is no pandering. The electorate can now draw inferences about the politician from this choice. He will only be reelected if he chose the popular action. Thus RD produces the same outcome as JR in the first period, but RD now dominates JR as the electorate can replace an official whose behavior suggests non-congruence. [The algebra on page 12 is too much for me].
  • The only benefit of accountability in the no-feedback case is the opportunity to screen out noncongruent officials. Accountability does not induce the official to act on behalf of the electorate (when δ> 1 the official panders; when δ<1 he acts in his own interests).
  • If the decision is particularly important for the legacy of the official (going to war etc.) then the parameter δ will be much smaller and thus less likely to generate pandering. Thus such decisions should be allocated to RD not JR [note that decisions in period 1 are not better under RD, only that RD provides an opportunity to screen officials.

Feedback

q > 0

 

  1. DD – as above: WDD = 2p
  2. JR – as above: WJR = 2π
  3. RD – [it gets somewhat complex here].
    • Full Pandering. The official selects the popular action in period 1, and is reelected only if he adheres to this equilibrium. This can only occur when the feedback is sufficiently slow, and there is a large desire to stay in office. As with No-Feedback, RD is dominated by either JR or DD depending on the same conditions as above.
    • Forward Looking Pandering (δq > 1). The official selects the optimal action in the first period regardless of his own preference. He is pandering not to current voters but to future voters who may have received feedback about his first period performance. This is the moral-hazard correcting effect of accountability (there is no adverse selection effect). This happens with rapid feedback. Welfare: WRD = 1 + π. This is better than JR (WJR = 2π)
    • Partial Pandering (δq < 1, q > 0). Either the official chooses his preferred policy (as in JP), or, if noncongruent, he possibly panders (improving welfare compared to JP). If there is no feedback then the period two outcome is the same is JP (chooses preferred policy), but if there is feedback then the likelihood of a congruent official is improved as noncongruents will be thrown out of office. This equilibrium thus incorporates aspects of both moral-hazard and adverse-selection corrections.

 Summary

  • When there is no feedback, elections help in the adverse selection correction but does nothing to solve the moral hazard problem. Either δ>1 in which case politicians pander and RD is dominated or δ<1 in which case behaviour is the same without accountability and elections offer merely the opportunity to remove noncongruent officials.
  • With rapid enough feedback (δq > 1) the forward looking pandering equilibrium exists and solves the moral hazard problem in the first period but does not help with adverse selection.
  • With moderately fast feedback (δq > 1, q > 0) the partial pandering equilibrium exists and to some extent counteracts both the moral hazard and the adverse selection problems.
  • Non-accountability is desirable when a) the electorate is poorly informed about the optimal action(p < π) and b) when feedback is slow. So technical decisions may best be taken by JR
  • The most important decisions should be taken by elected officials.