The Strategic Role of Party Ideology When Voters Are Uncertain about How the Economy Works

Abstract

A continuum of voters, indexed by income, have preferences over economic outcomes. Two political parties each represent the interests of given constituencies of voters: the rich and the poor. Parties/candidates put forth policies—for instance, tax policy, where taxes finance a public good. Voters are uncertain about the theory of the economy, the function that maps policies into economic outcomes. Parties argue, as well, for theories of the economy. Each voter has a prior probability distribution over possible theories of the economy; after parties announce their theories of the economy, each voter constructs an a posteriori distribution over such theories. Suppose that voters are unsure how efficiently the government converts tax revenues into the public good. Under reasonable assumptions the party representing the rich argues that the government is very inefficient and the party representing the poor argues the opposite. What appear as liberal and conservative ideological views emerge as simply good strategies in the electoral game.