The modern world is complex and difficult to understand for voters, who may hold beliefs that are at variance with reality. Politicians face incentives to pander to voters' beliefs to get reelected. We analyze the welfare effects of this pandering and show that it entails both costs and benefits. Moreover, we explore optimal constitutional design in the presence of imperfect information about how the world works. We compare indirect democracy to direct democracy and to delegation of policy making to independent agents. We find that indirect democracy is often welfare maximizing.
|Place of Publication||Tilburg|
|Number of pages||41|
|Publication status||Published - 2009|
|Name||CentER Discussion Paper|
- Imperfect information
- accountabil- ity