Shahram Arshadnejad ©

5 September, 2017

Downs, Anthony. An Economic Theory of Democracy. Boston: Harper & Row, 1957. 1st ed.

Shahram Arshadnejad - shahram.arshadnejad@cgu.edu

Summary

The book is about understanding the government’s behavior in democracies. The

measure to analyze is to observe the incumbent party (the governing party of
government’s apparatus) in elections. The methods that competing parties (two
or more) adopt in order to win are the concerns of this study. Downs believes
that government (in democracies) behaves like ration agents in an economic
sense which they behave to utilize their interest by the scarce resources
available to them. It is all about maximization of the profits by putting the least
input for the most output or income. The incumbent party needs to lure the
voters to keep them in power for the next term, so they offer and propose more
promising policies of utility income for the voters. Voters consider which
party(s) promises a better future so that they would vote for them. According to
Downs, all these parties (government, competing parties and voters) follow the
economic rules. Everybody is selfish, but they also indirectly or unintentionally
provide services for others. Political parties are no different than individuals.
The invisible hand of Adam Smith’s theory works in politics. The politics need to
have democratic nature in the first place so that those economic rules could
apply.
a. The book’s importance: This book is a classic study in political behavior, political
development in democracies.
b. The main argument: The main argument of the book is how the government, the
competing parties, and the voters interact with each other in an election. Based
on what rules do they act? And how do the economic rules apply in a democracy?
c. Data source: The data sources in this research were provided by social sciences
such as macroeconomics, social psychology, mathematics and actual data
gathered from elections.
d. The methodological approach is macroeconomics methods’.
e. The main result is to win the most support; and consequently, win the elections.

The economic model means how to use scarce resources as input to get the most

benefit as output. Any rational agent is more concerned about his means than his ends, and

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a democratic government is no different. Downs attempts to posit the same economic rules

for consumers and firms for the government. It is about the logic of the political behavior of

democratic governments. His goal is to explain that a democratic government also acts

rationally to maximize its support among the potential voters as its interest. Downs writes

about the public views of a democratic government as the main utility or service provider.

The logic for voters’ decisions is defined based on their utility income. There is a calculation

that voters adopt to assess how to cast their votes. However, there is uncertainty involved

for both sides, as a voter and as government. The prediction of the future is never certain.

Nevertheless, the logic for voters and the logic for parties utilize calculation to serve each

side’s interests as rational agents in an economic sense. Downs, so importantly, states that

the government itself has interests apart from the voters’. This motive forces democratic

governments to act rationally in an economic sense to maximize their votes in elections,

like their interests. Their output is to provide more utilities for people to earn more votes

as their income. They want to get reelected in an uncertain world of elections. Downs states

that “Our homo politicus is the ‘average man’ in the electorate, the ‘rational citizen’ of our

model democracy (Downs, 7).”

However, the basic logic of the government decision-making model follows

differing reasoning than the voting model due to complexity. In this model, governments

continue spending until the marginal vote gain from expenditure equals the marginal vote

loss from financing (Downs, 73). The determinants of vote loss and vote gain are the utility

incomes of all voters and the strategies of opposition parties. Consequently, the utility in

government is the maximization of votes. Moreover, there is also an issue in the

government of competing parties, all vying for control. Downs posits his government

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decision-making model off of these two axioms (Downs, 51). Furthermore, the majority

principle is the preferred choice among government subjects because it represents

common voter preferences and it helps with maintaining supremacy over the opposition

(Downs, 54). Downs further posits in his model of government decision-making opposition

strategies against the majority principle that includes matching of policies, coalitions of

minorities and the arrow problem.

Downs intends to show the importance of government in every economic model as

the sole decision-maker and the manipulating machine. The irony, however, is that the

economy has not offered any rules of behavior for the government as opposed to the rules

for consumers’ and firms’ actions. Downs’s theory tries to provide such rule by positing

that democratic governments act rationally to maximize political support for themselves.

He further explains what he means by rational action. He means the action is to be efficient

in achieving consciously chosen political or economic ends. He further explains that the

government pursues its goal under three conditions: (1) A democratic political structure

which allows opposition parties to exist and of course to function. (2) An atmosphere of

waring degrees of uncertainty. (3) The electorate rational voters.

Downs explains utility and also self-interest as the core motivation for people’s

economic activities. He mentions Smith, that nobody does anything out of pure altruism

and charity. Everybody is selfish and their activities are self-interest oriented. However, the

product of their activities may serve my needs, too (the hidden hand of the market). This

motivation is extended to political activities, as well.

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Downs also talks about the relation of the model (an economic theory for

democratic governments and their functions throughout elections) to Ethics and

descriptive science. The model resides between Ethics (normative behavior) and

descriptive science. He goes further to explain that the model is not normative, because it

contains no ethical postulates and cannot be used to determine how men should behave. It

is not purely descriptive, either. It ignores all the non-rational considerations that are so

vital to politics in the real world. Yet it is related to both these phases of the political

economy and has a distinct function in each. Ethical models of democratic politics generally

are constructed in this manner: The creator of the model postulates certain goals as “good.”

He outlines the behavior to achieve these goals. And lastly, he concludes that this behavior

“should” be carried out by members of real democratic societies.

In regards to descriptive implications, Downs continues by saying that the relevance

of the model to descriptive science is twofold. First, it proposes a single hypothesis to

explain government decision-making and party behavior in general. Second, the model tells

us what behavior we can expect if men act rationally in politics. In this study, the

government is defined as that specialized agency in the division of labor, which is able to

enforce its decisions upon all other agencies or individuals in the area.

The next development in Downs’s theory is about the logic of election. The basis of

logic is the utility income offered by the government. The government is expected to be the

ultimate service provider. Thus Downs comes with the term utility income. Citizens receive

many services from the government. He explains the logical structure of voting and its

formula. It is a simple subtraction of receiving benefits from the incumbent party and

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opposition party who offers more benefits if they get elected. The subtraction is the

measure of calculation by voters about whom to vote for to get more of utility income. The

two parties obviously create differentials which are the basis of logical calculation for

voters. Rational men, in the economic sense, are not interested in policies per se, but in

their own utility income. They can change their positions, and utility income is the reason

behind it.

Downs believes his model disintegrates because of the assumption of certainty. But

there are deficiencies caused by uncertainties. He offers three solutions to somewhat

overcome the uncertainty issue for voting. (1) Examine all phases of government action to

find out where the two parties would behave, differently. (2) Discover how much

differences would affect voters’ utility income. (3) Aggregate the differences in utility and

arrive at a net figure which shows how much one party would do better than the other.

Under conditions of uncertainty, a government’s best strategy is to adopt choices that are

favored by a majority of voters. However, conforming to the will of the majority does not

guarantee reelection for the incumbents. The opposition can form a coalition of dissenters

and win by upholding the minority view on key issues. Uncertainty may be present at every

level of the political decision-making process. It affects every party and every voter in

controlling their level of confidence.

The traditional point of view in economic theory assumes that government acts to

maximize social utility and social welfare, as the government’s private motive. Downs’s

hypothesis, however, is different in three ways: (1) Government’s social function is not

identical to its private motive. (2) The maximization of votes instead of utility or welfare.

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(3) The government is a party competing with other parties for control over the governing

apparatus (Downs 51).

Ideology is another factor for getting votes. Downs believes uncertainty allows

parties to develop ideologies as weapons in the struggle for office because it restricts

voters’ abilities to replace every government act to their own views of a good society.

Voters also believe ideology helps them to make a political decision. Ideology in fact, serves

as a means to connect parties to voters.

Downs reflects on the statics and dynamics of party ideologies. There is a spatial

market analogy, which he borrows from Harold Hotelling. Downs modifies it to use it for

analyzing political ideologies. He adds (1) Variable distribution of the population. (2) An

unequivocal left-to-right ordering of parties. (3) Relative ideological immobility. (4) Peaked

political preferences for all voters (Downs 140). Downs concludes that the parties in a two-

party system ideologically converge upon the center, distancing from the far right and far

left. However fear of losing extremist voters won’t let them become identical.