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Misspecified politics and the recurrence of populism

Razin, Ronny, Levy, Gilat and Young, Alwyn (2022) Misspecified politics and the recurrence of populism. American Economic Review, 112 (3). 928 - 962. ISSN 0002-8282

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Identification Number: 10.1257/AER.20210154

Abstract

We develop a dynamic model of political competition between two groups that differ in their subjective model of the data generating process for a common outcome. One group has a simpler model than the other group as they ignore some relevant policy variables. We show that policy cycles must arise and that simple world views—which can be interpreted as populist world views—imply extreme policy choices. Periods in which those with a more complex model govern increase the specification error of the simpler world view, leading the latter to overestimate the positive impact of a few extreme policy actions.

Item Type: Article
Official URL: https://www.aeaweb.org/journals/aer
Additional Information: © 2022 American Economic Association
Divisions: Economics
Subjects: H Social Sciences > HB Economic Theory
J Political Science > JC Political theory
JEL classification: D - Microeconomics > D7 - Analysis of Collective Decision-Making > D72 - Economic Models of Political Processes: Rent-Seeking, Elections, Legislatures, and Voting Behavior
D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D83 - Search; Learning; Information and Knowledge; Communication; Belief
K - Law and Economics > K4 - Legal Procedure, the Legal System, and Illegal Behavior > K42 - Illegal Behavior and the Enforcement of Law
Date Deposited: 02 Nov 2021 13:06
Last Modified: 28 Jun 2022 07:12
URI: http://eprints.lse.ac.uk/id/eprint/112544

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