Theoretical Comparisons of Electoral Systems: Joseph Schumpeter Lecture

European Economic Review 43 (1999) 671—697
Joseph Schumpeter Lecture
Theoretical comparisons of electoral systems

Roger B. Myerson
Kellog Graduate School of Management, Northwestern University, 2001 Sheridan Road, Evanston,
IL 60208-2009, USA
Abstract
Elements of an economic theory of political institutions are introduced. A variety of

electoral systems are reviewed. Cox’s threshold is shown to measure incentives for
diversity and specialization of candidates’ positions, when the number of serious candi-
dates is given. Duverger’s law and its generalizations are discussed, to predict the number
of serious candidates. Duverger’s law is interpreted as a statement about electoral
barriers to entry, and this idea is linked to the question of the effectiveness of democratic
competition as a deterrent to political corruption. The impact of post-electoral bargain-
ing on party structure in presidential and parliamentary systems is discussed. 1999
Elsevier Science B.V. All rights reserved.
JEL classification: D72
Keywords: Electoral systems; Constitution; Election game; Incentives
1. Invitation to political economics
To honor Joseph Schumpeter, I should try to begin as he might, from a long

view of the history of economic theory, observing that the scope of economics
has changed. With an initial goal of explaining the production and allocation of
material goods, economic theorists developed analytical tools to predict how
changes in market structure may affect rational behavior of producers and
consumers. As the principles of rational choice were first developed in this
context of price-theoretic decision-making, it seemed sensible to separate the
study of markets from the study of other great institutions of society, because
0014-2921/99/$ — see front matter 1999 Elsevier Science B.V. All rights reserved.
PII: S 0 0 1 4 - 2 9 2 1 ( 9 8 ) 0 0 0 8 9 - 0
672 R.B. Myerson / European Economic Review 43 (1999) 671—697
price theorists had a rigorous methodology for analysis of incentives in markets

that could not be extended to government or other social institutions.
But today, with game theory alongside price theory, we have a general
theoretical framework to analyze incentives and rational behavior in any social
institution or competitive arena. So where economists once defined their
mission as predicting how changes in the structures of markets and government
policies would affect the rational behavior of producers and consumers, now
economists can accept the more general mission of predicting how changes in
the structures and rules of any social institution would affect rational decision-
making by the participants in that institution. Thus we can now develop
rigorous models to better understand the institutions of civilized society, with
the same breadth of vision that characterized the ancient Greek social philo-
sophers who gave economics its name.
For several fundamental reasons, it is particularly appropriate that we should
include the analysis of incentives in political institutions as an essential part of
the domain of modern economics. First, markets and politics are substantively
interconnected systems in the real world, and economic analysis of markets can
suffer from a neglect of relevant political factors. Second, there are logical
similarities between political competition and market competition, and so
analytical skills that have been sharpened by the study of either arena may be
applied to offer new insights in the other arena. Third, failures of the political
system can affect people’s welfare at least as much as failures of the market
systems that economists have traditionally studied. There is an immediate
practical need for guidance on the questions of constitutional design in new and
reforming democracies all over the world, and so the addition of political
institutions to our list of concerns will not decrease the social value of the
economics profession to the public which supports us. Fourth, without help
from economists, traditional political scientists have lacked the game-theoretic
modelling skills to develop an analytical theory of democratic structures, and so
this important area of research has been left underdeveloped.
The basic constitutional structure of any democratic system defines the rules
of the game played by politicians. As such, this constitutional structure has two
levels: the governmental level defines a set of political offices and allocates powers
to these offices, and electoral level establishes the procedures by which candi-
dates are elected to these offices. (Although many countries establish the elec-
toral systems by organic law outside their formal written constitution, we
consider the electoral system here to be part of the constitutional structure,
because it is an essential element in the rules of the political game that politicians
must play to win power.)
A complete theory of politics clearly requires analysis at both levels, electoral
and governmental. Voters must evaluate candidates’ promises in terms of the
post-election governmental game that the elected officials will have to play, and
elected officials’ incentives in the governmental game are largely determined by
R.B. Myerson / European Economic Review 43 (1999) 671—697 673
their perceptions of how the voters will behave in the next electoral game. But to
keep things tractable, game-theoretic models of politics usually emphasize one
or the other of these two levels. So we have governmental models that focus on
the conflict and cooperation among a given set of elected officials, who use their
constitutional powers to try to move government policy in their preferred
direction. And we have electoral models that focus both on the campaign
decisions of candidates who want to win elected offices, and on the voting
decisions of voters who want to elect candidates who will implement the voters’
preferred policies. Such electoral models necessarily make simplistic assump-
tions about how the government policies that voters care about will depend on
who wins the election.
In this paper, I will focus mostly on analysis for the electoral level. My goal is
to introduce the elements of an economic theory of electoral systems and their
effect on competitive political behavior. In Section 2, I begin by outlining some
of the variety of electoral systems that exist. In Section 3, a simple formula is
introduced to measure the tendency of a voting rule to encourage candidates to
concentrate separately on special minority interests, or to make similar broad
appeals to all voters. This formula assumes a given number of candidates whom
the voters consider to be equally serious contenders in the election. This
assumption is dropped in Section 4, which introduces Duverger’s law and its
generalizations, which make predictions about the number of serious candidates
under different voting rules. But Duverger’s law can be interpreted as a state-
ment about the relative barriers to entry under different electoral systems, and
standard economic reasoning suggests that barriers can affect long-run profit-
taking in competitive systems. So in Section 5, a simple model of corrupt
profit-taking is introduced to compare the effectiveness of different electoral
systems for deterring such corrupt profit-taking by competitive political parties.
This question of how constitutional design can affect competitive incentives
against political corruption is discussed more broadly in Section 6. Then Sec-
tion 7 addresses the question of how post-election bargaining in the legislature, in
parliamentary and presidential systems, can affect the relative advantages of large
national parties versus small or regional political groups. Section 8 concludes
with some thoughts about the role of economic analysis in questions of constitu-
tional design. (For related surveys of this field, see also Myerson (1995a, 1997a)).
2. Variety of electoral systems
The range of possible electoral systems is enormous. I will focus here on

scoring rules, which include almost all of the voting rules that are actually used.
(The class of scoring rules can be derived axiomatically; see Myerson (1995b).
For a broader survey of electoral systems that are used in legislative elections,
see Taagepera and Shugart (1989).) In a scoring rule, each voter’s ballot is
a vector that specifies some number of points that this voter is giving to each of
the candidates (or parties) that are competing in the election. These vote-vectors
are summed over all voters, to determine who wins the election.
Elections can determine the winners in different ways. In single-winner elec-
tions, the winner of the election will be the candidate with the highest total point
score. But the number of winners, denoted by M, can be greater than one in
elections to allocate seats in a council or legislature. In such M-winner elections
where candidates run as individuals, the winners will be the candidates who get
the M highest total point scores. In proportional representation, the alternatives
on the ballot are party lists, rather than individual candidates, and the number
of seats won by a party is proportional to its total point score (up to some
rounding formula; see Balinski and Young (1982)). Other common variations
include quota-runoff requirements in which the high scorer wins the election if
her point score is above some quota (usually 50% of the votes), and otherwise
a new election is held among some subset of the candidates.
The set of permissible ballots also differs across different scoring rules. Let
K denote the number of candidates (or parties, if the alternatives in the election
are party lists) in the election. Given any number K of candidates in the election,
a rank-scoring rule is characterized by some list of numbers s ,2, s such that
)
1"s 5s 525s 5s " 0,
)\ )
and a vote-vector is permissible if and only if it is some permutation of the vector
(1, s ,2, s , 0).

)\
Without loss of generality, we can use here a (1, 0)-normalization in which 1 is
the greatest number of points that a voter can give to any candidate, and 0 is the
least number of points that a voter can give to any candidate.
There are many types of rank-scoring rules. Most common is single-positive
voting in which s "2"s "0, and so the permissible vote-vectors are the
)\
permutations of the K-vector
(1, 0,2,0, 0).
That is, in single-positive voting each voter must choose one candidate, to whom
the voter gives one point, and he gives 0 points to all other candidates.
Single-positive voting in a single winner election is called plurality voting or first
past the post. Single-positive voting in M-winner elections, where the alterna-
tives on the ballot are individual candidates, is often called SNTV (for single
I use male pronouns for voters, female for candidates.

nontransferable vote). ¸ist PR is single-positive voting with multiple seats allo-

cated by proportional representation, where the alternatives on the ballot are
party lists.
We may also consider single-negative voting, where each voter must choose to
vote against one candidate. Single-negative voting is equivalent to voting for all
but one candidate, and so in (1, 0)-normalization a single-negative vote vector
must be some permutation of the K-vector
(1, 1,21, 0).
Such negative voting is rarely used, but it offers a nice theoretical contrast with
single-positive voting. In our theoretical modeling, we will see some compelling
reasons why single-negative voting should not be used in democratic elections.
But that is why we want to have a theory of electoral systems: to enable us to see
the problems that may be generated by an electoral system before it is used.
For any number », a scoring rule can be defined with »-positive votes; that is,
1"s "s "2"s and 0"s "2"s .
4 4> )
A scoring rule with »-negative votes would have
1"s "s "2"s and 0"s "2"s .
)\4 Q>)\4 )
Of course the difference between specifying the number of positive votes or
negative votes only matters when the number of candidates is a variable.
In Borda voting, each voter must rank-order the candidates and give a linearly
increasing series of points, and so in (1, 0)-normalization a Borda vote-vector
with K candidates must have ranking points
s "1, s "(K!2)/(K!1),2, s "1/(K!1), s "0.
)\ )
Another rank-scoring rule is single-positive-and-single-negative voting, where the
(1, 0)-normalized ranking points are
s "1, s "1/2,2, s "1/2, s "0.
)\ I
In other nonrank scoring rules, voters are allowed to choose among the
permutations of more than one decreasing vote-vector. A good example of
a nonrank scoring rule is approval voting, in which each voter can give 0 or
1 point to each candidate, with no restriction on the number of candidates who
receive one point from the voter. Thus, in approval voting, a permissible
vote-vector can be a permutation of any vector of the form
(1,2, 1, 0,2, 0)
where the number of 1’s in this vector can be anywhere from 1 to K!1. That is,
the permissible ballots in approval voting include all ballots permitted under
any »-positive vote system, for all » from 1 to K!1.
3. Electoral incentives for competitive differentiation and specialization
Our goal now is to develop game models in which candidates determine their
campaign strategies and voters vote according to the rules of the electoral
system, so that we can see how rational competitive behavior of candidates may
be different under different voting rules.
There is an enormous literature on multi-candidate electoral competition, in
which papers differ by making different assumptions about the set of alternative
policy positions that candidates can promise in their campaigns, and about
when candidates can choose their policy positions. Most of this literature,
following Hotelling (1929), assumes that there is some given policy space which
represents the set of possible government policies. Voters have given utility
functions over these policies, and candidates choose their policy positions at the
beginning of the electoral campaign. In a simple model of a single-winner
election, we generally assume that the winning candidate’s policy position will
be implemented as government policy after the election. So in the election, each
voter should choose his vote rationally to maximize his expected utility payoff
from future government policy. It is commonly assumed that each candidate’s
objective, in choosing her policy position, is to maximize her probability of
winning the election.
Since Hotelling, a basic question in the literature on spatial competition has
been about the incentives for product differentiation. In this political context,
this question is: will the candidates cluster together, advocating identical or
similar policy positions, or will they adopt diverse positions that appeal to
different groups of voters? When we think about this question, we should note
that the welfare implications of candidate diversity are not isomorphic to
product differentiation in markets. In Hotelling’s oligopoly game between shops
on Main Street, separating the two shops could decrease the total of consumers’
transportation costs, because each consumer’s transportation cost depends on
the location of the shop that he patronizes. But when we re-interpret Hotelling’s
model as being about a single-winner political election, we should recognize that
each voter’s welfare depends on the policies of the candidate who wins the
election, not the candidate to whom he gives his vote. So in a single-winner
election, there is no aggregate welfare benefit from separating the two candi-
dates. Thus the negative connotation that Hotelling gave to ‘excessive sameness’
may be inappropriate in political competition, even if it has some merit in
oligopolistic competition.
A basic theme of this paper is the importance of explicitly comparing different
electoral systems in our analytical models. But most of the literature on com-
petitive determinants of political policy positions has focused on just one
electoral system: plurality voting. Cox (1987a, 1990) gave us the first model that
systematically considered different electoral systems, and he showed that incen-
tives for diversity may differ systematically across voting rules.
Cox (1987a, 1990) showed that political incentives for diversity depend on the
extent to which the voting rule is best-rewarding or worst-punishing. To under-
stand this distinction, notice first that each voter wants his ballot to increase the
probability that the winner of the election will be a candidate whose policy
position is better for him. To simplify matters (for now), we assume throughout
this section that the voters consider all candidates to be equally viable as serious
contenders in the election. Under this assumption, a voter should give more
points on his ballot to the candidates that he prefers more. Now consider what
happens if candidate changes her policy position in a way that made her more
appealing to a particular voter, so that he now prefers her to one more other
candidate than before. In a rank scoring rule, if the voter would have given this
candidate s points before, now he will give her s , and so the candidate has
( (\
gained s !s points. The size of this point gain depends on the place J that
(\ (
the candidate had in the voter’s rank-ordering. So we can ask, would a candidate
gain more from moving up in the ranking of voters who currently rank her
near the top of their preference ordering or at the bottom? The answer
depends critically on the electoral system. In a best-rewarding system, the
candidate gains more from moving up in the preferences of voters who currently
rank her near the top. In a worst-punishing system, the candidate gains more
from moving up in the preferences of voters who currently rank her at the
bottom.
In single-positive voting, a candidate gains nothing by moving from worst
to second-worst or from third-best to second-best in a voter’s ranking,
because a candidate’s score depends only on how many voters rank her best.
So single-positive voting is a pure best-rewarding voting rule. In single-
negative voting, however, a candidate gains nothing by moving from second-
best to best or from third-worst to second-worst in a voter’s ranking,
because a candidate’s score depends only on how many voters rank her worst.
So single-negative voting is a pure worst-punishing voting rule. Other rank-
scoring rules mix best-rewarding and worst-punishing aspects to varying de-
grees, and they are exactly balanced in Borda voting, which gives an extra
1/(K!1) points to a candidate whenever she moves up one level in a voter’s
ranking.
Cox’s main result is that best-rewarding voting rules encourage candidates to
diversify from each other, whereas worst-punishing voting rules encourage
candidates to adopt similar policy positions. This result can be made quantitat-
ively precise by defining Cox’s threshold of diversity. To define this threshold
(applying the formulation of Myerson (1993a)), let us consider a very simple
policy space consisting of just two alternatives, which we may arbitrarily label
‘Left’ and ‘Right’. Let Q denote the fraction of voters who prefers the Left
alternative, and so 1!Q is the fraction of the voters who prefer the Right
alternative. Cox (1987a, 1990) considered equilibria of the voting game that are
symmetric in the sense that candidates who adopt the same policy position will
be treated symmetrically (in aggregate) by the voters. If the fraction Q of voters

who prefer Left is very small (close to 0), then we should expect all candidates to
choose the Right policy position. Given any number of candidates K, Cox’s
threshold of diversity, which we may denote by Q*, is the largest value of Q such
that there exists a symmetric equilibrium in which all K candidates choose the
right policy position with probability 1. That is, Q* is the largest bloc of voters
whose preferred policy position can be neglected by all K candidates. (For other
thresholds in voting theory, see Rae et al. (1971).)
Cox (1987a) showed that, for a general rank-scoring rule in which voter’s
ballot must specify a vector that is some permutation of the (1, 0)-normalized
vector
(s , s ,2, s s ), where 1"s 5s 525s 5s "0,

)\ ) )\ )
the threshold of diversity can be computed by simply averaging these (1, 0)-
normalized point values; that is
1 )
Q*" s .
K G
G
Best-rewarding rules have small values of (s ,2, s ) and so have small Q*
)\
thresholds, but worst-punishing rules have large values (s ,2, s ) and so
)\
have larger Q* thresholds.
To prove this formula for, Q*, consider a single candidate who deviates to Left
while the other K!1 candidates all advocate Right. The deviator will get
1 point from each voter in the leftist bloc of size Q and 0 points from the other
rightist voters, which gives him an average of Q points per voter. But the average
over all candidates of these average-points-per-voter must be ) s /K and the
G G
symmetry assumption implies that other K!1 candidates all expect the same
point score. If Q( ) s /K then the lone deviator must be below the other
G G
candidates’ average point score and so should expect to lose the election, which
is the result that we need to sustain an equilibrium in which the K candidates all
neglect Q bloc of voters.
For single-positive voting with K candidates, Cox’s formula tells us that the
threshold of diversity is Q*"1/K, which goes to zero as K becomes large. So
when there are many serious candidates under plurality voting, we may expect
to find candidates who advocate small minority positions and have a positive
probability of winning the election. But in a single-winner election, having
serious candidates who advocate minority-preferred policies means that there is
a positive probability that the winner may be a candidate who does not
advocate the policy preferred by the majority. Such defeats of clear majority
interests can occur whenever Q* is less than 1/2.
Under single-negative voting, Cox’s threshold is Q*"(K!1)/K, which goes
to 1 as K becomes large. This result may seem very strange, because it allows an
absolute majority (Q'1/2) to be ignored by all candidates. The problem can

occur because the candidates are afraid of being identified as the single worst
candidate by substantial numbers of voters, and adopting the same policy as
other candidates can help by splitting the negative votes of voters who dislike
this policy. Such neglect of clear majority interests by all candidates can occur
whenever Q* is greater than 1/2.
Thus, to guarantee majority rule in this model, the ideal is to have Q*"1/2.
Only with Q*"1/2 can we guarantee that there exists a symmetric equilibrium
in which the winner is sure to be a candidate at the majority’s preferred position,
and there does not exist another symmetric equilibrium where the winner is sure
to not be at the majority’s preferred position. The voting rules that have this
ideal intermediate value of Q* are those in which a voter can submit ballots that
reward his best candidates and punish his worst candidates in some balanced
way. Borda voting is such a rank-scoring rule with Q*"1/2. Cox (1987a)
showed that, among nonrank scoring rules, approval voting also has this ideal
majoritarian threshold of diversity Q*"1/2 with any number of candidates.
For a related model, consider a situation where the winner of the election can
decide how to spend the money in some fixed budget. Suppose that this budget
is enough to give an average of 1 euro to each voter, or it can be spent on
a public good that is worth B euros to each voter, where B'1. Then there is
a symmetric equilibrium in which all K candidates promise to spend the money
on the public good only if B'1/Q*. If all other candidates were expected to
advocate the public good but there was some positive number e such that
B#e(1/Q*, then any one candidate could do better by offering B#e euros to
a 1/(B#e) fraction of the voters, which would give her more than the Q*
expected vote-share that she needs to win. So again from this perspective we find
that, as Q* becoems smaller, candidates feel more driven to campaign on the
basis of narrow appeals to small special interests, rather than broad public
goods. (See also Myerson, 1993a; Lizzeri and Persico, 1998).
This analysis of incentives for candidate diversity in symmetric equilibria does
not actually depend on the single-winner assumption. When we assume that
voters have additively separable utility over the set of winners, the relationship
between the threshold of diversity and best-rewarding or worst-punishing ballot
structures can be directly extended to any number of winning candidates up to
K!1. For example, consider an M-winner election where the voting is for
individual candidates. If the ballot type is single-positive voting, then the
candidates will have more incentive to concentrate on building narrow differen-
tiated bases of support; but if the voters are allowed multiple noncumulative
votes then the candidates will have an incentive to appeal more broadly to
overlapping groups of voters.
The main difference in the case of elections with multiple winners is that
a diversity of candidates who each concentrate on advocating different special
minority interests can be less problematical in multi-winner elections than in
single-winner elections. If each of our M elected representatives specializes in

advocating the interests of a different Q* fraction of the voters, then we have
representation for an MQ* fraction of the voters. So under single-positive voting
where Q*"1/K, a majority of the voters can feel well represented if the number
of serious candidates K is not more than twice the number of seats M.
As an application, consider open-list PR election, where each party nominates
an unordered list of candidates, and voters for the party can vote among
its candidates to determine their priority for filling the party’s seats. Unlike
closed-list PR elections, where a candidate’s place on the party list is determined
completely by her support in the party’s central committee, open-list systems
force candidates to compete individually for voters’ support.
Elections to the legislature in Brazil use an open-list PR system in which each
voter for a party must name one candidate on the party’s list, and the seats that
the party wins will be assigned to the candidates on its list who get the most
votes. But Ames (1995) reports that the open-list system in Brazil has caused
extreme centrifugal forces that undermine the parties’ ideological coherence,
because each legislative candidate concentrates on building a narrow separate
base of support among the voters. Candidates may have little concern for the
interests of party supporters outside of this narrow base. This pattern of
competitive specialization is exactly what we should predict from the low Q*
threshold of diversity that follows from using the single-positive vote.
Our theory tells us that such centrifugal tendencies within Brazilian party
could be reduced or eliminated by changing the open-list rules to a higher-Q*
voting rule like approval voting, where each voter can give an approval vote to
as many candidates as he wants. Because approval voting has a Cox threshold of
Q*"1/2, with any number of candidates, it should give each candidate an
incentive to appeal broadly to a majority of the party’s supports. So all
candidates on the party list would have an incentive to converge to the center of
the party ideologically, which might then force them to compete instead on the
dimension of their personal effectiveness as advocates of the party’s (now
well-defined) position. Thus, if a high-Q* ballot structure is used, a system of
democratic competition for party leadership can be compatible with ideological
coherence, even in a broad based party.
4. Nonsymmetric voting equilibria and Duverger’s law
The previous discussion assumed a given number of candidates, all of whom

are taken equally seriously by the voters. We must now drop this assumption
and consider nonsymmetric equilibria in which voters may treat candidates
differently even when they have adopted similar policy positions.
Duverger (1954) observed a strong tendency to have just two serious candi-
dates in elections by plurality voting (single-winner, single-positive voting). This
result has been called Duverger’s law by Riker (1982a), who believed that
political scientists had not yet discovered any other empirical regularity that was
worthy of being called a ‘law’. When Duverger’s law holds, if a third candidate
tries to enter ther race, she finds that the voters tend to ignore her. Even if the
third candidate adopts similar policy positions to one of the two established
candidates, there can be a self-fulfilling prophecy that a vote for the
third candidate would be a wasted vote, so that each voter should vote for
his preferred among the two established candidates. To explain and extend
Duverger’s law and the wasted-vote effect in voters’ decision-making, we need
a theory of nonsymmetric equilibria of voting games.
We assume here that voters’ payoffs after the election are determined by
government policies, which are determined in turn by the winners of elected
offices. The voters are assumed to care about voting only because they care
about future government policies which will depend on who wins the election.
After the votes are counted, we may say that a candidate is in a close race if
a change in a small number of votes could have changed this candidate from
a winner to a loser or from a loser to a winner. A rational voter knows that his
vote can matter only in the event of that a close race exists between some pair of
candidates. So a rational voter should vote to maximize his expected payoff
conditional on the event of a close race existing.
So a rational voter’s decision-making must take account of how likely each
candidate is to be in a close race with another candidate. In comparative statics
analysis, we may say that a candidate becomes a relatively more serious con-
tender when the probability of this candidate being in a close race becomes
relatively greater in comparison with other candidates. In absolute terms, we
should say that a candidate is not a serious contender if, conditional on the event
that a close race exists, the conditional probability of this candidate being in the
close race would still be considered vanishingly small by the voters in the
election.
Each candidate cares about her overall probability of winning. We may say
that a candidate is stronger or weaker depending on whether the candidate is
more or less likely to win the election. So in our terminology, the ‘strength’ of
a candidate depends on her probability of winning, while the ‘seriousness’ of
a candidate depends on her probability of being in a close race.
If candidates A and B are both perceived as likely to lose, but candidate A is
relatively stronger than candidate B, then candidate B should be considered as
a less serious contender than candidate A, because if one of these likely losers is
in a close race then it is much more likely to be the stronger candidate A. So
among the likely losers, a weaker candidate is a less serious contender.
In elections with multiple winners, a candidate could also become a less
serious contender by being perceived as one of the strongest among the likely
winners. For example, consider a legislative election in a district with 5 seats by
single nontransferable vote (SNTV), where the candidates run as individuals and
the 5 seats will go to the 5 top scorers. If the expected score for one candidate in
this district was much larger than any other candidate’s expected score, then the
voters might also perceive that this candidate is so strong that she is not
a serious contender. Thus, in multiple-winner elections, the serious contenders
should include the strongest among the likely losers and the weakest among the
likely losers.
A rational voter who wants to maximize the expected benefit of his vote in
a scoring rule should give the most points to the serious contenders whom he
prefers, and he should give the least points to the serious contenders whom he
dislikes, subject to the ballot constraints defined by the scoring rule. Other
candidates who are not serious contenders should be placed in the middle of
a rational voter’s rank-scoring ballot, even if they would be at the top or bottom
of the voter’s sincere preference ordering.
Thus, in a best-rewarding scoring rule, a candidate would be weakened by
a perception that she is not a serious contender, because the voters who would
like her most may rationally vote instead for a candidate whom they like among
the serious contenders. But in a worst-punishing scoring rule, a candidate
should be strengthened by a perception that she is not a serious contender,
because the voters who dislike her most may rationally vote instead against
a candidate whom they dislike among the serious contenders. These two
fundamental principles tell us how the tendencies to nonsymmetric equilibria, in
which some candidates are not considered serious contenders, may differ under
different electoral systems.
Consider for example an M-winner election with single-positive voting. Sup-
pose that, early in the campaign, polls and endorsements lead to predictions of
different predicted vote totals for the K candidates, and as a result the voters
perceive an ordering of the candidates from strongest (with highest predicted
score) to weakest (with the lowest predicted score). These predictions should
lead the voters to believe that the candidates ranked M and M#1 in order of
predicted strength are the most serious contenders. But this perception should
cause some voters to switch to voting for their preferred candidate among these
two serious contenders. As a result of this loss of support, the candidates who
were weaker than candidate M#1 in the initial poll’s ranking could become
even less serious contenders, causing further loss of support until they are
expected to get virtually no votes. On the other hand, the initial loss of support
for candidates who were stronger than candidate M in the initial poll’s ranking
should make them more serious contenders. This tatonnement argument is
admittedly not a rigorous equilibrium analysis, and it needs to be supported by
more careful game-theoretic methodology, but is strongly suggests that we may
expect to find M#1 serious contenders getting most of the votes in the election.
Evidence for this ‘M#1 law’ has been found by Reed (1991) and Cox (1994)
in data from Japan, where until recently legislative elections were run under this
SNTV system, with candidates competing as individuals in multi-seat districts
with s ranging from M"1 to M"6. In single-winner plurality elections,

commonly used in Britain and its former colonies, we have M"1; and so the
M#1 law includes as a special case Duverger’s law, that two serious candidates
get almost all the votes in plurality voting.
Cox (1994) has shown that, in such M-winner elections with single-positive
voting, the game played by the voters has other ‘non-Duvergerian’ equilibria, in
which there can be several likely losers who are expected to get positive shares of
the votes, but these likely losers can all be serious contenders only if their
expected vote shares are almost the same. But if one of the likely losers were
perceived to have lost some support and thus fallen behind the others, then she
would become a less serious contender and so would lose even more votes until
all her supporters abandoned her. In this sense, the non-Duvergerian equilibria
of this voting game are unstable.
Now consider what would happen if the voters instead used single-negative
voting, where each voter is required to vote against one candidate (or, equiva-
lently, to vote for all but one of the candidates). With such negative voting, an
early perception that certain candidates are less serious contenders should cause
these candidates to gain strength, because voters should switch to voting against
the candidates who are more serious contenders. For the M!1 initially
strongest candidates, this change would make them even stronger and take them
even further out of contention, until they are virtually certain of winning. For
the K!(M#1) weakest candidates, however, this change would make them
stronger, until they become serious contenders and start getting more negative
votes. So this dynamic tatonnement process with single-negative voting should
leads to an equilibrium where M!1 candidates are virtually sure to win, and all
other candidates are serious contenders for the last seat. In single-winner
elections where M"1, this argument says that all candidates should become
serious contenders under single-negative voting.
Now consider list-PR elections, where the alternatives on the ballot are party
lists that can win any number of seats. From our theoretical perspective, an
important difference between voting for a list and voting for a candidate is that
a list cannot go out of serious contention by being too strong, because more
votes can always help it to win more seats. So in the tatonnement story, any
party that is likely to win seats should be sustained as a serious contender,
because it could be in a close race to win another seat if it became stronger, or it
could be in a close race to lose a seat if it became weaker. But among parties that
are likely to get no seats in this district, a perception of become weaker can
induce a perception of being a less serious contender, which tends to further
weaken the party until it get virtually no votes at all. In our simple dynamic
story, only the strongest of the likely losers might remain in serious contention
for a first seat. Following this argument, Cox (1997) concludes that we should
expect anywhere from 2 to M#1 serious contenders in a list-PR system with
M seats per district. This conclusion, that the number of parties in a list-PR
system can vary over a wide range, has been called Duverger’s hypothesis by
Riker (1982a).
The equilibrium analysis in this section has been at an informal level, to
sketch broad insights and hypotheses about comparative electoral systems.
Scrutinizing the logic of these hypotheses rigorously requires much more work
at the level of formal modeling. To formalize the ideas about serious candidates,
we need probabilistic models of voting in which the relative probabilities of
different close races can be computed. For an introduction to this literature, see
Palfrey (1989), Cox (1997), Myerson and Weber (1993) and Myerson (1998,
1999). The tatonnement arguments that have been used here to categorize
equilibria as stable or unstable have not been identified as special cases of any
rigorous theory of stable equilibria in general games, and more work is needed
to try to establish such a foundation for these arguments (see Myerson,
1997b).
5. Electoral barriers to entry and incentives to reduce corruption
Duverger’s law and its extensions are statements about bounds on the
number of serious competitors in political competition. When these upper
bounds are achieved, the electoral system is creating a barrier to entry against
new parties. This interpretation is very inportant, because economic theory
teaches us that barriers to entry can be the most important determinants of
long-term profits in a competitive market.
The ability of political organizations to exploit their institutional role and
take profits from the broader public should be a central question in political
economics, just as the analogous question about oligopolistic producers is
a central question in industrial organization. There is no reason why we should
expect politicians to be exceptions from Adam Smith’s (1776) general observa-
tion that ‘People of the same trade seldom meet together, even for merriment
and diversion, but the conversation ends in a conspiracy against the publick’.
When elected leaders use political power for their own profit, we call it corrup-
tion or abuse of power or, in its most extreme form, tyranny. One of the basic
motivations for democracy is the hope that electoral competition should reduce
such political abuse of power below what would occur under an authoritarian
system, just as market competition reduces oligopolistic profits below monopoly
levels. (This is a liberal view of democracy, in the sense of Riker (1982b). See also
Schumpeter (1950, Part IV).) But if such deterrence against corruption is what
we want from democracy, then it should be a criterion for comparing the
effectiveness of democratic structures. That is, we should ask what democratic
structures, if any, are likely to be most effective in deterring political leaders from
abuse of power. Duverger’s law and its extensions suggest that different electoral
systems may indeed differ in this regard.
To investigate this question theoretically, I considered a simple model (Myer-

son, 1993b) in which voters are allocating seats in a legislature among parties
that have different levels of corruption. In this model, I tried to make political
corruption as simple and public as producer prices are in market competition.
So I assumed that every party has a publicly announced corruption level, which
is the cost per voter of paying each legislator who is elected from the party’s list.
That is, the total corrupt profit to a party is proportional to its corruption level
multiplied by the number of seats that it wins in the election, and we could
assume that each party wants to maximize its expected corrupt profit. So
a party’s corruption level here is analogous to a seller’s price in oligopoly theory,
which is multiplied by quantity sold to compute total revenue.
All voters are assumed to care similarly about the total cost of corruption to
all parties, but voters also care about government policy, where their preferences
may differ. To keep things very simple in Myerson (1993b), I assumed that there
are only two policy alternatives, which we may call ‘Left’ and ‘Right’. Some
fraction for the voters are expected to be leftists who prefer the Left policy, and
the rest of the voters are rightists who prefer the Right policy. With only two
alternative policy positions, we can simply assume that the realized government
policy will depend on whether a majority of the seats are allocated to parties
favoring the Left or Right policy (with a tie going whichever is the status quo,
say Right).
In this model, each voter wants to maximize his total utility payoff, which is
his payoff from the government policy (higher if the majority of the legislature
goes to the parties that advocate his preferred policy) minus his share of total
cost of corruption for all parties. So all voters want to minimize total corruption,
when policy is held fixed, but they have different preferences on the policy
question of Left or Right.
We could naturally assume that each party chooses its policy position and its
corruption level at the beginning of the campaign so as to maximize its expected
corrupt profits. But my analysis (Myerson, 1993b) looked at the subgame when
all parties’ policy positions and corruption levels already been chosen, and
I assumed that, for each positively corrupt party, there is another ‘clean’ party
that advocates the same policy position but has corruption level equal to zero.
I also introduced a small amount of uncertainty about the numbers of active
voters, to guarantee that each voter should think that his vote has a positive
probability of making a difference in the election.
These assumptions are sufficient to guarantee that, if all parties differed only
in their corruption level, then corrupt parties could never win when voters vote
rationally, under virtually any voting rule. But when parties also differ in their
policy positions, the policy question can interact with the corruption question in
ways that improve the chances for corrupt politicians under some electoral systems.
For example, suppose that there are four parties, called L1, L2, R1, and R2. As
their names suggest, parties L1 and L2 advocate the Left policy, while parties R1
and R2 advocate the Right policy alternative. Parties L1 and R1 (the older
parties) are known to be corrupt, with the same positive corruption level, while
parties L2 and R2 (the newer parties) are known to be noncorrupt or clean.
Suppose that we expect about half of the voters to be leftists who prefer the Left
policy, and half to be rightists who prefer the Right policy.
With these four parties, consider first a single-winner single-positive-vote
plurality election in a single national district. In this situation, plurality voting
admits an equilibrium in which the leftist voters all plan to vote for party L1 and
the rightist voters all plan to vote for party R1, and so one of these corrupt
parties will win the election. In this equilibrium, the vote totals for the corrupt
parties are random variables with the similar large expected values, while the
vote totals for the noncorrupt parties are expected to be zero. So each voter
should perceive that a close race between the corrupt parties L1 and R1 is much
more likely than a close race between a corrupt party and a noncorrupt party.
Even if a voter cares more strongly about the costs of corruption than about the
difference between the Left and Right policy alternatives, he should recognize
that the probability that his vote could change the level of corruption in the
government is infinitesimally smaller than the probability that his vote could
change the policy position adopted by the government. So each voter should
rationally vote for the corrupt party whose policy he prefers, to maximize the
probability that his preferred policy position will be adopted. Thus, the forces
that give us Duverger’s law for plurality voting can create a barrier that sustains
the corrupt politicians against their noncorrupt rivals in this example.
Of course there is another equilibrium of this game in which nobody votes for
the corrupt parties. We might hope that the voters would focus on this equilib-
rium, which is better for all of them. But suppose that the noncorrupt parties L2
and R2 are new parties, and so history operates as a countervailing focal factor
in favor of the corrupt equilibrium. Then the perception that this election is
likely to be a close race between parties L1 and R1, as in past elections, can
become a self-fulfilling prophecy. (See Schelling, 1960.)
The problem is that getting the voters to coordinate their expectations on the
equilibrium that they prefer may require some coordinating leadership, and they
already have leaders in parties L1 and R1 who prefer to maintain the old
equilibrium. The need for coordinating leadership to guide blocs of like-minded
voters in plurality elections seems particularly problematical when we recognize
that the whole point of democratic elections is to select our leaders. In effect, the
corrupt leaders of the L1 and R1 parties retain their political support by holding
their respective side of the Left/Right policy question as a hostage. In this sense,
it is each bloc’s need for coordination in plurality elections that can create
barriers to entry and sustain corruption.
If we change electoral systems, then the analysis of this example becomes very
different. Under approval voting, it can be shown (see Myerson, 1993b) that, in
a wide class of game situations which includes this four-party example, the
corrupt parties cannot have any positive probability of winning any legislative
seats. To see why, consider again a scenario in which every voter is expected to
vote for party L1 and R1. It can be easily shown that a voter might gain, and
could not possibly harm his interests, by adding a second approval vote for his
most-preferred noncorrupt party, L2 and R2. But no one needs to vote for
a corrupt party when all like-minded voters are voting for the most-preferred
noncorrupt party. The crucial difference under approval voting is that adding
a vote for party L2 or R2 does not reduce a voter’s ability to affect the electoral
outcome in the case of a close race between parties L1 and R1. Thus, under
approval voting, a perception that a close race between parties L1 and R1 is
most likely cannot so easily become a self-fulfilling prophecy.
Pure proportional-representation systems also yield good sets of equilibria
in these games (see Myerson, 1993b). In our simple example, proportional
representation in its ideal sense (infinite district magnitude) would mean
that each voter can allocate an equal fraction of the legislative seats. Recall
that the realized government policy is assumed to depend on whether a majority
of the seats are allocated to parties favoring the Left or Right policy. So even if
a leftist voter expected all other leftist voters to vote for the corrupt party L1,
he would still prefer to vote for the clean leftist party L2, because doing so
would reduce the corruption cost (by slightly reducing the number of seats won
by legislators who take corrupt profits) without affecting the Left/Right
policy balance in the legislature. So for list PR with a large magnitude of M
seats in each district, our model predicts that voting for a noncorrupt party
that advocates the policy which the voter prefers is a dominant strategy for the
voter.
The results are very different when we consider M-winner elections with
single-positive voting for candidates (SNTV) rather than for party lists. In this
system, we have seen that the number of serious candidates is driven strongly
towards M#1 when there are M seats available. If we assume that incumbents
are viewed as serious candidates when they run for re-election, then not more
than one incumbent out of M can be expected to lose in the next election. The
great difference from the list system is due to the fact that one extra ((M#1)th)
candidate can only threaten to win one individual seat in SNTV, whereas one
extra party could threaten to win all seats in list PR. This SNTV system also
encourages severe party discipline in blocs of voters who want to maximize the
number of seats won by like-minded politicians, because the number of seats
that they win can be reduced if the voters concentrate their votes on too
few candidates or distribute their votes among too many candidates. So it
seems reasonable to blame this SNTV system for a political rigidity that
protected corrupt political leaders in Japanese politics before the recent electoral
reform.
For theoretical completeness, consider now what would happen under a sys-
tem of single-negative voting, say in a single-winner election. With such negative
voting, we do not get barriers to entry against new parties. In fact there is
a strong incentive for blocs of like-minded voters to get a large number
of identical parties on the ballot, to split the negative votes of opposing
voters. But negative voting instead creates a kind of barrier to exit which
also protects corrupt parties. Consider what would happen if our four parties
competed in a single-winner election under negative-plurality voting. If
the voters were sure that the winner was bound to be the candidate of one
of the clean parties, L2 or R2, then the corrupt parties L1 and R1 would
not be treated as serious contenders, and so all leftist voters would vote
against R2, and all rightist voters would vote against L1; and thus the
winner would be a corrupt candidate from L1 or R1 (having no negative
votes)!
So in single-winner elections, a worst-punishing voting rule can create a bar-
rier against the exit of corrupt parties from the ranks of serious competitors,
because being perceived as not a serious contender actually makes a candidate
stronger under a worst-punishing system. In contrast, plurality voting could
create a barrier against the entry of clean parties into the set of serious
competitors, because being perceived as not a serious contender would weaken
a candidate under such a best-rewarding system, and so could become a self-
fulfilling prophecy.
Borda voting has both best-rewarding and worst-punishing aspects, but for
our four-party example it appears dysfunctional in the same way as single-
negative voting (see Myerson, 1993b). Consider what would happen if our four
parties competed in a single-winner election under Borda voting. If the voters
were sure that the winner was bound to be the candidate of one of the clean
parties (L2 or R2) then the candidates from the corrupt parties (L1 and R1)
would not be treated as serious contenders. Each voter, to maximize the impact
of his vote on the race between the two serious contenders, would move the
candidates of the clean parties to the top and bottom of his Borda ballot, putting
on top the party that advocates his preferred policy position. But when all voters
do so, they must give the same total points to the two clean parties as they give
to the two corrupt parties, because 1#0"2/3#1/3, and so there cannot be
a close race among the clean candidates without a corrupt candidate also going
a close contender to win. So the worst-punishing aspect of Borda voting
essentially creates a barrier to exit that sustains the corrupt candidates as serious
contenders.
Such perverse ‘barriers to exit’ under worst-punishing voting rules imply
that any new political movement that gets on the ballot, clean or corrupt,
must be treated as a serious contender by the voters. So worst-punishing
voting rules encourage a proliferation of candidates that would hurt politicians
as a class, without any necessary benefit for the voters. Thus we can see clearly
why worst-punishing voting rules like negative voting are not used in real
political systems. But established politicians as a class should be more favorable
towards political systems that erect barriers to entry against new political
parties.
6. Other perspectives on democratic incentives to reduce corruption
The concept of barriers to entry in political systems has broad applications

that go beyond the scope of a simple voting game in one district. For example,
consider the common practice of requiring that a party cannot be awarded any
seats in a proportional representation systems unless the party has got some
minimal quota of votes, such as the 5% quota for proportional representation in
German Bundestag elections. Such a quota can obviously function as a barrier
to entry against new parties. If the goal of these quotas is to prevent a prolifer-
ation of parties with narrow ideological bases, a similar result could be achieved
by applying the proportional representation in smaller districts, each with 20 or
fewer seats, as Taagepera and Shugart (1989) have emphasized. If the distribu-
tion of voters’ preferences is relatively similar across different districts, then
either system would eliminate parties that could not successfully appeal to more
than 5% of the political spectrum. But a new party that has reasonable hope of
appealing to 5% of the voters may find it easier to get started if it can enter the
legislature with a locally concentrated campaign that wins 1 out of 20 seats in
a single district.
Looking more broadly, we should recognize that some of the most funda-
mental ideals in democratic theory can be derived from a concern to decrease
barriers to entry in politics. Freedom of the press and freedom of assembly are
important for democracy because they facilitate the creation of new political
movements. At another level, guarantees of autonomy for regional or provincial
governments should also be recognized as structural features of a democratic
system that can lower barriers to entry into national politics, because they allow
politicians outside the capital to establish independent credentials for political
leadership.
My simple model of effectiveness against corruption (considered in the pre-
ceding section) makes predictions that are directly relevant to the recent debates
on electoral reform in Italy. In response to apparent excesses of corruption
in Italian politics, reformers changed the legislative electoral system from
proportional representation to a mixed system in which most seats are allocated
in single-member districts with single-positive voting. But the analysis of my
model (Myerson, 1993b) suggests that this change was a step in the wrong
direction.
If the Italian electoral reform can be justified as step towards reducing
corruption, it must be because some assumption in my model is wrong. Of
course, any theoretical model involves simplifying assumptions that are never
exactly true. But we should ask, which of my assumptions must be changed in
order to realistically explain how proportional representation can be so much

less effective against corruption than my model has suggested?
The essence of my argument was that, when the leaders for a big established
party take corrupt personal profits from the government, proportional repres-
entation makes it easiest for dissident politicians to launch a party that adopts
the same policy positions as this established party but also promises to reduce
corrupt profit-taking. Of course it is not so easy for leaders of a new party to
convince the voters that they will be cleaner than the old established party, but
that problem would be the same under any electoral system.
I would argue now that the crucial problem is in my model’s simple assump-
tion about coalition formation. My model assumed that, on the policy dimen-
sion where voters differ, government policy would be set equal to the position
advocated by a majority in the legislature. In effect, we were assuming that
a legislative seat won by a clean party had as much chance of affecting
government policy as a seat won by a corrupt party. But in a world where most
parties are very corrupt, a new small party of committed corruption-fighters
would probably be, among all parties, the least likely to be invited into the
governing coalition. In any post-election bargaining to form a governing coali-
tion, corrupt politicians might rationally choose to compromise on almost any
ideological dimension before they would compromise on the corruption dimen-
sion, which gives them their profit from elected office. Thus, in a multi-party
parliamentary democracy where most parties are corrupt, a vote for a noncor-
rupt party will have no beneficial impact on the government policy outcomes
that the voter cares about unless the noncorrupt parties get enough seats to form
a governing coalition themselves. A vote that gives an extra seat to a small
noncorrupt party is wasted just as much as a vote for a party that has no chance
of winning a seat at all. So we find again that an expectation that noncorrupt
parties will be small can become a self-fulfilling prophecy.
Until now, our theory of voters’ decision-making was based in the idea of
a close race between two candidates, where changing a few votes could change
the winners. But if some changes in the set of winners would not change the
outcomes that affect the voters, then we should instead look for close questions
in a space of outcomes that the voters actually care about. In general, we may
say that there is a close question involving two alternative outcomes if a change
in a few votes could (by changing the winners of the election) make a difference
between one of these alternatives occurring after the election rather than the
others. But in a large election, some close questions are much less likely than
others. In any set of possible alternative outcomes that the voters care about, we
may say that a particular pair of alternatives is a serious question in the election
In defense of my past work, I want to suggest that my model should still be considered valuable,
even if you disagree with its applied conclusions, precisely because it sharpens the question for us.
if, conditional on the event that some pair in of alternatives in this set is in a close
race, the event that the close race involves this particular pair has a substantial
positive conditional probability (which would not go to zero as the population
size becomes large, when expected voting strategies are held fixed).
A rational voter should recognize that his vote can only matter in the event
that a close question exists between two alternatives that affect him. So a voter
should choose his vote to maximize his conditional expected payoff given the
event that there is such a close question in the payoff-relevant outcome space.
Thus, a calculus of rational voting must depend critically on what policy
questions in this space are considered serious in the election. (To offer a rigorous
quantitative framework in which these ideas can be formulated, Myerson (1999)
develops a calculus of limits of probability ratios in large games when the
expected population size goes to infinity.)
We are assuming here that the payoff-relevant outcome space includes both
a corruption dimension and some other government policy dimensions that
voters care about. So the effectiveness of democracy against corruption depends
on whether political leaders can gain by making differences in corruption
a serious question in the election.
From this perspective, we can see some advantage for a political system that is
dominated by two coherent parties that are large enough so that a governing
coalition must include at least one of them. Once the serious political question
has become which of these two parties will lead the governing coalition, either
party could realize some competitive advantage from a better reputation for
reducing corruption. Viewing corruption as political profit, we must be con-
cerned that the leaders of two established parties might collude and agree not to
compete on this corruption dimension (which is why we have been concerned
about barriers against new parties). But to the extent that such interparty
collusion is difficult, we can now recognize the greater competitive effectiveness
of a system with two dominant parties.
A similar argument can be made for presidentialism. The key to this argument
is the assumption that anyone who wins a presidential election will have enough
power to reduce corruption, if she is committed to do so. So in a world where most
elected officials are corrupt, an individual presidential candidate can make reduc-
ing corruption a serious question, in a way that an individual candidate for a seat
in the legislature cannot. The only individuals in a parliamentary system who can
be like presidential candidates in this regard are the leaders of large parties that
are considered to have a serious chance of getting a majority of the parliament.
7. Legislative bargaining and party structure
Whenever power is divided among many elected officials, a theory of rational

voting must take account, not only of the probability of helping one candidate
to win rather than another, but also the probability that helping a particular
candidate to win would actually affect government policies in a way that benefits
the voter. So the characteristics of voting equilibria cannot be fully analyzed
without taking account of the constitutional structure of the government, which
defines the post-election games that elected officials will play to determine
government policy.
To complete our analysis in this way, we need tractable analytical models that
cover pre-election campaigning, voting on election day, and post-election bar-
gaining among elected officials. Such models are hard to develop, and much
more work in this direction is needed. In particular, we need such models to
explain why legislative politics can be so different in presidential and parliamen-
tary systems.
Austen-Smith and Banks (1988) have given us an excellent example of
what we can learn from such integrated models. They consider a list-PR
parliamentary election in a nation where the constitutional rules stipulate that
the largest single party will get the first opportunity to form a governing
coalition. Because this first bargaining move is expected to be successful, the
voters care greatly about which single party is the largest. As a result, a party can
be strengthened by being perceived as a serious contender to be the largest
party. In the equilibrium analyzed by Austen-Smith and Banks (1988), there is
one large party on the extreme left, one large party on the extreme right, and one
small party in the center. Because the question of whether the leftist party of
rightist party will be largest becomes a serious question for the voters, even
moderate voters who like the centrist party’s policy position best may rationally
give their votes instead to the party that they prefer among these two large
parties. This defection from the center is halted only when the small centrist
party becomes so small that there can be a serious question of it disappearing
from the legislature altogether, in which case the government would be formed
by one extreme party alone without the moderating influence of a centrist
coalition partner.
Now consider what happens when the constitution is changed so that there is
no longer any special significance for the largest party in determining the
leadership of the government. So a change in which party is largest may no
longer be a serious question for the voters, because the identity of the largest
single party is no longer something that voters should care about. Instead, the
composition of the governing coalition may depend in complex ways on the sets
of parties that together have enough seats to form a majority. So voters may be
motivated by the possibility of affecting government policy though an effect on
the number of seats won by a party of any expected size (not just a party that is
in a close race for largest, or that is so small that its extinction is a close
question). In such a situation, a voter may be more willing to vote for party
whose legislative position he most prefers. Thus, the two formerly largest parties
may be expected to lose much of their electoral support. Such an effect has
indeed been attributed to the recent constitutional reform in Israel that created
a directly elected prime minister.
People who consider the resulting increase in the number of small special-
interest parties to be undesirable might then argue that this constitutional
reform should be repealed. But we should be careful to think more broadly
about constitutional structures before we accept such an argument. Systemati-
cally studying the political effects of constitutional structures should make us
aware of the great variety of structural parameters that may tend to have
particular political effects. If one wishes to discourage a proliferation of small
parties, this effect could also be accomplished by subdividing the country into
districts with fewer legislative seats per district, so that the M#1 law imposes
a tighter bound on the number of parties.
Of course, subdividing a country into small legislative districts could replace
ideological specialization with geographical specialization instead. For example,
if the members of the legislature are elected by list PR in small 3-seat districts,
then the M#1 law predicts that there will be at most 4 serious parties in each
district. But will we have a different set of four parties in each district, each of
which specializes in advocating the local districts concerns, or will we have four
national parties running lists in each district?
To encourage integration of local political organizations into national parties,
many nations offer additional bonus seats to parties that win seats in multiple
districts (see Cox, 1997). But to qualify for these national bonus seats, local
political organizations from different regions could register jointly as a under
common national electoral label, as a kind of marriage of convenience, without
any constraint to actually vote together in the legislature. So it is not clear that
these national bonus seats should actually have the desired effect of creating
major national parties with coherent national programs.
A comparison of British and American legislative politics makes it clear that
the difference between presidential and parliamentary constitutional structures
can affect the incentives for local legislative candidates to accept national party
discipline. Britain and America use essentially the same legislative electoral
system (plurality voting in single-seat districts), and legislative politics is domin-
ated by two big parties in both countries. But candidates for the British
parliament are more willing to campaign as loyal party members on the basis of
their national party manifesto, while candidates for the American congress feel
compelled to present themselves more as independent advocates of local inter-
ests. It seems clear that these differences in legislative electoral politics are to be
explained by the differences between the British and American legislatures’
constitutional roles in the national government. But we need a theory to tell us
what aspects of the constitutional differences may be responsible for these
different incentives for national political integration.
The critical factor may be the relative political rewards that can be achieved
by a set of legislators who happen to include a majority of the legislative
chamber, if they commit themselves to act together as a durable coalition under

the direction of their selected legislative leaders. In a simple unicameral parlia-
mentary system, the leaders of such a coalition can then control both the
legislative agenda and the implementation of government policies, and can
thereby redistribute all the benefits of politics to their coalition. In a typical
parliamentary system, voters expect legislators to form such a governing coali-
tion, and so the critical event of political life after the election will be the
determination of this governing coalition and the selection of its parliamentary
leadership. The importance of determining the governing majority coalition
then creates a kind of increasing return to scale for national parties in the
legislature, as Cox (1987b) has observed in his study of the evoluation of party
discipline in Victorian Britain. A legislator who campaigned as a local indepen-
dent and refused to join any national coalition could not have any impact on
this critical question of which coalition will control the parliament.
In a presidential system, the leaders of a disciplined majority coalition in
a legislative chamber could not automatically get such political rewards of
power and control for their followers. A strong president with executive control
and a legislative veto can block the initiatives of such a coalition, decreasing its
leaders’ ability to reward the coalition members. Diermeier and Myerson (1995)
have shown that, when legislators act as independent agents who cannot be
committed to support any policy by their legislative leaders, they may actually
have more effective bargaining power against a strong president or a rival
legislative chamber (see also ‘Model 3’ in Myerson, 1995a). Shugart and Carey
(1992) have found empirical evidence that legislative powers of a president have
detrimental effects on legislative party discipline.
The constitution of Russia today gives the president an unusual combination
of veto power and decree power. By writing decrees that have force of law unless
reversed by legislative action, and then by vetoing any legislative actions against
these presidential decrees, the president of Russia can enact his own legislative
program as long as he can get support from either 1/3 of Duma or 1/3 of the
Federal Council. (See Parrish, 1998.) A disciplined majority coalition in the Duma
could not pass legislation and could not block the president’s legislative program.
So legislators in the Duma have virtually no incentive to make the hard compro-
mises needed to define a coherent national policy capable of getting majority
support. If this system is not reformed, it is difficult to see how voters will identify
any national policy decisions as serious questions in future Duma elections.
We clearly need much more theoretical work on legislative bargaining mod-
els, as well as empirical work on comparative presidential and parliamentary
systems, to understand how changes in presidential powers and legislative
procedures can affect the incentives for legislators to form coherent national
parties. The potential importance of different rules for legislative agenda control
in shaping political incentives of both presidential and parliamentary systems
has been emphasized by Huber (1996) and Diermeier and Feddersen (1998).
As Shugart and Carey (1992) have emphasized, there is great variety in the
constitutional powers of presidents in different countries. Since the establish-
ment of the French Fifth Republic, there has been great interest in the possibility
of new semi-presidential systems that might combine the best features of presi-
dential and parliamentary systems. But without a theory of political institutions,
we cannot say whether a new semi-presidential constitution might combine the
best features of both, or the worst features of both. As Austen-Smith and Banks
(1988) have shown, a critical focus of this analysis must be on how changes in the
constitutional allocation of powers may transform way that serious political
questions are identified by the voters in elections.
8. Conclusions
In this paper, we have tried to sketch the elements of a theory of electoral

systems, viewed as an essential part of the constitutional structure in which
politicians compete for power. We looked first at election games in isolation
from the rest of the constitutional structure, assuming a given number of equally
serious candidates. In this context, we saw how different voting rules can create
substantially different incentives for politicians to concentrate on diverse special
interests or to make similar broad appeals to all voters. Then we dropped the
symmetry assumption, and outlined a conceptual structure for understanding
Duverger’s law and other generalized propositions about the number of serious
contenders in an election. Economic understanding of barriers to entry led us
from simple predictions about numbers of serious competitors to predictions
about the relative effectiveness of different democratic structures for deterring
political abuse of power. Finally, we saw the importance of taking account of
how the winners will bargain after the election to control the government.
Rational voters should be concerned about their potential effect on this bargain-
ing process, and this concern may be an essential factor to explain the systematic
differences between party structures in presidential and parliamentary systems.
In any complex social institution, individuals’ behavior is guided by an
interconnected system of incentives, in which the decisions of one individual can
alter the incentives of another. When the basic structure of the institution is
reformed, this system of incentives may change in subtle ways. Economic
analysis aims to expose the workings of this system of incentives, so that
institutional reforms can be planned with a better understanding of their
long-term consequences.
In a world of increasing democracy, questions of constitutional design in new
and reforming democracies have generated a great need for economic analysis of
political institutions. In this analysis, we view constitutional structures as the
rules of the game that politicians must play to win political power, and we
analyze equilibria of corresponding game models to see how rational behavior
in this game may change when the rules are changed. For our analysis to address
the enormous variety of constitutional structures that have been used or pro-
posed, the structure of these game models must include some parameters that
can be varied to represent more of this variety. Because of welfare-relevant
consequences of political behavior are complex and multi-dimensional, we need
to develop different game-theoretic models of government, which make different
simplifying assumptions about the set of government policy alternatives and
about voters’ preferences, to focus on different welfare-relevant aspects of
political behavior. To improve the reliability of our analysis, we must also
compare the results of game models which make different assumptions about
the underlying framework of government policy alternatives, and about the
basic preferences of voters and politicians. With the passage of time and the
spread of democracy, more data about government performance under different
democratic institutions is becoming available, and this data needs to be studied
in a dialogue with theoretical analysis.
We must recognize that theoretical analysis cannot definitively prove the
practical superiority of new proposals in any area of engineering, and the stakes
in constitutional engineering are especially high. But when objective academic
expertise is lacking, the principal voices in constitutional debates are likely to be
those of professional politicians, whose constitutional preferences may depend
mostly on their short-term perceptions of how the political game might be best
restructured to their own immediate advantage. An analogy can be made to
classic tariff debates in international trade, where economic analysis has served,
not to definitively prove the superiority of free trade, but to assure that the
welfare consequences of tariff policies for broad groups of unfocused citizens
should be considered along with the concerns of active special interest groups.
So economic analysis of constitutional structures should serve to expand the
scope of public constitutional debates, by offering more perspectives on how
a change in the rules of the political game may affect rational political behavior
and the resulting performance of democratic government for the welfare of its
citizens.
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European Economic Review 43 (1999) 671—697

Joseph Schumpeter Lecture

Theoretical comparisons of electoral systems

Elements of an economic theory of political institutions are introduced. A variety of

JEL classification: D72

Keywords: Electoral systems; Constitution; Election game; Incentives

1. Invitation to political economics

To honor Joseph Schumpeter, I should try to begin as he might, from a long

price theorists had a rigorous methodology for analysis of incentives in markets

2. Variety of electoral systems

The range of possible electoral systems is enormous. I will focus here on

(1, s ,2, s , 0).

(1, 0,2,0, 0).

 I use male pronouns for voters, female for candidates.

nontransferable vote). ¸ist PR is single-positive voting with multiple seats allo-

3. Electoral incentives for competitive differentiation and specialization

be treated symmetrically (in aggregate) by the voters. If the fraction Q of voters

(s , s ,2, s s ), where 1"s 5s 525s 5s "0,

absolute majority (Q'1/2) to be ignored by all candidates. The problem can

single-winner elections. If each of our M elected representatives specializes in

4. Nonsymmetric voting equilibria and Duverger’s law

The previous discussion assumed a given number of candidates, all of whom

with s ranging from M"1 to M"6. In single-winner plurality elections,

5. Electoral barriers to entry and incentives to reduce corruption

To investigate this question theoretically, I considered a simple model (Myer-

6. Other perspectives on democratic incentives to reduce corruption

The concept of barriers to entry in political systems has broad applications

order to realistically explain how proportional representation can be so much

7. Legislative bargaining and party structure

Whenever power is divided among many elected officials, a theory of rational

chamber, if they commit themselves to act together as a durable coalition under

In this paper, we have tried to sketch the elements of a theory of electoral

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I use male pronouns for voters, female for candidates.