Public Choice Models of Democracy and the 2016 Election

30 Nov 2016 3:56 PM | Mike Lillich (Administrator)

 By Oren Levin-Waldman

First published online in the Yonkers Tribune.

Various public choice theorists have argued that rising income inequality can be dangerous to democracy because one possible response might be a popular uprising. One such model holds that authoritarian elites are likely to democratize when they are fearful that a mass uprising could lead to their overthrow from power. Hence in response to a possible revolution, the elite takes revolutionary steps by offering greater democracy, which at a minimum means offering greater procedural equality.

As a variant on this theory, the median voter theorem holds that the greater the level of inequality the greater will be the gap between median income and society’s average income, and it is the size of this gap that determines the tax rate for the purposes of redistribution. In other words, the median voter theorem holds that when there is a rise in income inequality, governing elites will seek to redistribute income from those at the top of the distribution to those at the bottom of the distribution through taxes.

This, of course, raises an interesting question: Is redistribution in any way comparable to a revolution? Or is it simply akin to the elite in the first model attempting to democratize? Instead of offering procedural equality, the masses are now being offered a form of economic equality. Of course, things can never be fully equal; so the quiescence of low income voters is simply bought with programs.

Of course, nobody is going to argue that the 2016 presidential election represents a revolution against rising inequality. And yet, if we substitute new terms for the terms in the first model of democratization, we ironically enough can see the 2016 election. First and foremost, a revolution of sorts is bound to occur when the elites are unresponsive to the concerns of the masses.

And yet, here we have a backlash against the standard response of “democratization” through the purchase of quiescence through redistribution. Can anybody deny that the forgotten members of the middle class that voted for Trump were really saying no more to programs? They were clear: We want decent paying middle class jobs that allow us to live autonomous lives in dignity.

In the 2016 election, we certainly had a backlash against those elites who long assumed that they knew what was best for everybody else. The growth policies that long formed the basis of a bi-partisan consensus since the end of World War II were effectively repudiated. The public made it clear that policies predicated on free trade in a global economy where decent wages cannot be guaranteed are simply not good enough. The idea that an economy that falls short in producing sufficient opportunity can be supplemented with redistributory programs was effectively rejected. Politics of diversion — where the focus is diverted from the economy to a host of social policy distractions, most notably identity politics — was also effectively rejected.

The median voter theorem effectively holds that in a democracy we can theoretically vote on a tax rate that redistributes income. But what happens when the political system is unresponsive to a so-called democratic vote on the tax rate? A pseudo right wing backlash? If we modify the models we can understand what happened. There is a call for redistribution of sorts here, but not as we traditionally understand it. By rejecting the open borders policies of the establishment as represented by both parties, the voters effectively said they want resources redistributed from Wall Street and financial managers who only promote growth to Main Street where there is economic development that will create decent jobs for the middle class.


t is too simple to dismiss the election as rural America rebelling against urban America. It might be more accurate to suggest that Main Street — where goods and services are produced — rebelled against Wall Street — where growth occurs simply by moving money around. Not only is there growth from moving money around, but there is growth when jobs are destroyed.

This is what the voters rejected, and it is also what the political elites with their allies in the media could not get a handle on. After all, who wouldn’t be satisfied with low paying jobs and social supports as supplements? There is no question that the mantra of “making America great again” may conjure up some negative images. But to create a narrative that only means that white America wants to return to positions of dominance really misses the point and trivializes the concerns of the middle class that has fallen through the cracks. For many it meant nothing more than living in an economy where one can work, earn a respectable wage and be self-sufficient without having to be partially dependent on the government for supplements.

Based on the 2016 election, we might postulate the following: A political elite during a period of rising inequality will seek to purchase the quiescence of low-income voters by offering them programs that will be paid for by higher taxes on the wealthy. In, other words, it will redistribute. When the elites cannot agree on a tax rate in accordance with the median voter theorem, these same elites may seek to ignore the fundamental issues that caused the rise in inequality, most notably the changing economy and labor market, by refocusing the public debate on various social issues. That is, they engage in the politics of distraction.

Redistribution is simply being substituted for democratization. Because inequality is merely the symptom of larger structural economic issues, there is a limit to both redistribution followed by changing the subject. When those limits are reached, we can expect there to be a mass response, even at the most nominal level of voting. When this voting results in an apparent sea change in the composition of government in terms of both ideology and public officials, it becomes clear that on a political level that the voters have brought about a figurative revolution. This is precisely what happened in the 2016 election, but instead of the elites offering greater democratization, the masses engaged in their own grassroots democracy.

Of course, another way to look at it is to say that the public responded with a statement that it really did not want the traditional approach of redistribution in response to rising inequality. Rather it wanted the approach that accords with core American values: A return of good paying jobs that allows workers to be self-sufficient.

If, however, we aren’t likely to see a return of the manufacturing base, then we need to think in terms of making the service economy one that pays better. Here the answer is to have higher wages, if even through a wage policy that serves to bolster wages of not only the bottom of the distribution, but the middle class as well. Higher wages are preferable to policies of redistribution through higher taxation. Rising wages of those at the bottom and in the middle can also narrow the gap between the median wage and society’s average wage. Do we really need to ask again what the voters were signaling they prefer?

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