September 20, 2022, 11:00–12:30
Room Auditorium 3
Economic Theory Seminar
In this paper we explore the effect of short-term memory on political outcomes in a model in which politics is viewed as a collective learning process. We analyse a dynamic model in which voters use past observations to make inferences about the true data generating process, and political parties are self-interested with polarised ideal policies. Voters balance party loyalty with a desire to vote for the party whose policy is a based on a better interpretation of past observations. We show that short-term memory leads to political cycles of polarisation and consensus. A short-term history involving only periods of consensus implies little variation in voters data, and hence less precise knowledge about the true state of the world; this allows parties to push their self interests. Alternatively, periods of polarisation imply sufficient variation which at some point allows voters to be confident about what is the true model; this forces parties to converge on the policy that fits that model. Our framework also sheds light on the relation between policy uncertainty and political polarisation, and on the effects of crises on political competition.