Wednesday, November 7, 2012

Why Are Presidents Less Effective than Prime Ministers?

Using game theory to model political systems leads to surprising insights

As the 2012 presidential election draws near, Barack Obama—like any incumbent president up for re-election—will try to draw voters' attention to his administration's record of accomplishments. An administration with a high level of "legislative success"—that is, proposing or endorsing bills that the legislature passes and turns into law—is rightly seen as an administration that "gets things done." And yet a common lament among even casual observers of U.S. politics, regardless of party, is that an administration that "gets things done" is hard to come by. Indeed, in the period between Dwight Eisenhower's first term and George H. W. Bush's first term, the average legislative success rate of U.S. presidents was a mere 68 percent. Meanwhile, prime ministers in the parliamentary system of the United Kingdom enjoyed an average legislative success rate of 94 percent from 1995 to 2003.

It seems that the American presidential system of government may be institutionally ill-equipped to "get things done" as effectively as a parliament. But why should this be so? In a recent paper, Daniel Diermeier, professor of managerial economics and decision sciences at the Kellogg School of Management, and co-author Razvan Vlaicu of the University of Maryland propose a model that offers an answer.

"We are trying to figure out how legislative decision making in these two systems actually works," Diermeier says. "If you were asked to create a new constitution that would ensure effective government, what would you write into it? It's not obvious."

"If you were asked to create a new constitution that would ensure effective government, what would you write into it? It's not obvious."

Conventional economic wisdom explains the "effectiveness gap" between presidential and parliamentary systems by pointing to the fact that prime ministers tend to exercise superior "agenda control" (that is, the ability to introduce favorable proposals to the legislature) and also control legislative majorities through disciplined partisanship. However, if satisfying these criteria were all it took to ensure high rates of legislative success, any U.S. presidential administration whose party held a majority in Congress (as the Obama administration's did before the 2010 midterm elections) should be able to enjoy parliament-like effectiveness. "That doesn't actually happen, which creates a puzzle," Diermeier says.

Diermeier's model proposes a new explanation for this effectiveness gap centering on the "confidence procedure" characteristic of the executive branch under the parliamentary system. The model builds on early work by Diermeier and his colleague Timothy J. Feddersen. The confidence procedure is one of the most salient structural differences between presidential and parliamentary systems. In the United States, which has no confidence procedure, the president and the legislature are elected separately; if the president loses the support of the legislative majority (as President Obama did after the 2010 midterm elections), his administration nevertheless persists until the next election.

But in a parliamentary system like the United Kingdom's, "you elect the legislature and they elect their executive, like a board of directors picking their CEO," Diermeier explains. "And they can remove the executive at any point through a vote of 'no confidence.' But this also means that not everyone in the legislature is part of the government; you get these coalitions to form a majority. And being part of the ruling coalition is very valuable: You don't want to risk being kicked out of the government. The prime minister knows this, and because of this confidence procedure, they can link the fate of any bill they propose to the fate of the ruling coalition itself. Since there's more at stake, you're more likely to vote yes."

Diermeier says that this model accurately explains not only the higher legislative success rates of parliamentary systems but also the anomalous fact that merely controlling the agenda through a partisan majority does not instantly turn presidential governments into legislative-success machines. "The type of sometimes-ugly bargaining between Congress and the president, and the fact that many of these bills fail, is an entirely predictable feature of this constitutional system—it's just set up that way," Diermeier says. Without a confidence procedure binding the political fate of an executive cabinet and a legislature together, the incentives for cooperation between them are fundamentally weakened, which results in a lower average legislative success rate.

Diermeier uses the Obama administration's battle to pass its healthcare reform bill as an example of this "baked-in" difference in legislative effectiveness. "In the U.S. presidential system, even with a majority in both houses of Congress, the administration proposed the bill and then there was all this back-and-forth to address all the competing interests," Diermeier says. "In the United Kingdom or Germany, here's what would have happened: The cabinet would introduce the bill to the legislature; everybody in the coalition would vote for it because everyone's main interest is to keep the coalition together and stay in power; and it would pass. The whole thing would be over in a few days."

So if the parliamentary system undeniably affords more opportunity for legislative success, why put up with the vagaries of a presidential system? "There are real trade-offs," Diermeier says. "If you want to have more broad-based support for your policies, a presidential system is better, even though lots of stuff will simply not get done because of gridlock. Parliamentary systems will be able to act more quickly and decisively, but the underlying support will come from narrower constituencies. And it's much more volatile: When the regime changes, they can easily dismantle what the previous government has done. 'Legislative success' cuts both ways.

"The differences between these two systems are like the differences between an SUV and a Ferrari," Diermeier continues. "Each one has its advantages in certain situations. But you can't be an SUV and a Ferrari at the same time." He cites the European Union, currently floundering through a fiscal crisis, as an example of the consequences of attempting a hybrid approach to designing a constitutional system. "The EU consists of states with parliamentary governments, but the EU itself is not parliamentary," he explains. "It's like the U.S. system but without a president. It's the worst of both worlds."

The somewhat counterintuitive insights generated by Diermeier's model come from game theory, which Diermeier has applied to other political systems as well. In another recent paper, Diermeier and Pohan Fong of the City University of Hong Kong used game theory to model legislative scenarios that contain a persistent "proposer"—that is, a party who maintains agenda control over the other legislators. In this scenario, the proposer is trying to introduce changes to a "default" policy that persists if those changes do not get approved. An example of this, says Diermeier, "is allocating entitlements like social security. Unless I can successfully change something, it all stays the same and doesn't go away.

"You'd think that in this situation, the proposer has all the power: He can set the agenda and play other parties off of each other to maximize his own benefit," Diermeier continues. "But this intuition is wrong."

Instead, Diermeier's game theory model shows that other parties in the system will act in each other's collective benefit as a check on the power of the proposer. "One nonproposer will not allow himself to be 'bought off' by the proposer at the expense of another," says Diermeier, "because that would only leave himself vulnerable to similar exploitation when the proposer decides to change the default policy again. Nonproposers have incentives to protect each other's assets, or else the proposer can pick them off one by one."

According to Diermeier, this theoretical model can be used to shed light on the dynamics of eighteenth-century European monarchies such as France or Spain or modern autocracies such as China and Russia, in which a powerful leader needs to maintain support of a coterie of elites. "Our simplistic understanding is that someone like Louis XIV or Vladimir Putin can do whatever he wants," Diermeier says. "But on certain issues like taxation, the king is actually able to do a lot less than you'd think."

Thanks to Daniel Diermeier, Pohan Fong And Razvan Vlaicu / Insight Kellog Northwestern Edu / Kellogg School of Management, Northwestern University


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