Why Political Information Fails to Circulate

Consulting Fellow, RIETI

Booms of Junichiro Koizumi and Makiko Tanaka, and Changing People's Attitude toward Democracy

For the past several years, Japanese politics has been attracting more and more attention from the public. Starting with enthusiastic supports for charismatic governors in local areas, people's interest in politics culminated with furors over Prime Minister Junichiro Koizumi and Makiko Tanaka, a former Minister of Foreign Affairs. Although the booms appear to have somewhat calmed down today, voters' interest in politics still remains high.
In the course of these events, the tones of the media on democracy swayed greatly. Up until recently, the Japanese media had wholeheartedly and uncritically accepted democracy, a system which Winston Churchill, late prime minister of Britain, described as the "worst form of government except for all those others that have been tried." In the past several years, however, the trend seems to have changed. People who are deemed (by majority of the media and critics) to lack qualifications to serve in key posts of the government have received tremendous public supports, and those who criticized such popular celebrities came under fierce attacks, getting numerous harassing telephone calls and e-mails. Although the Japanese economy has plunged into critical conditions, public opinions have shown little reaction, and Japanese politics has literally turned into a show, or matsuri festivities, broadcasted on TV screens. In overseas, the extreme right parties emerged in various parts of Europe riding on the growing antipathy toward the European Union amid the integration process. Against the backdrop of such political circumstances within and outside Japan, calls for the public election of the prime minister - an attempt to put administrators under the direct and stronger democratic control - picked up stream, and then disappeared in no time. Lately, some people have begun to argue that Japan's slump in the 1990s was not an economic slump but a political slump, and that politics (voters) would not dare to take any serious steps unless the Japanese economy clashes. Such preposterous arguments stem from the changing attitude toward democracy.

How to Interpret Populistic Phenomena - Rational Voter Model versus Socio-Psychological Model

Deep underneath such doubts about democracy is the lingering skepticism over voters' ability to make right decisions although those holding such a view tactfully wrap the idea in obscurity. Around that time, the word "populism" was used in the sense of "pandering to the general public," a deviation from the meaning of its etymology, and has become widespread. The heads of ruling and opposition parties, who should be championing democracy, even went so far as to denounce each other in the Diet as being a "populist." Behind the word "populism" is the shared idea that there is a gap between policies desired by voters and truly desirable policies for Japan (and voters as a whole) and therefore politicians who try to implement policies that please voters (populists) should be criticized. Should it be the case, a democracy in the sense of "governance of the government by voters" has a critical deficiency.
Is this true?
I once argued that, if a policy or a set of policies that is or are Pareto optimal to typical voters - median voters - exist(s) and if there is a gap between such a policy or policies and the one(s) supported by voters, the reason behind this can be explained by not the lack of voters' ability as implicitly assumed by those pointing to populism but asymmetric information between the government and voters. Facing serious information gap between the voters and the government, rational voters increase subjective discount value. And strategic interactions among players, which derive from that premise, generate "equilibrium of mutual distrust" and elicit seemingly non-rational (myopic) actions from voters.
By establishing this argument, however, I do not mean to deny the significance of analyzing reasons behind the vague and facile expression of populism and the true nature of political frenzies as observed in the history from the aspect of "voters' ability to make decisions and its consequence."
Recently, Daniel Kahneman, who questioned a series of premises for economic models such as the perfect rationality and self interest of players based on psychological analyses, won the Nobel Prize in economics. In the field of political science, especially in research on public opinion and voting, psychological models have rather been the mainstream, unlike in the field of economics. And thus, there are a number of quality works that empirically analyze voters' non-rationality, a concept broader than bounded rationality, such as collective passion, collective consciousness, altruism and shortsightedness. On the other hand, the psychological models have recently been under attack by rational choice scholars. Debates on voters' ability to make decisions and its political consequence (impact) will continue for some time.
According to the latest findings of studies in the fields of behavioral finance and experimental economics, non-rational behaviors are systematically observed even in economic activities. If this is the case, such non-rationality should be naturally reflected upon political activities which are linked less closely to self interest than economic activities are. The fact that the rational voter model finds little empirical support in studies on public opinion and voting is another evidence to show the non-rationality of voters. But such psychological analysis provides only limited normative implications as long as no alternative to democracy is found despite numerous trials and errors through the long human history.
On the other hand, what appears to be robust in empirical studies and public opinion surveys of any kind in any countries is that voters have very little information on politically crucial factors such as government policies, the background of policymakers, key contentious issues and the positioning of each political party. For instance, a series of public opinion surveys have been conducted in Japan as to whether or not to postpone the introduction of the "payoff," limited deposit protection system. Although the vast majority of the sample responds to those surveys, it has been shown that voters have extremely little knowledge (information) on the details of the payoff scheme. Such asymmetric information between the government and voters results in voter behaviors which appear non-rational (in the eyes of government officials and the media who have informational advantage). This is unnecessarily exacerbating the doubt over voters' ability to make rational decisions and thus over democracy as seen in a facile populism. As far as Japan's political aberrance of the 1990s is concerned, I believe that such an information gap between the government and voters was a far greater contributing factor than the non-rationality of voters. Especially, in a country where government authorities hide and manipulate information, an information gap between the government and voters is expansive and their mutual distrust stemming from the gap continues to grow infinitely, generating an environment which is prone to "seemingly non-rational political phenomenon." And if so, it is necessary to delve into politics from the viewpoint of a government-voters information gap before we one-sidedly blame voters' inability to make rational decisions and question democracy while having no alternatives as has been done by those arguing over populism.

Used Cars, Stock Market and Voting Rights - Two Sets of Asymmetric Information concerning Politics

My view that asymmetric information between the government and voters is the fundamental cause of political decisions to defer problems and of seemingly populistic phenomena may be criticized as being "too optimistic." Indeed some people have pointed out that voters have more intrinsic problems in their ability to make rational decisions, citing that certain politicians continued to hold fanatic popularity no matter how much evidence the media brought to show their lack of qualification to serve key posts. But in a small community where people know each other very well, someone who significantly lacks qualifications hardly has a chance to be elected as a leader of a neighborhood association. Considering this, I once again believe that an information gap is the fundamental cause of the problem even though psychological factors cannot be ignored. Members of the media should reexamine whether their reporting from past to present on persons they regard as "lacking qualifications" has been consistent enough to deserve voters' trust. The same can be said about policymakers who are growing distrustful of voters' responses to a series of policies for banking problems. It is often the case that those with the primary responsibility are the last to realize that they have fallen into a "vicious equilibrium."
The view that attributes much of the cause of the political problems in the 1990s to asymmetric information between the government and voters is not at all "optimistic" though. Studies on the consequence of asymmetric information among players have been developed in the field of economics. But it is the domain of politics that comes under the particularly fundamental and serious influence of such asymmetricity.
For instance, asymmetric information between sellers and buyers of used cars, a subject which was first studied by George Akerlof, gives the buyers - who are disadvantaged in terms of information - a strong incentive to gather more information (dissolve asymmetric information) to buy a good car for a relatively cheap price. Because both sellers and buyers are ready to pay premiums to dissolve the asymmetricity of information, there exists rationality for quality certification and guarantee systems as well as information mediation institutions such as used-car dealership chains (brand) to develop voluntarily. Here, although "technology-wise information asymmetry" still exists concerning the technological nature of used cars, there is almost no "incentive-wise information asymmetry" which would derive from the lack of incentives for concerned parties to dissolve asymmetric information between or among them.
On the other hand, in government-voters relations, voters have little incentives to collect information about politics to realize "good politics and administration" if we stand on the premise of the rational voter model because: 1) "good politics and administration," a fruit that voters would obtain by monitoring the government appropriately, is quasi-public goods in nature, and 2) in principle, political players, unlike market players, do not have an option to "exit," for instance, emigrating to another country (cf. minority stockholders in corporate governance), as pointed out by Albert O. Hirschman. In other word, free-riding flourishes. Of course, giving no exit option to the members of a certain group is the finest means to bring forth credible commitment from them, as exemplified by ancient Chinese General Han Xin's desperate fight-back and victory in Beishui Zhen (War of Beishui), a phrase which is now used as a metaphor to mean "fighting with one's back against the wall." Thus, the lack of an exit option helps prevent free-riding when the consequence of collective actions is attributable to individual members to an extent beyond a certain threshold. However, it increases members' indifference toward collective actions when the extent of attribution is below the threshold. This difference can be clearly recognized by anyone who has ever owned a used car, stocks or a right to vote. The problem stemming from this "incentive-wise information asymmetry" is particularly serious in today's Japan, in which social and regional communities - which have hitherto restricted "free-riding" on public goods and formulated networks for information and communication - are falling down on one hand while on the other hand political parties - another brake on "free-riding" - are no longer fulfilling such a function with more and more voters identifying themselves with no particular party. As such, in the aspect of information distribution, the presence of such "incentive-wise information asymmetry" makes politics fundamentally different from an ordinary market such as the one for used cars. And therefore, in politics, it is difficult to dissolve asymmetric information which would take modest efforts to dissolve in other fields. Such theoretical backgrounds explain why the scarcity of political information is commonly observed in empirical studies and public opinion survey regardless of the time and country in which they were conducted. In the case of Japan in the 90s where extremely complex and profound issues such as the financial and economic problems were a key political issue, another "technology-wise information asymmetry" also exists, making things even more difficult.

Thorough Analysis of Causes Required to Facilitate Information Flows - Information Disclosure is Necessary but not Sufficient

To dissolve asymmetric information between the government and voters, it is necessary first and foremost for the government to thoroughly disclose information. But this alone cannot solve the problem. In the domain of politics where "incentive-wise information asymmetry" exists, information disclosure and the fulfillment of accountability by the government are necessary but not sufficient condition to reduce or dissolve the asymmetric information. An attempt to compartmentalize the domain and reduce the number of players as a way to prevent "free-riding" would bring about new problems such as giving rise to interest group politics. Information mediators including nongovernmental organizations (NGOs), the media and policy thinktanks should play an important role but this again hits the wall because of the presence of "incentive-wise asymmetric information." Unlike buyers in ordinary markets, voters (buyers of policies) have little incentive (that is negligible in ordinary conditions), and therefore there is neither rational nor guaranty for information mediators in the field of politics to develop voluntarily into an organ whose competitive advantage rests on a "reputation of neutrality" as is the case with credit and rating agencies in markets. The accountability of some NGOs, which have turned into a mere interest group and tend to go out of control, is being questioned. Meanwhile, in Japan, the deflective way of news reporting in TV wide shows has become a problem and those who gained publicity through their appearance in "Takeshi no TV Takkuru (Takeshi's TV Tackle)," a highly popular TV program, have run and won elections. All these problems stem from the innate nature of politics and democracy, and lamenting over the moral degeneration of NGOs and broadcasters does not provide any answer to the problems. A finely system that is tuned to individual-level incentives must be designed to facilitate circulation of political information.

Compared to debates on economic issues, those on political affairs have greater tendency to be overwhelmed by the mood of time or ideological arguments, resulting in dualistic debates in disregard for theoretical and empirical proof. Blind faith may be placed on the function of democracy and the implementation of a simple direct democracy may be strongly advocated at a time, but that may be followed by the sudden spread of populism arguments. And such arguments, too, may encounter all-too-naive reactions, for instance, from those who ask, "Are you trying to befool people?" Likewise, NGOs may be given a categorical approval as if they were a "representative of justice" on one hand, they may be completely shut out of policymaking process on the other hand. Indeed, there was quite an upsurge of calls for introducing a single-seat constituency system as the ultimate means to solve political corruption, but criticism erupted on the system was introduced. Such simplification of political disputes and ensuing deviations were one of the contributing factors that caused the political aberrance of the 1990s.
What is required today, however, is not an ideological dualistic theory that tries to determine whether or not to have the doctrines of democracy penetrate. It is going too far to say that all the political decisions should be made through national referendum on the Internet based solely on the ground of democracy, but it does not make sense either to give government authorities to have greater room for arbitration (especially to hide or manipulate information) based on the ground of the conceptual obscurity as seen in populism. In order to make fine-tuned decisions while giving due consideration to multi-faceted factors and without falling into such a dualistic theory, there is no other way but to accumulate down-to-earth and fastidious theories and empirical findings.
Taking the point of argument in this column as an example, even if seemingly non-rational voters are observed, we should not seek explanation in facile populism arguments. Instead, we should analyze theoretically and empirically on questions such as: 1) to what degree the phenomenon in question is rational and attributable to "asymmetric information" between the government and voters, 2) why such "asymmetric information" occurs and cannot be dissolved, 3) in which policy domains "asymmetric information" is particularly serious and what kinds of countermeasures can be considered, and 4) how to ensure the accountability of NGOs and other information mediators. It is now required for us to first determine the mechanism of information distribution and the degree of information gaps between the government and voters in each domain, and then take steady measures to build politically efficient institutions and organizations for the respective policy domains.

*Translated by RIETI staff

December 3, 2002

December 3, 2002

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