Friday, October 14, 2011

You Think Our Legislators Suck? There's a Good Explanation For That!

If there is only one thing that I can be confident about Indonesia, that must be the notion that most Indonesian citizens hate their legislators. How couldn't we? We rarely (read: never) hear any good news about them, and we oftenly (read: all the time) hear about how irresponsible they are with their job. Remember how they lavishly spend the state budget for their ridiculous comparative study in foreign countries? How they plan to build a new potentially (read: absolutely) useless new building? How they can't meet their yearly target for issuing new laws? (though considering their capabilities, this might be a bless is disguise)

Before you're planning for a bloody revolution, try to think about it again. Aren't these legislators the product of our beloved democracy? After all, it's the people who vote them as our representatives. But why do they betray their own constituents? It seems as if they only think about themselves or the interest of certain minority groups who have the means and funds to purchase these legislators voices in the house of representative. In reality, these interest groups don't have enough voices to put the legislators in their current position. Yet, it's clear that these groups have more control over the legislators compared to the majority of the people, i.e. us. How could that be? Should we say that democracy is a total failure? Will we have a better chance under the rule of a benevolent dictator?

The Problem of Collective Action
 
Public Choice theory has a very good answer for this problem (by the way, public choice theory is basically the application of economic analysis into political theory). In short, we are facing the problem of collective action, which can be further elaborated into three main issues: (i) high transaction costs, making coordination within a large group almost impossible, (ii) free rider issue within uncoordinated group, keeping people from working together (creating a vicious cycle along the way), and (iii) internalization of the interest groups' costs among a lot of people tends to lower the average costs that must be borne by each individual, giving less incentive for the people to fight back. Let's discuss this one by one.  

In general, we, the people, are pretty much diversified. There are too many scattered interests and the costs for coordinating us into a single systematic group where each person knows perfectly other people needs, would be too expensive. Unfortunately, the case is different with interest groups. Because they are smaller in numbers, it is easier for them to coordinate among themselves, meaning less transaction costs to work together in order to satisfy their interests. This might seem obvious and logical but most people tend to underestimate this important factor. Why do you think we embrace the idea of decentralization?

Without any effective mechanism for coordination, surely it would be very difficult for the majority to fight back. Here is where the free rider issue arises. Suppose you really want to fight back the legislators and the interest groups, you want to show them that the people are not toys to play with. To do this, you plan to invest your money in making an awareness campaign, letting people know that their legislators suck and that we can't let that happen anymore in the next election. But just when you're about to cash your check, you start to think, "wait, if I'm putting my money now, will many people agree with me and support my effort, or will they just enjoy the fruit of my efforts by doing nothing?" Unless you're a saint or you have your own interest group, you'll probably reconsider your decision and then you will wait for other people to start the effort. See the vicious cycle here?

Finally, there is a major issue of cost internalization. When interest groups and our legislators are making policies that benefit themselves, they impose additional social costs to the rest of the people. Imagine the wasted tax money that they use for unnecessary spending, or imagine the additional burden that consumers will need to pay when interest groups, say in the form of pollutants, can induce the legislators to let them free from being responsible for the externalities caused by them to the society. Yet, since these additional costs are imposed upon a diversified group, most of the people only bear a fraction of the costs. Not to mention that these costs can also be internalized for a long term, lowering the burden to the each individuals. The end result? Less incentives for the majority to fight back since they don't feel the impact as a whole. If they do, they would have done something to prevent the interest groups and the legislators from doing whatever they want. The above things may explain why we had a "successful" reformation (read: revolution) in 1998, but not nowadays.

One Crazy Solution: Why Don't We Sell Our Votes?
 
So what can we do? Firstly, we need to understand how the majority of Indonesian people view the voting process and how interest groups and legislators perceive the benefit of their position. Do Indonesian people take voting as an important matter or they consider it as a commodity that they can sell for certain price? Furthermore, how do the majority of our legislators perceive their position? For the greater good of the society or for their own benefit (calculating the benefits of having the position minus the costs of getting appointed).

If the latter is correct, the solution would be to impose an excessive price for people's votes. My main idea is: rather than imposing a sanction for political parties which try to manipulate the vote by using money, give the freedom to them to use their money as they like. Why? In a country where the price of a vote is cheap and the legal authorities are weak, there is no way for a clean political party to win against those who use money in their campaign (money is real, talk is cheap). Having said that, why don't we say to the people that they should vote for whoever can purchase their votes for the highest price (of course there should be a minimum cap for such price reflecting as close as possible the benefit that the legislators might receive from getting the position, e.g payment from interest groups).

The more expensive the vote is, the better. The expected results are: (i) interest groups and political parties will be forced to exhaust their own resources for wasteful acts, i.e. spending a lot of money though there will be only one winner, and (ii) along with the increase in costs of buying votes, less interest groups will join the game since the expected benefits are going down to almost nothing. Through this solution, we're imposing a collective action problem to the political parties. They might work well as a single group, but if we put them in a situation where the most optimal way to reduce their costs is to not paying anyone, they will also face the same problem that larger groups face.

Let's see how my solution work. If parties continue to pay for getting their votes, some of the smaller parties will soon realize that it is not worth it and stop playing. At this stage, it is safe to assume that the remaining players are the major ones. You may think, now we're doomed, we have major players controlling the game and no one can fight it. Not necessarily! These major players have two options: (i) they can continue to compete in spending a lot of money for getting votes or (ii) they can reach a mutual consensus that no one will use money in their campaign. Of course since none of them can trust each other (collective action problem), they will continue to spend their money to the extent that they will have no more resources to spend. In the end, when they have exhausted all of their resources, they will be forced not to use money anymore in their campaign or they will face the risk of having a vicious cycle of unnecessary money spending.

Suggestions and comments are welcomed.

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