8.13 Economic voting

Economic voting is one way that voters solve the moral hazard problems inherent in representative democracy.

• Voters cannot monitor every policy that the government initiates. They do, however, have a rudimentary way to hold the government accountable—staying the course when times are good and voting for change when the economy sours.

• A common sort of empirical analysis uses economic growth (annual percentage changes in gross domestic product) to predict the vote. The idea is that large numbers of voters decide to vote against the incumbent party in bad times and with the incumbent party in good times.