Opportunistic and Partisan Behaviour: A Synthesis
We have seen in our earlier discussion that opportunistic theories of the
political business cycle assume that politicians are only office-motivated.
Their macroeconomic policies are designed to win elections. Partisan theories
stress ideological considerations and reject the assumption made in
opportunistic theories that all parties will follow the same policies. Partisan
theory rejects policy convergence. An alternative hypothesis is to follow the
suggestion of Frey and Schneider (1978a, 1978b) that political parties behave
in an opportunistic way when their chances of re-election are perceived to be
low. Governments can use independent surveys to assess their popularity.
When a party is ‘popular’ and confident of winning the next election, it can
afford to indulge in ideological policies. Frey and Schneider (1978a) suggest
that ‘a government’s lead over the opposition is determined by both the state
of the economy and the election cycle’. This latter feature is the tendency of
the incumbents to become less popular between elections (see also Alesina
and Rosenthal, 1995). Incumbent politicians want to be re-elected in order to
implement their ideological programmes, but may face an incentive structure
which varies at each election. Because the temptation to use opportunistic
policies is strongest when governments do not feel confident they can win the
next election, opportunistic behaviour will be an increasing function of the
incumbents’ political insecurity. Such an approach can account for the lack of
systematic evidence in support of opportunistic behaviour. Where political
security is an important factor opportunistic policy manipulations should be
observed before some elections but not all (see Schultz, 1995).
When considering the use of policy manipulations which have as their
objective the maximization of re-election prospects, incumbents need to consider
the marginal benefits and marginal costs of such policies. The marginal
benefits of opportunistic behaviour, in the form of extra votes, are greatest
when the government has a large popularity deficit. However, policy manipulations
also generate extra costs to the incumbents in the form of loss of
reputation, and this could damage long-term partisan support (see Schultz,
1995). Schultz argues that ‘by engineering a pre-election boom, governments
already open themselves up to charges of irresponsibility and opportunism’.
However, ‘when governments feel insecure in the current election, they can
ill afford the luxury of being far-sighted and hence they discount the future
quite heavily’. From these observations Schultz formulates the following
hypothesis: ‘The degree to which the government manipulates the economy
prior to an election will be negatively correlated with its lead in public
opinion polls at the time.’ Given the potential costs of policy manipulations, it
is also the case that governments should only respond to popularity deficits
close to the next election. Schultz tested this hypothesis for the manipulation
of UK government transfer payments, which have significant and instantaneous
effects on real disposable income. Schultz found that, with the exception
of the October 1974 election, there is a clearly discernible negative correlation
between growth of real transfers and the pre-election poll lead of the
incumbents. These results are suggestive. The strength of the political business
cycle effect in generating opportunistic behaviour will differ from one
election to the next ‘because the government’s incentives also differ from one
election to the next’ (Schultz, 1995). Clearly more research is needed in this
area. Table 10.4 summarizes the main features of the five main politicoeconomic
models of aggregate fluctuations.
In his survey of what economists have learned from 25 years of research
into the political business cycle, Drazen (2000b) concludes with a ‘clear
message’ that:
monetary surprises are an unconvincing force for political cycles, either opportunistic
or partisan; research should concentrate on fiscal policy as the driving force,
especially for opportunistic cycles. Political monetary cycles are more likely the
effect of accommodation of fiscal impulses, that is, are passive while fiscal policy
is active in trying to affect election outcomes.
We have seen in our earlier discussion that opportunistic theories of the
political business cycle assume that politicians are only office-motivated.
Their macroeconomic policies are designed to win elections. Partisan theories
stress ideological considerations and reject the assumption made in
opportunistic theories that all parties will follow the same policies. Partisan
theory rejects policy convergence. An alternative hypothesis is to follow the
suggestion of Frey and Schneider (1978a, 1978b) that political parties behave
in an opportunistic way when their chances of re-election are perceived to be
low. Governments can use independent surveys to assess their popularity.
When a party is ‘popular’ and confident of winning the next election, it can
afford to indulge in ideological policies. Frey and Schneider (1978a) suggest
that ‘a government’s lead over the opposition is determined by both the state
of the economy and the election cycle’. This latter feature is the tendency of
the incumbents to become less popular between elections (see also Alesina
and Rosenthal, 1995). Incumbent politicians want to be re-elected in order to
implement their ideological programmes, but may face an incentive structure
which varies at each election. Because the temptation to use opportunistic
policies is strongest when governments do not feel confident they can win the
next election, opportunistic behaviour will be an increasing function of the
incumbents’ political insecurity. Such an approach can account for the lack of
systematic evidence in support of opportunistic behaviour. Where political
security is an important factor opportunistic policy manipulations should be
observed before some elections but not all (see Schultz, 1995).
When considering the use of policy manipulations which have as their
objective the maximization of re-election prospects, incumbents need to consider
the marginal benefits and marginal costs of such policies. The marginal
benefits of opportunistic behaviour, in the form of extra votes, are greatest
when the government has a large popularity deficit. However, policy manipulations
also generate extra costs to the incumbents in the form of loss of
reputation, and this could damage long-term partisan support (see Schultz,
1995). Schultz argues that ‘by engineering a pre-election boom, governments
already open themselves up to charges of irresponsibility and opportunism’.
However, ‘when governments feel insecure in the current election, they can
ill afford the luxury of being far-sighted and hence they discount the future
quite heavily’. From these observations Schultz formulates the following
hypothesis: ‘The degree to which the government manipulates the economy
prior to an election will be negatively correlated with its lead in public
opinion polls at the time.’ Given the potential costs of policy manipulations, it
is also the case that governments should only respond to popularity deficits
close to the next election. Schultz tested this hypothesis for the manipulation
of UK government transfer payments, which have significant and instantaneous
effects on real disposable income. Schultz found that, with the exception
of the October 1974 election, there is a clearly discernible negative correlation
between growth of real transfers and the pre-election poll lead of the
incumbents. These results are suggestive. The strength of the political business
cycle effect in generating opportunistic behaviour will differ from one
election to the next ‘because the government’s incentives also differ from one
election to the next’ (Schultz, 1995). Clearly more research is needed in this
area. Table 10.4 summarizes the main features of the five main politicoeconomic
models of aggregate fluctuations.
In his survey of what economists have learned from 25 years of research
into the political business cycle, Drazen (2000b) concludes with a ‘clear
message’ that:
monetary surprises are an unconvincing force for political cycles, either opportunistic
or partisan; research should concentrate on fiscal policy as the driving force,
especially for opportunistic cycles. Political monetary cycles are more likely the
effect of accommodation of fiscal impulses, that is, are passive while fiscal policy
is active in trying to affect election outcomes.
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