Being the most intelligent species on the planet, the human race has been entrusted with a lot of responsibilities. We are expected, as result of a carefully constructed order, to give answers to all sorts of troubling questions. These may be, at times as simple as asking who should be our next PM (Modiji of course; dissenters, please report to the nearest police station) or could be as difficult as the question of who you hate the most in Bigg Boss (a question of much greater national importance). These everyday dilemmas are too much for us, sensitive beings to tolerate and therefore, sometimes we cannot help but look up to the sky and plead to a higher form to provide us with the answers. After a lot of soul searching, the internet community joined in unison to ask itself- “What would x do?” (where x is an infinite set in celebrity space) . All of our role models ranging from Jesus to Google to Tyler Durden comprise of this set. As a student of economics, there cannot be a bigger mai baap for me than the subject itself. Ever since it was conceived, economics has been used to analyse almost every aspect of human life. Keeping up with this rich and obsessive tradition, this series of articles titled “What would Economics do?” will attempt to put different topics of interest on the operating table to dissect and study it with the tools of economics. First up is electoral politics in India.
Democracy or autocracy?
Think of the entire elections as an exercise of market interaction where political parties are analogous to firms and voters analogous to consumers. In a democratic scenario of perfect competition i.e. free entry and exit of firms (political parties), consumer welfare is maximized with firms getting zero profits. On the other hand, an autocrat enjoys absolute monopoly; in which case his own profits are maximized at the cost of consumers’ welfare. So those of you who keep cribbing about too many parties and the instability that it causes might find it useful to take a foundation course in microeconomics.
Bundling and price setting
Another interesting aspect of this market is that the firms are not selling just one product (schemes and plans). There is a whole range of these products which different consumers value differently. For example, a higher quota for SCs will be valued highly by them but Hardik Patel’s valuation (for that matter, almost the entire upper caste’s valuation) will be strictly negative.
Since the market in consideration is the elections where schemes are only being proposed and not implemented by the parties, it will be fair to assume that the marginal cost of proposing schemes is zero. This is to say that parties are free to make their manifestos as elaborate and vibrant as they want without practically incurring any cost in formulating these proposals. Also, since this market only allows for all of the goods to be sold in a single bundle, a firm only has to worry about compiling a bundle that is preferred over all other bundles in the market for a majority of consumers. As a result, firms try to balance out or more often than not, consciously unbalance their portfolio of goods in order to maximize their consumer base.
A final note is that elections are not conducted in a centralized format. If we assume absence of externalities and that the voter is a self-interested rational agent, constituencies can be thought of as disjoint markets. This allows parties to have the liberty to undertake different market strategies in these different constituencies. The recent general election has shown that a party can root for the farmers and labourers in one area and then push for land acquisition and labour reforms at another platform and all of it in the name of an ambiguous central idea of “development”.