Following an election, market participants strive to explore the new political landscape. Pundits are commenting, and slowly but surely, people discover what the new landscape looks like. Interestingly though, if you ask political economists (sometimes called Public Choice economists) the most fascinating aspect of an election is perhaps not what parties gain control of which houses of Congress or the presidency, but that losing incumbents voluntarily hand over power after failing to retain office.
Consider this thought experiment. You invested tremendous amounts of time and effort to gain a foothold in the political arena; you’ve allowed yourself and your family’s private lives to be subject to public scrutiny and you’ve traded prospects of secure jobs with the certainty that you have to fight every two to six years to retain office. You’ve devoted every ounce of your energy to your political career and just four years ago you reached the most contested office, the Presidency of the United States. You’re the most powerful individual on the planet, affecting people you’ve never even met in ways you couldn’t imagine. But now, and here the thought experiment gets interesting, after having this power for an arbitrarily set period of four years, you’ve failed to convince enough people to cast a ballot in your name to be reelected. Now, as you’re still technically the Commander in Chief, you’re supposed to voluntarily give the keys to your office to someone who just barely beat you in the election?
Citizens of modern democratic countries could not imagine anything but this voluntary exchange of power. But when you think of the thought experiment, this exchange, after months and years of civil and sometimes not so civil campaigning, becomes quite fascinating. It appears that candidates are willing to do almost anything to get ahead during the campaign, yet the election results are never questioned and are treated with respect and civility. In fact, the losing candidate typically calls the winner and congratulates them on the victory.
The thought experiment begs the question of how the democratic system came to be in the first place. Without precedence, the proposition of voluntarily handing over power after an election seems unlikely to be upheld. But while it must have been tempting for leaders in the early Greek democracies around 500 B.C. to change the laws and keep their positions as rulers, somehow this transfer of power has evolved to be an unquestioned institution in most democratic countries.
The same political economists who find this transfer so fascinating are typically also the most vocal, pointing to inefficiencies in politics as a mode of collective decision making. Their argument is based on the notion that markets signal costs and preferences much more accurately than elections do. The result is that while consumers get a good representation of what they truly want, voters often do not. The Public Choice School of thought certainly thinks in these terms today, but they may also benefit from taking a minute and appreciate that while political competition may not be as efficient as markets, the choice of candidate that this process decides will be upheld.