Partisan Stabilization Policy and Voter Control

Public Choice 122, 2005: 115-132

Representative democracy is a principal-agent institution. Voter influence is noticeable when the president (agent) and median voter (principal) disagree about macroeconomic goals. One reason to think that they might disagree arises from the benefit of choosing a policymaker who is more conservative than the voter. This conclusion is demonstrated analytically in a new Keynesian model of endogenous stabilization in which the president reacts quickly to lean against the macroeconomic wind. We support this characterization of voter and presidential preferences with regression estimates of growth rate targets, allowing for differences between Democrats and Republicans.