Tying the Politicians’ Hands: The Optimal Limits to Representative Democracy

Abstract

We study the optimal delegation problem which arises between the median voter (writer of the constitution) and the (future) incumbent politician when not only the state of the world and but also the politician’s type (preferred policy) are the policy-maker’s private information. We show that it is optimal to tie the hands of the politician by imposing him/her both a policy floor and a policy cap and delegating him/her the policy choice only in between. The delegation interval is shown to be the smaller the greater is the uncertainty about the politician’s type. These results apply outside the specific problem to which our model is applied here.