Outcome , process and power in direct democracy

Based on survey data for Switzerland, new empirical findings on direct democracy are presented. In the first part, the authors show that, on average, public employees receive lower financial compensation under more direct democratic institutions. However, top bureaucrats are more constrained in direct democracies and have to be compensated by higher wages for that loss of power. In the second part, they demonstrate that reported subjective well-being of the population is much higher in jurisdictions with stronger direct democratic rights. This is not only the case because people value political outcomes higher but also because they derive utility from the political process itself. 1. Forms of democracy Public Choice has mainly been concerned with representative democracy. Most textbooks neglect the institutions of (semi-) direct democracy, i.e., popular referenda and initiatives, or mention them only in passing (e.g., Mueller, 1989). Pure direct democracy in the classical Athenian sense (i.e., without parliament) disappeared beyond the communal level (but it still exists in some American and in many Swiss communities). In so far as Public Choice has dealt with direct democracy, the literature focussed mainly on two aspects: on the theoretical side, the possibility or impossibility of consistently aggregating individual preferences to a social welfare function or social decision has received considerable attention (Arrow, 1951; Black, 1958; Sen, 1970, and the subsequent Social Choice literature). On the empirical side, the median voter model has been applied to two competing parties under perfect political competition (Downs, 1957), as well as to decisions between different issues (e.g., Barlow, 1970). Today’s semi-direct democracies, such as Switzerland and some American States (most prominently California), are a mixture of direct participation of the citizens via initiatives and referenda and the representative features of a ∗ The authors work at the Institute for Empirical Economic Research, University of Zürich, Bluemlisalpstrasse 10, 8006 Zürich, Switzerland, Tel.: 0041-1-634 37 28, Fax: 0041-1-634 49 07, E-mail: [email protected], [email protected], [email protected]. They are grateful to Reto Jegen and Stefan Meier for helpful comments.