Direct democracy

I was supposed to be in a video for a group that advocates direct democracy (initiative and referendum at the national level in the U.S., among other things). I said I had doubts. ("You see Switzerland. I see California.") But they wanted to do it anyway. In the end we couldn't schedule it. I had thought about what I would say, and here it is.

My first worry comes from my work (with Ed McCaffery) on the isolation effect. When people are asked about a given proposal by itself they isolate that proposal and ignore its side effects, its costs, and to some extent the alternatives to it. This leads to inconsistencies.

For example, majorities seem to favor lower government spending, lower taxes, a balanced budget, but more spending on health care, education, and social security. This happens when they are asked about these things one at a time. Yet the combination is impossible, even if we take into account their willingness to cut military spending and other parts of the U.S. budget.

Or, for a slightly more subtle case, they favor progressive taxation, couples neutrality, and marriage neutrality. Couples neutrality means that couples with the same income pay the same tax. Marriage neutrality means that marriage does not affect the total taxes paid by the couple. These three things are mathematically impossible to have at once.

The first problem is thus that referenda do not protect us against proposals that are incompatible with other things that we want.

The second problem is that, when we consider one proposal at a time, we prevent "log rolling". A better term might be mutual back scratching. This is what legislatures do, when they work as they are supposed to work. Each side gives in on something that it cares about less, in order to get something that it cares about more.

A recent example is the energy bill that the U.S. Senate almost got to debate. The idea was to get a price on carbon, for one side, in return for increased development of nuclear power, and increased off-short drilling, for the other side. It would still be a good deal, even without the off-shore drilling. This sort of thing could not happen unless someone happened to put together deals like this in an entire referendum proposal, which is unlikely, because most of these proposals come from interest groups on one side and they don't negotiate with their opponents.

I'm sure there are places where referenda can do some good, but we need to consider these problems too.