Summary of lecture 6 of the class Managerial Economics, which applies the spatial model to the EU, how the spatial model performs in real cases, and how to find points in the policy space
We have introduced the spatial theory of voting:
Decision-making in committees
One and two dimensions
Median voter theorem
Pivotal politics (KMVT)
All this to predict the outcomes of policymaking
Part I – Spatial Theory applied to the EU
- Equilibrium outcomes under various procedures
- What can we learn from this?
Conditions of Spatial Model of voting
Preferences of the players (plot them on a line)
Alternatives, especially the status quo (we compare alternatives against the SQ)
The rules of voting (procedures) of who can propose, amend and veto.
The European Commission
27 Commissioners
Voting by simple majority
o They vote because they need to agree how the draft proposal looks like. Then, the
proposal is sent to the Council and the EP.
Assumptions:
o Commissioners have Euclidean preferences,
- i.e., single peaked and symmetric.
- They vote for alternatives that are closest to their ideal preference.
o Decision-making occurs on 1 dimension.
Apply Black’s median voter theorem and focus on the preference of the median
Commissioner (COM). Instead of looking at all 27.
,The European Parliament
705 MEPs
Vote by simple majority:
o Two procedures: consultation and ordinary legislative procedure (= codecision).
The latter is where the EP has the strongest role.
o They vote on the Commission’s proposal and can also amend it with the Council.
Assumptions:
o MEPs have Euclidean preferences: single peaked and symmetric.
o Decision-making occurs on one dimension.
Apply Black’s MVT and focus on the preference of the median MEP (EP).
The Council of the EU
27 member states represented by ministers
Two voting procedures:
o Unanimity: all MS need to vote in favour
o Qualified majority voting (QMV) has two conditions:
55% in favour
MSs have to represent 65% of the EU population
Assumptions:
o MSs have Euclidean preferences: single-peaked and symmetric.
o Decision-making occurs on one dimension.
Apply K-majority voting theorem (KMVT). We focus on the preference of the left and
right pivotal players (MS). If the SQ is between the pivotal players, there is no policy change
, The Commission, EP and Council in a single model
Our model requires that we only know the position of the pivotal players of each body: (1)
median commissioner, (2) median MEP, and (3) four pivotal players in the Council.
If we also know the SQ against which to compare the alternatives, we only need to know the
rules of policymaking, which are described by the legislative procedure (policy-making game,
i.e., the voting rules). It depends on the procedure: co-decision or consultation.
The objective of the game is to maximise utility their objective is to obtain a policy
outcome as close as possible to their ideal policy. Remember: utility depends on the distance
of the alternative to their ideal policy.
Game theoretical form
The game theoretical form is a sequential game:
The different players make their decisions in a predetermined sequence.
It is the opposite of a static game:
o In a static game, the players make their decisions simultaneously (e.g. prisoners’
dilemma).
o Sequential game is different because policymakers decide in a sequence, i.e., in
a set order. This means that the one who decides latter has more information
because it already knows what proposals have been made.
When moves are sequential, we can draw out the game tree and reason backwards to
the beginning we apply backwards induction to solve the game.
The Consultation procedure
The Council votes with qualified majority voting (QMV).
Procedure:
o EC makes a policy proposal
o EP gives an opinion
o Council amends by unanimity OR approves by QMV.
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