Searching for Good Policies

I study a model of dynamic policy making in which citizens do not have com-plete knowledge of how policies are mapped into outcomes. They learn about the mapping through repeated elections as policies are implemented and outcomes observed. I characterize for this environment the policy trajectory with impatient voters. I find that through experimentation good policies are frequently found. However, I show that this is not always the case and demonstrate how policy mak-ing can get stuck at unappealing outcomes, revealing a novel informational failure of policy making. The model also provides insight into the size, direction, and sequencing of optimal policy experiments. Finally, I consider how the structure of political competition affects experimentation and learning. ∗I thank Martin Osborne, Abhinay Muthoo, Alan Wiseman, and several seminar audiences for helpful comments, and Guillermo Diaz for research assistance