Endogenous ballot decisions and "optimal" fluctuations : an economic model of politics

Elections---often to a considerable degree---influence the fiscal policies pursued by governments installed on the basis of their results. Nonetheless, government behaviour is typically modelled exogenously, usually by means of a benevolent, permanently installed "social planner." However, since fiscal policies, devised by democratically elected governments, complement the decentralised pricing system, which---as shown by Samuelson (1954)---is incapable of optimally allocating both private and public goods, the social-planner approach is viewed as being an unsatisfactory tool for the purpose of describing the political aspects of economic decisions.In the absence of a "first-best," Pareto-optimal tax system, fiscal policies are implemented as a result of inter-household "conflicts" over tax rates and public spending. In order to be able to overcome the theoretical difficulties encountered in previous contributions to the Economic Theory of Politics, this text will propose a model that explicitly depicts---"democratically aggregated"---political decisions made on the level of every individual.In this thesis, it will be shown that (i) a country's overall budget can be derived endogenously without relying on the theoretical shortcut of interpersonal preference aggregation, (ii) electoral fluctuations be explained on the basis of the changes to the individuals' particular income and wealth situations, (iii) political behaviour be described in terms of votes and abstentions as well as party membership and ideology, and (iv) the crucial importance of a country's wealth distribution be discussed in the context of economic stability and the role of government