Why perfect political market is not always good (part 2 of 2)

We continue our discussion. Suppose the coalition form is like the table. The first term in the bracket is number of seat in parliament (gain for president) and the second one is gain for each political party. Zero in the first term means that the president is not supported by a party.

From here we know that Policy A is supported by Golkar, PKB, and PD; Policy B is supported by PDIP, PKS, PD and Party Y; Policy C is supported by Golkar, PKS, PD and Party Y. Total support (237) means the number of member in parliament supporting the president's policy and this is more than half of the total seats in our hypothetical matrix. The coalition is formed according to the preference of political parties (for example in Policy A, Golkar, PKB and PD form a coalition to support the president). In this situation, the president is indifferent as the number of support is equal in each policy (just to make our analysis simple).

Gains for the President and Political Parties[1]

Party	Policy A	Policy B	Policy C
Golkar	(128,100)	(0,-100)	(128,50)
PDI-P	(0,-100)	(109,100)	(0,-100)
PKB	(52,100)	(0,-100)	(0,-100)
PKS	(0,-100)	(45,100)	(45,50)
PD	(57,100)	(57,100)	(57,100)
Party X	(0,-100)	(0,-100)	(7,100)
Party Y	(0,-100)	(26,100)	(0,-100)
Total support	237	237	237

To simplify the problem, the president tends to choose policy which get strong signal and support from the political parties. We should only notice three parties supporting more than one policy: Golkar, PKS and Partai Demokrat (PD). We drop PD from our analysis since it is less relevant (it supports every president’s policy).

Each political party does not cooperate. Each signals strong support for the most favorite policy and strong opposition for the least favorite policy. In this case, Golkar strongly support policy A while strongly reject policy B. PKS strongly support policy B while strongly reject policy A.

Then some brilliant politicians from both suggest “Why do not we cooperate and signal our second preferred policy as strong as the most preferred policy, so the president will choose policy C?”. It happens, the president chooses policy C, but would this cooperation be lasting? Maybe not. Golkar is tempted to defect the coalition and signal the most favorite policy (policy A) but PKS also does the same thing (policy B). Then, is there any outcome which is stable and certain? The answer is perhaps no.

This very simple situation shows how uncertain and unstable the multiparty and presidential system. Let’s put more complicated things. It surely does not make sense to assume that only one or two political parties doing portfolio of policies like what Golkar and PKS do. Imagine when there are many policies, many portfolios, the spreading support of political parties for every policy and the president is not indifferent over his policies. To narrow down many possibilities, president only pursue policies which get strong support. Since the coalition changes over time which means that support also changes, the president’s policies will lose coherency. Therefore, it is very possible that a policy chosen by the president contradicts to what he campaigned in the election.

What happen to other interest groups? Well they have to “bribe” more than one political party and also the president (since the president may come not from major political party, like SBY) to influence their favorite policies. This increases the cost of lobby.

The soaring cost of lobby and uncertainty may endanger our democracy. It is very clear that we should restructure our political institution. There are two systems which may bring good political outcome, parliamentary system or oligopoly political party-presidential system. These systems, i think, reduce uncertainty and the cost of lobby among interest groups. The first one reduces the cost of lobby and uncertainty in the relationship among interest groups, parliament and prime-minister. The second one narrow down policy options supported by political party and finally it eliminates uncertainty and push the cost of lobby for interest groups.

My colleague argues that presidential system is desirable particularly in divided society since the winners do not take all and it also trim down potential conflicts among groups (ethnic or religion). But looking what these guys find, stable and certain outcome are more important than “representation of all”. Regarding current political situation, I favor parliamentary system.

Lastly, it is completely wrong to blame democracy as the cause of our chaotic political situation. What has happened is that our political system within democratic regime does not produce efficient political outcome. The worst thing is that our politicians endanger the future of our democracy.

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[1] The first number in the bracket is the real seats in parliament. The second one is hypothetical gain for a political party. Party X and Y are hypothetical parties. This matrix is a very simplified (variant) menu-auction game since it is pretty difficult to cover each player strategies (the president and political parties) in a plain way within this short posting. You may come up with more illuminating model.