Is effective direct water policy impossible? Two articles shared over the past month, certainly seem to indicate that this may be so – atleast in democracies. The first article talks about why, in democracies, voters choose inefficient policies and institutions even when efficient options are available to them. Standard explanations for why bad policies are implemented when good policies are available typically point to the policy production process, including agency problems, incompetent policy-makers, and institutional failure to efficiently resolve competitive tensions. In this paper, the researchers shift the focus away from policy- makers and institutions. They provide experimental evidence that some of the blame for bad policies may lie with voters.

Although it is standard in the literature to assume that voters correctly assess the merits of the options they face, we show with a simple experiment that people demand bad policies because they fail to correctly predict how new policies change equilibrium behavior and welfare. Through their experiments, they show that a majority of subjects vote against policies that would help them overcome social dilemmas. This is due to their failure to fully anticipate the equilibrium effects of new policies. They systematically underappreciate the extent to which policy changes affect other people’s behavior, and this results in increased demand for bad policy. In addition, they found that one-third of subjects did not appreciate how their own behavior would adapt to the new policy!

The overall implication is that, in regimes where voter preferences affect policy selection, the underappreciation of equilibrium effects by voters could adversely affect the policies that get adopted. The second article looks at how democracy impacts policy implementation. The results indicate that the effect of a given policy may depend on whether it is chosen democratically or imposed on the subjects through another mechanism. The effect of a policy on the level of cooperation is greater when it is chosen democratically by the subjects than when it is exogenously imposed. The authors feel these results may be useful in interpreting results on democratic processes in small settings such as villages in low-income countries though they are not clear the extent to which these results apply to democratic processes at the level of the state or nation.

 

This policy LESSON is based on:

Key Results

CHOICE OF POLICY

The papers raise the question – can direct policies encourage the adoption of water conserving behaviors that may seem unrewarding at present but will lead to higher water availability in the future? The generalized learning from the paper is that democratic choices lead to selection of ‘bad’ policy instead of ‘good’ policy. The reason is that the voters are not able to correctly predict their own or other peoples’ responses to new policy changes and hence were not able to correctly predict the post policy change equilibrium. This made them vote for policies that have a lower equilibrium benefit for all but seemingly higher immediate benefit. An ‘Adaptation’ research is needed to explore the direct applicability of this learning to direct water policy. Intuitively, however, it seems that the research with hold true.

IMPLEMENTATION OF POLICY

The papers further raise the question whether direct policies that control water behaviors through pricing or regulation, even if formulated, will be adopted by people. The papers suggest that, without a democratic consensus, effective implementation of a policy is not possible. Since there are so many conflicting claims on water, it is reasonable to expect that there may not be a consensus in any policy decision taken for it. An ‘Adaptation’ research is needed to explore the direct applicability of this learning to direct water policy. Intuitively, however, it seems that the research with hold true.