Information Aggregation and Optimal Structure of the Executive

Dewan, T, Galeotti, A, Ghiglino, C and Squintani, F (2014) Information Aggregation and Optimal Structure of the Executive. American Journal of Political Science, 59 (2). pp. 475-494. ISSN 0092-5853

Abstract

We provide a novel model of executives in parliamentary democracies that accounts for key features of these institutions: decision-making authority is assigned to individual ministers; and policy relevant information is aggregated through communication between politicians. Politicians hold idiosyncratic biases and have private information relevant either to all policies or to a subset of them. When their information is relevant to all policies and communication takes place in private all decisions should be centralised to a single politician. A government that holds cabinet meetings, where any information communicated to one minister is made available to all, outperforms one where communication is private: a multi-member cabinet can then be optimal. We study the optimal form of authority allocation and find (i) that centralisation is non-monotonic in the degree of ideological divergence between politicians; and (ii) the cabinet need not be single peaked around the most moderate politician, and in fact may not even be ideologically connected. In a large cabinet,
however, all power should be centralised to the most moderate politician. In the case where uncertainty is policy specific, and a single politician is informed on each policy, power should never be fully decentralised. In fact numerical simulations show
that the optimal executive structure is no less centralized than in the common-state case. Our model provides a justification for centralised authority and the use of cabinet meetings to enhance the quality of policies implemented.