If the democrats and republicans colluded the only

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nothing wrong with more than a century of political duopoly in the United States. If the Democrats and Republicans colluded, the only way to stop them would be to incur the enormous expense of forming a third party. For old-fashioned structure-conduct-performance economists committed to the perfectly competitive benchmark, these arguments have considerable force. But many economists see this benchmark as flawed (Bork, 1993; Rothbard, 1993; Armentano, 1999). Ubiquitous real-world conditions – especially economies of scale – make the pursuit of an atomistic market structure extremely questionable. A smaller number of firms makes collusion eas ier , but it hardly implies that it becomes eas y. Indeed, even a single firm may act competitively due to the threat of potential competition. Once one recognizes the wrong-headedness of the perfectly competitive benchmark for markets, it is hard to avoid the conclusion that the benchmark is equally misguided in politics. Political parties have obvious scale economies, especially where information is concerned. Imagine exogenously creating hundreds of new parties. At first, voters would be horribly confused. But it would not be a stable equilibrium. Political competition would swiftly eliminate most of the parties by merger and attrition until the dust settled and voters once again felt comfortable choosing between the available ‘brands.’ Admittedly, this effect is less extreme under proportional representation. But even in multi-party systems, there are usually far fewer parties than politicians, and scale economies are the most natural explanation. 9 What about barriers to entry? Those who use the perfectly competitive bench- mark often put the ‘barrier’ label on everything from product differentiation to capital requirements. But critics have pointed out the absurdity of this approach. After all, incumbent firms had to face the same ‘barriers’ when they started out. The main barriers worthy of attention are legal restrictions on entry. These admittedly exist in democracy to some degree. Members of third parties frequently recount their annual quest to gather signatures to get on the ballot. But many such ‘barriers’ can be credibly interpreted as an effort to make voters’ lives easier, not to limit their choices. Without signature or other require- ments, the federal ballot would be as thick as a phone book. The number of candidates would number in the thousands, but almost no one would want to vote for the new additions. In any case, it is hard to see that legal restrictions on political competition have much effect on policy. Can anyone seriously claim that the Libertarian Party or Green Party’s low vote shares are primarily due to some factor other than the extreme unpopularity of the policies they favor? 10 Third parties have done well historically as long as they enjoyed the support of a significant fraction of the electorate, like Theodore Roosevelt’s Progressives in 1912 or Ross Perot’s Reform Party in 1992. Moreover, political scientists have long observed that major 9 We thank an anonymous referee for raising this point.
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Christopher Reinemann
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