Democracy by Competition: Referenda and Federalism in Switzerland

Competition is not only a prerequisite for the successful workingof economics but also of political coordination systems. Weargue that popular referenda and federalism are the key factorsin maintaining competition in the political arena. Competitiveeconomic or political markets require free entry and exit andthe absence of regulations that prevent suppliers from beingsuccessful with the best product-be it goods or services inthe form of policies-and prevent citizens from choosing freely.     

Fairness and competence in democratic decisions

The price system is generally thought to be the epitome of efficiency. In some cases, however, lotteries are preferred to the market as a social decision-making system for reasons of fairness. As recent research has shown, neither procedure is always well accepted among the general population. We analyze the social acceptability of both mechanisms and apply our framework to the allocation of social burdens, namely the siting of nuclear waste facilities. Lotteries are only acceptable if they are applied to a set of efficient options. The market is accepted if the production of fairness precedes the use of prices.