Demand for Populism: a Behavioural Profiling

"What Happened?"
(Hillary Rodham Clinton, after being defeated by Donald Trump)
Introduction
In the last ten years, most Western Countries have experienced a boom in Populist and Anti-Populist
politics. This surge in demand for populism found the Social Sciences literature partially unprepared.
The term populism itself has been lamented to be loosely dened, a \Cinderella shoe
1
" a \specter,
haunting Europe
2
". Currently available explanations of the demand for Populism can be categorized in
two groups. First, researchers mostly from Economics departments have pointed at economic discontent
due to growing insecurity, unemployment, income losses and restricted opportunities for large sub-groups
of voters. Second, researchers more familiar with sociological theory have supported an idea of Populism
as based on a cultural backlash, a resurgence of values that were marginalized in the process of interna-
tional integration. A variegated amount of empirical evidence supports the hypothesis that these two
families of explanatory variables, economic insecurity and cultural backlash, signicantly drove the rise of
demand for populism. Yet, I claim that behavioral aspects might be important mediators in the decision
to support for populism. For example, people who are more risk-seeking or impatient might be more
likely, when experiencing economic losses and status degradation, to support risky and short-sighted s-
cal policies, and greater propensity to be inuenced by echo-chambers and by conspiracy theories might
foster dissatisfaction and didence toward the ruling political institutions. Or, people who have a less
altruistic and open personality might be more likely to lean toward identitarian and protectionist parties.
The main question of this thesis is thus to inquire how a number of behavioral factors relate to demand
for Populism, and check if they signicantly inuence the gut and the head of voters. Similarly to what
has been observed in other kinds of economic choices, psychological dimensions such as risk-preferences,
time-preferences, condence, trust and personality { interacting with environmental factors { may signif-
icantly inuence the electoral choice, either favoring or discouraging support for populist parties.
As the last Nobel prize to Richard Thaler testies, Behavioral Economics is nowadays widely regarded
as a powerful tool in enhancing our understanding and predictive capacity in several elds of Economics:
Finance (Barberis and Thaler, 2003), Marketing (Frederick, 2002), Choice Theory (Bordalo, Gennaioli,
and Shleifer, 2012), Policy-Making (Thaler and Sunstein, 2008), and even Macroeconomics (Gabaix,
2016). Political Economics has instead been less able, relatively to other elds, to participate in this
trend. Actually, some political scientists have already attempted to pick insights from Psychology and
apply them in the study of Politics, on journals such as Political Psychology. However, the loopholes are
sill more than the bricks, and both complete theory and rigorous empirics are still under construction.
Consequently, the second purpose of this thesis is to investigate if some behavioral patterns exist in the
eld of electoral choice in general. The hope is that this work will not only contribute with a small piece
of evidence to the understanding of the populist phenomenon but also second a nascent strand in the
literature, applying behavioral theories in the eld of Political Economics.
The common joke about behavioral economists is that when seeking to publish a paper, they just open
a random page of a book of Psychology and look for a bias to apply. To some extent, this joke has some
truth, and to avoid such critique I will not only try to be precise about the correlational vs. causational
nature of the results, but I’ll also try to follow a strict order: rst review the theory, make a prediction,
and then test my hypothesis. In other words, I initially identify which biases, according to psychological
1
Berlin et al. (1968a)
2
Dubiel (1986)
3
and political-economic theory, are more likely to inuence the choice to support populist parties; then, I
take the resulting predictions to the data, using one of the most complete panel databases available, the
German Socio-Economic Panel (SOEP).
I will limit my study to the case of Germany, mainly because the SOEP is one of the few sources that
are rich enough to include political, economic and psychological variables in a panel manner, which is
thus viable for longitudinal analysis. Of course, when I started this thesis I could not know that the 2017
federal elections in Germany, a country once seen as immune to populism, would see such a disruptive
rise of AfD populists, nor that the Nobel prize would be awarded to one of the most important promoter
of behavioral theories used in this thesis. I hope that the fresh resonance of these events highlights the
importance of the questions that this thesis explores, and gives the reader an additional pinch of curiosity.
The thesis is organized as follows: Section 1 reviews the literature about populism and about the behav-
ioral phenomena I’m trying to test. Section 2 presents the data, the elaboration of which and nding
procedures represented a large part of the work. Section 3 presents hypothesis, testing strategy and
results. Section 4 reviews some caveats, undertakes several robustness checks, and proposes some inter-
pretations of them. Section 5 concludes, pointing out possible further steps suggested by my analysis.
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1 Literature Review
In order to consciously treat the topic of populism, the left-hand side of my empirical analysis, this chapter
will rstly review the main literature from Economics and Political Science, separating the analysis of the
demand side, which is the one more strictly related to this thesis, to that of the supply side of populism.
Before doing this, I will briey discuss the semantic problem concerning the denition of populism, which
is obviously key for precisely studying the populist phenomenon. I will nally review the literature asso-
ciated with the behavioral phenomena that constitute the right-hand side of the regressions in this thesis,
hence the literature on choices under uncertainty, Prospect Theory, Time-Preferences, Overoptimism and
Personality Traits: what are the main characteristics, predictions, and to what extent they have been
applied in the eld of Political Economics
3
.
1.1 Populism: an Economic Agenda? An Ideology? A Rethoric? A Strategy?
Provocatively, Berlin et al. (1968b) argues that \. . . there exists a shoe {the word ‘populism’ {for which
somewhere it must exist a foot. There are all kinds of feet which it nearly ts, but we must not be trapped
by these nearly-tting feet. The prince is always wandering about with the shoe; and somewhere, we
feel sure, there awaits it a limb called pure populism". Although it may seem a sophistic question, the
semantic problem about which is the most appropriate denition of populism complicates the academic
advancement on the matter. Clearly, dierent denitions of populism may imply dierent causes and
consequences of the populist phenomenon.
The dierent denitions of populism used in the literature can roughly be summarized in four groups. The
rst group dened Populism in terms of economic policy (Dornbusch and Edwards, 1991), considering it
as \an approach to Economics that emphasizes growth and income redistribution and deemphasizes the
risks of ination and decit nance, external constraints and the reaction of economic agents to aggressive
non-market policies". This denition is more common among economists (Acemoglu et al., 2013; Rodrik,
1993), but runs into some problems when compared with common days usage, since also non-populist
policy-makers have enacted loose scal and monetary policies.
The second semantic faction instead considers Populism as a specic kind of ideology \that considers
society to be ultimately separated into two homogeneous and antagonistic groups, ‘the pure people’ ver-
sus ‘the corrupt elite’, and which argues that politics should be an expression of the volont e g en erale of
the people." (Mudde, 2004). Yet, characterizing populism as an ideology requires to list what are the
founding values, the objectives and the boundaries of such ideology. This is only in part possible and,
beside general agreement on the virtues of the \common man", it is hard to detect a consistent picture
in the dierent populist Manifestos.
Third, authors as Kazin (1998) see Populism only as a rhetorical tool, \a language whose speakers con-
ceive of ordinary people as a noble assemblage not bounded narrowly by class, view their elite opponents
as self-serving and undemocratic, and seek to mobilize the former against the latter". In particular,
since Laclau (1977) many authors have noted a number of typical discursive elements of populism, such
as Manichean language
4
or you-them dichotomy. Scholars such as Aslanidis (2016) are attempting to
provide methodological foundations and to conduct empirical research based on text analysis.
Fourth, Populism can be seen as a political strategy, in the words of Weyland (2001) \a strategy through
3
A constant general reference in this work is Persson and Tabellini (2000) which provided me the necessary political-
economic tools in understanding how could the economic forces interact with behavioral traits and policy choices
4
Hawkins (2003)
5
which a personalistic leader seeks or exercises government power based on direct, unmediated, unin-
stitutionalized support from large numbers of mostly unorganized followers". This denition is as well
controversial, since not only it includes all authoritarian personalistic regimes, but also denes as populist
any political movement centered on a charismatic leader (e.g. En Marche in France).
Finally, not only the characterization but also the measure of Populism is varying across the literature.
Although the most common and simple approach is to dene a 0-1 dummy for voting or not for a populist
party, it may be more appropriate to include a measure of the intensity of support, or also of the \degree"
of populism of a specic party. To sum up, in studying the populist phenomenon the reader should always
keep in mind which shade of the populist genus is being analyzed. For my part, I will try in Section 2 of
this thesis to clearly state what concept of populism I have in mind, and to check the robustness of my
results to dierent denitions of the dependent variables.
1.2 Demand and Supply of Populism: an Economic and a Cultural Approach
The rst candidate in explaining the rise of populism is the economy. The timing of the populist wave,
mounting up over last two decades, but booming after the crisis of 2008-2010, seems to favor the idea
that globalization, income levels and income variations played a role as drivers of the support for pop-
ulist parties. In Figure 1, for a rst sight, I’ve plotted the average support for populist parties
5
and
anti-establishment parties in general
6
on the left graph, and for the two main parties on the right graph,
with log-household income per person on the horizontal axis, with no further controls. It is quite impres-
sive to note how the average support for populist parties steadily increases in poorer percentiles, while
mainstream parties follow an opposite trend.
Figure 1: Average support for dierent cathergories of parties by percentile of log income per household
per person, years 2009-2015
0 .02 .04 .06 .08 .1
populist_dummy and AntiEnstablishment_dummy
8 9 10 11
ln_income_HH_PP
 populist_dummy AntiEnstablishment_dummy
0 .1 .2 .3
spd_dummy and cdu_dummy
8 9 10 11
ln_income_HH_PP
 spd_dummy cdu_dummy
Populism: the new economic left?
5
AfD, Die Rechte, NPD and Die Republikaner
6
populist parties and die Linke
6