Are we better off if our politicians have more information?

Abstract

This paper studies a model of public policy with heterogenous citizens/voters and two public goods: one (roads) is chosen directly by an elected policy maker, and the other (pollution) depends stochastically on the amount of roads. Both a one-country and a two-country version of the model are analysed, the latter displaying externalitites across the countries which creates incentives for free riding and strategic delegation. The welfare effects of providing the policy maker with information about the relationship between roads and pollution are investigated, and it is shown that more information hurts some - sometimes even all - citizens. In particular, the opportunity not to build an institution for information gathering can serve as a commitment device for a country, although with the unfortunate effect of making the overall outcome even worse. Implications for the welfare effects of "informational lobbying" are discussed.