Getting Closer When It’s Close

A guest post by Oliver Strijbis, Sveinung Arnesen, Kjetil Thuen, and Lucas Rachow*

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Two weeks ago we published on this blog the predictions taken from our prediction market on the outcome of the ballots from March 3. The predictions were taken on February 22 – nine days before the official voting day. Our predictions deviated from the official results from 0.3% to 6% depending on the ballot. After one year of experience with prediction markets we come to the conclusion that this result is largely representative of our predictions over the last year.

The prediction on the Yes-vote for the “Bundesbeschluss über die Familienpolitik” was a strike. The prediction was that 54.6% of the voters would be in favor of the law while on voting day it was 54.3% (0.3% deviation). With only 3.2% deviation also our prediction on the “Raumplanungsgesetz” was rather accurate: while we expected a Yes-share of 59.7% on voting day it was 62.9%. The least precise prediction was on the share of Yes-votes for the “Abzocker-Initiative” – the most hotly debated proposal – where we expected 61.9% Yes-votes against the resulting 67.9% (6% deviation).

The predictions were rather representative of our experience with the prediction market since our first try one year ago. First, the predictions have been more precise the closer the outcome was. This is clearly reflected in our experience with the 26 ballots (15 national and 11 cantonal) for which we made predictions during the last year. Secondly, the accuracy of our predictions were within the range that we found for the predictions made previously. While the accuracy is typically within a 5% margin of error when the Yes-votes are between 40% and 60% it gets larger when the outcome is more clear (as with the “Abzocker-Initiative”).

Overall, after one year of applying our prediction markets to Swiss direct democratic decisions we can conclude that they have considerable potential. While they might not necessarily be equally precise as electoral forecasts they clearly allow to get a good feeling about the probable outcome of ballots at an early stage of the campaign and in particular when the race is close.

* Oliver Strijbis is a postdoctoral researcher at the University of Hamburg, Sveinung Arnesen is a postdoctoral researcher at the University of Bergen. Together with Kjetil Thuen and Lucas Rachow they are founders of politikprognosen.ch.

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The metamorphosis of an old political institution

(with Karima Bousbah)
The Swiss political system provides a few institutional veto points, which were originally thought to protect the catholic minority, organised around the Christian Democratic Party (CVP). After a re-configuration of the political conflict lines, the ‘Ständemehr’ now seems to serve the interest of the Swiss People’s Party (SVP), at the detriment of the CVP.  

Campaign against the new constitutional article on child care

In Switzerland, all constitutional amendments need to be approved in compulsory referendums by both the majority of people (Volksmehr) and the majority of cantons (Ständemehr). This “cantonal veto” was originally introduced in order to accommodate the catholic minority, and as a veto card of their political arm, the Christian Democratic Party (CVP). Historically, the Christian Democrats (CVP) could count on very large majorities among voters in the catholic cantons of Switzerland. On average, the catholic cantons are considerably smaller than the protestant cantons, and thus, they can use the Ständemehr to bloc constitutional amendments.

In the past 165 years, there have been only nine instances in which the Ständemehr had a direct effect. Meaning that, so far, in the history of Swiss direct democracy the majority of cantons has overruled the majority of the voters on nine different referendums on constitutional articles. However, it is possible that the Ständemehr had furthermore very strong anticipatory effects on parliamentary decision-making: in the last 100 years (this is the period for which voting recommendations by the political parties are available), there has been only one constitutional amendment opposed by the CVP, which was subject to a popular vote. It reached voters’ majority approval only in three (mainly protestant) cantons.

In a newspaper article, which appears on Tuesday, I am suggesting that the Ständemehr might, over time, have evolved into a veto card working in favour of the Swiss People’s Party (SVP). Since the 1990s, the constitutional amendments on which small and rural cantons have differed most strongly from the will of the voting population, dealt with questions of a conservative-liberal nature, or were related to the issue of political opening (European Union, United Nations, etc). Nowadays, on all these issues, the CVP is usually (and increasingly) aligned with both the parliament’s and the government’s , whereas the SVP stands in clear opposition. The SVP, however, increasingly finds support in the small, rural cantons, and while the CVP still predominates in electoral terms, the SVP has increased its influence in referendum votes in these cantons. This implies that the Ständemehr could turn into a veto card in the hands of the Swiss People’s Party (SVP).

Among the nine constitutional referendum instances, in which there has indeed been a difference between the majority of the people and the majority of the cantons, two occurred in 1994, and one occurred this last Sunday (3rd of March 2013). In 1994, the constitutional referendum addressed the promotion of arts; it was opposed only by the SVP and the small Liberal Party (representing 3% of the electorate). The constitutional amendment was blocked by the majority of the cantons.

This Sunday, the Ständemehr struck back again. The referendum was on the issue of a constitutional article on families (the controversy was mainly about child care). Also in this case it was the SVP (supported by parts of the Free Democratic Party), which politicised the issue along a conservative-liberal dimension. In the end, the SVP managed to defeat the article with the help of the Ständemehr. Given that the Swiss People’s Party (SVP) is nowadays quite strong, especially in the small cantons, and is often in opposition with parliament on conservative-liberal issues, we could actually expect an increase of referendums, where the Ständemehr is decisive, i.e. overruling the population’s majority. One thing, however, is particularly ironic about the failed referendum of Sunday: the veto card – originally thought to function as a the veto of the catholic minority (i.e. CVP) – was now used by the SVP to defeat a bill initiated by the CVP.

Predictions for the Ballots on March 3

This is a guest post by Oliver Strijbis, Sveinung Arnesen, Kjetil Thuen, and Lucas Rachow*

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About one year ago we published on this blog for the first time predictions for direct democratic votes taken from our “prediction market”. Prediction markets are designed to aggregate information and produce predictions about future events. Prediction markets are markets for contracts that yield payments based on the outcome of an uncertain future event, such as an election or a referendum. A considerable bulk of literature has shown that prediction markets can easily compete with surveys in forecasting election outcomes. This has also been shown for the Swiss parliamentary elections in 2011 where the forecasts of the prediction markets were more accurate than those of the surveys (Tagesanzeiger online, 27th October 2011).

Predicting election results, however, is clearly easier than results from direct democratic votes. And indeed, the accuracy of our forecasts published one year ago were rather mixed. We identified several reasons why this might have been the case. One reason is that predictions are easier if there is abundant information, which is clearly more so for national elections than for initiatives and referenda. There is little to do about that and predictions on direct democratic votes might always be somewhat less precise than election forecasts.

However, as another major reason for the rather large variance in the accuracy of our predictions we hypothesized that the participants need to learn. As a consequence, we decided to further develop our prediction market and applied it to the ballots of May, September, and November 2012. This allowed us to maintain a rather small though faithful community of traders. In order to test our hypothesis that for the prediction of direct democratic votes the ability of the traders is particularly important, we also made use of the knowledge about their behavior in previous rounds. In order to give the best traders more influence, they could now keep playing with the raised overall amount of money from the previous prediction cycle (all participants would win between 20 and 150 Swiss francs). Hence, the ballots from March 3 will allow us to test how important the ability of the traders in the market actually is for the accuracy of our predictions.

What, then, does our market foresee for the ballot of March 3? Here are our predictions from February 22: 61.9% yes for the “Abzocker-Initiative”, 54.6% yes for the “Bundesbeschluss über die Familienpolitik”, and 59.7% yes for the “Änderung des Bundesgesetzes über die Raumplanung”. Hence, for all three proposals we anticipate a rather clear victory.

* Oliver Strijbis is a postdoctoral researcher at the University of Hamburg, Sveinung Arnesen is a postdoctoral researcher at the University of Bergen. Together with Kjetil Thuen and Lucas Rachow they are founders of politikprognosen.ch.

Can cooperation limit tax competition? Three lessons from Switzerland

This post is co-authored with Fabio Wasserfallen and is cross-posted (with a different title) at the LSE European Politics and Policy Blog.

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The creation of the single market is widely believed to have strengthened tax competition among European countries; with few remaining barriers to the movement of capital and people, some member states reduce levels of tax to attract more investment at the expense of others. Despite several efforts, policy makers have not been able to agree on effective political actions constraining this dynamic, which many consider to be harmful. Evidence from tax competition in Switzerland suggests that institutional cooperation in fiscal affairs between selected countries in the EU might help to limit the negative externalities of tax competition.

Tax competition is a key characteristic of Swiss federalism. Switzerland’s twenty-six cantons enjoy almost unlimited freedom to set taxes and the general consensus is that they compete with one another to attract tax payers. There is disagreement on whether tax competition is a good or a bad thing, but all agree that it is an important phenomenon. In our study of tax competition between Swiss cantons, we started from this premise but then looked at the factors constraining competition. In particular, we analysed how institutionalised forms of cooperation between cantons limit the extent of competition between those cantons that participate in them.

In the Swiss context, an important role is played by the so-called regional conferences of cantonal ministers. These institutions have been in place for several decades and serve as a forum for discussing policy problems and elaborating common positions for negotiations with the federal government. An important goal of these conferences is the defense of cantonal autonomy. Therefore, they do not pursue stronger cooperation in tax policy. However, constraints on tax competition emerge as a byproduct of cooperation on other issues. The fact that finance ministers work together on a regular basis and develop personal relations makes them more sensitive to how their tax policies affect their colleagues. By no means does this form of socialization erase tax competition. However, it sets limit to it.

Our statistical analysis shows that, controlling for many other factors, tax competition is stronger between cantons that do not work together in the same regional conference. Specifically, we measured the extent to which two cantons are in competition with one another by looking at the commuting patterns between them (that is, how many people live in one canton but work in another). Most studies assume that competition occurs between neighbours. Our approach is similar but, we argue, more precise. In effect, in some cases using neighbourhood as a measure does not accurately show the connections between two cantons; moreover, the binary nature of neighbourhood (either two cantons are neighbours, or they are not) gives no information on the scale of connectedness. By contrast, commuting patterns give a fine-grained picture of the extent to which cantons compete with one another for taxpayers. An intuitive way to read the results of the statistical analysis is that, if a canton has two comparable competitors, it will react more strongly to the tax policies of the one with which it does not work together in the regional conference. Our interpretation of this pattern in terms of socialisation is consistent with the information we obtained in interviews with policy makers. For instance, they explained to us that, while the regional conferences strive to project a public image of consensus, in fact policy makers can be quite outspoken about their dissatisfaction with the policies of their colleagues.

Our research suggests that, in the Swiss case, cooperation can limit tax competition. What can the EU learn from the Swiss example? While there are enormous differences between these two political systems, we think that three conclusions may be helpful:

1) Most importantly, cooperation should take place between the relevant subgroup of countries. One reason why the Swiss regional conferences help to limit tax competition is that they bring together precisely those cantons that are most likely to compete with one another. In the EU, a more clustered and specialised structure of intergovernmental relations might increase the effectiveness of cooperation also in other policy areas.

2) Less intense tax competition does not have to be the goal of cooperation. It can emerge as a byproduct of cooperation on other issues because working together fosters social influence.

3) The unintended benefits of cooperation likely emerge only in the long term. Cantons have a prolonged history of cooperation and know exactly with whom they will have to work in the future. Newly established institutions cannot be expected to lead immediately to similar outcomes.

All in all, these lessons do not suggest that tax competition within the EU can be reshaped simply by enhancing a few cooperative arrangements. Nor would such a claim be credible. What our research implies, however, is that, over time, effective constraints on tax competition can emerge, provided that the structure of cooperation matches that of competition. Whether policy makers want to foster competition or rein it in, this conclusion can inform their choices.

Predictions for the Ballots on March 11

A guest post by Oliver Strijbis, Sveinung Arnesen, Kjetil Thuen, and Lucas Rachow. Oliver Strijbis is a postdoctoral researcher at the University of Hamburg, Sveinung Arnesen is a postdoctoral researcher at the University of Bergen. Together with Kjetil Thuen and Lucas Rachow they are founders of politikprognosen.ch.

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Who thinks in predictions of election and referenda outcomes thinks in surveys. However, an alternative method for forecasting has made its way into political science the last years. So called “prediction markets” are designed to aggregate information and produce predictions about future events. Prediction markets are markets for contracts that yield payments based on the outcome of an uncertain future event, such as an election or a referendum. A considerable bulk of literature has shown that prediction markets can easily compete with surveys in forecasting election outcomes. This has also been shown for the Swiss parliamentary elections in 2011 where the forecasts of the prediction markets were more accurate than those of the surveys (Tagesanzeiger online, 27th october 2011).

In an attempt to apply prediction markets in the context of Switzerland’s direct democracy we set up prediction markets for the ballots of March 11. We arrive at forecasts by setting up a market for each of the proposals. This means that on each of five markets the outcome of one proposal is treated as an asset. At voting day an asset pays the share of votes the proposal has received. For instance if the proposal “Schluss mit uferlosem Bau von Zweitwohnungen!” gets 45% of the votes, the final price of an asset of this proposal pays 45 units. Hence, a participant on the prediction market has an incentive to buy assets if the price is below 45 units and an incentive to sell if it is above. Consequently, rational players will buy assets if the current price is below the expected outcome and sell if it is above.

With the assistance of colleagues from various Swiss universities (special thanks to Laurent Bernhard) we were able to recruit 124 individuals of which 87 turned out to be active participants. In an attempt to recruit only the most talented players we were primarily approaching political scientists (students and professionals) and individuals trained in a related field. From the 87 participants 27% were political scientists, 21% economists, and 22% were trained social scientists from other disciplines. The participants are compensated with a small salary depending on their performance.

While theory tells us that our proceeding should yield accurate forecasts, only empirics can demonstrate it. So what do the prediction markets tell us for the ballots on March 11? Here are our predictions from March 3 (see Figure): 46.7% yes for the “Bauspar-Initiative”, 45.5% yes for the law on the “Buchpreisbindung”, 39.9% yes for the initiative “6 Wochen Ferien für alle!”, 70.5% yes for law on the “Neuregelung der Geldspiele”, and 45.5% yes for the initiative “Schluss mit uferlosem Bau von Zweitwohnungen!”. Hence, for all three proposals where a close race is expected we anticipate a narrow defeat.

Swiss national elections: strategic alliances more important than campaigning?

By Claudia Alpiger* and Daniel Bochsler

List apparentments have heavily affected the distribution of seats in the national assembly, also in the recent national elections of Switzerland. Our analysis, published today in the Neue Zürcher Zeitung, shows that the Green Liberal Party has doubled its mandates only due to its strategy of engaging in electoral alliances with different parties in different cantons.
Apparentments are a very rarely seen solution in proportional electoral systems. They are used in 20 out of 26 Swiss cantons, where elections to the national assembly are held by a proportional electoral system, relying on the D’Hondt formula. Under this formula (division allocation rule with rounding down), large parties are strongly favoured over small parties. However, political parties are allowed to link several electoral lists, and the initial seat allocation treats such alliances – called apparentments – jointly as a single unit, even if each party runs with its own list. Thereafter, mandates won by such an alliance are allocated to each of the electoral lists. Such apparentments especially help coalitions of small parties not to loose seats towards large parties (see Bochsler, 2010, Electoral Studies).

For the most recent Swiss parliamentary elections of 23 October, we have simulated the party benefits and losses from apparentment strategies. There are three main winners.
As in previous years, the Social Democratic Party (SPS) and the Green Party (GPS) had a consequential apparentment strategy in almost each canton (except for two cantons, Aargau and Ticino). This helped the SPS – the biggest party in this apparentment – to gain six seats, and the Green Party won four seats. The Green Liberals joined the left-wing-green alliance only in one canton, Graubünden, but won a seat there, only thanks to this apparentment.
Equally, the Christian Democratic Party (CVP) benefitted with six seats from apparentments. The party was lucky to find several new small centre-right parties, being very compatible with the CVP for joining apparentments.
The third party which equally benefitted from apparentments were the new Green Liberals (6 seats won). They engaged in flexible alliances, in many cantons with the CVP and the BDP, but in others also with various small parties, spanning the whole political spectrum from the left (GPS) to the far right (with the Christian-conservative EDU), and in one canton (Graubünden) allied to the SPS. The benefit of six gains due to list apparentments is quite remarkable, given the total of only 12 mandates that the party won in the national elections. Given these numbers, the right alliance strategy probably paid out much more than the electoral campaign.
The loser of the apparentments is the Swiss People’s Party (SVP). Due to their increasing political isolation in the Swiss party landscape, they engaged in apparentments almost only with the small Christian-conservative EDU in several cantons, the anti-immigration party Lega dei Ticinesi in the canton of Ticino, and in one case (Vaud) with the Liberals (FDP). These apparentments did not help them to win any seat. Instead, in most cases where other parties won mandates through apparentments, this was paid by the SVP. No wonder a MP of the SVP has now started a proposal to abolish the apparentment system in Swiss national elections.

* Claudia Alpiger works in the Democracy Barometer group at the Zentrum für Demokratie Aarau

Von Torten, Parlamentarier-Ratings, und anderen Ungeniessbarkeiten: Eine Nachlese zu den Wahlen 2011

A guest post by Simon Hug and Reto Wüest (University of Geneva). A simplified version has been published today in Die Weltwoche.

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Im lauen Wahlkampf zu den National- und Ständeratswahlen 2011 können neben der Entführung und Einfärbung Zottels wohl nur kulinarische Erlebnisse und Parlamentarier-Ratings als Höhepunkte betrachtet werden. Dass letztere auf recht wackeligen Füssen stehen, scheint sowohl der Bundeskanzlei als auch den Journalisten führender Schweizer Tageszeitungen entgangen zu sein.

Die in der Wahlbroschüre abgebildete Torte verortete alle Nationalrätinnen und Nationalräte basierend auf ihrem Abstimmungsverhalten und eingefärbt nach Parteizugehörigkeit auf einer schön glasierten Oberfläche. Stellen wir uns dazu kurz ein aus Marzipan hergestelltes Hochzeitspärchen vor, das sich in der politischen Mitte in Langenthal kennengelernt hat. Der Tradition gemäss werden unsere Marzipanfigürchen in der Mitte der Torte platziert . Nach durchzechter Hochzeitsnacht wacht das Pärchen erschreckt auf: Es befindet sich gemäss Tortendarstellung in der Wahlbroschüre fast ganz allein auf weiter Flur (lies Glasur). Die Ehefrau, eine erfahrene Verkosterin für den Gault-Millau-Führer, zeigt sich erstaunt, dass die kulinarischen Experten der Bundeskanzlei diesen Umstand nicht erfasst haben und keinen Gugelhopf (mit leerer Mitte) als Darstellungsform gewählt haben – dass die fehlende Mitte ein methodologisches Artefakt ist, hätte ein normal konstituierter Redaktionsverantwortlicher der Wahlbroschüre bei unabhängigen Experten in Erfahrung bringen können.

Im fast verlassenen Zentrum der Torte erinnert sich die frisch Vermählte, eine avide Leserin der Schweizer Qualitätspresse, an Zeitungsberichte (NZZ und Le Temps vom 7.10.2011), in welchen aufgezeigt wurde, dass im letzten Jahr der zu Ende gehenden Legislaturperiode die Polarisierung zwischen den Parteien abgenommen hat.

Voller Hoffnung stürzen sich die beiden ins Zeitungsarchiv und lesen die letzten Berichte über die sogenannten “Parlamentarier-Ratings” (NZZ vom 27.11. 2008, 21.11.2009, und 26.11.2010). Der Ehegatte, seit jeher kritischer Natur, stellt überrascht fest, dass in jedem der Parlamentarier-Ratings (mit der kuriosen Ausnahme des letzten Ratings von 2011, wo kein Parlamentarier am äussersten linken Pol (-10) verortet ist) je mindestens ein Parlamentarier auf der äussersten linken bzw. rechten Position zu finden ist. Seine frischgebackene bessere Hälfte klärt ihn auf: das ist die Eigenschaft eines Ratings. Alle Parlamentarier werden im Bezug auf die Ratskollegen mit den extremsten Positionen verortet. Der Ehemann zeigt sich überrascht: wie können denn die Positionen von einem Rating zum anderen über die Zeit verglichen werden, wenn automatisch immer mindestens ein Parlamentarier ganz links respektive ganz rechts zu stehen kommt, unabhängig davon über was im Rat abgestimmt wurde? Die belesene Gattin hat die Antwort: bei den Ratings handelt es sich jeweils um die wohlbekannte Links-Rechts-Achse. Die Dokumentation ist diesbezüglich eindeutig: “Die Bezeichnung der Pole als “links” und “rechts” erfolgt ex-post. Dies ist möglich, weil die von der [Methode] wiedergegebene Polarität mit der alltäglichen Bedeutung von links und rechts übereinstimmt.” Daher können die Positionen sehr wohl über die Zeit miteinander verglichen werden. Der frisch Vermählte, Geograph von Beruf, ist erstaunt: wäre das nicht das gleiche, wie wenn wir Geographen jedes Mal, wenn sich der nördlichste Eskimo vom Nordpol zum Fischen Richtung Süden begibt, die Länge der Erdachse neu bestimmen würden? Genau, belehrt ihn seine Angetraute, und Ihr solltet, wenn Ihr seriöse Forscher wäret, in Abhängigkeit der Position dieses Eskimos den Breitengrad, auf welchem sich das Bundeshaus mitsamt der ganzen Parlamentarierschar befindet, neu bestimmen. Der neu Verheiratete hat leichtes Spiel, seine bessere Hälfte vom Unsinn dieser Berechnungen zu überzeugen. Die Parlamentarier-Ratings sowie der Befund zur reduzierten Polarisierung im Parlament (NZZ und Le Temps vom 7.10.2011) landen – der Hochzeitsliste sei Dank – im brandneuen Shredder.

Nachdem die Konsultation der Zeitungsarchive keine Hilfe lieferte, versuchen sich die Turteltauben neu auf der Torte zu orientieren. Der Tradition der ungeteilten Ehestandesstimme folgend möchten sie die gleiche, ihnen möglichst nahestehende Partei wählen. Der Geograph schlägt vor, sich Richtung Norden hin zum “liberalen” Pol zu bewegen. Dabei stossen die beiden Marzipanfigürchen schnell auf ein paar gelbe Zuckerperlen. Da die beiden aber trotz kirchlicher Trauung Agnostiker sind, erscheinen ihnen diese ersten Parlamentarier, die sie antreffen, als nicht wählbar. Die Reise geht weiter Richtung Norden und schon fast am Tortenrand angelangt, treffen sie auf ein paar blaue Zuckerperlen, die ihnen als wählbar erscheinen.

Um Sorgfalt walten zu lassen kehren die beiden zum Ausgangspunkt (Tortenmitte) zurück und die Ehefrau schlägt eine Exkursion nach rechts vor. Nach etwa gleicher Marschzeit stossen die beiden auf ein paar grüne Zuckergeissböcke. Siehst Du, argumentiert die frisch Vermählte, rechts von uns haben wir etwa auf gleicher Distanz auch valable Kandidaten gefunden. Die befinden sich zwar ein bisschen weiter südlich Richtung “konservativem” Pol, aber scheinen uns trotzdem nahe zu stehen. Wollen wir nicht die grünen Geissböcke wählen? Der Geograph zeigt Interesse, will aber mit seiner kritischen Natur zuerst erfahren, wie die Namen der Pole bestimmt wurden. Leider geben die kulinarischen Experten der Bundeskanzlei in der Wahlbroschüre keine Auskunft dazu und auch sonst sind darüber kaum Informationen zu finden (ausser der oben erwähnten, recht non-chalanten Bemerkung zur Links-Rechts-Skala).

Hier müssen wir unsere Geschichte wohl abbrechen. Jeder, der auch nur das geringste von der Bundespolitik versteht, wird bemerkt haben, dass diese Marschrouten, so wie sie sich auf der Torte darstellen, nicht vergleichbar sind. Detailliertere Forschungen haben gezeigt, dass die politische Landschaft weder einer Hochzeitstorte noch einem Gugelhopf entspricht. Die kulinarisch nächste Äquivalenz wäre ein “Caprice des deux”: die Parteien unterscheiden sich stark auf der Links-Rechts-Achse, wenn es sich um Abstimmungen im Parlament handelt, und sind sich in anderen Belangen relativ nahe.

Fazit: Dass sich Zeitungen auf solche effekthascherische und undurchdachte Analysen stürzen, mag ja noch akzeptabel sein. Als zahlende Leser können wir per Kaufentscheid unserem allfälligen Unmut Ausdruck verleihen. Dass aber die Bundeskanzlei auf Kosten der Steuerzahler derartige politische Desinformation (und anscheinend ohne vorgängige wissenschaftliche Abklärungen vorgenommen zu haben) an alle Haushalte mit stimmberechtigten Wählern schickt, sollte zu denken geben.