The Impact of Direct Democracy on Society - Universität St.Gallen

– 14 –Given these results, public goods do not appear to be negatively affected by the lowerspending in more direct democratic political systems 20 .As argued earlier, because <strong>of</strong> all these detected impacts to the advantage <strong>of</strong> the citizens, autility increasing effect can be expected. <strong>The</strong> works by FREY and STUTZER (2000, 2002) findempirical evidence in line with this conjecture using a cross section <strong>of</strong> 1992 data (LEU et al.,1997). <strong>The</strong>se authors show first that direct democracy appears to lead to an increase in socalledoutcome utility, which means happiness achieved through the resulting allocation <strong>of</strong>goods and resources. Moreover, they also reveal that the major part <strong>of</strong> the increase in lifesatisfaction can be attributed to so-called procedural utility, i.e. satisfaction gained throughmere participation in the political process. A corroboration <strong>of</strong> the positive utility impact fromanother perspective might be deduced from the literature on tax evasion: In more directdemocratic cantons, significantly less tax evasion occurs than in more representativedemocratic cantons, as the studies by POMMEREHNE and WECK-HANNEMANN suggest (1989,1996) 21 . This finding could be viewed as an indicator <strong>of</strong> the satisfaction <strong>of</strong> tax payers withthe policy-making carried out by their governments and administrations.So far, literature speaking in favor <strong>of</strong> institutions <strong>of</strong> direct democracy has been examined.<strong>The</strong>re are, however, also some theoretical and a few empirical studies 22 which shed light onits potential negative aspects which should not be neglected. Some <strong>of</strong> these arguments whichfollow have already been alluded to in the previous paragraphs. <strong>The</strong>se counter-arguments canbe grouped under the heading ‘cost aspect’, ‘interest groups’ and ‘political decision-making’.As regards the costs <strong>of</strong> decision-making in direct democratic political systems, someeconomists suggest that a representative political system has an advantage over a directdemocracy because it saves information costs and pr<strong>of</strong>its from efficiency gains through thedivision <strong>of</strong> labor between specialized politicians and the electorate (FELD and KIRCHGÄSSNER,2003). Furthermore, the negative sides <strong>of</strong> direct legislation are also shown in a more specifictheoretical model by MATSUSAKA and MCCARTY (2001) with includes a voter, arepresentative, preference uncertainty and costly initiatives. <strong>The</strong> authors' model suggests that20 A detrimental impact <strong>of</strong> direct democracy on health (infant mortality rate) and education (share <strong>of</strong> pupils withmaturité/Matura) going beyond a budgetary one is found by BARANKAY (2002). <strong>The</strong>se results, however,might suffer from misspecification as important fiscal and political determinants are missing in his model.21 See also more recent analyses by FELD and FREY (2001, 2002).22 Information on some empirical studies is provided in the footnotes <strong>of</strong> this section.