Referenda as a Catch-22

The result of a referendum delivers a significant amount of information about social preferences to each composite member of the society. This paper argues that, beyond this obvious fact, the choice of an authority not to offer a referendum, although permitted to do so, may enhance the information individuals posses about social preferences as well. The addition of a referendum option in the rules of a game, that is, by enabling the authority to offer referenda at will, results in an assured re-election of the authorities that implement socially beneficial policies and reduces the likelihood of the re-election of the authorities that implement socially detrimental policies. In a sense, by allowing an authority to offer referenda, an inescapable Catch-22 is introduced in the game, which inhibits the re-election of a measure of “bad” authorities and, thus, confirms that one of the main benefits of a democratic institution is the preservation of “good” authorities in power. It is, finally, demonstrated that non-binding referenda are more influential (in the directions described above) than binding referenda as far as the authority’s re-election prospect is concerned.