The legislative elections and the principal-agent problem

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NOT the type of people we get working the voting centers.
NOT the type of people we get working the voting centers.

Venezuela is supposed to hold legislative elections this year … emphasis on the word “supposed.” As Quico explained, the government has all the incentives not to hold the elections. The government is deeply unpopular, and no amount of tinkering with the results could hide the shellacking they’re looking to receive.

There is another reason why large scale fraud is going to be harder to pull off, and it has to do with the principal-agent problem.

Imagine you are the boss of a company, say, Walt DIsney World. Let’s call you the “principal.” As a principal, you want your employees – let’s call them “agents” – to do an outstanding job that makes it worthwhile for families to shell out the $95 it costs to get in. You want, for example, for Snow White to be exceedingly charming, and Tinkerbell to be a hyper’caffeinated ball of pluck. You want the people at the gates to greet park visitors with a cheerful smile, and make sure everyone there is treated very, very nicely. VERY nicely.

Problem is, you can’t supervise all of them! After six hours asking thousands of people going on a ride “how many in your party?” you just want to bang the first bratty kid you see in the head with the first thing you can grab – and, trust me, there are many of those.

This is a well-known conundrum in economics. It is solved mainly through incentives – something like shifting people around, randomn inspections, bonuses for good performance, have them work in teams, and even giving them stock options. These are all common techniques in management. Some organizations are really bad at this. Other, like Disney, excel.

In presidential elections, the principal-agent problem is a huge deal because there is only one person on the ballot. The principal (say, Capriles) needs to take into account that his agents (the people manning voting centers in Elorza, for example) stay there until the full count is done. He needs them to defend the votes as if they were his own. He needs them to accurately report back to headquarters when a chavista comes in with 300 cédulas ready to stuff the voting machine.

But Caracas is really, really far away from Elorza. There are something like six layers of management between Capriles and the guy in Elorza, and each of those layers has their own incentives to do their job in a half-assed manner. And when manning a voting center in San Félix means getting a gun pointed at your head … well, let’s just say the incentives end up not being aligned in a manner that allows you to take care of the 2% of the votes you need.

But in a legislative election, the problem becomes easier to solve. When you have hundreds, maybe thousands of candidates, it is easier to know what your “agents” are doing. The problem is not as acute because there are many more principals around, on the ground, close to their agents. Each one of them is more capable of effectively supervising what their agents are doing. They know the terrain, they can talk to them and align the incentives more easily.

These principals are well aware of the importance that the agents do their job. The agents are not working for some guy in Caracas who has never visited, and the guys supervising specific regions are not clogs in a big campaign machine. They are the candidates. They are working for themselves.

That is part of the reason why there are fewer claims of fraud in mayoral and legislative elections in Venezuela – it’s simply harder to pull off. And if you can’t cheat on the vote, the only way to make sure you win the election … is to make sure you don´t have one.

1 COMMENT

  1. I noticed yesterday on some pseudo news outlets that chavismo’s favorite exemplar of the American paranoid style is warning the world that a coup is already under way.

    I wonder how agency works when anyone who doesn’t work for Mickey is declared an enemy of the Magic Kingdom.

  2. Yes, it is harder to pull off, but certainly not impossible–e. g., I remember a mayoral /maybe gubernatorial election in Puerto Ayacucho where more people voted than there were men/women/children in the voting area (including a friend, living in Caracas, who saw her name published in the local paper as having “voted”), and, of course, the PSUV candidate “won”. And, you don’t actually need the physical Cedulas to commit voting machine fraud–you just need the Cedula numbers of the 6 million or so Electoral Registry “voters” who are “registered”, but never did actually register, don’t know they’re registered, and don’t vote.

      • An interesting question, and, if you discover the answer, I would be interested in knowing it–that is, if you believe in the statistics of this Govt.

        • Also, if I’m one of the 6 million really not registered, but “voted”, why would I investigate whether i “voted” or not, and, even if I found that I had voted, when I didn’t, as my friend’s experience in Puerto Ayacucho, to whom do I complain?

      • I don’t think it’s possible. You can only check if a person is registered to vote and where. I tried to see if somebody had voted with my dad’s id (he passed away a couple of months of the past elections) and I couldn’t.

      • No, you can’t. And that’s why Tibisay denied any request to make the “voting notebooks” public or part of the audits as Capriles requested the last election, because then anyone could see if dead or non-existant people were voting.

  3. “The government is deeply unpopular, and no amount of tinkering with the results could hide the shellacking they’re looking to receive.”

    That might largely be true inside the country…although just wait and see…there will still be plenty of ” oppos” who will claim there are less opposed than what they had thought.

    But the greatest damage will come from the the European press, and secondly from the US liberal press.
    They will pretend they are just reporting facts.

    And here we go round and round

    • “But the greatest damage will come from the the European press, and secondly from the US liberal press.
      They will pretend they are just reporting facts.”

      Huh?

      • Rory,

        Perhaps you haven’t been observing the subtle language in the ” liberal” press.I put liberal in quotes because they certainly have their biased opinions which often reflect a tactic sympathy with the Fascist government of Venezuela.

        Here in the US most of my liberal friends who have no Venezuelan experience will often have sympathy for the ” Socialism” they so aspire to.When you read the Liberal media here you can see or hear the words they choose that make others think badly of the opposition .Just 3 days ago I heard on NPR …They called Ledezma an instigator of of opposition protests…had they wanted to sound neutral they would have said that he was a supporter.In English the word instigator is more commonly used when someone is committing some sort of skullduggery,.

        As for Europe even the Economist in their last article referred to the LL/MCM faction of the opposition as ” Radical”….and you should know the kind of impression that gives.

        My husband’s brothers still today cannot say they are against Chavez in England….no wonder…the Socialists apparently are quite violent in their lack of acceptance of other people opinions.Socialists there are not Liberals.Liberals in the US are divided between those who are liberal and those who are not.

        In Europe Podemos is gaining in strength…this could never happen if there were a truly free press , expounding the truth rather than parsing words in order to subtly influence .

        • Cognitive Dissonance: people tend to resist information that conflicts with their established beliefs. The economy is imploding, and blaming the opposition or putting them in jail is not a solution! Do your brothers at least agree with that?

    • Esta tía está obsesionada con Europa. Tiene que ir a un psiquiatra.
      Debería limitarse a bordar en su casa en Carolina del Norte, en vez de comentar sobre un país y un continente que no puede comprender.

      • Kepler, you have all the right in the world to disagree with Firepigette, but to mock her the way you do does not make you not intellectually superior (which is clearly your intent) but rather makes you a playground bully.

        You contribute you own share of, let’s call them, debatable arguments, and I’ve never read FP stoop to the level you do when she does not agree.

        • Kirye, thatks for reminding Kepler of that fact.THe reason people try to denigrate others for their opinions is usually becuase that person feels frustrated that they have no way to refute what is said….I doubt that it has anything to do with feeling superior…..but it is importante that people be allowed to discuss without insults because it is the only way we can create a free and respectful space on the blog.Creative solutions are at risk if everyone just agrees.A mutual admiration society of like minded thinkers is not conducive to deep thinking.

  4. The other way to cheat is how they did in the 2010 elections: Where the fraud was rearranging the voting districts to have more seats with less votes, or “their votes are worth way more than ours”.

    • Gerrymandering is a very powerful tool for corrupt regimes.

      For a one turn bipartisan system, the recipe is extremely simple. It’s called packing:
      – Draw a few districts overwhelmingly favoring the opposition.
      – Draw a lot of districts somewhat favoring your side, where your candidates will be 100% guaranteed to get 50%+1 votes, but without too much margin.

      Let’s say your redistricting so that each district has the same number of voters and is such that the opposition side wins its districts with 90% of the votes (and 10% for your side), while your side wins its districts with 55% of the votes (and 45% for the opposition). If you manage to pull something like that, it means you can hang on 51% of the districts and the control of the assembly representatives with less than 1/3 of the overall electorate and without committing any overt electoral fraud .

      This is a very extreme (although in the US a state like North Carolina, gerrymandered to death, isn’t that very far from that).

      But even with less lopsided hypothesis, say your candidates win on average with 55% of the votes while you’ve bagged the opposition voters in a few districts so it wins its districts on average with 70% of the votes, you still keep a 51% majority in the assembly even if the opposition garners 58% of the overall votes and only 42% for your side. And with an electorate divided 50%/50%, the same hypothesis would give you a crushing 80% majority of the assembly.

      But it’s a dangerous game.

      The danger lies in the low buffers your redistricting builds for you own candidates. If the shit hits the fan for a reason or another (like your country being completely broke…) and your party becomes deeply unpopular across the board and you can no longer rely on party loyalty, your candidates can no longer reach their 50%+1 of the votes, with a lot of them losing 49%/51%, and your party can be completely wiped out in a single election, for lack of safe districts for your side. In that case, you are probably better off switching to a full proportional system before the election, in order to retain some representation in the assembly and, for instance, to deny the opposition a super-majority.

  5. OT; This is hardly a surprise but always interesting:

    from BCP Secuties

    Subject: BCP Comment. SIMADI: Another fiasco?

    The long awaited new FX system called SIMADI has been operating for two weeks with disappointing results. Locals report that system is far from “free market” as officials previously promised, an example: SIMADI is an automated system, where Casas de Bolsa and Banks place the trades they arrange with their clients. The system is blind, nobody sees the price formation, each participant places the trades and the system “validates” them. Yet, the system is not validating all trades, even though buyer and seller agree on a rate. Trades done at prices over a certain threshold are rejected by the system. There are no interbank trades allowed either. SIMADI as is working now, resembles the old SICAD II, where price was fixed by the governement, and buyers had to line up for days to get little or no FX. The result? Parallel market is ruling again, passing through 200 VEB/US$ yesterday.

    • No, it isn’t functioning as planned. We’ve had three transactions not process through two different mediums.

      Initially, the expectation was that the SIMADI rate would exert a slight pull on the black market rate, if it functioned correctly as it would allow a legal siphon for businesses and pull some of the bolo liquidity out of the market and flush dollars in.

      I’ve now heard from multiple sources beyond my own experience that there are “difficulties”, to put it mildly.

      No wonder the big spike in parallel dollar is showing up a few days into trading. People were waiting to see if It worked, and now it sort of doesn’t.

      By continually creating systems that do not work, the government is actually undermining their own currency. It is one thing to claim an economic war is responsible. It is another thing entirely to sabotage your self.

  6. “They are the candidates. They are working for themselves.”

    First, isn’t that a bit inaccurate to say that the local pols will not be as concerned with national elections, given that the Venezuelan political structure is clientelar, meaning the local chieftains depend on the central government handouts and provide political support in return (which explains why chavismo was such a massive success to begin with)? Second, if this is in fact a problem, isn’t the solution as easy as emphasizing the incentive for good electoral turnout and minimizing cheating by the opposition to your local party bosses (remind them the bosses that they are operating within a clientelar system)?

    The amount of resources disbursed by the central commands during presidential elections will generally be larger since that is the biggest prize, and that alone can be expected to encourage more cheating. There is also the possibility that parties are blind to opponents cheating during local elections, precisely because there are less resources to monitor cheating.

  7. “No voy a permitir una doble banda”, dijo [Maduro yesterday] y advirtió a los dirigentes de oposición, que tengan estos planes, que se olviden de los cargos públicos.”

    Guess who gets to decide which opposition politicians are “playing a double game” and hence ineligible for public office?

  8. Look, I understand you want to be optimistic, but there is simply no way the opposition will win these elections. There are way too many things the government can do to guarantee victory, regardless of how bad the economic situation is or might get. You already mentioned one of those things: In many voting centers, witnesses will be offered a choice between two metals: “Plata” or “Plomo”. Faced with that choice, I don’t really think the fact that the guy being elected is “closer to home” makes any difference. What can an opposition candidate do to counteract such an “incentive” to betray him?

    • Of course. With over 15 years of experience in stealing elections with various systems, help fron the cubans and the chinese with brand new cedulas, chavismo will cheat again. Until people finally get really pissed off..

      • Two years ago I was returning to Caracas from West Africa via Air France from Paris. I had several Chinese workers around me on the flight. When it came time to fill out the immigration forms they were lost. None could speak or read a word of spanish only some english so they approached the gringo and asked me to help them fill out their forms. My jaw dropped when they all pulled out spanking brand new cedulas, all of which started with a V instead of the E they should have had. I am sure all of their cedula numbers will vote in the upcoming elections.

  9. You can also ban some opposition parties and figures from taking part in the election (VP, ABP, Borges and Vente at least). That gives incentives to smaller former chavista groups (marea and others) to think they can win and have them run. It also divides the opposition, which most certainly would have some still wanting to participate and some others calling for a general boycott of the election. I think this is the best strategy the government can have and most probably it would ultimately be successful.

    • Dividing the opposition is one of many tools they will use to win the election. If there are many opposition candidates for every seat, and people don’t know who is THE opposition candidate, then the government has a huge advantage. They can make sure people don’t know who the real (as in backed by the MUD) opposition candidate is by several means:

      1.- Leave very little time between the day they announce the elections and the date they will actually take place (this is precisely the reason it hasn’t been announced yet, not because they plan to suspend them). That leaves very little time for the opposition to organize and campaign for their candidates (it also leaves little time for the government candidates to do the same, but that’s irrelevant in their case).

      2.- Don’t let the name “MUD” in the ballot.

      3.- Pay as many people as needed to run as opposition candidates. Give them much more time on the media than the ones backed by the MUD, and present them all as THE opposition candidates in said media. If the votes for the opposition for a given seat get distributed among 4 or 5 opposition candidates, then the government can win the seat with just 20% to 25% of the votes.

      4.- Create a bunch of parties with names similar to existing opposition parties (e.g. “COPER” or “Voluntad Nacional”), with similar symbols in the ballot, and have the faked opposition candidates run for those faked parties.

      And I’m not even talking about trying to create divisions inside the MUD. These are just moves they can make regardless of the MUD.

    • The jailing of opposition politicians is a sure indication of panic setting-in. It is also doubtful that there will be parliamentary elections this year. They’d never risk it. There appears to be a “perfect storm” of factors coming together which will lead to major civil unrest. Reuters is reporting today that there are major problems at the El Palito refinery, as well as Amuay and Cardon, resulting in even longer lines at gas stations. Nobody has any clue as to whether food shipments passing through Puerto Cabello are sufficient to feed a very angry populace. If the food importers get their numbers wrong, the consequences will be dramatic. Decreased revenues from the drop of oil prices are just now beginning to bite. SIMADI appears to be a complete failure. It’s all coming together, the perfect storm, and there’s panic in the air…

      • Two thoughts:
        1. If panic sets in, people will stop waiting in lines… especially if they get hungry enough and feel insecure! Political demonstrations will be nothing compared to what people do in a panic, when people crash the lines and take what they can!
        2. At some point, blaming the opposition, blaming an economic war or USA or whomever is not going to be enough when desperation and impatience demands something more.

    • I respect The Economist. They are not alarmist and generally do very well researched and balanced reporting. But, their audience is Business (with a capital B). They only get interested in a place when Business is affected. Their interest in politics is purely pragmatic. Mind you, I am not criticizing them for this. However, I do criticize them for not sounding the alarm about Venezuela earlier and louder. In the last month, a slew of multinational corporations took huge write-downs because of Venezuela, and these seemed to take the market by surprise. That isn’t good. Markets don’t like surprises. But this one shouldn’t have been a surprise. It was a long time in the making and should have been predictable. I think that lot of big-time business journalists failed their readers by treating Chavez and his antics as comic relief rather than a real problem.

      • Roy,

        To me the interesting thing of the article is the calling of the other Latin American countries to account for their complicit silence. This is moves away of a ‘what banana republics do’ reporting that they had in the past years.

        I have stated in some previous comment on this blog that from a realpolitik perspective there is no real immediate benefit for countries like Peru, Chile, Uruguay or Brazil to denounce Venezuela, yet this article seems to be an indication that the ‘ some expert and decision maker’ may be changing their mind on this matter.

        It would be healthy for all Latin American countries to call a dictator a dictator and chuck away the pelucon hangups of 60s noble revolutions (that’s with you Fidel). It would be a good precedent to the already creeping authoritarianism in the region.

        Maybe more noble ideals will prevail with the region leaders as they react to Chavismo final spasms of abuse.

        • There are absolutely no ideals among regional leaders. They will react when they see their businessmen are not being paid by Maduro. They are becoming more agitated in Brazil because they see Venezuela is out of money. The same goes for Colombia and the same will be for Uruguay.
          Maduro might have visited Trinidad and offered oil again in order to have Trinidad do anything it can to veto things at the OAS.

        • I am not quite as cynical as Kepler on this, but it feels to me more like they are hedging their bets so that if there is a true humanitarian disaster, they can claim to have been “involved” and denounced the regime. This saves them from criticism later by their opponents.

          • Kepler, Roy,

            According to the learned the day of default is soon arriving so we ought to have the moral spine firmed in due course…

            As for Colombia, I think things are not quite the same because of the FARC peace talks and the ability of Venezuela to sabotage things just because it can.

            Ultimately the public relations campaign run by the opposition over the past year is bearing good fruits. I will say it is fait accompli when I see a bumper sticker “Free Leopoldo” along side “Free Tibet” in some suburban highway in the US.

          • I say it will be we have reach the day when social democrat politicians in Brazil or Argentina ask their governments to wake up and condemn the Chavista regime.

          • Nice, indeed things are evolving in Brazil. I guess some businessmen are lobbying through the PSDB
            in order to get some dollars for the tumbled chickens they exported to Venezuela.

          • That’s what Godgiven Hair has probably said too… That “las elites in Miami, Bogotá, Madri and now Sao Paulo want to tumble us. Run to the mountains!” hehehe.

        • Renacuajo: like Roy, you have simply not been paying proper attention to The Economist’s coverage.

          “This is moves away of a ‘what banana republics do’ reporting that they had in the past years.”

          The change you claim to perceive is nothing of the kind. “Calling other Latin American countries to account for their complicit silence” has been an integral part of The Economist’s coverage of Venezuela for many years (and I’d be interested to see an example of what you think is a “what banana republics do” kind of article).

          If you’re in any doubt, I would refer you, for example, to the issue of September 30th, 2006, whose cover was captioned, “Who leads Latin America? Lula vs Chávez”.

          The accompanying leader lambasts Lula and Brazil for a “naive” foreign policy, and in particular for backing Venezuela’s UN security council bid.

      • Roy:

        “I do criticize them for not sounding the alarm about Venezuela earlier and louder.”

        I don’t think you read The Economist very much. Or if you do, you don’t pay attention. Take this, from December, 2007, for instance:

        “José Manuel Puente, an economist at IESA, a business school in Caracas, sees four warning lights for the economy: oil output, inflation, fiscal problems and a growing shortage of dollars”.

        The reference formed part of a three-page article largely devoted to telling readers that XXI-century socialism does not work and that only high oil prices prevented it from hitting the buffers.

        That was over seven years ago, but I could go back much further if you like.

        Anyone who has been reading The Economist properly for the past decade and more could scarcely have been “taken by surprise”.

        In news stories and editorials the magazine has consistently slammed the region (and in particular Brazil) for failing to speak out about the regime’s growing authoritarianism.

        The Economist is not just interested in politics to the extent that it affects business. If that were the case, you would not find so many references in its pages to human rights abuses for instance. In fact, every issue contains political stories from around the world that are there on their own merits.

        And with the exception of a couple of light-hearted articles early in the Chávez years, it never treated him as “light relief”.

    • Thanks, renacuajo, for the link to the Economist. The selected photo of Maduro shows him in dyspeptic form: bloated, overweight, dare I say, confused?

  10. “And when manning a voting center in San Félix means getting a gun pointed at your head … well, let’s just say the incentives end up not being aligned in a manner that allows you to take care of the 2% of the votes you need.”

    Good news, everybody! You might have your head blown at point blank with a shotgun, but it’s OKAY! Since the new sparkly ombudsman just said that the kid’s human right were not stepped on.

    As long as they claim they were “rubber bullets” (bullets that don’t exist since rubber would just melt and evaporate the moment it’s fired from a shotgun) they are not considered “fireweapons” even if they can tear a chunk of your skull with a blast, they still respect your human rights, everybody can sleep well tonight, knowing our dear goverment worries so much about us!

    I bet that if chavismo put a tenth of the work they do in fabricating bullshit into actually fixing the country’s problems, we would be in like Dubai’s levels of development.

    Inb4 some shmuck tries to post “stuff that proves Dubai is actually worse than Venezuela” that I won’t give a damn about.

    • “Rubber” bullets are in no circumstances to be fired at close range. Period. That’s the policy/practice of riot police and national guards everywhere. They are usually not deadly at a distance, but at close range or point blank the chances of fatal injury increase dramatically.

    • I bet that if chavismo put a tenth of the work they do in fabricating bullshit into actually fixing the country’s problems, we would be in like Dubai’s levels of development.

      I’m sorry to disappoint you, Ralph. But transposing the activity of chavistas, from a bullshit model to practical work with measurable results is never going to happen. Remember: there is a typical, core being to most chavistas. And among the character traits are those that seek excuses to avoid engaging in practical, measurable work.

  11. The principal-agent issue will continue until the Venezuelan people realize that they are the principal and the Chavez-Maduro-PSUV government are their agents and that the interests of both parties are horribly misaligned.

    The problem is that the government believes they are the principal and has done a swell job of convincing far too many Venezuelans that the people are the agents.

    • Which I guess brings us back to that notion that if a government primarily relies on taxation of individual citizens to sustain itself, the principal-agent relationship tends to be properly aligned.

  12. some might use this exact argument, for the opposition to cast their vote for any of the spineless leaders we have, If they keep on chicken out with this regime.

    Like voting again for Capriles? yeah sure… Falcon? Ledezma? phleeeaaase…

  13. One question to CC:

    What are your thoughts about the “Acuerdo para la Transicion” (the cause of Ledezma’s imprisonment)? It was made accessible to the public via chamge.org for signatures, after people like Tejera Paris, Miquilena & Pompeyo Marquez publicly supported it.

    Are you going to write about it?

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