Political parties, political integrity and public policy: a 'transactions costs' approach

Increasing concern about political 'sleaze' prompted the establishment, in 1995, of the Standing Committee of Standards in Public Life and the announcement, in 1999, of proposals to reform political party finance in the UK. A 'public choice' analysis predicts 'opportunism' by representatives at the expense of 'rationally ignorant' voters. It commends constitutional constraints to restrict the range of policy options open to representatives. By contrast, a 'transactions costs' approach suggests that electoral competition can offer protection when voters rely on 'party signal' as a low cost information source. If voters reduce transactions costs by relying on party signal, politicians have an incentive to maintain party reputation. Representatives are more willing than might otherwise be anticipated to accept the need for regulation if this serves to protect reputation.