![]() ![]() The price elasticity of demand measures how much the quantity demanded responds to a change in price. Or, in the words of a contemporary textbook in economics: The elasticity (or responsiveness) of demand in a market is great or small according as the amount demanded increases much or little for a given fall in price, and diminishes much or little for a given rise in price. So what do we mean by elastic and inelastic demand? Marshall’s classic definition of elasticity states that Elasticity and inelascitity in economic theory The price of each had implications for the voter’s decision. Each of these two options had – as in economic theory – different demand curves. for applying economic reasoning to non-economic choices.įundamentally, the Brexit referendum could be seen as a choice between economic stability and political sovereignty. 6 As this pioneering research shows, situations when voters, parties and other political agents are dealing with decisions and trade-offs between two or more competing products are particularly suited for economic analysis, i.e. Referendums as goodsĮconomists since the 1950s have sought to use the basic logic and the basic concepts of economics to analyse such political phenomena as majority voting and party strategies in two-party and multiparty systems. For the present purposes, this article provides a first attempt at developing a scientific research programme within which future referendums can be analysed. Once this theory has been corroborated, it can then serve as the basis of a more quantitative study analysing referendums more generally using economic modelling. Thus, the study seeks to render plausible the hypothesis that microeconomic theory – especially the concepts of elastic and inelastic goods – can be used to illustrate voting behaviour in referendums. In this article, qualitative evidence (such as reports from the campaign and interviews with leading representatives from each of the two sides) will be used to support the hypothesis. 5 This article is an attempt to do exactly this to analyse the nonmarket referendum through the prism of economics and economic theory, and the first steps are made towards establishing a microeconomic theory of referendum choice. Mueller defines public choice as “the economic study of nonmarket decision making, or simply the application of economics to political science”. 3 While some scholars have attempted to use formal modelling, 4 the majority of studies have been case-specific and have not been based on economic models.Ĭould public choice theory and microeconomics provide insights into why voters voted the way they did? There is a large body of research that answers this in the affirmative. While political science has made advances in understanding voting intentions and rational choices in referendums, 1 most of the models have been based on either statistical models identifying common denominators for voting decisions or on description-heavy, 2 empirical analysis of individual referendums. Using economics to understand political phenomena Analysed through the prism of microeconomics, in particular the well-known concept of elastic and inelastic demand curves, it is suggested that “Brexit” was an inelastic political good, and that a change in the price did not affect the desire to “purchase” this good. This article advances the hypothesis that economic theory contributes to an understanding of the outcome. Why did a majority vote Leave? Why were the majority of the voters not susceptible to the economic arguments advanced by major economic institutions such as the Bank of England, OECD, IMF, HM Treasury and virtually all major investment banks? Why did (now former) Prime Minister David Cameron, who campaigned for Remain, lose the vote only a year after his party had won a surprise victory in the 2015 general election? On 23 June 2016 a slight majority of 52% of UK voters opted to leave the European Union after 44 years of membership. ![]()
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