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Investment theory of party competition


The Investment theory of party competition is a political theory developed by Thomas Ferguson, Emeritus Professor of Political Science at the University of Massachusetts Boston. The theory focuses on how business elites, not voters, play the leading part in political systems. The theory offers an alternative to the conventional, voter-focused, Voter Realignment theory and Median voter theorem, which has been criticized by Ferguson and others.

The Investment Theory of Party Competition was first outlined by Thomas Ferguson in his 1983 paper Party Realignment and American Industrial Structure: The Investment Theory of Political Parties in Historical Perspective. The theory is detailed most extensively in Ferguson's 1995 book Golden Rule: The Investment Theory of Party Competition and the Logic of Money-driven Political Systems, in which his earlier paper is republished as a chapter.

Ferguson frames his theory as being both inspired by and an alternative to the traditional median voter theories of democracy such as that posited by Anthony Downs in his 1957 work An Economic Theory of Democracy. Quoting Downs, Ferguson accepts that 'the expense of political awareness is so great that no citizen can afford to bear it in every policy area, even if by doing so he could discover places where his intervention would reap large profits'. While Downs largely overlooked the implications of this insight, Ferguson makes it the foundation of the Investment Theory of Party Competition, recognizing that if voters cannot bear the cost of becoming informed about public affairs they have little hope of successfully supervising government.

The central claim of the Investment Theory is that since ordinary citizens cannot afford to acquire the information required to invest in political parties, the political system will be dominated by those who can. As a result, the investment theory holds that rather than being seen as simple vote maximizers, political parties are best analyzed as blocs of investors who coalesce to advance candidates representing their interests.

Contrary to the median voter theorem where political parties have traditionally been seen as vote maximizers who will seek out the position of the 'median voter' on any particular issue, the Investment Theory holds the real area of competition for political parties is major investors who have an interest in investing to control the state.


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