Frey and Stutzer: Beyond outcomes

Frey and Stutzer. 2005. Beyond outcomes: Measuring procedural utility. Oxford Economic Papers.

In Brief

In this empirical article, Frey argues that citizens strongly value the right to participate, even down to inferring a monetary value. Thus, what theorists call "procedural utility" does seem to exist. That is, people obtain utility not only from the outcome of an election, but from participating in the procedures that lead to it (i.e. by voting). (Others have called "procedural utility" "act-contingent utility"). Participatory decision making in politics is measured through democratic participation in Switzerland and found to be significant.

Main Argument

The paper addresses two major questions on the topic of procedural utility: How to measure procedural utility, and how to disentangle outcome and procedural utility.

Sources of procedural utility

1. PU people get from INSTITUTIONS (can appreciate the market for the freedom it provides personal choice and democracy for the equality it provides, thus utility can come from different institutions)
2. PU people get form non-interactive individual behavior (when people have an intrinsic attitude about the action being taken--e.g. gambling (in commercial casinos) always has a negative expected utility, but people do it anyway because they enjoy it.)
3. PU people get from interaction between people (e.g. a person is negatively affected when they attribute the action of another individual, good or bad, to criminal motives)

The Test

Utility measured though subjective well-being (proxy measure for PU), assessed through large scale surveys. Surveys ask questions like "How satisfied with your life on the whole are you these days (scale of 1 to 10)?"

The authors study the 26 cantons in Switzerland because of their differences in participation. Citizen access from canton to canton differs significantly (ie the number of signatures to launch a referendum varies or the time frame a referendum can take affect)

In the case where there is an increase in satisfaction between two different cantons, the difference may be due to a more favorable outcome, not procedure, so a control method is used: Foreigners have no participation rights but experience the outcomes while nationals get to participate and experience the outcomes, so we can compare these two groups to disentangle procedural and outcome utility.

The Hypothesis

More developed participation rights are expected to increase reported satisfaction with life, due to a larger increase in procedural utility.

The Results

• On average, residents with high participation rights experience a 0.22 point higher level of well being
• Where participation rights are weak, the difference between Swiss citizens and foreigners is 0.55
• Where participation rights are strong, the difference between Swiss citizens and foreigners is 0.8
• This difference is huge.

Comments and Criticism

• This designs assumes that foreigners in each canton value the same outcomes equally. Suppose some foreigners migrate to French speaking areas, others go to German areas, etc. Do these different ethnic groups evalute using the same criteria? If not, this design is flawed to the point of uselessness.
• Maybe voters in places where they can participate more enact populist laws against foreigners. This would explain the differences in utility between citizens and foreigners.
• Note that the authors found that people (apparently) value the 'right' to participate, not participation itself. He's looking at participation rights, not participation rates.