Political surface
▶ I call the following set of ideas political finance. The credit surface depends on two factors: the level of the collateral and the risk/credit score of the borrowers. It also takes into account the market risk, the impatience of the borrowers, lenders’ fear of default, and expectations.
▶ Consider the political surface. Suppose collateral is the political capital of the contender. The two-dimensional political surface spanned by the political capital and the credibility of the opposition party–and transaction cost, which represents the friction level of political change- does not exhaust the characteristics of the electoral market.
▶ There may be many functions that map the political landscape. Some can cause the costs of transition to head north swiftly as collaterals lose value or as credibility crumbles. Others could work less rapidly, and renders the surface smoother. This can be called the degree of democracy.
▶ These are also ideologies. Ideology maps political parties to various risk groups as banks do vis-à-vis clients. CHP has little political capital (weak collateral) because it never has come to power.
▶ Ideology also works against the opposition because it curtails its credibility among religious people. Finally, lack of genuinely democratic institutions raises the cost of transition so it deters people from attempting at changing the party in power.
▶ Suppose we have two functional relationships that map the path to convergence: one good one bad. According to the ‘bad’ one, as the value of the collateral falls and as the credibility of the contender deteriorates, the cost of transition goes up steeply. The converse holds true for the ‘good’ one.
▶ Has the election changed all these? Has it shifted the speed of adjustment and led the electoral market towards the ‘good’ functional? After all, the degree of democracy is related to both the smoothness of the political surface and the steepness (riskiness) of the political mapping. I am not sure. But it has been a benign result. Everybody is hopeful now.