Optimal policymaking under yardstick vote : an experimental study

We develop a numerical model that simulates the evolution of a virtual population with an incentive and ability-based wage, capital yield from savings, social welfare system, and total income subject to taxation and political turnovers. Meta-heuristics, particle swarm optimization (PSO) in particular, is used to find optimal taxation given the constraints of a plurality democracy with yardstick vote. Results show that the policymaker tends to a taxation system that is highly punitive for a minority in order to win the election by benefiting others. Such decision-making leads to a cyclic taxation policy with high taxation targeting sequential portions of the population.