Third Parties and Political Investments
(Supposedly said by Joseph Kennedy to JFK during the West Virginia primary)
Judging by current polls and the views of political commentators, the upcoming British elections may well end up with a hung parliament—a majority for neither major party. If so, whichever one ends up trying to run things will need the cooperation of the Liberal Democrats. The situation suggests an interesting way of looking at third parties in systems such as Britain's.
Imagine that you are considering investing in the political marketplace, as candidate, party official or contributor. What party should you invest in?
The obvious choice is one of the two majors. Most of the time, one of them is running things and so in a position to provide benefits to its supporters—opportunities to influence policy and legislation, cash, status. There is, however, another option. The more supporters the party in power has, the more thinly the loot will have to be spread; seen from this standpoint, the ideal electoral victory produces a majority of one. Most of the time, one of the major parties is in power and someone who invests in the third party gets little or no return for his time or money. But once in a while ... .
In a hung parliament, any two parties can form a government. Think of parties—abstracting away from their internal politics—as players in a majority vote game. Each has one vote, and two votes out of three control. The third party is not merely an equal player in that game, it is a superior player, since each of the other two prefers alliance with the third party to alliance with its traditional opponent. Each major party has a chance of about .5 of being in the ruling coalition. The third party has a near certainty. Hence, on average, the third party should get more out of the situation than either of its larger rivals.
From the standpoint of the investor, the question is not what the party gets but what he gets. The third party has fewer contributors, fewer candidates, fewer workers. It is easier to be a big fish in a small pond. The fewer people the loot is divided among, the more for each. So, while investing in a third party should yield a lower probability of a payoff than investing in a major party, the payoff, if it comes, should be larger. Perhaps much larger.
Which may help explain the existence of third parties.