The implicit contract: why voters tolerate corruption — and why independent media matters

In early 2025, revelations emerged that Argentine President Javier Milei had promoted $LIBRA, a cryptocurrency that subsequently collapsed and left thousands of investors with significant losses. The evidence that came to light over the last few days points to a knowingly and voluntarily participation by the president and his closest staff. For many outside observers, the episode seemed like exactly the kind of scandal that should seriously damage a government. For a meaningful share of Milei’s supporters, it barely registered as a reason for second thoughts. This reaction — frustrating to critics, puzzling to outside observers — is not unique to Argentina, to Milei, or to the political right. It is a recurring pattern across democracies, and it has a rational explanation.

The puzzle isn’t really why voters don’t punish their leaders. The puzzle is why we keep expecting them to.

An implicit contract

Think of the relationship between voters and politicians as a long-run game rather than a single transaction. In any repeated interaction, players develop informal rules — understandings that aren’t written anywhere but that everyone knows govern the relationship. Voters understand, at some level, that politicians engage in rent-seeking: they extract benefits, reward allies, cut corners. This is not a secret. What voters implicitly negotiate is a threshold — a level of self-dealing they are willing to tolerate in exchange for the policies, identity, and coalition benefits their preferred party provides.

This is not naïveté. It is a rational calculation. The relevant comparison for a voter is never “this politician versus a perfectly clean alternative.” It is “this politician versus the opposition.” When that comparison is sufficiently unfavorable to the opposition — when the other side is seen as more corrupt, more threatening, or simply representing the wrong values — the implicit threshold rises. Voters extend more tolerance precisely because the cost of defection feels high.

The contract breaks when a violation is so egregious that it exceeds even the elevated threshold. What looks from the outside like inexplicable loyalty is often, from the inside, a rational assessment that the implicit terms have not yet been violated.

Rational hypocrisy

Bryan Caplan’s The Myth of the Rational Voter helps illuminate this behavior. Caplan’s central insight is that voters face almost no cost to holding mistaken beliefs. In a market, believing the wrong thing about prices gets you punished quickly and directly. In a voting booth, your individual ballot changes nothing — so the incentive to update carefully on new information is essentially zero. What voters do get from their political beliefs is something more immediate: a sense of identity, community, and belonging. Politics functions partly as tribal membership.

This means voters are not simply failing to process information correctly. They are, in a meaningful sense, rationally motivated to avoid processing it in ways that would threaten group membership. Call it rational hypocrisy: behavior that appears inconsistent or self-serving from the outside, but that is utility-maximizing from the inside, given the voter’s actual objective function. The voter who dismisses the $LIBRA scandal is not necessarily uninformed. They may have calculated — not always consciously — that the psychic cost of abandoning their political identity outweighs the moral cost of tolerating the scandal.

This dynamic is strongest for voters who have publicly and enthusiastically supported a politician, since they face higher reputational costs. To turn against that politician now is to admit poor judgment retroactively. The more vocal the prior support, the higher the cost of reversal. This means that when a scandal becomes public, supporters who were loudest in their endorsements are paradoxically the least likely to defect.

This is why it is part of the populist playbook to provide a sense of award, or prize, to those who signal belonging. The group is morally or intellectually superior; it receives benefits, and so on. Part of the same playbook is to expel, or ostracize, those who dare to show dissent, signaling that the implicit threshold might have been crossed.

Why the opposition gets judged differently

The asymmetric application of standards that follows from all this is not, strictly speaking, hypocrisy in the morally loaded sense. It is a predictable output of the model. Voters hold their own side to the implicit contract threshold they have negotiated; they hold the opposition to a much stricter standard because they have no stake in extending the opposition any benefit of the doubt. Rational irrationality, in Caplan’s sense, actively reinforces this: voters who are motivated to see their side favorably will consume information selectively, weight evidence asymmetrically, and rationalize inconsistencies fluently.

The result is a political equilibrium that is quite stable — more stable than it perhaps should be. Governments can sustain a significant level of corruption without triggering meaningful accountability, as long as they do not so dramatically exceed the implicit threshold that even loyal voters cannot rationalize the gap. Political survival, in this model, is partly a matter of staying just below the tolerance ceiling.

The one enforcer that isn’t playing along

Here is where independent institutions enter the picture. Courts, non-partisan academics, audit bodies, and a free press all share a critical structural property: they are not party to the implicit contract between voters and politicians. They have no coalition to protect, no threshold to defend, no sunk costs of prior endorsement. The focus here is on independent media in particular because it is the enforcement mechanism that operates continuously, publicly, and at precisely the point where voters form their beliefs — in real time, at scale, and in direct contact with the daily information diet of citizens. But the broader category matters: any institution that sits outside the contract can, in principle, perform this function.

Journalists and editors at genuinely independent outlets are not party to the implicit contract. They have no group belonging at stake in the outcome. They carry no sunk costs from prior endorsements of the government or the opposition. They have no implicit threshold to defend. Their professional incentives — reputation, credibility, the story itself — run in exactly the opposite direction from the voter’s rational hypocrisy.

This is not a romantic claim about the nobility of the press. It is a structural point. Independent media functions as an external enforcement mechanism precisely because it does not share the incentive structure that makes voter accountability so fragile. It applies — or should apply, in the absence of capture — the same standard to all sides. As I have argued before, the double standard that voters apply is a feature of their rational position; the single standard that professional media should apply is a feature of its rational position.

Governments that find themselves exposed by independent reporting rarely respond by engaging the facts. The more common playbook is to attack the messenger: accuse journalists of fabricating stories, claim the press is politically motivated, and frame the government as the real victim of a coordinated smear campaign. This is not accidental. It is a rational strategy that appeals directly to the voter base’s rational hypocrisy, designed to reinforce distrust of the external enforcer so that its findings can be rationalized away without requiring engagement with the evidence itself. When the strategy works, the implicit contract holds even as the facts pile up.

This is also why capturing the media is such a high-value political strategy. Even so, for self-described libertarian governments. Media capture, or intimidation, is not primarily about suppressing individual stories — though it does that. It is about bringing the press inside the contract, transforming an external enforcer into a partisan one. A captured media outlet applies the same asymmetric logic as the voter base it serves: strict scrutiny of the opposition, tolerance, and rationalization for the governing coalition. Once that happens, the last institutional check that does not depend on voter consistency has been neutralized.

The institutional lesson

The $LIBRA episode will not be the last of its kind, in Argentina or elsewhere. Every democratic system produces scandals that loyal voters absorb without consequence for the government, and scandals that topple governments seemingly overnight. The difference is rarely the severity of the offense. It is whether the implicit threshold has been crossed — and whether there exists a credible external enforcer capable of making the case clearly enough that even rational hypocrites cannot fully look away.

Democratic accountability does not fail because voters are irrational in the traditional sense. It fails because they are rational in exactly the right way for their private interests, and in exactly the wrong way for collective governance. The remedy is not to demand that voters be better people — they are responding sensibly to the incentives they face. The remedy is to protect and strengthen the institutions that do not share those incentives: courts with genuine independence, audit bodies with real teeth, and above all, a press that has no seat at the table of the implicit contract, and no interest in acquiring one.

This post was written with the assistance of Claude (Anthropic). Originally published here: https://economicorder.substack.com/p/the-implicit-contract-why-voters