The Effective Number of Parties measure has had a pronounced influence on political science research. This measure, based on an economic measure of market concentration (the Herfindahl index), calculates the probability that two parties selected at random represent the same type. However, measures of diversity using this index are insensitive to rare categories (such as small parties) leading to the implication that studies may under predict the degree of variability or instability in party systems. Importantly, we argue that this measure may bias analyses towards finding stability. To adjust for this insensitivity, we propose an easy to calculate measure of diversity based on Shannon’s H, a measure from information science with recent applications to the study of public policy and agenda-setting. Through simulations, real world examples and a replication of Clark and Golder’s (2006) reanalysis of Duverger’s Law we show that a measure of the effective number of parties calculated from Shannon’s H better reflects the diversity of parties within a system. Overall, our findings demonstrate that studies interested in the number and relative strength of parties in a system should use a measure of diversity based on Shannon’s H rather than a Herfindahl index.
