Direct Democracy, Unanimity Rules

Transcription

1 WEEK 2 POLITIL EONOMY McGraw-Hill/Irwin opyright 2008 by The McGraw-Hill ompanies, Inc. ll rights reserved. Direct Democracy, Unanimity Rules If free rider problem exists, public goods are underprovided. So how can we decide whether we should all pay for a public good? Simplest solution is, if a vote were taken on whether to provide an efficient quantity of the good

2 Direct Democracy, Unanimity Rules Lets assume that dam was told that his share of the cost of the public good is 30 percent. If this share goes up, he will demand less of the public good. This tax share is called the Lindahl prices. 6-3 Direct Democracy-Unanimity Rules Eve s share (S E ) 0 S* D r E dam s share (S ) D r 0 r* The Lindahl Model Public good per year 6-4 2

3 Feasibility of Unanimity Rules Reaching equilibrium: uctioneer announces tax shares, and if they cannot reach equilibrium, the auctioneer has to announce another group of tax shares. Practical problems Strategic behavior (People may not vote sincerely) time to reach equilibrium (What if too many people are involved?) 6-5 Direct Democracy-Majority Voting Rules Majority voting rule one more than half of the voters must favor a measure for it to be approved hoice First rad Voter Jen ngelina Second Third 6-6 3

4 Direct Democracy-Majority Voting Rules Voting Paradox community preferences can be inconsistent even though individual s preferences are consistent genda Manipulation process of organizing order of votes to ensure a favorable outcome (the control of determining the order of votes) hoice First Second Third rad Voter Jen ngelina ycling when paired voting on more than two possibilities goes on indefinitely without a conclusion ever being reached 6-7 Graphing Preferences Utility Single-peaked preferences Jen Double-peaked preferences rad ngelina Missiles 6-8 4

5 Median Voter Theorem s long as all preferences are single-peaked, the outcome of the majority voting reflects the preferences of the median voter 6-9 Direct Democracy - The Median Voter Theorem ssume those 5 are voting over the expenditure on a public good Voter Donald Daisy Huey Dewey Louie Expenditure $

6 Election result nything above 150 will be blocked by at least 3 voters. So median voter wins!! 6-11 Direct Democracy - Logrolling I Voter Project Melanie Rhett Scarlet Total Net enefits Hospital Library Pool

7 Direct Democracy - Logrolling II Voter Project Melanie Rhett Scarlet Total Net enefits Hospital Library Pool Direct Democracy - rrow s Impossibility Theorem Reasonable collective decision-making criteria It can produce a decision whatever the configuration of voters' preferences It must be able to rank all possible outcomes It must be responsive to individuals preferences It must be consistent Independence of irrelevant alternatives Dictatorship ruled out rrow s Impossibility Theorem ll conceivable voting schemes have some potential for being unfair or producing a paradoxical result Meaning of theorem consistent rule not necessarily impossible to find, but cannot be guaranteed

8 Representative Democracy - Elected Politicians Number of Voters Liberal onservative 6-15 Implications of the Median Voter Model Two-party systems tend to be stable Replacement of direct referenda by representative system has no effect on outcomes

9 pplication: The case of Education Education is always a matter of political discussion in many countries 6-17 EDUTION Real per-pupil government expenditures on elementary and secondary education in the United States have increased by about 68 percent since 1980 This trend is valid for other countries as well

10 Real nnual Expenditure Per Pupil in Public Elementary and Secondary Schools (selected years) School Year Expenditure per pupil (2004 dollars) 4,917 $5,687 $6,746 $6,849 $7,574 $8,242 $8,248 Source: omputed from US ensus ureau, Statistical bstract of the United States Washington, D 2006, p Justifying Government Intervention in Education Is Education a Public Good? It is rival and excludable in most cases, so it is not a public good Then why is education provided publicly in most countries?

11 Justifying Government Intervention in Education ecause Education Generates Positive Externalities! The presence of positive externalities does not justify the current structure of government programs for higher education, which subsidize all eligible students at the same rate Does public spending on education make a difference? The evidence on whether increasing expenditures on public education improves average test scores is mixed. The evidence suggests that marginal increases in education expenditures have very little impact on future earnings. The estimated effect is relatively large for additional spending on younger, disadvantaged children