Lecture 12: Voting & Democracy

Question 1

The Median Voter Theorem

Answer 1

Parties move to the exact median of the distribution of voter preferences. In other words, they both offer the platforms most preferred by the median voter.

Subject to fail if:

1) Decisions are multidimensional (not likely)
2) Voters are unsure of the views of Candidates or Vice Versa

Question 2

The Miracle of Aggregation

Answer 2

Implies that a highly uninformed electorate may- at the aggregate level - act as if it were perfectly informed. This is based on the idea that the uniformed voted “randomly.”

Ex:
90% of the population is totally ignorant. 10% are informed. Unibomber vs. Normal Guy. If the ignorant vote 50v50 and the informed all vote for the Normal Guy, then the better option still wins.

Question 3

Caplan’s 4 systematic biases of voters

Answer 3

1) Anti-Market
2) Anti-Foreign
3) Make-Work
4) Pessimistic

Question 4

Anti-Market Bias

Answer 4

A tendency to underestimate the economic benefits of the market mechanism.

Question 5

Anti-Foreign Bias

Answer 5

A tendency to underestimate the economic benefits of interaction with foreigners.

Question 6

Make-Work Bias

Answer 6

A tendency to underestimate the economic benefits of conserving labor.

Question 7

Pessimistic Bias

Answer 7

A tendency to overestimate the severity of economic problems and underestimate the (recent) pas, present, and future performance of the economy.

Question 8

What is the effect of Voter Bias on “The Miracle of Aggregation?”

Answer 8

In the presence of systematic bias, uninformed voters do not simply “flip a coin.” They are more likely to vote one way than another. Thus, the distribution of voter preference is skewed one direction or another. As a result the median voter does not represent the socially optimal outcome. Caplin argues this is “why democracies choose bad policies.”