LECTURE 5 Flashcards
Direct democracy
voters directly cast ballots in favour or opposition of particular projects.
2 forms of direct democracy
- Referendum
2. Voter initiative
How do referendum and voter initiative differ?
Referendum = already passes state legislation.
Voter initiative = vote to then be proposed as legislation.
Indirect democracy =
voters elect representatives who then make decisions about public projects.
Another name for indirect democracy
representative democracy
Majority voting is a method to…
aggregate individual voters into a social decision.
What’s a majority?
50% + 1 of the total votes.
3 conditions on preferences for majority voting to lead to a consistent aggregation.
- Dominance.
- Transitivity.
- Independence of irrelevant alternatives
What does dominance mean?
If all individuals choose X over Y, SWF should rank X > Y
What does transitivity mean?
If the SWF ranks X>Y and Y>Z, then it must rank X>Z
What does Independence of irrelevant alternatives (IIA) mean?
If SWF ranks X > Y, then another alternative Z is introduced, this should not affect pairwise ranking X > Y regardless of how Z relates to them.
Method to determine majority winner if there are 3 alternatives and 3 individuals with rankings over them?
PAIRWISE comparisons for each alternative
A vs B: which wins majority from 3 voter’s ranks?
A vs C
B vs C
Which ever wins in all pairwise comparisons = majority voting winner.
What is cycling and what does it violate?
Cycling = when majority voting does not deliver a consistent aggregation of preferences. Transitivity is violated and there is no clear winner.
CONDORCET PARADOX =
Individual transitivity –> social intransitivity
ARROW’S IMPOSSIBILITY THEOREM
There is NO social decision rule that converts individual preferences into a consistent aggregation decision without either restricting preferences or imposing a dictatorship.
INPUT arrows impossibility theorem
I = IIA N = Non-dictatorship P = Pareto efficiency/dominance U = Unrestricted domain T = Transitivity
What’s the issue if IIA is not satisfied?
Government could add irrelevant alternatives and affect the outcome of voting.
What is non dictatorship? What can it solve?
One person’s preferences should not determine the social outcome alone. Can solve intransitivity, but unfair.
What’s Pareto efficiency/dominance?
If all individuals rank X > Y, the SWF should rank X > Y.
What’s unrestricted domain?
SWF must account for any possible individual ranking - must choose a winner for any group of people with any set of preferences.
ARROW’S IMPOSSIBILITY THEOREM relating to INPUT
When there are >2 options, NO collective decision making process can satisfy all INPUT conditions.
2 common solutions to arrows impossibility.
- Single peaked preferences
2. Place different weights on different individuals depending on intensity of preferences.
Why do we also use pairwise comparisons for majority voting?
To reduce problem from choosing among many options to choosing among 2 at a time.
CONDORCET WINNER =
the option that defeats all others in pairwise comparisons by majority voting.
The existence of a Condorcet winner requires…
Single peaked preference.
What are the axis for graph of single peaked preferences?
Y axis = utility / rank / score
X axis = alternative e.g. low, middle, high school spending.
Single peaked means…
Constantly increasing
Constantly decreasing
OR go up, reach a peak, then down.
An example of preference shape of graph that are not single peaked
Go down, reach a minimum, then up - unclear how it continues after so we do not know the peak.
SO: if preference are single peaked, majority voting –>
TRANSITIVE ordering
Condorcet winner
Median voter =
The voter whose peak is at the median of the spectrum on an issue.
Median voter works when there’s an X number of voters?
ODD number of voters.
Median voter theorem states that…
The peak of the median voter is the Condorcet winner.
Does the MVT ensure efficiency? Explain.
NOT necessarily.
Efficiency requires sum SMB = SMC (Samuelson)
I.e. efficiency looks at AVERAGE MB - NOT median.
MVT only efficient if median = average, which tends not to be true.
Why can socially desirable projects be rejected by MVT?
Because MVT doesn’t account for INTENSITY of preferences - just uses median MB, doesn’t sum up MBs.
MVT is a convenient way to predict outcomes for what type of democracy?
REPRESENTATIVE/INDIRECT - candidates should align their policies to the preferences of the median voter to get elected.
6 assumptions of MVT when it predicts outcomes for representative democracy.
- 1D policy space.
- Only 2 candidates at a time - pairwise voting.
- No ideology or influence
- No selective voting
- No money
- Full info
Assumptions of MVT: explain ID policy space issue.
MVT only allows for a single issue to be considered.
In reality, voters based their votes on a manifesto of issues and may lie at different points of the spectrum on different issues.
Assumptions of MVT: explain only 2 candidates issue.
Can only have 2 candidates running for office. NO stable equilibrium if. > 2 candidates because always an incentive move in response to other’s position.
Assumptions of MVT: explain no ideology issue.
Assumes candidates will align themselves to the policy of the median voter as they only care about maximising votes. But they may be reluctant to deviate from their ideologies.
Assumptions of MVT: explain selective voting issue.
MVT assumes all people affected by the public good vote - in reality on a selection do. Moving away from median could increase turnout.
Assumptions of MVT: explain no money issue.
The model ignores the influence of money in elections - may position towards extremes in order to maximise fundraising = indirectly maximise votes over LR.
Assumptions of MVT: explain full info issue.
Assumes perfect info along 3 dimensions:
- Voter knowledge of issues.
- Politician knowledge of issues.
- Politician knowledge of voter preferences and hence median voter.
Borda voting =
scoring method. N options, individual’s first rank gets N points, last rank gets 1 point. Scores added up and option with highest score wins.
2 pros of Borda voting
- Always picks a winner even when no Condorcet winner.
- considers ranks over all alternatives
Major con of borda voting
VIOLATES IIA = can manipulate voting outcome
Plurality voting =
Only 1st ranked choice counts and given 1 point. Winner = option ranked first by most people.
pro and con of alterantives to majority voting relating to condorcet winner
pro = always pick a winner even if Condorcet doesn't exist. con = do not always choose the Condorcet winner when one exists.
pro of plurality (1)
simple method: only need 1st choice,
3 cons of plurality
- fail to choose condorcet winner
- Dispenses all info but first choice
- strategic voting: if think 1st choice doesn’t have real chance of winning, may vote for 2nd choice to stop least favourite winning.
Approval voting =
Each voter can approve as many options as they like. Voting for one doesn’t exclude approving others. Winner = one with most approval votes.
4 pros of approval
- incentive to be honest - no cost of voting for an option unlikely to win.
- Can express range of preferences
- Simpler than Borda
- Only need to vote once unlike pairwise voting.
2 cons of approval
- Fail to pick up Condorcet winner
2. doesn’t account for intensity of preferences
Runoff voting =
2 rounds of plurality voting.
Count 1st place votes, if majority = winner.
If no majority, eliminate least preferred and 2nd round
1 pro of runoff
Seems fair and widely used.
2 cons of runoff
- fail to select Condorcet winner
2. Violates +VE responsiveness
What’s +VE responsiveness?
A fundamental principle of democracy. Changing the preferences of some voters e.g. swap 1st and 2nd place for one voter should NOT reverse social aggregate - but it does for runoff. An option receiving extra support in the 1st round can end up losing overall!!
Lobbying =
the expenditure of resources by certain individuals or groups in an attempt to influence the political process.
2 functions of lobbying
- provides funds for campaigns.
2. reveals preferences to politicians.
How does lobbying affect MVT outcome?
Can correct inefficiencies in theory as can allow intensity of preference to play a role.
When does lobbying actually lead to inefficiencies?
When MVT outcome already socially optimal, but those against it are a small group with strong incentives so are more political organised to oppose it –> inefficient outcome. If public has imperfect info / doesn’t pay attention.
Gov failure =
the inability or unwillingness of the government to act primarily in the interest of its citizens.
Bureaucracies =
organisations of civil servants that are in charge of carrying out services of the government BUT follow their own self interest.
Leviathan theory of the gov
Voters cannot trust the government to spend their taxes efficiently since gov is a monopolist who tries to maximise size of public sector and takes advantage of electoral ignorance.
What’s a middle ground solution to the natural monopoly problem? How does it deliver efficiency?
Contracting out: gov retains responsibility but hires private sector firms to actually provide the good. Harness competition through competitive bidding and grant right to most efficient firm.
What’s the problem w contracting out?
Potential for corruption - bidding in contracting not efficient in reality, may award contract to provider who assists them in maximising own bureaucratic power or offers bribes.
Electoral accountably -
the ability of voters to throw out corrupt regimes.
Inclusive growth -
work in interest of people, civil servants paid MPL, extend political rights, secure property rights, law and order, constraints on politician.
Extractive growth =
power held by small self-serving elite, no constraints on politicians.
