Part III Flashcards
Klausur alt Part III Task 1 a
Why is the economic theory of constitution (Verfassungstheorie) based on constitutional calculus (Verfassungskalkülen) of individual persons? What are “costs of consensus building”, “probable external costs” and “costs of interdependence”?
Cost of census building include the cost of Avoidance cost, Transaction cost and Cost of agreement
Cost of interdependence = costs of consensus building + external costs
Klausur alt Part III Task 1 b
What is the optimal number of yes-votes in a collective decision on a constitutional rule as considered by an individual? Sometimes this point is more at the left side and sometimes more at the right side of the curve of interdependence costs. How do you interpret these different positions as regards the rule of decision making the individual in question prefers?
The curve of decision costs is shown to rise from left to right with an increasing share of individuals required for a collective decision.
Individuals will take into account both types of costs when they determine an optimal majority (M*).
The optimum is given where total costs are lowest.
The shapes of the external and decision-making cost curves differ according to the matter considered.
For each problem there may be a different majority that is optimal when it comes to making decisions about allocating activities as between the private and collective domains.
For example, in the personal area (such as the kind of music ones listens) the external costs are likely to be higher because individuals probably experience a large utility loss if a collective decision is imposed. Individuals will therefore allow collective decisions in this area only provided a large majority is required.
The optimal majority is 50% by chance only, because simple majority has no special significance as a decision-making rule with regard to the determination of the private and collective domains
