Logrolling

1. Logrolling • With simple majority voting, voters can’t register the strength of their (or their constituents’) preferences. • Logrolling allows people to trade votes thereby partially revealing the strength of their preferences. • Vote for something to which you’re not strongly opposed in return for support for your pet project. © Terrel Gallaway 2003

2. Voluntary trade can lead to increased efficiency and a stable equilibrium. (You would expect a net gain for both traders.) Compromise is an essential part of governing May accomaodate pork. The gains to powerful special-interest groups might not ballance the loss to others. Vote trading may reflect relative power and not just strength of preferences. Logrolling Pros Cons © Terrel Gallaway 2003

3. Improving General Welfare © Terrel Gallaway 2003

4. Lowering General Welfare © Terrel Gallaway 2003

5. Arrows’ Impossibility Theorem • Is there any acceptable way of translating individual preferences into social preferences? • Arrow suggested six criteria which a social decision-making rule should satisfy. • Turns out that there is no guarantee any decision-making rule can satisfy these criteria. © Terrel Gallaway 2003

6. Arrow’s Criteria: • 1) Should produce a decision whatever voters’ preferences. • 2) Should rank all possible choices. • 3) Should be responsive to individuals’ preferences. • 4) Should be consistent (transitive). • 5) Choices should be independent from irrelevant alternatives. • 6) There should be no dictatorship. © Terrel Gallaway 2003

7. Representative Democracy • Economists’ models are based on maximizing. • Voters seek to maximize Utility • Politicians seek to maximize votes. • If voters’ preferences are signal-peaked and uni-dimensional, the vote-maximizing politician will adopt the agenda of the median voter. • Two-party systems will be stable near the center. • Direct referenda and a representative system will yield the same results. © Terrel Gallaway 2003

8. Public Employees • The salaries, prestige, office size, etc. of bureaucrats may depend on the size of their bureaucracies. • Maximize size of bureaucracy where TB = TC, rather than maximizing net benefits where MB = MC. • Results in an inefficiently large bureaucracy. • Analogous to revenue maximizer vs. profit maximizer. © Terrel Gallaway 2003

9. Special Interest Groups • May be based on: • capital versus labor interests, career fields, size of income, age, religion, race, gender, region, etc. • Like Bureaucrats, they may have disproportionate power because they are well organized and armed with information. (there are no organizations like the Non-Truckers of America.) © Terrel Gallaway 2003

10. Controlling Size of Government • Large size of government does not necessarily mean it is too large. • Balanced Budget Amendment? • Most economists, liberal and conservative, think its a bad idea. • More politically acceptable than cutting spending or raising taxes; but in itself, does nothing. • Would have to be based on forecasts which might be wrong. • Doesn’t define outlays and receipts. Creative accounting could be used to circumvent the law. • Would we throw congress in jail ? Let the courts determine the budget? © Terrel Gallaway 2003