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Public Choice and Government Failures

This article explores the differences between decision-making in the private and public sectors, the influences and paradoxes in the public sector, voting in the public sector, different voting systems, influences on voting, tactical voting, and the paradox and impossibility of voting. It also examines the preferences of voters, the preferences of honeybees in choosing a new nest location, how to reward bureaucrats, and what to do when a bureaucrat fails.

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Public Choice and Government Failures

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  1. Public choice and government failures Miloš Fišar BPV_APEC Public Economics

  2. What are we going to talk about? • How does decision making in private and public sectors differ? • How to make a good decision in public sector? • Are there any influences? • Or paradoxes? BPV_APEC Public Economics

  3. PrivateSector • Equilibrium: demand curve and supply curve • Individuals reveal preferences about the private goods by buying them • Price reflects individual’spreferences BPV_APEC Public Economics

  4. Public Sector • No demand x supply equilibrium • Price is not obvious • Decisions made by public agencies, not „customers“ • Individuals vote to elect representatives who vote for public budget • Budget is spent by public agencies • No comparability to private sector BPV_APEC Public Economics

  5. What is the public choice? • “Public choice can be defined as the economic study of nonmarket decision making“,“Application of economics to political science” (Mueller, 2009) • Covers: • theory of the state • voting rules • voters behavior • bureaucracy • legislatures • etc. BPV_APEC Public Economics

  6. Voting in Public Sector • UNANIMITY • Time consuming • Leads to Pareto-preferred situation • Encounters strategic behavior • MAJORITY • Most used • Lower costs • Less time to make decision • Some individuals will be worseoff BPV_APEC Public Economics

  7. Majority rules: • Simple majority rule (>50%) • Runoff election (1st round >50% if not best 2 to 2nd round) • Plurality rule (most “popular” wins) • Approval voting (choose more options; most “popular” wins) • Bordacount (n choices, give to each option points {1,2,…,n}, most popular n, least popular 1; most points wins) • Hare system (select best; in each round the least popular options leaves until there is only one) • Coombs system (select worse; in each round the least popular options leaves until there is only one) BPV_APEC Public Economics

  8. Whatcan influence thevoting? • Personal constrains attitudes • Physical, social, economic, moral, psychological, etc. • External influences • Politics, lobbying, corruption, international relations, legislation, economics, labor unions, etc. • Wouldyou make votingcompulsory? BPV_APEC Public Economics

  9. Tacticalvoting • Compromising (whathappensifthe country has first-past-the-post electionsystems?) • Burying - very usefulifsome party has open primaries • Push-over– Imagineyou are a Frenchvoter, wholikes Sarkozy. Pollsforfirstroundsay: • Sarkozy 24%, Hollande 18%, LePen 17%, lot ofothercandidates, theLeft has a majority. BPV_APEC Public Economics

  10. Condorcet criterion • Used to measure efficiency ofchoices • Pair-wise comparisonof possibleoutcomes BPV_APEC Public Economics

  11. Tennessee needs a newcapital, but where? BPV_APEC Public Economics

  12. The preferences of the voters BPV_APEC Public Economics

  13. Matrix BPV_APEC Public Economics

  14. Arrow's impossibility theorem • Voting rule should fulfill: • Universality (allchoices are allowed) • Non-dictatorship • Pareto efficiency • Independenceofirrelevantalternatives. • But none oftherules does! • In other words: No voting rule is fair. BPV_APEC Public Economics

  15. The paradox of voting • Also called Downs paradox • Individual preferences in a group may lead to ineffective outcome therefore voting becomes • Decision of people to cast a vote is led notonly by a human rationality. BPV_APEC Public Economics

  16. Not onlyhumansvote Thehoneybeeoccasionallyneeds Find a new place for a nest. Theswarmsendsout scout bees To lookfor a newlocation BPV_APEC Public Economics

  17. Whatmethodthebees use? • Firsttheresearchersthoughtbeespreferedunanimity. • Thentheyobservedthatonly a quorumissufficient – 30 beesoutof 75 beesat a potentialnestsite. BPV_APEC Public Economics

  18. How to rewardbureaucrats? BPV_APEC Public Economics

  19. There are hugedifferencesbetweencountries: • Top payforelitework • Strict seniority • Project management BPV_APEC Public Economics

  20. Canweorgovernementpunishbureacratsifsomethinggoeswrong? • Most projects end behindschedule. • Also more expensive and lessusefulthenexpectedinitially. • Whatexactlywouldwepunish? BPV_APEC Public Economics

  21. What to do when a buerocrat fails? • Jay, Antony, and Jonathan Lynn. "A Question of Loyalty." Yes, Minister. Prod. Peter Whitmore. BBC. S02E07, 6 Apr. 1981. Television. • https://www.youtube.com/watch?v=JU68wBR4pjQ BPV_APEC Public Economics

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