Chapter Review: Key Points

Date: 2015-10-07; view: 545.

Chapter Objectives

PUBLIC CHOICE

Chapter 1(33) Module 5

After you have studied this chapter you should be able to describe the economic effects of various voting systems; the behavior underpinning the public policymaking process; and the extent of public bureaucracies and their consequences.

1. No allocative mechanismworks perfectly. Just as markets foil in some cases, forces within all political systems can prevent government from reflecting the preferences of the people governed. Public choice analysis entails economic analysis of political behavior.

2. The probability that one vote will swing a major election is close to infinitesimal. Because the personal payoffs from voting are small, many people do not vote, nor do most find it personally worthwhileto inform themselves on a broad range of social issues. This is known as rational political ignorance, and tends to be more prevalent thanthe lack of information confronted when people make market decisions.

3. All voting systems are flawed in that economic efficiency may be lost through political decision making. Majority rule voting tends to impose losses on those taking minority positions; this is inefficient if their losses exceed the majority's gains. Majority rule may also lead to inconsistent or unstable political choices.

4. A unanimity ruleensures that all changes in laws are efficient because everyone must expect to gain before acquiescing to a change. People who are reasonably indifferent about a policy change, however, might require excessive compensation for agreeing to the change from those who stand to gain much from the change. This should make changes in policies a very cumbersome and time-consuming process. Moreover, a unanimity rule assumes that the initial situation is equitable, which may be untrue.

5. Point voting would allow voters to indicate their preferences by allocating votes in proportion to how strongly they felt about some issues relative to others. This system is flawed, however, by the potential for strategic behavior, people might not vote their preferences per se, tending instead to weigh their votes according to how they expected others to vote.

6. Voting is a lumpy process; we cannot pick and choose among the political stances taken by the candidates for an office. The market permits us to fine-tune our decisions, but we generally can choose only a single candidate or platform when we vote.

7. Attempts to maximize their chances for election cause candidates and political partiesto try to attract the median voter, whose vote tends to determine the outcomes of elections. Rational ignorance among voters causes many candidates to avoid taking stands on issues while attempting to project a moderate image. Political competition for the support of the median voter causes candidates and parties to cluster around middle-of-the-road positions, and creates pressures for a two-party system.

8. Logrolling occurs when lawmakerstrade votes. This allows legislators to register the intensities of their preferences because they trade votes about which they care little for votes about things which they feel relatively strongly. Logrolling can, however, result in inefficient amounts of pork barrel legislation, which occurs when projects that have primarily local benefits are paid for by a broader taxpaying public.

9. Special interests groups may be over represented because of low voter turnouts, widespread rational political ignorance, and intense lobbying. However, intensities of preference may be better reflected in political decisions because of this overrepresentation.

10. Rent-seeking involves attempts by special interest groups to manipulate government policies for private gain even though the social costs of special laws or regulations would exceed the expected benefits to the interest group that seeks economic rents.

11. The efficiency of most government bureaucracies is hard to measure, and the absence of a profit motivereduces incentives for efficiency in the public sector. Managerial salaries and "perks" are often tied to the numbers of employees supervised and the size of the agency budget, which leads to empire building and further growth of government. (3545 digits)