1. Mehdi Arzandeh, University of Manitoba
PowerPoint Presentation by
Mehdi Arzandeh, University of Manitoba

2. © 2016 McGraw‐Hill Education Limited
Government’s Role and Government Failure 5
Appendix to Chapter 5
Public Choice Theory and Voting Paradox
LEARNING OBJECTIVES
LOA5.1 Explain the difficulties of conveying economic preferences through majority voting.
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3. © 2016 McGraw‐Hill Education Limited
Public Choice Theory
The economic analysis of government decision- making, politics, and elections
Majority voting systems
Difficult to correctly discern voter preferences
Hinders the ability of government to deliver what the voters want
LOA1
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4. © 2016 McGraw‐Hill Education Limited
Revealing Preferences Through Majority Voting
A5.2
Determines the size and scope of government involvement in the economy
Reveals preferences
Results can be inconsistent and imperfect
Presentation order of the choices
Distribution of the costs vs benefits
LOA2
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5. © 2016 McGraw‐Hill Education Limited
Revealing Preferences Through Majority Voting
A5.2
Inefficient Voting Outcome
INEFFICIENT “NO” VOTE
TB > TC
INEFFICIENT “YES” VOTE
TC > TB
Government might fail to improve economic inefficiency of overproduction or underproduction of specific public goods.
LOA2
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6. © 2016 McGraw‐Hill Education Limited
FIGURE A5-1
Inefficient Voting Outcomes
$700
YES
Total benefit = $1150
Total cost = $900
Total benefit = $800
Total cost = $900
Benefit, Tax
Benefit, Tax
$350
$350
YES
YES
$300
$300
$250 NO
$200
In Figure A5.1 (a) Majority “NO” vote wins. The majority vote defeats the proposal. This is an inefficient outcome because TB ($1150) >TC ($900). Too little of this public good will be produced. In Figure A5.1 (b) Majority “Yes” vote wins. This is an inefficient outcome because TB ($800) < TC ($900). The majority vote provides a public good that cost $900 but only delivered $800 in total benefits. NO
$100 NO
Adams
Benson
Conrad
Adams
Benson
Conrad
(a) Inefficient majority “no” vote
(b) Inefficient majority “yes” vote
LOA2
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7. © 2016 McGraw‐Hill Education Limited
Revealing Preferences Through Majority Voting
A5.2
Interest Groups and Logrolling
INTEREST GROUPS
Those who have a strong preference for a public good may band together
POLITICAL LOGROLLING
The trading of votes to secure favourable outcomes
LOA2
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Paradox of Voting
When society cannot rank its preferences consistently through paired-choice majority voting
PREFERENCES
Are determined through paired choice majority voting
VOTING OUTCOMES
May depend on the order in which the votes are taken
Median-Voter Model
LOA3
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TABLE A5-1
Paradox of Voting
LOA3
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10. © 2016 McGraw‐Hill Education Limited
LO4.1
Appendix Summary
LOA5.1 Explain the difficulties of conveying economic preferences through majority voting.
© 2016 McGraw‐Hill Education Limited