MODELS OF PERFECT COMPETITION AND PURE DEMOCRACY*

Bruno Frey

Kyklos, 1970, vol. 23, issue 4, 736-755

Abstract: In the ‘Economic Theory of Politics’ the model of pure democracy has the same importance as the model of perfect competition in economic theory. The author shows that both ‘ideal’ models use almost identical assumptions with respect to social actors (vote‐, profit‐, and utility‐maximizers) and social states. Both guarantee a Pareto‐optimal allocation of resources. In the equilibrium of a two party democracy the same programs are advanced and put into reality. It follows that in equilibrium (and only there) nobody votes. Extensions of the simple two‐party model to include various parties and induced preferences of voters by the parties destroy some of the simple results: sometimes no equilibrium exists, it is unstable or does not conform to observations of reality. Finally, democracy's allocation with generally more equal distribution of income than through the price system, is destroyed when the declamatory assumption of ‘one man—one vote’ is given up and the inequality of political starting positions is taken account of.

Date: 1970
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