Voting, or a Price System in a Competitive Market Structure
American Political Science Review, 1970, vol. 64, issue 1, 179-181
In this brief note it is demonstrated that if all the conditions for the existence of a competitive equilibrium are satisfied, then simple majority voting to determine the distribution of goods may be less efficient than a price system.The argument here may be somewhat cryptic for those not familiar with the work of Anthony Downs. A considerably more discursive presentation of the background material is given in â€œA Two Party System, General Equilibrium and the Voters' Paradox.â€ The tax and public goods aspect of the voting problem have been discussed elsewhere in â€œNotes on the Taxonomy of Problems Concerning Public Goods.â€ The result presented here, nevertheless, stands by itself, hence is presented in this brief form.The political system is modeled at its simplest. We assume the existence of two players called â€œpolitical parties.â€ The goal of each player is to win an election by as large a vote as possible. A strategy for each player is to name a policy that it will carry out if it is elected. A policy is any point in the set of feasible distributions of final product. It follows immediately that, although any policy may be considered as a strategy, any non-Pareto optimal policies are dominated by some policy that is optimal. A discussion of the reasons for modeling a party in this simple manner is given in detail elsewhere. It is assumed that all voters are passive or â€œmechanistic,â€ i.e., they do not form groups but merely vote individually, selecting optimally between the two policies offered.
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