1、CHAPTER 6Political EconomyCopyright 2010 by the McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin6-2Direct Democracy-Unanimity Rulesr per year00Adams share (SA)Eves share (SE)DrAThe Lindahl ModelDrEr*S*6-3Feasibility of Unanimity Rules Reaching equilibrium Practical problems Strategi

2、c behavior Time to reach equilibrium6-4Direct Democracy-Majority Voting Rules Majority voting rule one more than half of the voters must favor a measure for it to be approved VoterChoiceBradJenAngelinaFirstACBSecondBBCThirdCAA6-5Direct Democracy-Majority Voting RulesVoting Paradox community preferen

3、ces can be inconsistent even though individuals preferences are consistentAgenda Manipulation process of organizing order of votes to ensure a favorable outcomeCycling when paired voting on more than two possibilities goes on indefinitely without a conclusion ever being reached VoterChoiceBradJenAng

4、elinaFirstACBSecondBACThirdCBA6-6Graphing PreferencesMissilesUtilityABCBradJenAngelinaSingle-peaked preferencesDouble-peaked preferences6-7Practical Importance of Double-Peaked Preferences Availability of private substitutes Issues ranked along single dimension6-8Direct Democracy - The Median Voter

5、TheoremVoterExpenditureDonald$5Daisy100Huey150Dewey160Louie7006-9Direct Democracy - Logrolling IVoterProjectMelanieRhettScarletTotal Net BenefitsHospital200-50-5595Library-40150-3080Pool-120-604002206-10Direct Democracy - Logrolling IIVoterProjectMelanieRhettScarletTotal Net BenefitsHospital200-110-

6、105-15Library-40150-120-10Pool-270-140400-106-11Direct Democracy - Arrows Impossibility Theorem “Reasonable” collective decision-making criteria It can produce a decision whatever the configuration of voters preferences It must be able to rank all possible outcomes It must be responsive to individua

7、ls preferences It must be consistent Independence of irrelevant alternatives Dictatorship ruled out Arrows Impossibility Theorem All conceivable voting schemes have some potential for being unfair or producing a paradoxical result Meaning of theorem consistent rule not necessarily impossible to find

8、, but cannot be guaranteed Buchanans critique Use of social welfare functions6-12Representative Democracy - Elected PoliticiansNumber of VotersLiberalConservative6-13Implications of the Median Voter Model Two-party systems tend to be stable Replacement of direct referenda by representative system ha

9、s no effect on outcomes6-14Other Factors Influencing Voting Single-dimensional rankings Ideology Personality Leadership Decision to vote6-15Representative Democracy-Public Employees Function of bureaucrats Goals of bureaucrats6-16Niskanens Model of BureaucracyQ per year$0VCQ*EfficientoutputQbcActual

10、output6-17Representative Democracy Special Interests What are “Special Interests”? Establishment of Special Interest Groups Source of Income: Capital or Labor Size of Income Source of Income: Industry of Employment Region Demographic and Personal Characteristics6-18Representative Democracy Rent-Seek

11、ingtons of peanuts per year$S=MCDMRRents6-19Representative Democracy Other Actors Judiciary Journalists Experts6-20Explaining Government Growth Citizen PreferencesG = f(P, I) Marxist View Chance Events Changes in Social Attitudes Income Redistribution6-21Controlling Government Growth Government grow

12、th as a non-issue Government growth as a problem Commitments made in the past Basic flaws in the political system6-22Improving the Workings of the Political System Change bureaucratic incentives Financial incentives Privatization Change Fiscal Institutions Budget Enforcement Act (BEA) 1990 Balanced

13、Budget rules at the state level Institute Constitutional Limitations Balanced Budget amendment6-23Provisions of a Typical Balanced Budget Amendment1.Congress must adopt a budget statement “in which total outlays are no greater than total receipts”2.Total receipts may not increase “by a rate greater than the rate of increase in national income”3.“The Congress and President shallensure that actual outlays do not exceed the outlays set