POLITIC
AL
ECONO
www.britannica.co
m
INTRODUCTI
ON
Market left on their own do
not always reach a desirable
allocation of resources. When
the market’s outcome is
judged to be either inefficient
or inequitable, there may be a
role for the government to
step in and improve the
situation. However, there is
one fact to consider: the
government is also an
imperfect institution. The field
THE CONDORCET VOTING
PARADOX
Most advanced societies rely on democratic
principles to set government policy. When a
city is deciding between two locations to
build a new park, for example, a simple way
to choose is the majority gets its way. Yet for
most policy issues, the number of possible
outcomes far exceeds two. A new park could
be placed in many possible locations. In this
case, as the 18th -century French political
theorist Marquis de Condorcet famously
noted, democracy might run into some
• The Condorcet Voting
Paradox
For example, suppose there are three possible
outcomes, labeled A, B, and C, and there are three
voter types with preferences shown in the table
below. The mayor of the town wants to aggregate
these individual preferences into preferences for
society as a whole. How should he do it?
The Condorcet paradox teaches two lessons. The
narrow lesson is that when there are more than two
options, setting the agenda (that is, deciding the
order in which items are voted on) can have a
powerful influence over the outcome of a democratic
election. The broad lesson is that majority voting by
itself does not tell us what outcome a society really
ARROW’S
IMPOSSIBILITY
THEOREM
Since political theorists first noticed
Condorcet’s paradox, they have spent
much energy studying existing voting
systems and proposing new ones. For
example, as an alternative to pairwise
majority voting, the mayor of the town
could ask each voter to rank the possible
outcomes. For each voter, 1 point is given
for last, 2 for second to the last, 3 points
for third to last, and so on. The outcome
that receives the most total points wins.
With the preferences in the table above,
outcome B is the winner. This voting
ARROW’S
IMPOSSIBILITY
THEOREM
• Unanimity: If everyone prefers A to
then A should beat B.
B,
• Transitivity: If A beats B, and B beats C,
then A should beat C.
• Independence of irrelevant alternatives:
The ranking between any two outcomes A
and B should not depend on whether some
third outcome C is also available.
• No dictators: There is no person who
always gets his way, regardless of
everyone else’s preferences
ARROW’S
IMPOSSIBILITY
THEOREM
Arrow’s impossibility theorem is a deep
and disturbing result. it does not say that
democracy should be abandoned as a form
of government. But it does say that no
matter what voting system society adopts
for aggregating the preferences of its
members, it will in some way be flawed as
a mechanism for social choice.
THE MEDIAN VOTER
IS KING
Despite Arrow’s theorem, voting is how
most societies choose their leaders and
public policies, often by majority rule. The
next step in studying government is to
examine how governments run by majority
rule work. That is, in a democratic society,
who determines what policy is chosen? In
some cases, the theory of democratic
government yields a surprisingly simple
answer.
THE MEDIAN VOTER
IS KING
Imagine that society is deciding how much
money to spend on some public good, such
as the army or the national parks. Each
voter has his own most preferred budget,
and he always prefers outcomes closer to
his most preferred value to outcomes
farther away. Thus, voters from those who
prefer the smallest budget to those who
prefer the largest can be lined up. The
figure (Figure 5) below is an example. Here
there are 100 voters, and the budget size
THE MEDIAN VOTER
IS KING
Imagine that society is deciding how much
money to spend on some public good, such
as the army or the national parks. Each
voter has his own most preferred budget,
and he always prefers outcomes closer to
his most preferred value to outcomes
farther away. Thus, voters from those who
prefer the smallest budget to those who
prefer the largest can be lined up. The
figure (Figure 5) below is an example. Here
there are 100 voters, and the budget size
THANK
TO EVERYONE PRESENT
YOU
HERE
