Week 9 - Voting

Question 1

Political failures

Answer 1

Political failures occur when the actions taken by the government do not maximise a social welfare function and may create inefficiency

Question 2

What is one of the political failures that exist in almost every country?

Answer 2

Corruption.
Moves money to those ppl with “connections” & creates bad incentives

Question 3

4 axioms/agreeable criteria of Arrow’s (impossibility) theorem

Arrow proved that that there is no consistent social welfare function that will ALWAYS respect ALL 4 of his agreeable procedures, thus cannot set up a voting system that can avoid political failures

Answer 3

1. Unrestricted domain - we should be able to apply the reasoning of the SWF to any policy and any type of preferences
2. Non-dictatorship - societal ranking should not be implied by a single person’s ranking
3. Pareto principle - if everyone prefers policy A to policy B the ranking should reflect this (A should be before B)
   > ranking should reflect the preferred policy
4. Independence of irrelevant alternatives (IIA) - the ranking between 2 policies should depend only on the individual preferences over those policies

Question 4

IIA violation

Answer 4

Where one person’s change in ranking would change societal outcome
- If ranking changed due to changing preferences over 1 person, even though the preferences/scores for others didn’t change

> Arrow’s theorem is saying whether Slutskaya skated before or after shouldn’t have flipped the ranking

Question 5

Borda count

Answer 5

• measuring the sum of rankings instead of the intensity of preferences
• there is potential IIA violation but not always

Question 6

Condorcet winner & Condorcet cycle

Answer 6

Condorcet winner - the option that wins the MAJORITY of pairwise comparisons
- if exist, there is a STABLE outcome

If no, we get a Condorcet cycle. No stable outcome.

Question 7

Downsian politics

Answer 7

• About parties deciding where to set up political economies (left vs right) on the spectrum, according to Hotelling’s law
• (strong) assumption that parties only care about winning the election
• Voters will vote for the candidates offering the policy closest to their ideal

Question 8

Median voter theorem

+ its issue

Answer 8

Political parties tend to converge to the middle option b/c there are no profitable deviations that allow them to win the election.
- the median option is the Condorcet winner, Nash equilibrium

Rmb that welfare should be judged based on a Social Welfare Function - it may or may not coincide with what the median voter wants!
eg. groups A and C’s preferences are not considered

Question 9

3 main functions of a government

Answer 9

1. Taxation
2. Regulation
3. Spending