Voting, Vote-Selling, and Externalities

I found Mankiw’s posting very interesting. Too bad he doesn’t want to hear a compliment thrown his way. Should he be reading this blog I thought I would share the following with him which accepts his challenge to use this approach in a variety of useful ways. Anyway, the following three scenarios pretty much illustrates the phenomena of earmarks pretty well.

Enjoy …

A better example would be to introduce two public goods that were identical except for the beneficiaries. The first illustration shows why an earmark in isolation will not prevail but multiple earmarks will. The following summary table of the benefit-cost analysis shows the impact of log-rolling with earmarks.

Scenario #1: Andy tries to get his self-serving earmark projects funded but must get a majority vote.

Andy Ben Carl Public

Cost -3 -3 -3 -9
Benefit 8 0 0 8
Net benefit (cost) 5 -3 -3 -1
Vote (1=yes;-1=no) 1 -1 -1 1,-2 [failed]

Scenario #2: Andy and Ben conspire to get their respective self-serving projects passed at the expense of Carl.

Andy Ben Carl Public

Cost of A -3 -3 -3 -9
Cost of B -3 -3 -3 -9
Benefit of A 8 0 0 8
Benefit of B 0 8 0 8
Net benefit (cost) 2 2 -6 -2
Vote (1=yes;-1=no) 1 1 -1 2,-1 [passed]

Scenario #3: Now visualize this process on a grand scale where all three have their own earmarked projects and each “interest group” only myopically sees the benefit of their beneficial earmark and does not appreciate the cost to them of other earmarks. This will benefit the representatives who are “bringing home the bacon,” at the expense of the myopic voters. This benefit will be called “Myopic benefit.”

Andy Ben Carl Public

Cost of A -3 -3 -3 -9
Cost of B -3 -3 -3 -9
Cost of C -3 -3 -3 -9
Myopic Cost of A -3 0 0
Myopic Cost of B 0 -3 0
Myopic Cost of C 0 0 -3
Benefit of A 8 0 0 8
Benefit of B 0 8 0 8
Benefit of C 0 0 8 8
Net benefit (cost) -1 -1 -1 -3
Net myopic benefit (cost) 2 2 2 6
Vote (1=yes;-1=no) 1 1 -1 3,0 [passed]

p.s. Greg its sad that you had to do what you had to do and I totally understand. Just remember there are hoards of people like myself that appreciate what you bring to the table. I only wish people could be more civil and appreciative.

I think the more important point that Bastiat makes is that if law is what it should be, the question of selling votes resolves itself. He argues that we can have a ruling class where a few plunder the many, a democracy where everyone votes to plunder everyone else or keep the law as it should be and no one plunders anyone. Only the third choice gives us the liberty we desire.

Bastiat’s vision is amazing. Thanks for the link!

You might argue that vote-selling merely allows the Coase theorem to function, such that the typical externalities from voting are more likely to be internalised. Unfortunately, the effect is likely to be somewhat selective internalisation (depending on who can pay), and you could easily set up a prisoners’ dilemma type model to generate the result that, while it may be in individuals’ interests to sell their votes (defect), they would collectively do better if they didn’t. The reason this could occur is precisely because of externalities that aren’t taken into account in the choice to sell your vote.

If you’re afraid of vote-selling, you should be afraid of voting. But that doesn’t mean you shouldn’t be more afraid of voting and vote-selling together. Or that there are better alternatives to voting.

In addition, there may actually be a reasonable argument that there are additional externalities in vote selling: it reduces the independence of the signals sent by voting, which is one of the conditions for things like the Condorcet jury theorem to go through.

Corporations buy and sell votes by definition. Why are the externalities ignored for corporations?

Bastiat may want to restrict the franchise, but the end result, at best, would be more efficient vote selling.

I would acknowledge democracy to be a vote selling process, and make it as easy as possible for individual citizens to sell their vote.

Vote selling should assure the most economically efficient government, over long integration times.

The question posed was

If you economists are so in favor of voluntary exchange, would you extend that conclusion to letting a person sell his right to vote to another person?

but it is not exactly a choice between allowing and disallowing a voluntary exchange: it is impossible to sell a vote, with no need for any sort of coercive power, as long as no proof of individual votes are ever generated. Certainly a market will be generated by changing this situation, but it seems silly to suppose that economists (free- or of any other kind) are in favor of creating any and all markets possible.

I hereby refute a few misunderstandings. Nay, they refute themselves:

“One of the biggest problems with democracy is that the votes of stupid or uninformed citizens count just as much as the votes of the intelligent and informed citizens. ”

becomes

One of the biggest problems with free markets is that the purchases of stupid or uninformed consumers count just as much as the purchases of the intelligent and informed consumers.

and

“I don’t remember where I first read about this idea, but I support voter tests at the polls. Voters who fail to answer simple questions about the candidates or referendums cannot vote in the relevant elections.”

becomes

I don’t remember where I first read about this idea, but I support consumer tests at the shopping mall. Consumers who fail to answer simple questions about the products or services cannot purchase in the relevant market.

Both voting and behavior in free markets have externalities.

I look forward to the day when the intelligent high IQ people can care for everyone else. Utopia here we come.

If all exchanges that had externalities were banned, there would be no exchanges. Externalities are unavoidable. Any extant government has externalties too. I challenge Mankiw to come up with a system that does not.