econ434notes37a

econ434notes37a - 50:50 distribution may be preferred on...

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Wicksell Voting- median voter model Contract Curve -any trade must make someone worse off U x A A U y x y MUa MUa Pa ------ (E) = ------ (M) = ---- MUb MUb Pb Efficiency types: Allocative efficiency right mixture of goods Technical efficiency: lowest cost Distributive: goods are going to the right people What should be done if you are operating at an inefficient point? Swap goods back and forth or change the mixture of goods. However, it is possible that one party could gain all the utility at the expense of the other.
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Majority Voting System Problem: democratic majority can easily vote against minority loss for minority Note: perfect information in conjunction with perfect utility on production possibilities frontier Social indifference curve : Example: 99:1, 50:50, 1:99 All three distributions are efficient (multiple equilibriums are present), however, the
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Unformatted text preview: 50:50 distribution may be preferred on the basis on non-economic measures, such as fairness. James Buchanan -We are unable to come up with results based criteria; all we can do is come up with fair procedures.-What is necessary in order to establish fair procedures: rules of law established in constitution, once laws are in place let it run Problem: Whose stuff is it anyways? Example: Civil War, slaves have nothing, making it impossible to come up with a constitution from scratch that ignores the effects of history. Another problem: perfect procedures can be in place, but can end up producing an outcome that people dislike. Question: Is voting intrinsically a case where some people would lose and others would win?...
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econ434notes37a - 50:50 distribution may be preferred on...

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