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econ434notes37b

econ434notes37b - Econ 159 Public Choice The fundamental...

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11/21/05 Econ 159 Public Choice The fundamental problem of a democratic system is that there are winners and losers. This can lead to inefficient outcomes. For example, the majority can impose proposal Y upon the minority, even though there exist other options which would increase overall utility by a larger amount. Proposal X FAILED Individual Benefits Tax Cost Votes Note that proposal X failed A 700 400 yes even though it provided B 600 400 yes more overall utility than C 350 400 no proposal Y. D 375 400 no E 275 400 no Total 2300 2,000 2 yes, 3 no Proposal Y PASSED Individual Benefits Tax Cost Votes A 425 400 yes B 575 400 yes C 450 400 yes D 150 400 no E 100 400 no Total 1700 2,000 3 yes, 2 no The policies of a majority ruled system could change often, making the system less stable. Unanimity- The use of unanimity voting can ensure a more efficient outcome by ensuring that all parties benefit from the passage of the legislation. It prevents exploitation of the minority but it also gives the minority a disproportionate amount of power. However, it is obviously very difficult to pass bills in a unanimity situation.
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