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January 28, 2005

Voting the right way

We now know the question we’ll be asked about the EU constitution. We also know the question will be answered in a bone-headed way - by a simple majority.

To see the problem with this, consider three people: Alan, Bill and Charlie. Alan and Bill vote yes to the constitution and Charlie votes no. Under simple majority rule, we sign up.

But what if Charlie feels strongly about the issue whilst Alan and Bill aren’t so fussed?

Say Charlie would spend £100 to stay out of the constitution whilst Alan and Bill would spend only £20 each to join. Then, in principle, Charlie could give Alan and Bill £25 each to stop them voting. The upshot would be that we’d stay out of the constitution and everyone would be better off. Alan and Bill have made a net gain of £5 each, whilst Charlie has bought £100 of benefit for just £50.

The lesson here is simple and should be well known: majority rule can conflict with utilitarianism. In this sense, the notion of the “national interest” is incoherent; the “national interest” as decided by majority vote isn’t necessarily the “national interest” in the sense of what makes people happier.

There is, though, a simple solution – to use a demand revealing referendum.

It would work as follows. Instead of asking people to say yes or no, we ask them to vote the sum of money they’d pay to sign up or not. In our example, the votes would be:

Alan - £20 to sign up.

Bill - £20 to sign up.

Charlie - £100 to say no.

Then, rather than count votes, we add up the money, and go with the biggest sum. So in this case we stay out.

The next step is crucial. Each voter pays a tax according to whether his vote made a difference. Alan and Bill pay no tax because their vote has not affected the outcome. But Charlie must pay £40 – because had he not voted, our trio would have signed up to the constitution, giving Alan and Bill £40.

Now, there are plenty of arguments against this process. But a lot of them are either silly or arguments against our existing political processes. Here’s what the benefits would be:

1. It reconciles majority rule and utilitarianism by allowing people to reveal the intensity of their preferences.

2. It encourages people to think clearly about the issue. If they vote too large a sum, they risk having to pay a tax. If they vote too small a sum, they risk not getting their way. As Thomas Sowell said, “making people pay is a way of making them think.” (I’ve used this line before – and I’ll keep using it until the message sinks in.)

3. It recognizes that we have obligations to each other. If your preference imposes a cost onto others, it is just as well as efficient that you pay a price for this.

4. It would improve the quality of debate. Picture the scene. A politician is on Newsnight railing against the EU constitution. “Alright”, says Paxo. “How much would you vote to stay out?”

I think these are compelling arguments.

One other thing. Economists have known about these demand-revealing processes for at least 40 years; William Vickrey is credited with their discovery, but some of you might be able to date the idea back to Knut Wicksell. But politicians seem never to question simple majority rule. And they wonder why we hold them in contempt.

January 28, 2005 in Public choice |

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Comments

Can you imagine the hue and cry about democracy for the rich. It would work well on the issue of taxation though :)

Posted by: EU Serf | January 28, 2005 at 01:14 PM

Would tactical voting emerge so that, say, opinion polls told me the rich favoured keeping fox hunting, and roughly how much the average vote was going to be, I could try and vote just below that amount against it, with the hope of being compensated (on an issue I care nothing about) so that rather than being made to think about how much the underlying issue matters, it would just become a game whereby people try to second guess each other and devise the most profitable strategies?

Otherwise, a fine idea. while it would doubtless be presented as democracy for the rich, it would redistribute wealth to the poor if the rich voted against their interests.

Posted by: Paddy Carter | January 28, 2005 at 02:17 PM

actually, scratch that. You only get compensated by the amount you can put up, so on any issue which is worth more to you than you can afford to vote, you'd lose out.

I guess CD you're going to say something about having to assume perfect capital markets.

oh, and while I think of it, of all the reasons there are to hold politicians in contempt, their reluctance to challenge the one-man-one-vote principle is not among them. I can understand why they leave that puppy alone.

Posted by: Paddy Carter | January 28, 2005 at 02:47 PM

I agree with Paddy's last point, if what he means is that the great merit of one-man-one-vote is that it puts an end to all-consuming discussion of what the franchise ought to be, thus releasing politicians'energies for... Let me re-phrase that. I disagree entirely with Paddy; side-tracking pols into endless debate about the franchise, thus precluding them from endless interference in my life, would be a very wonderful thing.

Posted by: dearieme | January 28, 2005 at 03:40 PM

So, in other words, you think the US system of campaign finance would be an improvement compared to the way things are done elsewhere (you can only signal intensity up to a maximum, but there's quite a bit of monetary intensity signaling going on). Speaking as a local participant in that system, I respectfully disagree. It seems to me that our system actively encourages unproductive rent-seeking and "money race" coverage (as opposed to substantive debate). I'll admit (given current circumstances) to be attracted to the idea of a refund for the losers, but, overall, I think our experience shows monetary preference signaling is a deeply flawed idea.

Posted by: Ravi | February 01, 2005 at 12:42 AM

I agree with EU Serf. While the theory is elegant, the real-world difficulties are, well, real. Monetary endowments make a difference, and the wealthy would feel comfortable putting a higher monetary value on their preference because they simply have more money/disposable income. If I only just scrape a living, but really value a 'yes' to the constitution, I may not be able to afford to bid the true value to me for fear that I will actually win!

Posted by: Tim Hicks | May 09, 2005 at 09:49 PM

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