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PublicChoiceIII
This book represents a considerable revision and expansion of Public Choice II
(1989).Sixnewchaptershavebeenadded,andseveralchaptersfromtheprevious
editionhavebeenextensivelyrevised.Thediscussionofempiricalworkinpublic
choicehasbeengreatlyexpanded.Asinthepreviouseditions,allthemajortopics
of public choice are covered. These include why the state exists, voting rules,
federalism, the theory of clubs, two-party and multiparty electoral systems, rent
seeking,bureaucracy,interestgroups,dictatorship,thesizeofgovernment,voter
participation, and political business cycles. Normative issues in public choice
are also examined, including a normative analysis of the simple majority rule,
Bergson–Samuelson social welfare functions, the Arrow and Sen impossibility
theorems,Rawls’ssocialcontracttheory,andtheconstitutionalpoliticaleconomy
ofBuchananandTullock.
Dennis C. Mueller is Professor of Economics at the University of Vienna.
He previously taught for many years at the University of Maryland. Professor
MuelleristheauthorofPublicChoiceII,ProfitsintheLongRun,Constitutional
Democracy, and four other books, in addition to numerous articles in leading
refereedjournals.Heisalsotheeditorofthetwo-volumeTheEconomicsofPolitics
(2001), Perspectives on Public Choice (Cambridge University Press, 1997), and
The Dynamics of Company Profits (Cambridge University Press, 1990), as well
as six other titles. Professor Mueller is a past president of the Public Choice
Society,theSouthernEconomicAssociation,theIndustrialOrganizationSociety,
andEARIE.Hismainresearchinterestscontinuetobeinpublicchoiceandindus-
trialeconomics.
Public Choice III
DENNIS C. MUELLER
UniversityofVienna
Cambridge, New York, Melbourne, Madrid, Cape Town, Singapore, São Paulo
Cambridge University Press
The Edinburgh Building, Cambridge , United Kingdom
Published in the United States of America by Cambridge University Press, New York
www.cambridge.org
Information on this title: www.cambridge.org/9780521815468
© Dennis C. Mueller 2003
This book is in copyright. Subject to statutory exception and to the provision of
relevant collective licensing agreements, no reproduction of any part may take place
without the written permission of Cambridge University Press.
First published in print format 2003
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isbn-13 978-0-511-07350-2 eBook (EBL)
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isbn-10 0-511-07350-X eBook (EBL)
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isbn-13 978-0-521-81546-8 hardback
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isbn-10 0-521-81546-0 hardback
isbn--13 978-0-521-89475-3 paperback
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isbn-10 0-521-89475-1 paperback
Cambridge University Press has no responsibility for the persistence or accuracy of
s for external or third-party internet websites referred to in this book, and does not
guarantee that any content on such websites is, or will remain, accurate or appropriate.
ToAdrienne,Holly,Jacob,andLaurence
Contents
Preface pagexvii
1 Introduction 1
PartI Originsofthestate
2 Thereasonforcollectivechoice–allocativeefficiency 9
2.1 Publicgoodsandprisoners’dilemmas 9
2.2 Coordinationgames 14
2.3 Publicgoodsandchickens 16
2.4* Voluntaryprovisionofpublicgoodswithconstantreturnstoscale 18
2.5* Voluntaryprovisionofpublicgoodswithvaryingsupplytechnologies 22
2.6 Externalities 25
2.7 TheCoasetheorem 27
2.8 Coaseandthecore 30
2.9 AgeneralizationoftheCoasetheorem 32
2.10 DoestheCoasetheoremholdwithoutpredefinedpropertyrights? 34
2.11 Externalitieswithlargenumbersofindividuals 35
2.12 Externalitieswithlargenumbersofindividuals–asecondtime 39
2.13 Experimentalresultsinthevoluntaryprovisionofpublicgoods 40
3 Thereasonforcollectivechoice–redistribution 44
3.1 Redistributionasinsurance 45
3.2 Redistributionasapublicgood 47
3.3 Redistributiontosatisfyfairnessnorms 49
3.4 Redistributiontoimproveallocativeefficiency 51
3.5 Redistributionastaking 53
3.6 IncometransfersintheUnitedStates 56
3.7 Redistributionandthedistributionofincome 58
3.8 Redistributiontospecialinterests 61
PartII Publicchoiceinadirectdemocracy
4 Thechoiceofvotingrule 67
4.1 Theunanimityrule 67
4.2 Criticismsoftheunanimityrule 72
4.3 Theoptimalmajority 74
4.4 Asimplemajorityastheoptimalmajority 76
vii
viii Contents
5 Majorityrule–positiveproperties 79
5.1 Majorityruleandredistribution 79
5.2 Cycling 84
5.3* Themedianvotertheorem–one-dimensionalissues 85
5.4 Majorityruleandmultidimensionalissues 87
5.5* Proofofthemedianvotertheorem–multidimensionalcase 92
5.6 Majorityruleequilibriawhenpreferencesarenotdefinedin
spatialterms 94
5.7* Proofofextremalrestriction–majorityruletheorem 95
5.8 Restrictions on preferences, on the nature and number of issues, and
onthechoiceofvotingrulethatcaninduceequilibria 97
5.8.1 Preferencehomogeneity 97
5.8.2 Homogeneouspreferencesandqualifiedmajorityrules 99
5.8.3 Therelationshipbetweennumbersofissuesandalternatives
andtherequiredmajority 103
5.9 Logrolling 104
5.10* Logrollingandcycling 108
5.11 Testingforlogrolling 109
5.12 Agendamanipulation 112
5.12.1 Agendacontrolinaspatialenvironment 112
5.12.2 Agendacontrolinadivide-the-cakegame 113
5.13 Whysomuchstability? 114
5.13.1 Issuesareindeedofonedimension 115
5.13.2 Votingonedimensionatatime 116
5.13.3 Logrollingequilibria 118
5.13.4 Empiricalevidenceofcycling 120
5.13.5 Experimentalevidenceofcycling 123
6 Majorityrule–normativeproperties 128
6.1 Condorcet’sjurytheorem 128
6.2 May’stheoremonmajorityrule 133
6.3* ProofofMay’stheoremonmajorityrule 135
6.4 TheRae-Taylortheoremonmajorityrule 136
6.5 Assumptionsunderlyingtheunanimityrule 137
6.6 Assumptionsunderlyingthetworulescontrasted 138
6.7 Theconsequencesofapplyingtherulestothe“wrong”issues 140
6.7.1 Decidingimprovementsinallocativeefficiencyviamajorityrule 140
6.7.2 Decidingredistributionbyunanimity 143
6.8 Conclusions 144
7 Simplealternativestomajorityrule 147
7.1 Thealternativevotingproceduresdefined 147
7.2 Theprocedurescompared–Condorcetefficiency 148
7.3 Theprocedurescompared–utilitarianefficiency 151
7.4 TheBordacount 152
7.4.1 Axiomaticproperties 152
7.4.2 TheBordacountandthe“tyrannyofthemajority” 154
7.4.3 TheBordacountandstrategicmanipulation 155
7.5 Approvalvoting 156
7.6 Implicationsforelectoralreform 157
