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Chapter 5: Q3. (page 114)

鈥淢ajority voting ensures that government will produce only those public goods for which benefits exceed costs.鈥� Discuss.

Short Answer

Expert verified

Majority voting sometimes leads to the production of goods whose overall benefits are less than the costs or rejection of goods whose overall benefits are more than the costs due to the majority supporting or rejecting the production of the goods, respectively.

Step by step solution

01

Meaning of majority voting 

Majority voting is a technique adopted by the government to know people's preference for the public good. In this, people vote in either 鈥測es鈥� or 鈥渘o.鈥�

People vote according to their self-interest so that their economic welfare can enhance, that is, a person will say yes to producing a good if the benefit received by him/her exceeds the amount he/she is paying as a cost of production.

02

Explanation for the statement

In practice, majority voting might not lead to an increase in the overall economic welfare. Hence, there is a possibility that a public good is wrongly accepted or rejected through majority voting. This can be explained using an example.

Suppose there are three people in the society, say A, B, and C, who have to decide if a particular public good should be produced or not. The taxes are used to fund the production. The government charges $200 as a tax from each person, so the total cost is $500. A鈥檚 benefits are $600, B鈥檚 are $150, and C鈥檚 are $100. The total benefit from producing the good is $850.

Here, the total benefit ($850) exceeds the total cost ($600), but two out of three people would say no to this public good as their own benefits are less than the cost they are paying. Hence, the overall economic welfare is not considered, and the production of the said public good will not happen.

Thus, the statement is false.

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Most popular questions from this chapter

Look back at Figures 5.2a and 5.2b, which show the costs and benefits to voters Garcia, Johnson, and Lee of two different public goods that the government will produce if a majority of voters support them. Suppose that Garcia, Johnson, and Lee have decided to have one single vote at which the funding for both of those public goods will be decided simultaneously.

a. Given the $300 cost per person of each public good, what are Garcia鈥檚 net benefits for each public good individually and for the two combined? Will she vote yes or no on the proposal to fund both projects simultaneously?

b. What are Lee鈥檚 net benefits for each public good individually and for the two combined? Will she vote yes or no on the proposal to fund both projects simultaneously?

c. What are Johnson鈥檚 net benefits for each public good individually and for the two combined? Will he vote yes or no on the proposal to fund both projects simultaneously鈥攐r will he be indifferent?

d. Who is the median voter here? Whom will the two other voters be attempting to persuade?

Political advertising is often directed at winning over so-called swing voters, whose votes might go either way. Suppose that two political parties鈥攖he Freedom Party and the Liberty Party鈥攄isagree on whether to build a new road. Polling shows that of 1,000 total voters, 450 are firmly for the new road and 450 are firmly against the new road. Thus, each party will try to win over a majority of the 100 remaining swing voters.

a. Suppose that each party spends $5,000 on untargeted TV, radio, and newspaper ads that are equally likely to reach any and all voters. How much per voter will be spent by both parties combined?

b. Suppose that, instead, each party could direct all of its spending toward just the swing voters by using targeted social media ads. If all of the two parties鈥� combined spending is targeted at just swing voters, how much will be spent per swing voter?

c. Suppose that only the Freedom Party knows how to target voters using social media. How much per swing voter will it be spending? If at the same time the Liberty Party is still using only untargeted TV, radio, and newspaper ads, what portion of its total spending is likely to be reaching the 100, swing voters? How much per swing voter does that portion amount to?

d. Looking at your answers to part c, how much more per swing voter will the Freedom Party be spending than the Liberty Party? If spending per swing voter influences elections, which party is more likely to win?

What is rent-seeking, and how does it differ from the kinds of profit maximization and profit-seeking that we discussed in previous chapters? Provide an actual or hypothetical example of rent seeking by firms in an industry, by a union, or by a professional association (for example, physicians, school teachers, or lawyers). Why do elected officials often accommodate rent-seeking behavior, particularly by special-interest groups located in their home states?

Use the distinction between the characteristics of private goods and public goods to determine whether the following should be produced through the market system or provided by government: (a) French fries, (b) airport screening, (c) court systems, (d) mail delivery, and (e) medical care. Explain your answers.

We can apply voting paradoxes to the highway construction example of Table 5.2. Suppose there are only five people in a society, and each favors one of the five highway construction options listed in Table 5.2 (鈥淣o new construction鈥� is one of the five options). Explain which of these highway options will be selected using a majority paired-choice vote. Will this option be the optimal size of the project from an economic perspective?

Plan
Total cost of project (\()
Marginal cost (\))
Total Benefit
Marginal Benefit
Net Benefit (TB-TC)
No new construction
0-0--
A: Widen existing highways
5050200200150
B: New 2-lane highways
14090350150210
C: New 4-lane highways
240100470120230
D: New 6-lane highways
620380580110-40
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