18.E: Public Economy (Exercises)

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Key Concepts

18.1 Voter Participation and Costs of Elections

The theory of rational ignorance says voters will recognize that their single vote is extremely unlikely to influence the outcome of an election. As a consequence, they will choose to remain uninformed about issues and not vote. This theory helps explain why voter turnout is so low in the United States.

18.2 Special Interest Politics

Special interest politics arises when a relatively small group, called a special interest group, each of whose members has a large interest in a political outcome, devotes considerable time and energy to lobbying for the group’s preferred choice. Meanwhile, the large majority, each of whose members has only a small interest in this issue, pays no attention.

We define pork--barrel spending as legislation whose benefits are concentrated on a single district while the costs are spread widely over the country. Logrolling refers to a situation in which two or more legislators agree to vote for each other’s legislation, which can then encourage pork-barrel spending in many districts.

18.3 Flaws in the Democratic System of Government

Majority votes can run into difficulties when more than two choices exist. A voting cycle occurs when, in a situation with at least three choices, choice A is preferred by a majority vote to choice B, choice B is preferred by a majority vote to choice C, and choice C is preferred by a majority vote to choice A. In such a situation, it is impossible to identify what the majority prefers. Another difficulty arises when the vote is so divided that no choice receives a majority.

A practical approach to microeconomic policy will need to take a realistic view of the specific strengths and weaknesses of markets as well as government, rather than making the easy but wrong assumption that either the market or government is always beneficial or always harmful.

Questions

1. Based on the theory of rational ignorance, what should we expect to happen to voter turnout as the internet makes information easier to obtain?

2. What is the cost of voting in an election?

3. What is the main factor preventing a large community from influencing policy in the same way as a special interest group?

4. Why might legislators vote to impose a tariff on Egyptian cotton, when consumers in their districts would benefit from its availability?

5. True or false: Majority rule can fail to produce a single preferred outcome when there are more than two choices.

6. Anastasia, Emma, and Greta are deciding what to do on a weekend getaway. They each suggest a first, second, and third choice and then vote on the options. Table $\PageIndex{1}$ shows their first, second, and third choice preferences . Explain why they will have a hard time reaching a decision. Does the group prefer mountain biking to canoeing? What about canoeing compared to the beach? What about the beach compared to the original choice of mountain biking?

	Anastasia	Emma	Greta
First Choice	Beach	Mountain biking	Canoeing
Second Choice	Mountain biking	Canoeing	Beach
Third Choice	Canoeing	Beach	Mountain biking

Table $\PageIndex{1}$

7. Suppose there is an election for Soft Drink Commissioner. The field consists of one candidate from the Pepsi party and four from the Coca-Cola party. This would seem to indicate a strong preference for Coca-Cola among the voting population, but the Pepsi candidate ends up winning in a landslide. Why does this happen?

8. How does rational ignorance discourage voting?

9. How can a small special interest group win in a situation of majority voting when the benefits it seeks flow only to a small group?

10. How can pork-barrel spending occur in a situation of majority voting when it benefits only a small group?

11. Why do legislators vote for spending projects in districts that are not their own?

12. Why does a voting cycle make it impossible to decide on a majority-approved choice?

13. How does a government agency raise revenue differently from a private company, and how does that affect the way government makes decisions compared to business decisions?

14. What are some reasons people might find acquiring information about politics and voting rational, in contrast to rational ignorance theory?

15. What are some possible ways to encourage voter participation and overcome rational ignorance?

16. Given that rational ignorance discourages some people from becoming informed about elections, is it necessarily a good idea to encourage greater voter turnout? Why or why not?

17. When Microsoft was founded, the company devoted very few resources to lobbying activities. After a high-profile antitrust case against it, however, the company began to lobby heavily. Why does it make financial sense for companies to invest in lobbyists?

18. Representatives of competing firms often comprise special interest groups. Why are competitors sometimes willing to cooperate in order to form lobbying associations?

19. Special interests do not oppose regulations in all cases. The Marketplace Fairness Act of 2013 would require online merchants to collect sales taxes from their customers in other states. Why might a large online retailer like Amazon.com support such a measure?

20. To ensure safety and efficacy, the Food and Drug Administration regulates the medicines that pharmacies are allowed to sell in the United States. Sometimes this means a company must test a drug for years before it can reach the market. We can easily identify the winners in this system as those who are protected from unsafe drugs that might otherwise harm them. Who are the more anonymous losers who suffer from strict medical regulations?

21. How is it possible to bear a cost without realizing it? What are some examples of policies that affect people in ways of which they may not even be aware?

22. Is pork-barrel spending always a bad thing? Can you think of some examples of pork-barrel projects, perhaps from your own district, that have had positive results?

23. The United States currently uses a voting system called “first past the post” in elections, meaning that the candidate with the most votes wins. What are some of the problems with a “first past the post” system?

24. What are some alternatives to a “first past the post” system that might reduce the problem of voting cycles?

25. AT&T spent some $10 million dollars lobbying Congress to block entry of competitors into the telephone market in 1978. Why do you think it efforts failed?

26. Occupy Wall Street was a national (and later global) organized protest against the greed, bank profits, and financial corruption that led to the 2008–2009 recession. The group popularized slogans like “We are the 99%,” meaning it represented the majority against the wealth of the top 1%. Does the fact that the protests had little to no effect on legislative changes support or contradict the chapter?

27. Say that the government is considering a ban on smoking in restaurants in Tobaccoville. There are 1 million people living there, and each would benefit by $200 from this smoking ban. However, there are two large tobacco companies in Tobaccoville and the ban would cost them $5 million each. What are the proposed policy's total costs and benefits? Do you think it will pass?