The Interpretation of Voting in the Allocation of Economic Resources

Economists’ interest in collective decision after World War II: a history

“…The Scottish economist Duncan Black likewise proposed the blending of insights from economics and political science into a theory of committee decisions in order to "contribute to the development of the theory of trade-unions, the firm, and the cartel; and to provide the basis for a theory of the equilibrium distribution of taxation or public expenditures" (Black 1948, p. 23). Against the earlier pessimism of Bowen (1943), Black (1948 demonstrated that simple majority voting could yield interesting results for those seeking optimal decisions. Specifically, if individual ordinal preferences are single-peaked, committee decisions following a simple majority rule result in a political equilibrium corresponding to the choice of the median voter.…”

“…Musgrave (1939) initially envisioned an integrated theory of taxes and public expenditures around a voluntary exchange relationship between the individual and the state, but was left to conclude that the idea bore "little practical significance," because individuals were in practice constrained to pay taxes, and because of the underlying competitive price assumption, deemed too unrealistic. In the same vein, Howard Bowen (1943) understood that the optimal provision of public goods required the revelation and aggregation of individual preferences and thought the voting process was "the closest substitute for consumer choice." But in the end he concluded that though the decision of the "modal voter" sometimes approximated the optimum allocation point, overall the majority rule was unreliable, sometimes "hopeless" and "virtually useless."…”

Takeovers and cooperatives: governance and stability in non-corporate firms

“…Say that a cooperative is internally e¢ cient if the level of externalities (direct or pecuniary) it provides for its members satis…es the Samuleson condition for public goods. There is a related result by Bowen (1943) who shows that if the median voter and the mean voter have the same preferences then majority voting will result in e¢ cient provision of public goods. Together the two results imply that a cooperative which is internally e¢ cient, can only be taken over when it is socially desirable in the sense that the raider increases the total surplus.…”

Demand for public landscape management services: Collective choice-based evidence from Swiss cantons

“…The most prominent specification of local fiscal choice is the median voter model proposed by Bowen (1943), conceptually enriched by Downs (1957) and first used for theory-based econometric analysis by Barr and Davis (1966), Borcherding and Deacon (1972) and Bergstrom and Goodman (1973). In its empirically most useful form, the median voter model hypothesizes a given tax schedule and a single public service for which consumer-voters have single-peaked preferences.…”