class: center, middle, inverse, title-slide # 3.3: Voting III: Democracy<span class="math inline"><em></em>²</span>? ## ECON 410 · Public Economics · Spring 2020 ### Ryan Safner<br> Assistant Professor of Economics <br> <a href="mailto:safner@hood.edu"><i class="fa fa-paper-plane fa-fw"></i> safner@hood.edu</a> <br> <a href="https://github.com/ryansafner/publicS20"><i class="fa fa-github fa-fw"></i> ryansafner/metricsf19</a><br> <a href="https://publicS20.classes.ryansafner.com"> <i class="fa fa-globe fa-fw"></i> publicS20.classes.ryansafner.com</a><br> --- # The Story So Far .pull-left[ - .hi-purple[Pure democracy] (majority rule) is .hi-purple[indeterminate] - .hi[Condorcet's Paradox]: cycling from 3+ choices, 3+ voters, and disagreement - .hi[Arrow's Impossibility Theorem]: no non-dictatorial rule can efficiently and fairly determine a group choice - .hi-purple[Agenda control] & .hi-purple[strategic voting] ] .pull-right[ .center[  ] ] --- # The Story So Far .pull-left[ - Democracy devolves into .hi[dictatorship] or institutions are created to .hi-purple[restrict choice] - .hi[Constitutional republics]: limit domain of what may be voted on - Real world electoral systems reduce effective choices to 2 - First-Past-The-Post: **Duverger's Law** `\(\implies\)` two political parties - Parliamentary: "government" vs. "opposition" ] .pull-right[ .center[  ] ] --- # The Story So Far .pull-left[ - Voters imperfectly vote for a candidate closest to their preferences - Voters have poor incentives `\((MC>MB)\)` to inform themselves or to vote for the *best* candidate - Good governance is a public good with .hi-purple[free rider problem] - .hi[Rational ignorance] - .hi[Rational irrationality] ] .pull-right[ .center[  ] ] --- # Radical Markets .pull-left[ .pull-left[ .center[  Eric Posner ] ] .pull-right[ .center[  Glen Weyl ] ] ] .pull-right[ .smaller[ 2018, *Radical Markets: Uprooting Capitalism and Democracy for a Just Society* - A series of proposals to make markets and democracy more free and efficient, but also more equal and just - too much inequality and market power right now - Argued economically, often market-like proposals - mechanism design, game theory ] ] --- # What's Wrong With 1P1V? .pull-left[ - The bedrock of democracy is the idea of .hi[One person, one vote (1p1v)] - Everyone has equal voice in the outcome - Used to argue for extending the franchise to women, African Americans, etc - Constitution requires representation in Congress apportioned to population ] .pull-right[ .center[  ] ] --- # What's Wrong With 1P1V? .pull-left[ - .hi-purple[Tyranny of the majority]: unprotected minorities can get trampled on by the majority - Persistent minorities view system as illegitimate, turn to other means of resistance - secession, riots, violence ] .pull-right[ .center[  ] ] --- # What's Wrong With 1P1V? .pull-left[ - U.S. only started protecting a lot of abused minorities in 20^th century - Mostly result of federal court cases - Not very democratic! Unelected, unaccountable life-long judges - Seem to rely on preferences of judges ] .pull-right[ .center[  .smallest[Federal troops protecting the "Little Rock Nine" during racial integration of schools.] ] ] --- # What's Wrong With 1P1V: Ordinality .pull-left[ - Voting systems give equal weight to preferences by person - No way to differentiate **preferences** or **intensities** - Only .hi-purple[ordinal rankings]: `\(A > B\)` or `\(A < B\)` - An indifferent, lethargic majority, can outvote a passionate minority ] .pull-right[ .center[  ] ] --- # Cardinality: In Markets .pull-left[ - In markets, not only more choices, but can indulge **intensity** of your preferences - If you *want* 4 more cookies, you can buy 4 more cookies - Goods flow to those that value them the most, willing to pay the most ] .pull-right[ .center[  ] ] --- # From Markets to Politics .pull-left[ - But we can't easily transfer market mechanisms to collective choices - .hi-purple[Free rider problem] of voting and informing oneself - Voters with the strongest preferences can just try to "buy" the most votes ] .pull-right[ .center[  ] ] --- # From Markets to Politics .pull-left[ - Olson: .hi-purple[smaller, more passionate groups can better organize than large, apathetic groups] - most people don't know (or care) about bank regulation, nuclear power, emissions standards - rational ignorance - Special interest groups have a strong incentive to capture the democratic process - rational: high level of participation ] .pull-right[ .center[  ] ] --- # Getting the Price Right .pull-left[ - In markets, the .hi-purple[cost of acquiring more goods is proportional to how much you want them] - Again, for 4 more cookies, pay 4x the price of one ] .pull-right[ .center[  ] ] --- # Getting the Price Right .left-column[ .center[  .smallest[ William Vickrey 1914-1996 Economics Nobel 1996 ] ] ] .right-column[ - Work on .hi-purple[auctions] and .hi-purple[auction theory] - Auction's goal: get item to the person who values it the most ] --- # Getting the Price Right .left-column[ .center[  .smallest[ William Vickrey 1914-1996 Economics Nobel 1996 ] ] ] .right-column[ - Turns out, more important to get the .hi-purple[winner to pay the price that compensates for the cost that they create] - Other bidder cannot get the item - .hi[Vickrey] or .hi[Second-price auction]: Winner pays the bid of the second-highest bidder - Markets, in general: prices reflect opportunity cost of next best alternative use - What somebody else is willing to pay for a different use ] --- # Getting the "Voting Price" Right: A Hypothetical for Intuition .pull-left[ <img src="3.3-slides_files/figure-html/unnamed-chunk-2-1.png" width="504" style="display: block; margin: auto;" /> ] .pull-right[ - Suppose society votes to zone land for cattle ranching, optimum at A ] --- # Getting the "Voting Price" Right: A Hypothetical for Intuition .pull-left[ <img src="3.3-slides_files/figure-html/unnamed-chunk-3-1.png" width="504" style="display: block; margin: auto;" /> ] .pull-right[ - Suppose society votes to zone land for cattle ranching, optimum at A - But more ranching imposes a cost on Farmer Frank (Cows eat his crops) - Without Frank, optimal ranching is at A. - But with him, .hi-red[social cost] increases, moving social optimum back to B. ] --- # Getting the "Voting Price" Right: A Hypothetical for Intuition .pull-left[ <img src="3.3-slides_files/figure-html/unnamed-chunk-4-1.png" width="504" style="display: block; margin: auto;" /> ] .pull-right[ - In some sense, Frank imposes an externality on society for reducing its ranching from A to B - Frank should have to "pay" for the additional external cost imposed, which is the area of the **DWL triangle** ] --- # Getting the "Voting Price" Right: A Hypothetical for Intuition .pull-left[ <img src="3.3-slides_files/figure-html/unnamed-chunk-5-1.png" width="504" style="display: block; margin: auto;" /> ] .pull-right[ - What if the cost to Frank is actually larger? - .hi-purple[Area of DWL triangle grows in size with the *square* of the reduction in quantity] - More valuable land (.hi-blue[higher MSB]) is prevented from becoming farmland - Value of lost farmland is *increasing* as more farmland is being lost! ] --- # From Prices to Votes .pull-left[ .center[  ] ] .pull-right[ - But this ruling is going to be determined by **votes**, not market prices or transactions - Under 1p1v, marginal cost of "buying" votes is constant - Those that care very much try to buy all the votes - Cost per vote to them is too low - Those that don't care very much - Cost per vote to them is too high ] --- # From Prices to Votes .pull-left[ .center[  ] ] .pull-right[ - Posner & Weyl's proposal: .hi["Quadratic Voting"] 1. What if people could "buy" votes to spend on an issue 2. The total cost of buying votes should increase **quadratically** - i.e. cost of `\(n\)` votes is `\(n^2\)`; or - most votes you could buy with `\(x\)` is `\(\sqrt{x}\)` ] --- # Quadratic Cost Structure .pull-left[ .smallest[ | Votes | Total Cost | Marginal Cost | |------:|-----:|--------------:| | 1 | 1 | - | | 2 | 4 | 3 | | 3 | 9 | 5 | | 4 | 16 | 7 | | 5 | 25 | 9 | | 6 | 36 | 11 | | 7 | 49 | 13 | | 8 | 64 | 15 | | 9 | 81 | 17 | | 10 | 100 | 19 | ] ] .pull-right[ - Unlike 1p1v, .hi-purple[Marginal cost of additional vote increases proportionate to the number of votes cast] ] --- # Proposed Benefits of Quadratic Voting .pull-left[ - Get a better indication of people's preferences - Reduces strategic voting, cycling, free-rider problem - More of an incentive to inform oneself - have one's votes count proportionate to degree of interest - .hi-purple[A passionate minority can now outvote an indifferent majority] - Is that what we want?? ] .pull-right[ .center[  ] ] --- # How Might it Work? .pull-left[ - Imagine each person is given a budget of "voice credits" `\(Q\)` per year (e.g. 100 `\(Q)\)` - For each issue, individual can expend `\(x\)` `\(Q\)`-credits to cast `\(\sqrt{x}\)` votes - `\(Q\)`-credits "rollover" if not spent on issues - Can save credits for issues you care more about ] .pull-right[ .center[  .smallest[ Screenshot from ["Collective Decision Engines"](https://collectivedecisionengines.com/index.html) ] ] ] --- # How Might it Work? .pull-left[ - Each person can cast as many votes as desired **FOR** and **AGAINST** any proposal - If total votes For `\(>\)` total votes Against, resolution passes (and vice versa) ] .pull-right[ .center[  .smallest[ Screenshot from ["Collective Decision Engines"](https://collectivedecisionengines.com/index.html) ] ] ] --- # How Might it Work? .pull-left[ - Multiple option voting: - Have a default option - People can cast as many votes FOR and AGAINST as many options as they want - If any option gets the most votes, enacted - If no option gets most votes, default option enacted ] .pull-right[ .center[  .smallest[ Screenshot from ["Collective Decision Engines"](https://collectivedecisionengines.com/index.html) ] ] ] --- # Interest in Quadratic Voting Beyond Politics .center[  ]