Public Economy

Read this chapter as it explains public choice theory and how the rational voter conducts cost-benefit analyses of public issues. Be sure to click through to read sections 18.1 to 18.3.

6. Key Concepts and Summary

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.

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 a lot of 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.

Pork-barrel spending is defined 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.

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 and the specific strengths and weaknesses of government, rather than making the easy but wrong assumption that either the market or government is always beneficial or always harmful.