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Ch 6 Political Economy 1 Introduction (1). This chapter applies economic principles to the understanding of political decision making, a field known as political economy. (2). Political economy models assume that individuals view government as a mechanism for maximizing their self-interest. 2. Direct Democracy (Unanimity Rules) If a vote were taken on whether to provide an efficient quantity of the good, consent would be unanimous as long as there was a suitable tax system to finance it---- Lindah’s procedure s* r* (1) : the quantity of rockets demanded by Adam where (Adam’s Lindah’s Price) denotes Adam’s share ( % ) of the cost of rocket provision, : the quantity of rockets demanded by Eve where (Eve’s Lindahal’s Price) denotes Eve’s share ( % ) of the cost of rocket provision: where (2) Equilibrium Lindahal’s Price (3).Feasibility of Unanimity Rules—How to reach the equilibrium ? a. An auctioneer announces some initial set of tax shares. b. Each of Adam and Eve votes for the number of rockets they want c. The procedure continues until Adam and Eve unanimously agree on the quantity of the rockets The Problem of Lindah’s Procedure: a. Strategic behavior may prevent Adam and Eve from reaching the Lindahal’s equilibrium. If Adam can guess the maximum amount that Eve would spend for rockets rather than do without them, he can try to force her to that allocation. b. It may take a lot of time to find the mutually agreeable tax shares. Indeed, although unanimity rules guarantee that no one will be “exploited”, they often lead to situations in which no decisions are made. 2.2 Majority Voting Rules ○ Because unanimity is difficult to attain, voting system not requiring it may be desirable. ○With a majority voting rule, one more than half of the voters must favor a measure to gain approval ○Consider a country with three voters, who must have to choose among three levels of missile provision (or 核能發電) The