Rankings

The paradox is that majority voting does not always provide a clear and consistent picture of the public's preferences. Here the courthouse is preferred to the school and the park is preferred to the courthouse so we would surmise that the park is preferred to the school. But paired-choice voting would show that the school is preferred to the park.

Project B (small reservoir wins) using a paired-choice vote. There is no "paradox of voting" problem here and B is the preference of the median voter. The two voters favoring No reservoir and Levees respectively will prefer Small reservoir -- project B -- to Medium or Large reservoir. The two voters preferring Large reservoir or Medium reservoir will prefer Small reservoir to Levees or No reservoir. The median voter's preference for B will prevail. However the optimal size of the project from an economic perspective is C -- it would provide a greater net benefit to society than B.

The electorate is faced with a small number of candidates each of whom offers a broad range or "bundle" of proposed policies. Voters are then forced to choose the individual candidate whose bundle of policies most resembles their own. The chances of a perfect identity between a particular candidate's preferences and those of any voter are quite slim. As a result the voter must purchase some unwanted public goods and services. This represents an inefficient allocation of resources.

Government bureaucracies do not function on the basis of profit so the incentive for holding down costs is less than in the private sector. Also because there is no profit-and-loss test of efficiency it is difficult to determine whether public agencies are operating efficiently. Nor is there entry of competing entities to stimulate efficiency and develop improved public goods and services. Furthermore wasteful expenditures can be maintained through the self-seeking lobbying of bureaucrats themselves and the public budgetary process can reward rather than penalize inefficiency.

The incidence of an excise tax is likely to be primarily on consumers when demand is highly inelastic and primarily on producers when demand is elastic. The more elastic the supply the greater the incidence of an excise tax on consumers and the less on producers.

The efficiency loss of a sales or excise tax is the net benefit society sacrifices because consumption and production of the taxed product are reduced below the level of allocative efficiency which would occur without the tax. Other things equal the greater the elasticities of demand and supply the greater the efficiency loss of a particular tax.