NOMINAL GROSS DOMESTIC PRODUCT: The total market value, measured in current prices, of all goods and services produced within the political boundaries of an economy during a given period of time, usually one year. The key is that nominal gross domestic product is measured in current, or actual prices; the prices buyers actually pay for goods and services purchased. Nominal gross domestic product is also termed current gross domestic product.
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Voting is a key source of government inefficiency because it can fail to provided leaders with a valid indication of society's preferences. Part of the inefficiency rests with utility-maximizing decisions of the voters, who choose rational ignorance (not to be informed) and rational abstention (not to participate), both of which lead to voter apathy and influential special interest groups. Part of the inefficiency rests with the voting process, which results in importance of the median voter, inconsistency of the voting paradox, and logrolling (vote-trading ) among voters. Voting is the primary method of making collective decisions in a representative democracy. It is used to elect political leaders and to select government policies. It is the primary method that members of society have of making their preferences known to government decision makers.
However, it is also a source of government inefficiency. Voting does not necessarily reveal society's preferences to government leaders. If such preferences are not known, then leaders cannot implement policies in an efficient, preference-addressing fashion.
One set of voting problems arise from rational, utility maximizing decisions made by prospective voters. They might rationally choose not acquire information about a candidate or issue because the cost exceeds the benefit, what is termed rational ignorance. Or they might choose not to participate in an election because, once again, the cost exceeds the benefit, what is termed rational abstention.
Another set of problems arise from the voting process itself. In a majority-rules election, the median voter determines the outcome, meaning the preferences of other voters can be ignored. The voting paradox arises because voting by three or more people does not necessarily achieve a consistent ranking of preferences. And logrolling or vote trading among voters, especially in legislative bodies, can lead to the approval of actions contrary to the preferences of society.
Voter ApathyAs utility maximizers, people might choose not to know about, or participate in, the political process. When people follow this rational path the result is what can be termed voter "apathy." If so, then politicians can take actions that do not reflect the preferences of ALL of society. This is bound to generate an inefficient allocation of resources.
Voters are, after all, human beings who make choices that maximize utility. In the same way consumers (people) seek to maximize utility when making purchases and workers (also people) seek to maximize utility when making employment decisions, voters (people once again) seek to maximize utility when making voting choices.
As utility maximizers, people (consumers, workers, voters) rationally choose those activities that generate the most satisfaction, that provide the greatest benefits over costs. Two choices are particularly important for the study of public choice and the inefficiency that is attributable to the voting public -- rational ignorance and rational abstention.
The problem with this rational voter apathy is that political leaders do not necessarily know nor need to account for the preferences of every member of society.
- Rational Ignorance: Rational ignorance is the decision NOT to become informed about a topic (such as what a political candidate wants to do) because the cost of acquiring the information is more than the expected benefit. Acquiring information is comparable to the production and consumption of any good, it incurs an opportunity cost and it provides a benefit. People compare the benefit of acquiring information with the cost. If the cost exceeds the benefit, then there is no effort to obtain the information. People rationally choose to remain ignorant.
- Rational Abstention: Rational abstention is the decision NOT to do something (such as vote in an election) because the cost of taking the action is more than the expected benefit. The act of political participation, including voting in an election, is also like the production of any good, it too incurs an opportunity cost and provides a benefit. People rationally compare the benefit of political participation with the cost. If the cost exceeds the benefit, then there is no effort to participate, including voting. People rationally choose to abstain from political participation. People rationally choose not to vote.
With markets, preferences are indicated by the prices buyers are willing to pay. Resources are allocated to the production of goods with the highest prices and thus which provide the most satisfaction. That's a recipe for efficiency.
However, with this rational voter apathy, preferences are not necessarily known. Politicians do not know the best way to allocate resources. They do not know which goods provide the most satisfaction. That's a recipe for inefficiency.
Rational ignorance and rational abstention by some members of society opens the door for other members to be more informed and more activity in the political process. Those who rationally choose this path often do so through what are termed interest groups. An interest group, or special interest group, is a group of people with share interests, who have more to gain or lose from some candidate, issue, or policy and thus try extra hard to ensure that the political system is aware of their preferences.
Because an interest group has more to gain or lose from particular government actions, they are also likely to be more involved in the political process. They are more likely to vote in elections that affect their interest. They are more likely to actively campaign for candidates and issues. And they are more likely to provide financial support (both legal and illegal). As such, their preferences are likely to have a disproportionately greater influence on the political process. That's also a recipe for inefficiency.
The Voting ProcessThe preferences of society might not be efficiently represented in the political process due to a three additional problems -- the importance of the median voter, the voting paradox, and the trading of votes through logrolling.
- Median Voter: This voting principle, one that is well known by politicians, is that the median voter determines the outcome of an election. The median voter is the one with an equal number of voters on either side of the vote. As such, the vote cast by THE median voter is the deciding vote. However, this median voter's preference might not generate the best, that is, efficient, result.
- Voting Paradox: While the preferences of individuals is what we call transitive and consistent, the preferences of voters might not be consistent. That is, as a group, voters might prefer candidate A to candidate B and candidate B to candidate C, but then prefer candidate C to candidate A. This is not only paradoxical and confusing, it also can be inefficient.
- Logrolling: This is the process in which voters trade votes to ensure the passage of two separate issues neither one of which would receive a majority on its own. This is commonly done in legislative bodies. It's also something that can lead to an inefficient use of resources.
Other Sources of Government FailureVoting problems are not the only source of government failures. Three other noted sources are politicians, interest groups, and bureaucracies.
- Politicians: These are members of society who seek elected offices. Problems and inefficiencies arise because politicians, like all human beings, seek to maximize their own utility. This pursuit can and does conflict with doing what's best for the economy.
- Interest Groups: While some people have little or no involvement in the political process, others have a great deal of involvement. These people, who also seek to maximize utility, have more to gain or lose from particular government actions and are thus motivated to act accordingly, usually by forming special interest groups.
- Bureaucracies: Government policies are usually implemented by complex organizations. Those who work in these bureaucracies are also, you guessed it, utility maximizers. Their pursuit of utility can and does conflict with the efficient implementation of government policies.
VOTING PROBLEMS, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2024. [Accessed: March 2, 2024].
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