Many different inefficiencies of candidates and voters have
been discussed, but let's go back to the inefficiency of majority rule to reiterate some points.
Democracy is regarded as a means for a collective to cause public
goods to be supplied. A democratic government allows consumers
to communicate their demands in a different way-by voting, as
has been discussed. It is almost impossible for majority voting
to result in the optimal supply of a public good. Most voters
will be dissatisfied with the amount that is supplied wanting
either more or less.
Pure public goods should be supplied up to the point that marginal collective benefits equals the marginal cost. Economists tend to identify the most efficient quantity pretty well, but not the most efficient distribution of gain-in that they don't really care who receives the gain. However, people are concerned with distribution. In the case of a large collective, where public goods are supplied by means of a representative democratic national government, the cost burden is in the form of mandatory taxes. How it is divided among members of the collective is decided by the legislator who was elected. Yet, if members of a collective make decisions using simple majority rule will their decisions be efficient in the economic sense?
Assume that a decision about how much
to supply is made by majority rule. Under this, the quantity preferred
by the median voter would win the vote since some would have preferred
more and others less. However, given realistic assumptions, there
will be neither efficiency nor full satisfaction with the quantity
supplied except by coincidence. Under the equal sharing rule,
the size of the member's tax bill
rises with the quantity of the public good supplied. Efficiency
and full satisfaction would be achieved only if all demands were
alike. In this ideal, all voters would be the median voter. The
idea is that once a rule is established, the quantity is chosen
by the median voter. The only way that complete satisfaction with
the collective decision could be achieved is to vary the tax price
to whether a voter-consumer has a low or high demand. Unfortunately,
by definition a rigid rule does not allow this.
Efficiency and satisfaction under an income
tax is another interesting topic. The rational for
having an income tax in the first place is so that people who
would have earned high incomes in the market economy without tax
should pay a higher tax than those who would have earned lower
incomes. However, ideally it is hard to do this since people always
look for ways to avoid the tax. Some can do this better than others.
Defining income also presents a problem. If, for example, income
is defined as money, then people will shift to self-sufficient
activities and barter. They'd try to define it as satisfaction
received from a flow of activities. Of course it then becomes
hard to decide what a fair tax is. They'd have to be able to compare
the value received from various activities. Plus enforcement is
hard to do. They have to know how much someone makes before they
can make a fair assessment of how much income a person should
be taxed on. As mentioned, some people can conceal how much they
make quite well. Furthermore, some people can defend themselves
better than others against the charge of tax evasion. Furthermore,
for some it is more beneficial to evade the taxes than to pay
them-with the help of a good lawyer or bribes. Therefore, not
only can a real tax system not achieve the ideal that is implied
in the concept of an income tax, real-world democratic governments
typically use their tax systems for other purposes. For example,
it has often been found that legislators may set income taxes
lower for families than individuals because those with families
have a stronger voting force to offer. In general, there are quite
a number of things that legislators and other government officials
may do.
The previous ideas demonstrate how simple-majority collective
decisions in the case of a single public good under direct democracy
are almost always inefficient. Collective-decided tax-sharing
schemes would never lead the median voter to choose the optimal
amount of the public good. Both distribution of preferences among
voters and income distribution assure that there is inefficiency
(in the economists' sense of the word). And it was shown that
with majority-rule; collective-decision making can cause goods
to be supplied even though some people, even the majority, may
be harmed by the financial arrangement.
What happens if a simple majority (in a democracy) does not
choose the theoretically efficient quantity of the pure public
good? The possibility of inefficiency means that there can be
gains from trade, thus this is what people would like do to try
to minimize the inefficiencies. If many people are going to gain,
then the incentive to buy the median voter's vote increases, as
does the incentive to block votes by those who might lose out.
Thus as we can see, vote buying may also lead to inefficiencies
of its own (if for example the median voter's quantity desired
was already too large and it was bought by those who wanted more).
However, democracies have laws against buying and selling votes,
as was previously discussed.