James Buchanan and Gordon Tullock
(1962), who, as I have said, have both studied this
issue in depth, discuss the collective decision-making process.
If you were a member of the collective you would want to elect
the most knowledgeable and trustworthy politician because you
want them to make decisions on your behalf. However, you also
want politicians who will make judgements that you personally
agree with, even if they will harm others. External costs of collective
decision making can therefore exist so that harm is felt by individuals
due to collective decisions that are against their interests.
Buchanan and Tullock said that when we think about all of the
members of a collective, it's possible that, without proper rules,
the sum of these costs will outweigh the public good benefits.
Buchanan and Tullock focused on the size of the majority needed
to make a collective decision. To reduce external costs they suggested
that members make a constitution that requires laws to be approved
by a larger majority than 50%--even to the point of having to
have unanimous consent (at this point the external cost would
be zero). Unfortunately, unanimous votes are hard, if not impossible,
to obtain.