James d. Gwartney

ELEMENT 3.4
Allocation through political voting is fundamentally different than market allocation.

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if decided by majority vote, it would pass three to two. Increasing the number of voters from
five to 5 million or 200 million will not alter the general outcome. As this simple example
illustrates, majority voting can clearly lead to adoption of counterproductive projects.
It is useful to compare markets with democratic political allocation, the major
alternative form of economic organization. It is particularly important to keep the following
four points in mind.
First, in a democracy, the basis for government action is majority rule. In contrast,
market activity is based on mutual agreement and voluntary exchange. In a democratic setting,
when a majority—either directly or through their elected representatives—adopts a policy, the
minority is forced to pay for its support even if they strongly disagree. For example, if the
majority votes for a new football stadium, housing subsidy
(?)
program, or bailout of an
automobile company, minority voters are forced to yield and pay taxes for support of such
projects. Whether they benefit or not, they pay higher taxes, suffer loss of income, or are
harmed in other ways.
The power to tax and regulate makes it possible for the majority to coerce the minority.
There is no such coercive power when resources are allocated by competitive markets. Market
exchanges do not occur unless all parties agree. Private firms can charge a high price, but they
cannot force anyone to buy their product. Indeed, private firms must provide benefits that
exceed the price charged in order to attract customers.
Video:
The Power to Coerce
Second, there is little incentive for voters to be well-informed about either candidates
or issues. An individual voter will virtually never decide the outcome of an election. It is more
likely that a voter will be struck by lightning on the way to the polling place than it is that their
vote will be decisive in a city, regional, or national election!
Recognizing this point, most voters spend little, if any, time and energy studying issues
and candidates in order to cast a well-informed vote. Most simply decide on the basis of

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information acquired as the result of their other activities (watching television, interaction with
friends on social media, or discussions at the workplace). Given these incentives, most voters
have little or no idea where candidates stand or what impact government actions (such as
agricultural subsidies and trade restrictions) have on the economy. Economists refer to this as
the rational ignorance effect
(?)
. That is, voters are poorly informed, but their lack of
information is rational because an individual’s vote is so rarely decisive.