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The Public Commodities Problem

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  • Karl Widerquist

Abstract

The decision about how much to spend on a public program depends on the answers to two questions: (1) a normative and binary question-Should the government pursue the goal of this program? (2) a positive and continuous question-Given that the program's goal should be adopted, what is the optimal level of spending to achieve it? If the answer to the first question is yes, it might seem desirable to set spending at the optimal level to achieve the goal; however, spending is often not set at that level and there is likely to be an underfunding bias. This paper uses the median voter theorem to demonstrate that the level that is approved does not depend solely on the amount supporters think is necessary. Opponents of the program's goal and supporters of the goal who favor relatively less spending than other supporters favor may form a coalition that ensures that the level of spending approved will be lower than the level most supporters think is optimal. The more opponents there are and the more disagreement there is among supporters about the optimal level, the greater the difference between the actual level of spending and the amount the typical supporter believes is optimal.

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Bibliographic Info

Paper provided by Levy Economics Institute in its series Economics Working Paper Archive with number wp_299.

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Date of creation: Mar 2000
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Handle: RePEc:lev:wrkpap:wp_299

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  1. Randall Holcombe, 1989. "The median voter model in public choice theory," Public Choice, Springer, Springer, vol. 61(2), pages 115-125, May.
  2. Poole, Keith T. & Rosenthal, Howard, 1996. "Are legislators ideologues or the agents of constituents?," European Economic Review, Elsevier, Elsevier, vol. 40(3-5), pages 707-717, April.
  3. Brennan, G. & Hamlin, A., 1996. "Two theories of rational voting," Discussion Paper Series In Economics And Econometrics 9632, Economics Division, School of Social Sciences, University of Southampton.
  4. Congleton, Roger D & Bennett, Randall W, 1995. " On the Political Economy of State Highway Expenditures: Some Evidence of the Relative Performance of Alternative Public Choice Models," Public Choice, Springer, Springer, vol. 84(1-2), pages 1-24, July.
  5. Jung, Gi-Ryong & Kenny, Lawrence W. & Lott, John Jr., 1994. "An explanation for why senators from the same state vote differently so frequently," Journal of Public Economics, Elsevier, Elsevier, vol. 54(1), pages 65-96, May.
  6. Comanor, William S., 1976. "The median voter rule and the theory of political choice," Journal of Public Economics, Elsevier, Elsevier, vol. 5(1-2), pages 169-177.
  7. Levitt, Steven D, 1996. "How Do Senators Vote? Disentangling the Role of Voter Preferences, Party Affiliation, and Senate Ideology," American Economic Review, American Economic Association, American Economic Association, vol. 86(3), pages 425-41, June.
  8. Turnbull, Geoffrey K & Djoundourian, Salpie S, 1994. " The Median Voter Hypothesis: Evidence from General Purpose Local Governments," Public Choice, Springer, Springer, vol. 81(3-4), pages 223-40, December.
  9. Slutsky, Steven, 1977. "A voting model for the allocation of public goods: Existence of an equilibrium," Journal of Economic Theory, Elsevier, Elsevier, vol. 14(2), pages 299-325, April.
  10. Cahan, Steven F & Kaempfer, William H, 1992. "Industry Income and Congressional Regulatory Legislation: Interest Groups vs. Median Voter," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 30(1), pages 47-56, January.
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