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Beliefs and errors in voting choices: A restatement of the theory of fiscal illusion

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  • Richard Carter

Abstract

This paper reformulates the theory of fiscal illusion to make it more compatible with the median-voter model of collective choice. It emphasizes the requirement that misperceptions about marginal tax-costs and benefits must be permanent to have any significant effect on the level of public expenditures. The Lancaster-Becker model of consumer demand is then used to demonstrate the peculiar effects of permanent misperceptions on consumer demand. It can be shown, for example, that other things being the same, a Republican who underestimates continuously the marginal benefits of public activities may demand more public goods than a Democrat who overestimates those same benefits in a permanent fashion. Copyright Martinus Nijhoff Publishers 1982

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  • Richard Carter, 1982. "Beliefs and errors in voting choices: A restatement of the theory of fiscal illusion," Public Choice, Springer, vol. 39(3), pages 343-360, January.
    • Handle: RePEc:kap:pubcho:v:39:y:1982:i:3:p:343-360
    DOI: 10.1007/BF00118792
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    References listed on IDEAS

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    1. Darby, Michael R & Karni, Edi, 1973. "Free Competition and the Optimal Amount of Fraud," Journal of Law and Economics, University of Chicago Press, vol. 16(1), pages 67-88, April.
    2. Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, vol. 74, pages 132-132.
    3. Werner W. Pommerehne & Friedrich Schneider*, 1978. "Fiscal Illusion, Political Institutions, And Local Public Spending," Kyklos, Wiley Blackwell, vol. 31(3), pages 381-408, August.
    4. Stigler, George J & Becker, Gary S, 1977. "De Gustibus Non Est Disputandum," American Economic Review, American Economic Association, vol. 67(2), pages 76-90, March.
    5. Auld, Douglas A L, 1972. "Imperfect Knowledge and the New Theory of Demand," Journal of Political Economy, University of Chicago Press, vol. 80(6), pages 1287-1294, Nov.-Dec..
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    Cited by:

    1. Charles H. Breeden & William J. Hunter, 1985. "Tax Revenue and Tax Structure," Public Finance Review, , vol. 13(2), pages 216-224, April.
    2. R. Lankford, 1986. "Property taxes, tax-cost illusion and desired education expenditures," Public Choice, Springer, vol. 49(1), pages 79-97, January.

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