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    Black Theorem

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    shreyshishir
    The Black Theorem states that when voters have single-peaked preferences over alternatives, majority rule voting will produce a unique political equilibrium at the median voter's preferred alternative. This is illustrated through an example where 3 voters have preferences over spending amounts (Rs. 10 lakhs, Rs. 20 lakhs, Rs. 30 lakhs) for a new school building. Pairwise elections are held between the alternatives, and Rs. 20 lakhs, the median preferred option, wins each election. However, the Black Theorem has limitations, as it assumes one-dimensional voting and does not account for transaction costs or voters' inability to directly amend legislation.

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    Black Theorem

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    shreyshishir
    283 views3 pages
    The Black Theorem states that when voters have single-peaked preferences over alternatives, majority rule voting will produce a unique political equilibrium at the median voter's preferred alternative. This is illustrated through an example where 3 voters have preferences over spending amounts (Rs. 10 lakhs, Rs. 20 lakhs, Rs. 30 lakhs) for a new school building. Pairwise elections are held between the alternatives, and Rs. 20 lakhs, the median preferred option, wins each election. However, the Black Theorem has limitations, as it assumes one-dimensional voting and does not account for transaction costs or voters' inability to directly amend legislation.

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    Black Theorem

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    The Black Theorem states that when voters have single-peaked preferences over alternatives, majority rule voting will produce a unique political equilibrium at the median voter's preferred alternative. This is illustrated through an example where 3 voters have preferences over spending amounts (Rs. 10 lakhs, Rs. 20 lakhs, Rs. 30 lakhs) for a new school building. Pairwise elections are held between the alternatives, and Rs. 20 lakhs, the median preferred option, wins each election. However, the Black Theorem has limitations, as it assumes one-dimensional voting and does not account for transaction costs or voters' inability to directly amend legislation.

    Copyright:

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    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    283 views3 pages

    Black Theorem

    Uploaded by

    shreyshishir
    The Black Theorem states that when voters have single-peaked preferences over alternatives, majority rule voting will produce a unique political equilibrium at the median voter's preferred alternative. This is illustrated through an example where 3 voters have preferences over spending amounts (Rs. 10 lakhs, Rs. 20 lakhs, Rs. 30 lakhs) for a new school building. Pairwise elections are held between the alternatives, and Rs. 20 lakhs, the median preferred option, wins each election. However, the Black Theorem has limitations, as it assumes one-dimensional voting and does not account for transaction costs or voters' inability to directly amend legislation.

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    Black Theorem

    Introduction
    Duncan Black gets the credit of making an important advance in the theory of
    public choice. He argued that under certain constraints the position of the median
    voter wins, or is selected under majority rule, and that this outcome is a Nash
    equilibrium. That is, no actors have anything to gain by moving away from the
    position of the median voter (given what the other actors are doing). He showed
    that the cause of cycling and the lack of pair wise voting on the basis of majority
    rule is the existence of multiple-peaked preferences.

    Black Theorem Model


    The Black Theorem states that when all voters have single-peaked preferences,
    then simple majority rule is capable of achieving a unique political equilibrium for a
    single issue, say election, at the median peak for all voters. Single-peaked
    preferences is an assumption that individuals prefer points close to their own ideal
    point, and that they grow less satisfied as outcomes move farther from their ideal
    point.
    Assume that the tax share of each is given, though not necessarily equal. Also
    suppose that decision is to be taken about the construction of school building. Let
    there be three voters A,B and C. The decision that has to be taken is how much is to
    be spent on school building Rs 10 lakhs, Rs 20 lakhs or Rs 30 lakhs. The
    preferences of the three voters are presented below.

    Preference Building Order for School

    Voter First Choice Second Choice Third Choice


    A Rs. 30 Lakhs Rs 20 Lakhs Rs 10 Lakhs
    B Rs 10 Lakhs Rs 20 Lakhs Rs. 30 Lakhs
    C Rs 20 Lakhs Rs 10 Lakhs Rs. 30 Lakhs

    Benefits from the three alternatives to each voter are given in order of importance.
    That is, first choice means the largest benefit and the third the lowest.
    It can be seen from the diagram below that all preferences have single peak.
    Now, elections are held between pairs of alternatives as before, but on the basis of
    preferences as given in the table above. The electoral tally sheets are given in the
    table below.
    Electoral Tally Sheet
    Election 1: Rs 10 lakh versus Rs 20 lakh

    Voter Rs 10 lakhs Rs 20 lakhs


    A X
    B X
    C X
    1 2
    Rs 20 lakhs budget wins
    Election 2: Rs 10 lakh versus Rs 30 lakh

    Voter Rs 10 lakhs Rs 30 lakhs


    A X
    B X
    C X
    1 2
    Rs 30 lakhs budget wins
    Election 3: Rs 20 lakh versus Rs 30 lakh

    Voter Rs 20 lakhs Rs 30 lakhs


    A X
    B X
    C X
    2 1
    Rs 20 lakhs budget wins
    It is clear from the table that out of three elections held, Rs 20 lakh budget for the
    school building wins twice.
    Hence on the basis of simple majority it wins and a unique Nash equilibrium
    emerges. It is the median peak budget with no cycling of outcomes and no
    arbitrariness involved in the collective choice.
    Limitations
    The Black theorem has several limitations. There are many factors which prevent
    the political process from reaching maximum efficiency.
    1) Transaction costs prevent efficiency in market exchanges and the limitation of
    the majoritarian voting process stop it from reaching optimality.
    2) With the Black theorem in particular the voters inability to directly amend
    legislation acts against the theorem.
    3) Buchanan and Tollison note that the problem with Black theorem is that it
    assumes that decisions can be made on a one-dimensional field. If votes are
    considering more than one issue simultaneously, the median voter theorem is
    inapplicable.

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