Connecting Arrow's Possibility Theorem with Public Choice Theory: What Price For Collective Rationality?

by Carl J. Dahlman

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The Arrow Possibility Theorem is an axiomatic description of basic ideals for a democracy. There is a often logical contraction between these ideals, which can lead to never-ending decision cycles--unless a dictator resolves the conflict. The branch of economics called Public Choice studies various observed practices in collective decision making process. It assumes that public servants will strive to attain their own private goals, creating processes which violate our fundamental notions of fair democratic processes. The author proposes that the sometimes unsavory decision processes studied in the public choice literature all break at least one of the axiomatic conditions specified in the Arrow Possibility Theorem. This implies that public choice processes actually contribute to stability in democratic decisions without having to rely on a dictator. Thus, in order to attain virtue (our democratic ideals), we must carefully choose our vices (the nondemocratic processes that must violate our ideals).

Originally published in: Makten over politiken, 1999, pp. 1-61.

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