An Economic Analysis of Democracy

An Economic Analysis of Democracy

An Economic Analysis of Democracy

An Economic Analysis of Democracy


Democratic decisions determine the allocation of resources through the public sector.

Holcombe uses the median voter model as a base, but goes on to develop a more general multidimensional model of democratic decision making that incorporates many theoretical developments of the past decade. He focuses upon the representative body of government and the fact that representatives can profit more from passing legislation to benefit special interests than from passing legislation in the general public interest.

Using these insights Holcombe develops a model that describes the allocative effects of making economic decisions by majority rule. The model describes a stable equilibrium outcome for majority rule decisions made in a multidimensional setting; it is a logical extension of the framework established in his well-received Public Finance and the Political Process.


The goal of this book is to develop an economic model of the way in which a representative democracy allocates resources. Readers familiar with earlier writing on the subject willundoubtedly notice the similarity between the title of the present volume and the title of Anthony Downs book An Economic Theory of Democracy. the similarity extends to more than the title. Both books endeavor to use economic theory to describe political decisions made by representative democracies. Downs's book, published in 1957, has had great influence over the thinking of economists and political scientists, and deservedly so, but in the decades that have passed since then, many others have done work in the same area. the present volume is able to take advantage of the cumulative research that has appeared since the time that Downs wrote, and many of the key elements in the theory presented here are built on a foundation of that research.

Under ideal circumstances, decades of research would point toward a single model of public sector resource allocation that could then be compiled into a reference book on the subject. New ideas have been developing rapidly, however, and research over the past decade has often been in the nature of building new models that question the appropriateness of their predecessors. the result has been an abundance of models examining many individual details of democratic decision making, such as bureaucracy, referenda, logrolling, special interest politics, and so forth. Regrettably, it is not always clear whether the models . . .

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