ALBERT

Notes: 6. Summary This investigation of the majority voting decision under various tax structures makes the following points. First, that majority voting cannot be relied upon to choose the Pareto optimal level of output of the public good if the structure of taxes is predetermined. What is chosen is an output level of the public good that is Pareto optimal with respect to the particular tax structure. Another tax structure might exist that provides a better solution. Secondly, the choice of a tax structure should not be made independent of the choice of the output of the public good if Pareto efficiency is the objective. Pareto efficiency is guaranteed because the change in the contribution to the candidate of a marginal change in any after-tax endowment, λi U i Y, is equal for all individuals. Consequently, individuals capable of offering high marginal contributions, λ i , will be rewarded with low tax rates. attaining Pareto efficiency via this pairing, however, may require a significant altering of the after tax distribution of income. If, for example, all individuals have identical utility functions and equal marginal contributions, equation (12b) requires equal after tax incomes (equal marginal sacrifice). This system of voting and taxation is the antithesis of that developed independently by Clarke (1971) and Groves and Loeb (1975). Clarke, and Groves and Loeb determine the output level of the public good by maximizing the sum of stated valuation functions for the public good for given tax rates associated with the public good. Because penalties may be imposed if people misrepresent their valuations, true and complete representations are forthcoming (this results in β i = 1 for all i in equations (9) and (10)). Here the approach is to reward voting intensity with reductions in the tax on private endowments until and individuals have equal voting intensity (i.e., β i = β for all i). Both systems overlook equity considerations. Finally, individual tax burdens associated with a public project should be made known to the individual. Uncertainty about the individual cost of a joint project will lead to suboptimal output, even though the aforementioned conditions for Pareto optimality are met. An extrapolation of these results might suggest that, to the extent that persons are more homogeneous within regions than across regions, a wider range of tax structures might be needed to assure Pareto efficiency at the aggregate level than at the local level. This provides a rationale for the fact that state and regional income tax rates are often uniform while federal income tax rates are graduated according to income. Conversely, if all taxing bodies are subject to the same tax structure constraints, one would expect the provision of local public goods to more closely approximate the Pareto ideal than the provision of pure public goods at the national level.

Notes: Conclusion A politician's preferences do matter. He is not simply a captured agent speaking only for his constituent's interests. Some latitude exists for him to shirk his responsibility to serve his constituents' interests and to cast votes consistent with his own personal ideology. More important to our understanding and modeling of voting behavior, shirking for ideological consumption is seen to increase with age once a threshold of about 53 years old is reached. Shirking is not a phenomena of the politicians' final term in office, rather it likely exists in every term and begins to increase significantly two terms prior to the expected horizon. Sixty percent of the sample of senators were seen to exhibit increasing ideological consumption with age. Other studies have attempted to distinguish the investment and consumption components of ideological measures by more appropriately characterizing the constituent interest variables (Peltzman, 1984) or purifying the ideological variable (Kalt and Zupan, 1988; Kau and Rubin, 1979). Of course, one might always ask, are the variables now properly characterized and completely pure? This paper takes a different approach. It shows that the ideological measure, as an explanatory tool, increases in importance with age. Our explanation is that there is a true ideological component imbedded in the measure and politicians do, in fact, shirk their constituents' interests to engage in ideological consumption. Because an approaching horizon lowers its price, ideological consumption increases with age.

Notes: Abstract An endogenous model of constitutional changes and economic growth links the temporal decline in private market returns when technology is constant with the returns to rule changes realized in a political market. There is a steady state constitutional setting in which all rule changes have been incorporated that is analytically equivalent to the neoclassical steady state. As in the neoclassical model, private-sector technological progress postpones the steady state. To the extent the original constitutional setting promotes innovation, the evolutionary process toward the steady state is delayed. The model yields a theory of revolution based on forces leading to the adoption of inefficient changes in the constitutional setting.