Question

Explain Buchanan and Tullock's optimal decision rule model. Give examples of cases where rules near unanimity are optimal, where rules far from unanimity are optimal, and when it is optimal to not decide collectively.

Answer 1

INTRODUCTION:-

Buchanan and Tullock's optimal decision rule model are explained as follows:-

They both argued that no voting rule is flawless because there is always a tradeoff between decision costs and external costs. Unanimity rule imposes no external costs but includes decision costs. They have made arguments in " The Calculus of Cosent" . According to them very less time is neede by an individual to make decision because one has its own decision power and is not influenced or interrupted by anyone else. More time is required as the number of assent increases, because everyone has their own decisions power and few of them will obviously oppose the proposal of rival.

As they write, " there is no necessary inconsistency implied in the adoption of, say, simple rule, sach as majority rule for making of certain everyday decisions for a groul with the respect to those activities that have been explicitly collectivized, and the insistence on Unanimity of consensus on changes in the fundamental organization rules". There are certain properties that influence the optimal choice of an individual. Large communities may face gretaer difficulties in decision making in comparison to smaller ones which meams they have larger decision costs. There analysis suggests that if both external and decision costs are relevant to the decision, then the optimal majority rule will be between 1 and N. Basically the majority is likely to make decisions and are optimal. It would be more clear if we try to understand it through example:- Suppose r is set to 65 out of 100 voters.A party propose to increase hospital expenses and might get votes of 35. After this, it decides to stabilize the hospital expenses. The party that adopts such a deadlocked in an endless series of offsetting decisions. Proposals could change the decision costs. This happened because the majority rule that allows winning the coalition to be found on both the sides of the issue. The exact majority that minimizes the total costs still depends on the decision costs and value of external costs by individual member.

Unanimity is the optimal voting rule in a world of zero transcation costs. Unanimity rule is no longer optimal as such said by economists. It is still preferred as for the choice of constitutional rules that are agreed upon the veil of uncertainty. Unanimity is one of the major highlights discussed by them. It deals with the individual approach to constitutional economics. It minimizes externalities. Optimal results are produced when decision costs are absent. Case of the budgetary rules in European Union could be taken into account to discuss about how Unanimity are optimal. The Unanimity rule leads to a final blockade in hybrid constitution.

It is optimal to not decide collectively when the information is not restricted only to opening stage in real instances.The decision is no longer belonging to individual choice. Inefficiency would continue to rise in the Unanimity case when all the purposals are welfare equivalent. It occurs under conditions lf uncertainty and lack of knowledge about the situation thst is not stable.