On Thu, 29 Aug 2002, Fred Foldvary wrote: > Yes, but an essential element is that each individual be assigned a specific > cost share, in dollars, so that he knows ahead of stating a value what it > will cost. That is Hal Varian's explanation in * Intermediate > Microeconomics * .
But, since no voter is decisive in the DRP, the cost share is irrelevant. Let's state the problem somewhat more concretely. The ballot in front of the voter might as well state: "Dear Voter. You are helping to determine whether we undertake project X. However, it is vanishingly unlikely that your vote will change the outcome. In effect, whether we do X or don't do X really doesn't depend on your vote. But, we'd like you to tell us how much you'd value having X be done. If X is done, you'll have a $100 increase in your taxes. But, this does not depend on your vote at all. Really, it's the sum of everybody else's votes that will determine whether X is done. So, you might as well ignore the $100 when telling us how much X is worth to you. Now, if we do X, you'll get about $10 in actual benefits. If we don't do X, you save the $100. But, if you vote for X, you can tell yourself that you're a really public spirited kind of guy who loves puppies and apple pie (since X will benefit puppies and apple pie). In fact, if you write down on the ballot that X is worth $5 million to you, you'll feel really good about yourself and you'll value that wonderful feeling as much as if you found a five dollar bill on the sidewalk. Now remember: however much you write down, it's almost impossible that you'd ever actually have to pay any of it, and the average cost of $100 will be decided basically without your vote. So, do you want to go for the sure bet of $5 in "feeling good" benefits? Or, do you want the miniscule tiny chance of having the project not go through so that you don't have to spend the $100. Really, your chances of changing the outcome are so small that the expected value of voting against the project is just pennies. So, why don't you go for the sure thing? Write down $5 million for Project X and feel good about yourself!" Each voter writes down $5 million, the project is undertaken, and social loss of $85 per voter follows. > 4) The decisive (pivotal) agents pay the social cost (Clarke tax) equal to > the sum of the net values (all n(i)) other than that of the pivotal agent. When stated values reflect expressive preferences, the difference between net values has no connection to actual social cost. Eric
