The Voting Model

Inequality and the Demand for Public Goods

First, we consider the impact of demand factors on public spending. If agents are identical, there are no conflicts with respect to the provision of public goods. In reality, because of differences with respect to income and preferences, the optimal size of public goods differs among voters. Thus, who finally determines the actual size of public goods?

With regard to private goods, differences with respect to income and preferences do not cause serious problems because quantity may be adjusted according to preferences and income. At the market price, if an agent wants to consume a large amount, she or he simply buys a great deal. This is the benefit-to-pay principle.

With regard to pure public goods, because of the property of equal consumption without excludability, all agents must consume the same amount. Thus, conflicts arise and the government has to adjust these. A plausible adjustment process is to use the majority voting system.

 
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