Information Aggregation in Democratic Mechanisms

40 Pages Posted: 18 Apr 2016

See all articles by Volker Britz

Volker Britz

ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich

Hans Gersbach

ETH Zurich - CER-ETH -Center of Economic Reseaarch; IZA Institute of Labor Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

Date Written: March 17, 2016

Abstract

We examine whether and how democratic procedures can achieve socially desirable public good provision in the presence of profound uncertainty about the benefits of public goods, i.e., when citizens are able to identify the distribution of benefits only if they aggregate their private information. Some members of the society, however, are harmed by socially desirable policies and aim at manipulating information aggregation by misrepresenting their private information. We show that information can be aggregated and a socially desirable policy can be implemented under a new class of democratic mechanisms involving a sample group. These mechanisms reflect the principles of liberal democracy, are procedurally efficient, and involve a conditional tax privilege of sample group members. This tax treatment motivates sample group members to reveal their private information truthfully before voting takes place. Depending on the distance between two feasible public good levels, the optimal mechanism involves either one or two voting rounds. We show that procedural efficiency cannot be achieved by communication among all citizens prior to voting. Finally, we outline several applications of the mechanism.

Keywords: democratic mechanisms, polling, sampling, public goods, voting, information aggregation

JEL Classification: D620, D720, H400

Suggested Citation

Britz, Volker and Gersbach, Hans, Information Aggregation in Democratic Mechanisms (March 17, 2016). CESifo Working Paper Series No. 5815. Available at SSRN: https://ssrn.com/abstract=2766247

Volker Britz

ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich ( email )

Zürichbergstrasse 18
Zurich, 8092
Switzerland

Hans Gersbach (Contact Author)

ETH Zurich - CER-ETH -Center of Economic Reseaarch ( email )

Zürichbergstrasse 18
Zurich, 8092
Switzerland
+41 44 632 82 80 (Phone)
+41 44 632 18 30 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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