Voting and Efficient Public Go Od Mechanisms

Two neighbors are considering buying a street light. It costs $100 to install. Alice values the light at $70. Bart values it at $60. If they rely solely on the marketplace to make this decision and do not act together, neither will buy the lamp. However, it is clear that both would be better off if they acted together to make the purchase and split the cost. This street light is a public good—a good that cannot easily be denied to others once the allocation and payment for the good has been provided. Providing clear air and water or providing national security are examples of public goods. There are many others. In this chapter, I am interested in processes for the allocation and financing of public goods. I begin by looking at markets. Market processes are widely used for the allocation of many types of goods. There are several theoretical rationales for this ubiquity. Stated concisely, they say ‘Markets Work.’ But, as the above example shows, markets won’t necessarily ‘work’ when asked to allocate public goods. Instead, voting processes are widely used for that task. There is little theoretical rationale for their ubiquity. In an effort to fill the gap, I am going to look for conditions under which we can say ‘Voting Works.’