BINDURA UNIVERSITY OF SCIENCE EDUCATION

FACULTY OF COMMERCE
DEPARTMENT OF ECONOMICS
PROGRAMMES: BSC ECONOMICS HONOURS & B.COM. FINANCIAL
INTELLIGENCE HONOURS
EC218: PUBLIC FINANCE I

Assignment II (Due date, 7 October 2015)

Question
Discuss the efficacy of the median voter theorem with specific reference to Zimbabwe.
[25 marks]
Model Answer
Students are expected to:
 Define median voter theorem:
o A median voter is the voter whose preferences lie in the middle of the set of
all voters’ preferences; half the voters want more of the good/policy than the
median voter and the other half want less.
o The median voter theorem states that "a majority rule voting system will
select the outcome most preferred by the median voter". That is, it means that
if everyone’s preferences are single-peaked, then the most preferred outcome
of the median voter (exactly the same number of people preferring outcomes
‘to the left’ and ‘to the right’) is going to be chosen as a result of majority
voting.
o In the case of Zimbabwe, political leaders of the two main parties in this country
(ZANU-PF and MDC-T) would try to position themselves at the point where the
Median Voter is located. Generally towards the elections politicians were
observed to become more ‘centrist’. The politician is going to win extreme wing
of his party anyway, the challenge is to win more people in the ‘centre’.
 State any two key assumptions of the median voter theorem:
o Voters can place all election alternatives along a one-dimensional political spectrum.
It seems plausible that voters could do this if they can clearly place political
candidates on a left-to-right continuum, but this is often not the case as each party
will have its own policy on each of many different issues. Similarly, in the case of a
referendum, the alternatives on offer may cover more than one issue.
o Voters' preferences are single-peaked, which means that voters choose the alternative
closest to their own view. This assumption predicts that the further away the outcome
is from the voter's most preferred outcome, the less likely the voter is to select that
alternative.
o Voters always vote, regardless of how far the alternatives are from their own views.
The median voter theorem implies that voters have an incentive to vote for their true
preferences.
o The median voter theorem applies best to a majoritarian election system.

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  Explain the evolution of the median voter theorem:
o Harold Hotelling (1929) noted in passing that political candidates' platforms seem
to converge during majoritarian elections. Hotelling compared political elections
to businesses in the private sector. He postulated that just as there is often not
much difference between the products of different competing companies, so, too,
there is not a stark contrast between electoral platforms of different parties. This is
because politicians, just like salesmen with consumers, seek to capture the
majority of voters.
o Duncan Black (1948) triggered research on how economics can explain voting
systems through a formal analysis of majority voting that made the theorem and
its assumptions explicit. Black wrote that he saw a large gap in economic theory
concerning how voting determines the outcome of decisions, including political
decisions.
o Anthony Downs (1957) expounded upon and popularised the median voter
theorem.
 Discuss the strengths of the median voter theorem:
o Although theoretical arguments suggest that the applicability of the median voter model
may be very limited, the empirical evidence suggests otherwise (Congleton, nd)
o Median voter theorem helps to explain fiscal policy particularly government spending
and international tariffs over time. Holcombe analysed the Bowen equilibrium level of
education expenditures for 257 Michigan school districts (USA) and found that the actual
expenditures were only about 3 percent away from the estimated district average. The
median voter model provides a better explanation of large scale public programmes than
comparable interest group models (Congleton and Shughart, 1990; Congleton and
Bennett, 1995).
o The theorem helped to explain the rise in government redistribution programmess over
time. For example, Thomas Husted and Lawrence W. Kenny examined the growth of
redistribution programmes especially between the years of 1950 and 1988 in USA. Tom
Rice noted that voters with the median income took advantage of their status as deciders
by electing politicians who would tax those who were earning more than the median
voter and then redistribute the money, including to those who are at the median. Until the
mid-1960s, Rice stated that the gap between median and mean income levels tightened
due to among other things, the strength of the Democratic Party which is more disposed
to redistribution of wealth and increased voter turnout at the polls by individuals of lower
incomes.
 Discuss the shortcomings of the median voter theorem:
o Just as transaction costs prevent efficiency in market exchanges, the limitations of the
majoritarian voting process stop it from reaching optimality. For example, the voters'
inability to directly amend legislation acts against the median voter theorem (Keith
Krehbiel).

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 o Most real world policies (and programmes) being voted on are too complex and cannot
be placed within a one-dimensional continuum or field (Buchanan and Tollison; Keith
Krehbiel). For example, if voters are considering more than one issue simultaneously, the
median voter theorem is inapplicable. This may happen if, for example, voters may vote
on a referendum regarding education spending and police spending simultaneously.
o A larger problem for the median voter theorem is the incentives structure for government
representatives. Downs (1957) observed that people's decisions were motivated by self-
interest (an idea deeply rooted in the writings of Adam Smith). This holds for the
government system as well, because it is composed of individuals who are self-interested.
One cannot guarantee the degree to which a government representative will be committed
to the public good, but it is certain that, to some degree, they will be committed to their
own set of goals. These goals can include a desire to serve the public interest, but most
often they include the desire for power, income and prestige. To continue obtaining these
things, then, officials must secure re-election. When representatives are constantly
focused on becoming re-elected, this distorts the mandate they receive from their
constituents: representatives will translate the wishes of their constituents into benefits
for themselves. For example, they will tend to vote for short-term policies that they hope
will get them re-elected.
o Political ideology: Generally, politicians have beliefs that prevent them from positioning
themselves exactly in the middle.
o Leadership and guided voting: It is possible to change the distribution of voters (instead
of reallocating towards Median Voter) by persuading Median Voter to change his/her
position.
o There also is a well-known theoretical problem with majority rule that appears to reduce
the applicability of the median voter model. A median voter does not always exist. For
example, suppose there are three voters, A, B and C who must choose among three policy
alternatives, I, II and III. Suppose that A prefers option III to II to I, while B prefers I to
III to II and C prefers II to I to III. Note that the pattern of votes will be, III > II and II >
I, but I >III. Majority rule can lead to inconsistent rankings of policy alternatives and to
unstable policy choices. Duncan Black (1948) pointed out that single peaked preferences
are sufficient to guarantee the existence of a median voter in one dimensional issue
spaces. However, in 2-dimensional cases, a median voter exists only in cases where voter
tastes are very symmetrically distributed (Plott, 1969). In other cases, intransitive cycles
are endemic even if voter preferences are single peaked. In such cases, no median voter
exists and every policy has a non-empty win set. The win set of policy vector z is the set
of policy vectors which is preferred to z by a majority of the electorate. The absence of a
median voter equilibrium may also arise in models where candidates can manipulate
information and voter turnout. Chaos and indecision are predicted features of majority
voting in such models.

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