An Economic Theory of Democracy

Downs uses this phrase to describe the overall benefits that a citizen receives from the government. It is a broad term that may describe both economic and non-economic benefits. Economic benefits would include anything from welfare benefits with cash value, government subsidies for goods such as healthcare or education, or public services funded at least in part through taxation. Non-economic benefits would include the confirmation of personal ideology, a sense of community, or a sense of safety and stability. It may also include policies that a citizen prefers even if it has no personal impact on them whatsoever, such as a diplomatic achievement which the citizen thinks will be good for the world. A citizen may not be consciously aware of certain benefits, such as food safety inspection or public health efforts, but this remains a part of their utility income so long as it provides them with a tangible or intangible benefit.

Downs uses this German term, which literally translates to “world view,” to describe the overall ideological position of a party seeking to maximize its vote share. Parties need to win majorities across several issues in order to build a winning coalition, and it is nearly impossible to do so simply by packaging a series of positions on various issues. The contradictions will be too evident to the electorate, and it is too expensive to measure voters’ positions on each of those issues and the degree of importance which they assign to them. It is far more efficient to package a series of views into a broad ideological vision of the “good life,” where general principles can help obscure some of the contradictions within the various planks of the platform. This provides voters with the illusion of a dramatic choice between different governing philosophies when in fact every party is driven by the same set of rational (self-interested) motivations.

A Pareto Optimal is an ideal condition in economic theory when no one can become better off without making someone worse off. It does not refer to a condition of equity, but rather one of efficiency, wherein producers and consumers have no more incentive to adjust their behavior, and maintain a societal status quo by continuing in their behavior. This condition is difficult—if not impossible—to achieve within the confines of economic competition; adding the government renders it even more unlikely. Governments have an incentive to maximize their vote share for the upcoming election, and so they have no desire to achieve a state of economic equilibrium that precludes any effort to make any citizen better off.