We now know the question we’ll be asked about the EU constitution. We also know the question will be answered in a bone-headed way - by a simple majority.
To see the problem with this, consider three people: Alan, Bill and Charlie. Alan and Bill vote yes to the constitution and Charlie votes no. Under simple majority rule, we sign up.
But what if Charlie feels strongly about the issue whilst Alan and Bill aren’t so fussed?
Say Charlie would spend £100 to stay out of the constitution whilst Alan and Bill would spend only £20 each to join. Then, in principle, Charlie could give Alan and Bill £25 each to stop them voting. The upshot would be that we’d stay out of the constitution and everyone would be better off. Alan and Bill have made a net gain of £5 each, whilst Charlie has bought £100 of benefit for just £50.
The lesson here is simple and should be well known: majority rule can conflict with utilitarianism. In this sense, the notion of the “national interest” is incoherent; the “national interest” as decided by majority vote isn’t necessarily the “national interest” in the sense of what makes people happier.
There is, though, a simple solution – to use a demand revealing referendum.
It would work as follows. Instead of asking people to say yes or no, we ask them to vote the sum of money they’d pay to sign up or not. In our example, the votes would be:
Alan - £20 to sign up.
Bill - £20 to sign up.
Charlie - £100 to say no.
Then, rather than count votes, we add up the money, and go with the biggest sum. So in this case we stay out.
The next step is crucial. Each voter pays a tax according to whether his vote made a difference. Alan and Bill pay no tax because their vote has not affected the outcome. But Charlie must pay £40 – because had he not voted, our trio would have signed up to the constitution, giving Alan and Bill £40.
Now, there are plenty of arguments against this process. But a lot of them are either silly or arguments against our existing political processes. Here’s what the benefits would be:
1. It reconciles majority rule and utilitarianism by allowing people to reveal the intensity of their preferences.
2. It encourages people to think clearly about the issue. If they vote too large a sum, they risk having to pay a tax. If they vote too small a sum, they risk not getting their way. As Thomas Sowell said, “making people pay is a way of making them think.” (I’ve used this line before – and I’ll keep using it until the message sinks in.)
3. It recognizes that we have obligations to each other. If your preference imposes a cost onto others, it is just as well as efficient that you pay a price for this.
4. It would improve the quality of debate. Picture the scene. A politician is on Newsnight railing against the EU constitution. “Alright”, says Paxo. “How much would you vote to stay out?”
I think these are compelling arguments.
One other thing. Economists have known about these demand-revealing processes for at least 40 years; William Vickrey is credited with their discovery, but some of you might be able to date the idea back to Knut Wicksell. But politicians seem never to question simple majority rule. And they wonder why we hold them in contempt.