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Economics shows why it’s hard to elect a good president

The political parties are ready to nominate candidates for the White House. Unfortunately, voters don’t like them.

According to the CBS/New York Times poll in May, the leading Republican and Democratic presidential candidates have negative favorability ratings among registered voters. Voters are unhappy with their choices.

This election year we would all do well to remember an important principle of government: Nobody’s perfect.

Government leaders can sometimes improve the market outcomes, reduce the risks we face, and help us resolve differences, but government itself is an imperfect institution. The academic discipline known as political economy shows the limitations of our democratic institutions.

Nobel prize-winning economist Kenneth Arrow published a landmark study in the 1950s explaining why no perfect voting system exists. Today it is known as the Impossibility Theorem.

Arrow first assumed that society wants a voting scheme that satisfies, at the very least, the social properties of unanimity and transitivity. Unanimity implies that if everyone prefers choice A to choice B, then A will always beat B. Transitivity says that if choice A beats B, and B beats C, then A also beats choice C.

Unfortunately, both of these properties are easily violated in elections. The property of unanimity can be violated when just one pivotal voter changes his or her preference. Transitivity can be violated by groups.

Suppose voter 1 prefers A to B and B to C, voter 2 prefers B to C and C to A, and voter C prefers C to A and A to B. This is a case of cyclical, not transitive, preferences. The group as a whole prefers A to B, but one majority (2 of 3 voters) prefers B to C. Another majority prefers C to A. As a group these voters violate transitivity.

Arrow proved that no voting system can satisfy these and other socially desirable properties of voter preferences. No matter what voting scheme we use, one way or another it will be a flawed mechanism for social choice.

The lesson of political economy is that the best we can do is guard against results that promote only the limited self-interest of a few voting groups. The limited powers outlined in the U.S. Constitution are designed for just that.

Economics shows we can’t expect a perfect leader. Let’s just hope we get one who defends our constitution.

Peter Crabb is professor of finance and economics at Northwest Nazarene University in Nampa. This column appears in the June 15-July 18, 2016, edition of the Idaho Statesman’s Business Insider magazine.