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Black Theorem

Introduction
Duncan Black gets the credit of making an important advance in the theory of
public choice. He argued that under certain constraints the position of the median
voter wins, or is selected under majority rule, and that this outcome is a Nash
equilibrium. That is, no actors have anything to gain by moving away from the
position of the median voter (given what the other actors are doing). He showed
that the cause of cycling and the lack of pair wise voting on the basis of majority
rule is the existence of multiple-peaked preferences.

Black Theorem Model


The Black Theorem states that when all voters have single-peaked preferences,
then simple majority rule is capable of achieving a unique political equilibrium for a
single issue, say election, at the median peak for all voters. Single-peaked
preferences is an assumption that individuals prefer points close to their own ideal
point, and that they grow less satisfied as outcomes move farther from their ideal
point.
Assume that the tax share of each is given, though not necessarily equal. Also
suppose that decision is to be taken about the construction of school building. Let
there be three voters A,B and C. The decision that has to be taken is how much is to
be spent on school building Rs 10 lakhs, Rs 20 lakhs or Rs 30 lakhs. The
preferences of the three voters are presented below.

Preference Building Order for School

Voter First Choice Second Choice Third Choice


A Rs. 30 Lakhs Rs 20 Lakhs Rs 10 Lakhs
B Rs 10 Lakhs Rs 20 Lakhs Rs. 30 Lakhs
C Rs 20 Lakhs Rs 10 Lakhs Rs. 30 Lakhs

Benefits from the three alternatives to each voter are given in order of importance.
That is, first choice means the largest benefit and the third the lowest.
It can be seen from the diagram below that all preferences have single peak.
Now, elections are held between pairs of alternatives as before, but on the basis of
preferences as given in the table above. The electoral tally sheets are given in the
table below.
Electoral Tally Sheet
Election 1: Rs 10 lakh versus Rs 20 lakh

Voter Rs 10 lakhs Rs 20 lakhs


A X
B X
C X
1 2
Rs 20 lakhs budget wins
Election 2: Rs 10 lakh versus Rs 30 lakh

Voter Rs 10 lakhs Rs 30 lakhs


A X
B X
C X
1 2
Rs 30 lakhs budget wins
Election 3: Rs 20 lakh versus Rs 30 lakh

Voter Rs 20 lakhs Rs 30 lakhs


A X
B X
C X
2 1
Rs 20 lakhs budget wins
It is clear from the table that out of three elections held, Rs 20 lakh budget for the
school building wins twice.
Hence on the basis of simple majority it wins and a unique Nash equilibrium
emerges. It is the median peak budget with no cycling of outcomes and no
arbitrariness involved in the collective choice.
Limitations
The Black theorem has several limitations. There are many factors which prevent
the political process from reaching maximum efficiency.
1) Transaction costs prevent efficiency in market exchanges and the limitation of
the majoritarian voting process stop it from reaching optimality.
2) With the Black theorem in particular the voters inability to directly amend
legislation acts against the theorem.
3) Buchanan and Tollison note that the problem with Black theorem is that it
assumes that decisions can be made on a one-dimensional field. If votes are
considering more than one issue simultaneously, the median voter theorem is
inapplicable.