I have considered discussing vote selling for a while, and now Greg Mankiw has brought up the subject

Professor Sandel asked a fascinating question (and I am paraphrasing), “If you economists are so in favor of voluntary exchange, would you extend that conclusion to letting a person sell his right to vote to another?”

I said No. It is true that both parties in the transaction must be better off if they agreed to the deal. Nonetheless, the standard argument for unfettered voluntary exchange does not apply because there are externalities. That is, when one person sells his vote to another, that transaction may affect unrelated third parties through the electoral process.

I think Mankiw’s answer is correct. Economists should not favor vote markets, at least vote markets which can include transactions other than pure vote for vote trading. I also think the reason for this is that voting decisions have large externalities, but I’d like to elaborate a little bit on Mankiw’s reasoning.

As I have discussed here many times before, people generally do not vote in their material self interest, and thus voting is a reasonably good way of providing for public goods. However, if vote selling is allowed, the people buying votes are likely to use the votes in their material self interest, so there would be a shift in the type of people who make voting decisions from those who are likely to seek public goods to those who are likely to seek private goods. This is the essence of the problem.

Let’s do a little math to show that buying a presidential election would be possible in a vote market. I suspect that in any given election, most people would currently be willing to sell their vote for about $15, and there are about 220 million potential voters in the U.S (source). That means that to buy 1/2 of all the votes in the U.S. would cost approximately $1.7 billion. It is definitely within the power of the President to divert much more than $1.7 billion to a private company over the course of 4 years, so a presidential candidate could buy the election through a vote broker by promising to pay them over $1.7 billion if he is elected.

There are two major bad outcomes that would result from a vote market. First, in such a political system, government policy will be designed to maximize rent extraction, through high taxes, tariffs etc.. Consider the simple world where politicians buy votes to be elected dictator and make all policy decisions except how to conduct elections. Votes would have a rather large market price because they would be worth a great deal to politicians because the government manages a great deal of money. I envision that votes would be sold contingently; people would sell their vote to a politician on a contract which pays out several thousand dollars if the politician wins. In order to continue offering more and more money for votes, politicians would have to extract more and more money via rent extraction. Politicians would have little incentive to provide for public goods because, by definition, public goods are non-excludable and would not help them get votes. The resulting wealth distribution would be very egalitarian because the winning politician would switch quite often, so everyone would get paid for their vote fairly often, so this might sound good, but this would be achieved by maximizing rent extraction, which is clearly a very harmful and inefficient practice.

The second bad outcome is that the country would likely eventually collapse into an actual authoritarian system. In a political system with a vote market, there would be no way to limit control of a ruler over elections and law enforcement because politicians would compete solely on vote prices and not at all on policies. Politicians who are completely free to establish their own policies would inevitably do away with elections and establish some type of oligarchy. Politicians could even state so openly because vote holders would have no incentive to favor non-authoritarian politicians over authoritarian politician.

Addendum: Bryan Caplan also weighs in

The lesson: If you’re afraid of vote-selling, you should be afraid of voting as well.

I think he is too pessimistic.