The Paradox of Vote Trading

Abstract

Although, conventionally, vote trading in legislatures has been condemned as socially undesirable by both scholars and lay citizens, a recently popular school of scholarship has argued that vote trading improves the traders' welfare in the direction of Pareto-optimal allocations. This essay is an attempt to reconcile the disagreement by showing formally that vote trading does improve the position of the traders but that at the same time trading may impose an external cost on nontraders. In sum, it turns out that sporadic and occasional trading is probably socially beneficial but that systematic trading may engender a paradox of vote trading. This paradox has the property that, while trading is immediately advantageous for the traders, still, when everybody trades, everybody is worse off. Furthermore, vote trading may not produce a stable equilibrium that is Pareto-optimal either for individual members or for coalitions of members.