LPPE ASSIGNMENT 1

After careful consideration of the Technical Note and the reading by Kenneth Shepsle please respond to the following three questions: 1. Deductive thinking is an important skill of a manager and it consists in finding real-life implications of abstract, general frameworks. So here’s an exercise in deductive thinking: Please write what sort of problems with policy-making in democratic countries does Arrow Theorem predict?
ANSWER
Problems with policy-making in democratic countries does Arrow Theorem predict:- A. The problem associated with the groups that each group should have equal numbers of members. B. In most of democracies people don’t have individual preferences. C. Democracies have simple majority rule. In a simple majority rule, the Minimal Decisive Number is 50%+1. D. In most Democracies simple majority rule result in never ending voting cycle.

2. Offer at least two ideas for how real-world democracies can deal with such problems.
ANSWER
A democratic decision--‐making system is a system that in every case can somehow combine individual preferences into a collective, social preference.
Solution for problems mentioned in answer 1 according to arrow theorem can be:- A. Democracies should have a general formula that covers not only the majority rule but every rule that aggregates individual preferences into a collective preferences that means democracies with majority rule should also have minimal Decisive rule.
For example :- countries may require 2/3 majority votes.

B. Each group can have any numbers of members .They, in particular, do not need to have an equal number of members. C. People can have their individual preferences.

3. Economic regulation is frequently justified by a need to further “social” or “public interest.” For instance, article 40 of the Polish Energy Law states