The efficiency paradox of majoritarian democracy

Abstract

Abstract Majoritarian democracy is widely regarded as the canonical procedure for converting heterogeneous individual preferences into collective decisions, yet its welfare properties are far more fragile than legal and political theorists suggest. This paper contributes to the literature on the limits of majoritarianism by applying a spatial voting model to demonstrate that the conditions under which majoritarian democracies produce efficient outcomes are narrowly constrained by the structural features of majority rule itself. We formalize a multidimensional policy environment in which voters bargain over both the policy vector and lump‑sum transfers. We show that—even with transferable utility among members of the majority coalitions—the equilibrium chosen by the pivotal majority is generally off the Pareto frontier. Taken together, these results establish an impossibility theorem for majority rule in multidimensional policy spaces: whether coalitions are stable or cyclical, simple majority voting fails to maximize aggregate welfare. Political externalities imposed on minorities systematically exceed the surplus gains accruing to decisive majorities, and vote trading cannot redress the loss. Institutional remedies—supermajority thresholds, agenda control, or issue-bundling constraints—are therefore necessary conditions for approaching efficiency under democratic decision-making.