1.7. Let's walk through the median voter theorem in a little more detail. Consider a town with three voters, Enrique, Nandini, and Torsten. The big issue in the upcoming election is how high the sales tax rate should be. As you'll learn in macroeconomics (and in real life), on average, a government that wants to do more spending has to bring in more taxes, so "higher permanent taxes" is the same as "higher government spending." Enrique wants low taxes and small government, Nandini is in the middle, and T orsten wants the biggest town government of the three. Each one is a stubborn person, and his or her favorite position-what economic theorists call the "ideal point" -never changes in this problem. Their preferences can be summed up like this, with the x denoting each person's favorite tax rate:

Enrique 0%

Nandini I

I N

0 Sales tax rate Torsten I

p 20%

a. Suppose there are two politicians running for office, N and 0. Who will vote for N?

Who will vote for 0? Which candidate will win the election?

b. 0 drops out of the campaign after the lo cal paper reports that he hasn't paid his sales taxes in years. P enters the race, pushing for higher taxes, so it's N vs. P. Voters prefer the candidate who is closest to them, as in the text. Who will vote for N? Who will vote for P? Who will win? Who will lose?

Political Economy and Public Choice • CHAPTER 21 • 477

c. In part

b, you decided who was heading for a loss. You get a job as the campaign manager for this candidate ju t a month before election day. You advi e her to retool her campaign and come up ith a new position on the ale tax. Of cour e in politics as in life, there s more than one way to win, so give your bos a choice:

Provide her with two different po ition on the sales tax, both of which would beat the would-be winner from part

b. She'll make the final pick herself.

d. Are the two option you recommended in part c closer to the median voter' pre ferred option than the loser's old position, or are they further away? So in this case, is the median voter theorem roughly true or roughly false?