Arrow’s Theorem

What is Arrow's Theorem?

● The starting-point of modern social decision theory was a theorem by Kenneth Arrow
(1951).
● Arrow's theorem is a social-choice paradox illustrating the flaws of ranked voting
systems. It states that a clear order of preferences cannot be determined while
adhering to mandatory principles of fair voting procedures. Also known as the
general impossibility theorem.

Understanding Arrow's Impossibility Theorem

● The ability to hear people's voices is critical to democracy. When a new government
needs to be created. For example, an election is called, and people go to the polls to
vote. Millions of ballots are then counted to determine who will be the next elected
official and who will be the most popular contender.
● Arrow's impossibility theorem has shown that no voting method exists which satisfies
all of the following six (6) conditions:

1. Free (Citizen's sovereignty)

● Every conceivable society preference order should be allowed. The Social

Welfare Function (each individual's choice and usefulness in the social group)
should be able to accommodate all individual preferences without having to
identify which ones are valid or illegitimate.

2. Independence of irrelevant alternatives

● The decision made by society between a and b should be based solely on

how people rate a and b (and not on other information). This criterion must be
met in order to avoid strategic voting and the obfuscation of preferences.

3. Unanimous (Pareto-consistency)

● If everyone in society prefers a to b, then society must prefer a to b as well.

4. Completeness

● Everyone in society can compare all alternatives.

 5. Transitivity

● If a is socially preferred to b and b is socially preferred to c, then a is socially

preferred to c.

6. Non-dictatorship

● The preferences of just one person should not determine the outcome.

Example of Arrow's Impossibility Theorem

Consider the following example, where voters are asked to rank their preference of three
projects that the country's annual tax dollars could be used for: A; B; and C. This country has
99 voters who are each asked to rank the order, from best to worst, for which of the three
projects should receive the annual funding.

33 votes A > B > C (1/3 prefer A over B and prefer B over C)

33 votes B > C > A (1/3 prefer B over C and prefer C over A)

33 votes C > A > B (1/3 prefer C over A and prefer A over B)

Therefore,

66 voters prefer A over B

66 voters prefer B over C

66 voters prefer C over A

So a two-thirds majority of voters prefer A over B and B over C and C over A---a paradoxical
result based on the requirement to rank order the preferences of the three alternatives.

Arrow’s theorem indicates that if the conditions cited above in this article i.e.
Non-dictatorship, Pareto efficiency, independence of irrelevant alternatives, unrestricted
domain, and social ordering are to be part of the decision making criteria. Then it is
impossible to formulate a social ordering on a problem such as indicated above without
violating one of the following conditions.

Condorcet

What is the Condorcet Method?

● Condorcet advocated a voting method which is majority voting.

● Frenchman Nicolas De Condorcet is the founder of the condorcet method in

1743-1794.

Understanding Condorcet’s Jury Theorem

● It assumes that all voters have independent probabilities to vote for the correct

alternative, these probabilities are larger than 1/2, and are the same for all voters.

Under these assumptions, the probability that the majority decision is correct is

strictly larger when the group is larger; and when the group size tends to infinity, the

probability that the majority decision is correct tends to 1.

Understanding Condorcet’s Paradox

● Selection of Condorcet winners is one of the voting methods in preferential voting. It

is an election where the winner is defined as a candidate who wins in all pairwise

contests against all other candidates.

● A candidate that always beats the other candidates in all pairwise contests is defined

as strong Condorcet winner, while a candidate that is never beaten (wins or ties) by

other candidates in all pairwise contests is defined as weak Condorcet winner.