Majorities and the 316 Slush Fund

           

         316 is both the name and the address of my college house just off grounds behind the corner. A house passed down since the 90s, certain traditions have been maintained for generations, such as the living room stadium seating. A less public house tradition is how the finances of 316 handled. Every housemate, 18 strong, pay a fixed rate for "rent" every month. This amount is set above the monthly lease payment to also cover utilities. Some months, however, the amount owed for the utilities is less than the extra amount paid. Rather than refunding each person, the money is then placed into a "slush fund". This fund is used to pay for everything from house functions to toilet paper. Because everyone has equally payed into the fund, however, we encounter a collective action predicament in deciding how to spend the money.

       Debating this at our first house meeting in August, we concluded that a simple majority of 10 affirmative votes to make a slush fund purchase was insufficient, as nearly half the house could be against any decision. This directly correlates with principles laid out by Buchanan and Tullock in Chapter 6, where the number of the population (n) needed to agree for action increases as the external costs and importance of the decision increases. The number of needed yes votes we settled on is 12, or a 2/3rds majority. We thought this protected from the fund being used recklessly by any internal interest group, such as the house sports bettors, while also allowing for the functioning of the fund in the face of stingy dissenters. Even a 2/3rds majority still leaves room for housemate discontentment, as a slush-financed Walmart trip highlighted last year. Because of this, the types of purchases the slush fund can be used for has been more explicitly defined, further reducing the potential cost to individuals. Altogether, the system has been maintained as the benefit of acting collectively to pay for events and entertainment outweighs the potential external cost of the majority choosing to spend the slush fund in a way one disapproves.