The decentralized, spontaneous flow of information in the market should be contrasted with the relatively rigid information-processing procedures of a democratic mixed economy, in which voters express their value-choices by means of ballots. Of course, voting may also be used in a free society to select the legislators and other officials who will implement the laws needed to maintain freedom; however, areas such as economic choices, life styles and personal morality, education, philosophy, and religion are removed from the political arena. In the democratic mixed economy, on the other hand, all of the latter areas—and indeed, all of the most fundamental life-choices of human beings—may potentially be impacted by the electoral process. How efficiently then are the values of individual voters conveyed through voting procedures?

One standard method of measuring information flow is to determine the number of bits of information conveyed by a typical message relayed from point to point within a system. The term "bit," short for "binary digit," denotes the amount of information conveyed by a single choice between two alternatives. Let us assume, for example, that a typical ballot contains five elections that are significant enough to concern the average voter. Assume further that each election features two candidates that the average voter would regard as having any chance of winning the election. (Although strong arguments can be advanced for voting for minor candidates, in practice most voters consider only the two leading choices, unless the latter are regarded as virtually indistinguishable; consequently, we include only the top two choices in the present analysis.)