Netherlands faces first national referendum in history.

This BBC article deals with the Dutch referendum to approve the EU constitution. Whereas most routine decisions are made by the legislature, which is comprised of rationally motivated vote-sharers; referendums are difficult to entirely predict, as you are evaluating the opinion of all of the citizens of the country. To add to this quagmire, this will also be the first time that the Netherlands has ever had a national referendum. All the major parties are urging voters to vote “yes” on the constitution, but as we all know, this does not necessarily translate into the views of the populace. As the Dutch European Affairs Minister, Atzo Niarticle, notes, "Sometimes referendums are not about the issue itself but about the government or something else." Many Dutch political analysts are worried that people will transcend the “single-issue space” of the EU constitution ratification and instead vote based on worries of other issues. The Netherlands is one of the founding six nations of the EU and contributes the most per capita to the EU. It is unthinkable if the Netherlands rejects the EU constitution. I found the article interesting and pertinent to our class regarding voters and their motivations.

The reaction to Chief Justice Rehnquist’s illness is a perfect demonstration of how interest groups can increase the efficiency of public choice. Because of his illness, there may be a seat open in the Supreme Court. He has not announced retirement, but already both Democrats and Republicans are organizing their campaigns. Money is being raised and lawyers are advertising their services to advocacy groups. This can be viewed as a form of rent seeking. The interest groups are trying to purchase the political resources that could be enjoyed if their candidate wins. Harberger notes that some rent seeking is socially optimal. However, is the current flurry of fundraising and polling and advocating socially optimal? After all, this money and these lawyers are not being productive, only protective of specific interests. This diversion of funds is significant. One individual conservative group says it has already committed $3-5 million to the fight. Despite these expenditures, I argue that the campaign preparation is socially efficient. Even if Rehnquist maintains his seat, the campaign expenditures will not be wasted. They will make the utility functions of the different groups clear. Senator Schumer (D-NY) commented in the article that he responds rationally to changes in the candidates’ positions. He is willing to accrue greater costs if more is at stake. A step towards more perfect information can only help increase the efficiency of government.

Shifting Preferences in Congressional Committees

I came across this article at cnn.com. The article describes the Senate's approval of a new intelligence bill. The bill is designed to "overhaul the U.S. intelligence community by placing the budgets and most assets of 15 spy agencies under a new post of national intelligence director". This bill is a direct reflection of the re-alignment of the relavent senate committees, which in this case is the Senate Committee on Intelligence. In the Weingast-Moran article, the authors put forth the idea that legislators set up an incentive system to control bureau behavior. The incentives include the budget which is controlled by the appropriations committee, confirmation of the senior bureaucrat, and oversight. With the approval of this bill by the Senate, the memebers of Congress realize that "Congress now must take steps to reform its own oversight of U.S. intelligence agencies". The passing of this bill can be seen as a realignment of the status quo in both the committee and the Congress as a whole. The committee has opted for higher levels of intelligence, and a more centralized procedure of coordinating intelligence. Their use of the budget and oversight for the new postions created are incentives for the bureaucrats to follow their preferences. This refelcts well the Congressional Dominance view that Wiengast and Moran put forth.

Wal-Mart: Your Neighborhood Price Discriminator Since 1962

I came across this website recently regarding the current status of one of the largest companies that has ever been established in the United States, Wal-Mart. In recent years, Wal-Mart has become the focal point of attention in the eyes of many anti-monopolists because of its enormous size and authority across numerous countries. One of the most prominent capabilities of Wal-Mart is its ability to price discriminate. In this article, the author seems to be targeting the failure of the government and other regulatory institutions for the uncontrollable expansion of Wal-Mart’s power. Wal-Mart’s chairmen were able to obtain exemptions from anti-trust, tax, and criminal laws that other small and large corporations are forced to abide by. Wal-Mart has forced the outsourcing of American jobs to lower-wage countries only to turn around and sell their products at highly inflated prices back to Americans. You may ask why such a friendly company would do such a thing to its most valuable consumers. There is only one answer for this: profits. Wal-Mart reaps the benefits from their sales and ultimately redirects them away from Americans. Throughout this entire practice, other law-abiding companies are losing out on profits and are being forced to go out of business. The ability of Wal-Mart to sway the government, policymakers, and the media has led to a decrease in competitiveness across large and small corporations alike. Arguments in favor of large corporations such as Wal-Mart claim that these companies provide substantial tax revenue to communities as well as providing employment for people that otherwise are unable to get jobs. While it may seem plausible in its demeanor, Wal-Mart, as a whole is in violation of the federal Robinson-Patman Act and similar laws that prohibit price discrimination. Wal-Mart is even capable of making its way around paying overtime to employees which even further lowers the prices of goods at the expense of its employees. Ultimately, this is eliminating the nearby competition from the very people that purchase their products. Instead of handing out smiley face stickers at the front door, Wal-Mart should, in fact, be handing out stickers featuring distressed faces.

Rational Choice Without Apology

This paper on policy theories, by Mathew McCubbins, focuses on debunking the criticisms of Positive Political Theory, which is based on Rational Choice Theory. Many of the criticisms he debunks are related to issues we have discussed in class, including a general criticism of the rationality approach and human behavior theories, spatial models, and criticisms by Green and Shapiro. I will highlight some of McCubbins' main points on these 3 topics. The underlying reason theories such as PPT have been criticized so freely is because they are so "explicit". In other words, they explain so much that it makes it easy for people to attack them. In the past, key theories of political behavior left a lot of their explanation up in the air or not clearly specified, so they were harder to attack. Specifically, PPT most often gets criticized for its assumptions - rationality, component analysis (small parts of the system can be analyzed to understand human behavior), and strategic behavior (people play games).

In class we have talked about "rational ignorance", the idea that people do a cost-benefit analysis on whether or not to acquire more information on candidates in order to vote in proper accordance with their preferences. Much of the time, people find the costs associated with collecting that information to outweigh the benefits. In this paper, the author discusses the criticism that people usually cannot explain why they voted one way or another. I tend to feel that "rational" ignorance is a fairly accurate description of the human behavior in this situation. "Rational choice is reasoned choice" is something the author underlines. McCubbins' states two important things related to this.. That when people do not accept the rationality argument it is mostly because they do not "see people making [these] reasoned choices". But just because we don't see them reasoning does not mean they haven't in the present or that they haven't been conditioned from experiences in the past. His basic conclusion is that people have learned throughout their lives with each experience and they make rational decisions accordingly, even if we can't see it. Finally, decisions don't have to appear reasonable to be rational. McCubbins discusses component analysis, specifically in regards to spatial models (graphic representations of political problems), and debunks criticisms of them. He first lays out some basic assumptions - that policy packages can be laid out in "N-Space" so in graph form and single peaked preferences. While its hard to put specific numbers on graphs for such packages, it is only important that graphs have "relative" significance, as in one policy relative to another, and this can be done. The author notes that such models are criticized for narrowing down "multi dimensional" issue space into a single one. This is OK for two reasons. First, this can still give important insight into the policy process. Secondly, it is justified because many times for example, budgets decisions are made one at a time and thus such one dimensional models work. Finally, such spatial models never claim to fully explain a "dependent variable", they just seek to show the effects of big changes (like Democratic president to Republican president and so forth). Finally, he looked specifically at Green and Shapiro's argument. Their argument - that RCT fails to formulate empirically testable hypotheses, that any testable ones are never scrutinized, that the tests are poorly devised and irrelevant to the models, and that any properly done tests tend to undermine the rational choice theories they are testing - does not properly interpret scientific method or the PPT, according to McCubbins. Their fundamental problem is that they confuse a "PPT Research program" with what is actually "individual PPT projects" and thus assume that the absence of empirical hypothesis testing is a fault when in fact it is just a characteristic of the structure of "individual PPT projects". McCubbins main point is that PPT is usually a series of steps, of individual PPT projects, most of which do not test empirically but when put together reveal a larger and more accurate fundamental theory of politics.

Congressional Committee System: To Reform or Not To Reform?

I found this article regarding the congressional committee system to be very interesting. The article emphasizes of the importance of reforming the current committee system to make it less dispersed, and more "sreamlined". The author believes that in order to make the system more efficient, it needs to be centralized so that certain issues are covered not by many committees, but instead by only one. This, he says, will allow for a quicker, easier way to produce legislation and accomplish goals. The article mentions the issue of homeland security in specific, noting that there are at present 14 full committees as well as 25 sub-committees that deal with the issue. It calls for a new committee of homeland security to cover the issue on its own so that the current "mix of dispersed jurisdiction and authority [which] creates wasteful inefficiencies" will be taken care of. From our discussion in class about the committee system, I am not sure that this new "streamlined" committee structure is appropriate. Isn't the current system streamlined enough? Right now, our system allows for any given committee to have almost monopoly power and influence to alter the status quo on the issues that fall under its title. We are giving only these few members the right to decide how, in fact, the status quo can and will be altered. These few members in return, have to give up their power on all other issues and bills, in order to have power over a couple of issues dearest to them. It seems as though this structure is costly because if you are not on a certain committee that will end up effecting your district, you do not get the opportunity to implement the best policy for your constituents. Moreover, for national, more far reaching committees that are important to all districts in all states, such as national security, there are only a small portion of legislators that have the opportunity to influence that topic. If the new homeland security committee is created, we would only be lowering the number of representatives, and thus the public voice, that would be allowed to make policy changes . Instead of narrowing an already narrow system, leaving some issues to multiple committees will allow more members of congress the opportunity to effect the issue. "Dispersed" and "wasteful," as it may seem, the greater the number of committees and therefore representatives that can touch a topic, the more in check it will be, and in turn, the better it will be able to serve a greater number of citizens.

Costs and Benefits of Choosing a College Major

Each of us, as students, have had to ask ourselves “What do I want to major in?” Now ask yourself, “Why did I choose my major?” Were you thinking about how your major would apply to your future or were you thinking more along the lines of how much you love the subject matter and how much you really enjoy taking the necessary courses? The article I chose “Choosing a College Major: For love or for the Money?” (http://www.nytimes.com/2004/12/05/jobs/05jmar.html?oref=login) discusses how majors relate to future financial earnings and the pressures of choosing a major. It suggests that parents and students think rationally and even like economists in selecting a major for they “consider college more an investment than a time of academic and personal exploration. Some students say they are education consumers seeking the best return on that investment.” Studies were conducted by three Northeastern University economists who wrote a book “College Majors Handbook with Real Career Paths and Payoffs” and concluded that a student’s major is “more crucial to future financial success than the college attended.” With this in mind, we can now use some of what we’ve learned in class to weigh the choices. In choosing a major did you think about how to best maximize your ability to make money? or did you worry about the opportunity cost of majoring in something that you would probably get the most utility from in college but that might not help you buy that fancy sports car when you are 30? Hopefully we will all reach our optimal utility. The question just remains as to whether we will reach optimal utility at the end of our four years or in 30 years with early retirement and large bank accounts. Thinking even harder one can relate this to the issues of public and private school. When going to a probably more expensive private school the weight on choosing a major is much heavier for if you decide to change it could cause additional years of paying tuition. All in all, choosing a college major based on future financial success can have great opportunity cost of not enjoying college and being able to academically explore during college and then later in life lead to more utils form a wealthier lifestyle.

Monopoly Power and Rumsfeld

Well I'd like to comment on the latest news surrounding Secratery of Defense Rumsfeld and especially how it's related to monopoly power as despite all these bad reputation he is keeping his place in the cabinet. I just came acroos this article as the shortage of armor for the troops in Iraq has also been documented by Congress statistics. Also it has been announced that President Bush has nominated former New York City Police cimmisionar Bernard Kerik for the Homeland Securit Secretary which is another defense related department So obviously even in a time when the President is changing his crew some people like Rumsfeld still keep their place and their monoploy power. First of all the fact that even the statistics released from official government departments proves the theory that output of the Buero is extremely hard to measure. The number of people who have to authrity to evaluate what the Buero is doing and act upon it is really small. Even when these peopel decide that the Bueru needs reform and decide to act upon it they have the burden of responsibilty on them about wheather the person they replace the current one with will be better. In Rumsfeld's case I believe President Bush was hesistant to change him since although Rumsfeld may be critisized a lot, he is the one right know that has the most information about war in Iraq and the current situation over there. Therefore there's no gurantee that if he had been replcaed his succesor would do a better job than him. This sheds light on to another side of the monopoly power of the Bueros. Although the Buero might be really inefficent in what it does if it gets the job done even very poorly authorities don't take the risk of reforming it. They hesitate that the replacement may even not get any of the work done. The fact that President bush has replaced the Homeland Security Secratery proves that Bush himself may not be that happy with the country's defense related polities. In this case the fact that Rumsfeld keeps his place in the cabinet also proves that the link between Legislators and Bueros is not very efficient.

Regulation of the Wine Industry

Twenty four states ban or restrict sales of wine from other states. An Economist article deals with protectionism in the wine industry, discussing a lawsuit which several wineries and wine distributors have brought against the state of New York for restricting their access to the second-largest market in the United States. Defenders of New York’s position argue that the state restricts wine sales for the good of its citizens; the lawyer representing New York’s wine wholesalers defends the regulations, saying that the licenses New York sellers must obtain keep them from selling alcohol to minors. Other observers attribute the regulation to the irrationality of politics; the legislation giving states the ability to regulate interstate wine sales hearkens back to the end of Prohibition and the lawyer for the out-of-state wine distributors jokingly blames the regulation on Americans’ puritanical spirit. In addition, the two sides have turned the dispute into a states' rights argument, an issue about which--in theory--the wine sellers are probably not particularly concerned. Stigler and Peltzman, on the other hand, would argue that it is the impetus of the New York wine industry that has kept the regulations in place and has dictated how it is designed and operated. Although the state politicians were elected to represent their constituents, Stigler would argue that it is likely that they are enforcing a policy that would be voted down by a full, fully informed public. Kenneth Starr, of the famous Lewinsky case, is the out-of-state distributor’s lawyer. He argues that keeping his clients from selling their wine across state lines “robs consumers and growers of a fundamental freedom.” The Economist article does not mention the lobbying efforts of the New York wine industry, but one would assume, through Stigler’s model, that the regulation would be responsible for a net loss to society through deadweight loss from the restricted output, administration costs for protecting the regulation and ensuring that wine is not illegally sold across state borders, and the rent-seeking costs carried by the New York politicians and the New York wine industry. In this area, Peltzman differs from Stigler. Peltzman would argue that the restrictions are only in place because the marginal benefit they bring to society is greater than the marginal cost, and that otherwise, opposition to the regulations would have been too strong to overcome. From his point of view, the current case could perhaps be viewed as a test for whether or not the marginal benefit to the public is still greater than marginal cost.

EPA allowing sewage externalities?

The article from the Washington Post (seen here) is about decisions that are in the works regarding partially treated sewage to be dumped during heavy rainfalls. This externality would affect the water resources in the immediate areas. The author goes on to say, “Some scientists, environmentalists and state and local officials object to blending because it could foster the spread of disease.” The other alternative is spending billions of dollars on plant upgrades. Benjamin H. Grumbles, assistant EPA administrator says that, “Blending is acceptable if the sewage is treated enough to meet Clean Water Act requirements at the end of the pipe.” The current policy in place allows plants to discharge partially treated waste if and when there is no other alternative. Nancy Stoner, who is in charge of the National Resources Defense Council’s clean water project, believes that the new policy will result in more deaths and people getting sick. Joan B. Rose, a microbiologist, also adds that, “the EPA’s proposal ignores scientific findings that link waste water to the spread of disease.” She also said that, “sewage is the source of a lot of major pathogens.” There are disagreements regarding this policy, which is why no decision has been made yet. There was however an agreement to build three underground water storage tunnels over the next 20 years. This would remove the sewage overflows that account for 3 billion gallons of raw waste that gets dumped into local rivers and creeks each year. This article addresses some of the costs and benefits to each side of the story regarding the externality of partially treated sewage entering water through heavy rainfall. The costs to add plant upgrades would be hundreds of billions of dollars. However, there is evidence to show that deaths will increase if the policy passes. In referring back to Professor Coppock’s lecture with the hog farm and the neighbors with the externality of terrible smells in their midst, the question remains whether it is legal for this to be allowed. In the hog farm example, the fact that there was a law regarding the right to farm trumped the externality of the smells. Property rights could also be addressed if there was a specific person or group who owned a nearby river. If a plant happens to own the river, then they would not have to pay to fix the problem. If someone else owned a nearby river, then the plant could be held accountable for the waste. If the new policy is passed, then that would change this because then the plants would never be accountable for negative externalities of discharged waste. I understand that there is often an optimal level of pollution when considering all of the factors that weigh into the issue. However, when there is evidence to show that this policy could lead to deaths, I thank that even the cost of billions of dollars would be better than passing this policy.

The Illusion of 'Either-Or' Politics

On November 23, 2004, a mere 21 days after the 2004 presidential election, Tod Lindberg’s article “The Illusion of ‘either-or’ politics” appeared in the Washington Times. He claims that the Republican party has yet to come to a satisfying conclusion as to the methods of their victory: by appealing to their base, pumping up turnout especially among evangelical Christians, or by reaching to the middle, where they made gains among women, Catholics, etc”. Lindberg goes on to describe the intraparty struggle amongst both Republicans and Democrats. There are two main factions within each party: the extremists and the moderates. Each faction would like to be in control of the party and therefore wield more power over changing policy, etc. Upon seizing control, there would be only one definition for the party. Lindberg depicts these options as a Democratic “party of the centrist Democratic Leadership Council or the activist left wing that produced the surge of early enthusiasm for Howard Dean? Will Republicans be the party of the religious right or will the more moderate types of the John McCain, Arnold Schwarzenegger or Rudy Giuliani school carry the day?” The appearance of choice is exactly that – an illusion. Lindberg argues that should any party swing to the moderates or the extremists, the dividing party would become a minority party. Secondly, “the prevailing faction would immediately split into two, probably divided over the question of how to bring the losers … back into the fold”. Furthermore, for the good of the party, each individual party tries their hardest to portray their opposing political party as extremists - GOP evangelical Christians and the "characterization of the Democratic party as 'liberal, liberal, liberal' ". The reason for this is because it allows the party to "operate both in maintaining their base and reaching toward the middle." Meanwhile, the moderates within each party try to moderate these hyperbolic views, insisting that they possess more centrist views to try and explicitly garner support from the median voter. Lindberg concludes that the necessity of the median voter will result in President Bush avoiding a hard right stance in favor of a mostly moderate policy scheme because he has such a “broad, majority coalition to manage.” Also, his administration’s success hinges upon “his ability to keep it [the coalition] intact and broaden it for Republicans to go forward.” Lindberg’s assertions closely correlate to Hotelling’s spatial location theory and the median voter theorem. Hotelling argued that within a single issue space with two individuals (or candidates), each candidate will move towards the middle in order to maximize the amount of space to include both their extreme point and at least half of the middle. If an individual does not claim the middle ground, the likely point for his/her competitor is to choose the spot exactly next door so as to take as much of the space as possible. This leapfrogging will occur until both individuals end up in the middle. However, there can be no stable equilibrium if there are more than two individuals (or political parties). Thus, should any faction within the Republican or Democratic party seize power and oust their fellow members, there would most likely be one of two results. Either their members would all surge towards the Republican party, thus returning the space to two individuals and going back to the need to move towards the middle, or three political parties would exist. With three parties, continuous leapfrogging would occur as each party tried to best the other until inevitably two of the parties fused. The parties are well to be confused since it behooves them to change their stances according to the political stage. As discussed in class today, the United States electoral system occurs in two stages: the primary and later the general election. It is generally believed that the primary will garner more support from extremists. As a result, candidates must appeal to the median voter of the party, as opposed to the median voter within of the entire country. It is probable that the party’s median will be farther to the from the middle than the voting populace. After party nominations, candidates scurry towards the middle to gain the most issue space. As a result of our two-stage system, candidates may not be able to actually reach the middle in time for the general election; however, while their absolute proximity is subjective, they do come fairly close, especially when compared to the alternative suggested by public interest theory.

Inefficient Bureacracy: Department of Defense?

While searching through the New York Times for articles that would apply to my post, I found a quite disturbing article, found at http://www.nytimes.com/2004/12/09/international/middleeast/09rumsfeld.html?oref=reg, on the Defense Department and Defense Secretary Donald Rumsfeld as its senior bureaucrat. Yesterday, Rumsfeld visited the Iraq-bound troops during a town hall discussion at Camp Buehring in Kuwait. Although he came expecting a morale boosting visit, Rumsfeld was faced with complaints "about aging vehicles that lacked armor for protection against roadside bombs" and questions about what would be done about this problem, revealing an inefficiency within the Defense Department. However, Defense Secretary Rumsfeld argued that the military was producing the necessary equipment--extra armor for Humvees and trucks--but it would take time. This article's dialogue between the involved soldiers and the bureaucrats resembles issues in Niskanen's model of bureaucracies and their inefficiencies. Niskanen argues there are three reasons why bureaucracy is inefficient: output is not easily measured, monopoly supply, and senior bureaucrat compensation is not linked to efficiency. In the article, the Defense Department appears to be inefficient at producing the supplies necessary for the troops in the Iraq War. This inefficiency could be because of the first reason presented by Niskanen. The output of the Defense Department is very difficult to measure for the general public. Pentagon spokeman, Lawrence Di Rita, claims in the article "that the military was now producing 450 armored Humvees a month, compared with just 15 a month in the fall of 2003, when the threat of roadside bombs began to emerge. He also said that three out of four Humvees in the war zones were armored, and that unarmored vehicles were used in back-up operations." This appears to be a large number, but those affected by the output--the soldiers--claim they are having to "scrounge through landfills here for pieces of rusty scrap metal and bulletproof glass - what they called "hillbilly armor" - to bolt to their trucks." Therefore, there is an efficiency that is due to the lack of the public being able to easily discern output. The amount of equipment being produced by the Defense Department appears to be enough in number, but the troups argue this amount is still inefficient. The true effective output is difficult to determine.

Median Voter Theorem and Election 2004

Initially, I was going to blog on the players' union in baseball,and how, as an interest group it provides benefits to its members, however, class discussion today convinced me to tackle the idea of the applicability of the MVT to this past presidential election. As I sat in class, and listened to the debate over the similarities and differences of Bush and Kerry I remembered a piece on CNN.COM Link This site illustrates all of the candidates' platforms on the issues. There are different categories of issues, and by clicking on them we can see what the candidates think on each of the issues within the category. This site provides quite a bit of evidence that would support the median voter theorem. First, it should be noted that whomever made the point in class that the candidates differ on many of the social issues was absolutely correct. The site shows that Bush and Kerry had opposing views on abortion, the death penalty, and gay adoption. However, these differences don't necessarily refute the MVT. As Downs discusses, the idea is that because both candidates value the median voter (who decides the election) they move closer and closer to the middle. By doing this the candidates begin to adopt similar platforms, thus in the end become essentially identical. He also acknowledges that this is done within reason, so that to alienate the extremist voters belonging to their own party. If we look at the issues listed above, on which the candidates differ, its fairly obvious that their opinions fall in line the views of their party. That is most conservatives oppose abortion and gay rights, meanwhile most liberals support these rights. Thus, it is reasonably inferred that Bush and Kerry's views on these issues were merely means upon which to maintain support from their extremist supporters. Additionally, further examination of the issues reveals that Bush and Kerry had roughly the same views on the state fiscal crisis, budget deficits, and drug costs. The most interesting issue was, by far, gay marriage. As we saw, this issue was key in the election, and highly discussed in the presidential debates. Its no surprise that Bush is against gay marriage, as he supports an amendment to the constitution to ban gay marriage. What is interesting, is that Kerry, paradoxically, is against gay marriage, but supports giving them benefits and supports their rights as gay couples. How do we explain this paradox? Why would Kerry support gay rights and even gay couples rights, yet be opposed to gay marriage? The most plausible explanation is that he was making an attempt to win median vote. More of the median voters were opposed to gay marriage than those who were not, so by taking the platform of anti-gay marriage Kerry was attempting to move toward the center and capture the median vote. If you couple this with the fact that Kerry supported the war in Iraq (but insisted Bush misled America) it is becoming fairly obvious that on most of the key issues Kerry and Bush have remarkably similar views. All things considered, then the 2004 election actually provided a lot of evidence to support the median voter theorem, and suggest that Downs was not far off in his thinking that the median voter wins, and as a result the candidates are very similar. While Bush and Kerry certainly were not identical, it appears as if they shared more similarities than differences (somewhat to validating Downs' conclusion), and even these differences (it can be argued) were merely an attempt to prevent alienation of their extremist supporters. After viewing their stances on many of the different issues I would certainly not classify Bush and Kerry as identical, they certainly share common views on many of the key issues, leading me to believe that the Median Voter Theorem has at least some merit, and that Rational Choice Theory has taught us a lot in this area of economics/politics.

President's Role in Bureacracy

Weingast and Moran discuss the legislature's role in controlling bureaucratic behavior. They assume that Congress has effective sanctions and rewards, so most control and influence goes unnoticed. But what about the President? Does he have power over bureaucratic behavior? In times of party-dominated Congress and White House, I say yes. For instance, President George W Bush signed a new $388 billion spending bill into law yesterday. Niskanen concludes that most of the top bureaucrat's utility is derived from his bureau's budget. The larger the budget, the more the utility. Bush's influence is felt in this budget legislation. The President submits a budget to Congress, and his influence is felt. The Department of Education received $1.4 billion more than last year. This reflects Bush's committment to increasing funding for education and his "No Child Left Behind" program. Also, the Environmental Protection Agency received a drop of 3.3% in their funding. Considering Bush's record, this is no surprise (the EPA actually got 3.8% more than Bush wanted). Just considering this brief empirical evidence, it appears the President influences Congress' budget, and therefore influences bureaucracies and their behavior. Obviously, this is easier to see when the President and Congress are dominated by the same party, but I think it is undeniable to see the President's influence on a bureau's budget.

Defense Dept. "Misplaces" Assets

In my search for something interesting to post, I came across this article from the San Francisco Chronicle from May of 2003. In the article, the journalist reports that the Department of Defense, one of our largest bureaucracies, has “misplaced” assets that total nearly $1 trillion. Worsening this exorbitant monetary value is the assets that have been “misplaced,” which includes “56 airplanes, 32 tanks, and 36 Javelin missile command launch-units.” Now, according to our studies of Weingast and Moran’s Congressional Dominance Approach, this waste would presumably be the result of the desires of those Congressmen who oversee the Department of Defense. I don’t know about you, but I would hate to think that our legislators would support such huge wastes and/or losses of assets and funds. So, in order to discover the true preferences of the legislators, in accordance with the views of Weingast and Moran, one must uncover the incentives that they have put in place to coax the bureaucracy into doing their bidding. As opposed to my expectations, Congress’s incentives seem to point to their desire for the Department of Defense to continue wasting money! There has been no outcry by the Oversight Committee, nor has the Appropriations Committee threatened to take the department funds. In fact, the budget of the Department of Defense has grown substantially in recent years. Why does it seem like legislators support such flagrant losses? It may be possible for the larger bureaucracies to ignore their funder’s desires more so than the smaller ones, since the larger bureaucracies often are more widespread and more difficult to do without. The Department of Defense may also have special leeway because it is seen as highly important nowadays, as we have multiple military engagements in multiple countries at present. Therefore, it seems that the monopoly powers of the funders may have been overcome by necessity of the monopoly supplier of national defense, at least for the time being. Legislators assuredly do not approve of or support such wastes of resources, it just seems that there is not much that they can do about it. It is much more reasonable to think that the legislators would do better for themselves, as vote maximizers, to support bad accounting over cutting the budget of our Defense Department in a time of war.

Advocay Groups: New Means to the Same End

Flipping through the internet looking for an article, I found this one about advocacy groups. Titled "Adovacy Groups Blur Media Lines" by Jeffery Birnbaum, it's an interesting look at other ways interest groups are acting to influence people. According to the article The U.S. Chamber of Commerce started a newspaper called the Madison County Record, which you can read online, in order to make the citizens of Madison Coutny, Illinois that their county was the "laughingstock of the country." The chamber, as their noted by i the article, are a pro-business lobbing group that is using the Record as a tool to bring a multi-million dollar lawsuit against lawyers who file outrageous claims, like those mentioned in the article. The chamber wants to make people aware that lawyers are using up valuable taxpayer money and resources filing class action lawsuits. Birnbaum goes on to list other groups that are using the media to promote their causes. One group has produced a made-for-tv movie concerning unprotected nuclear materials. Another such example is Congress.org, a website set up by a Fairfax, Va based lobbying firm. The group not only provides accesses to numerous local, state, and national policital venues, it has been attracting a growing number of people interesting in government and politics, but it also provides a forum for lobbying groups to promote their views. The url of the group attracts people interested in learning more about politics and while they can find that information through the website, they are also faced with causes of numerous lobbying groups that advertise there. It is idea that makes the article interesting, the almost deception of the advocacy groups through the media. A point brought up in the article is that people judge communication by its source. In essence, the point is that if you do not tell people exactly who is behind the message you are seeing, reading, or hearing, as many of the interest groups do not, then you are not being completely honest. But if it gets your point across doest it really matter? I believe that most people place a lot of faith behind what they see on TV or what the read in the newspaper or tabloids. Not to insult the American populus, but come on,most of us, when we think about it, blindly believe those things. How often does one really question the person or group behind the facts being presented? Not often. As one of the owners of the Record claims, he wasn't to worried about the ethics of disclosing who was behind the articles when he was getting his point out there to the public. As long as your cause gets the attention you feel it deserves, why worry about the means. Is producing a TV-drams about terrorists in control of a nuclear weapon, aimed to promote threat level awareness of terrorism, any different than Congressmen being lobbied with money or votes for their support on a particular issue? It seems not. When a Congressman votes a particular way on a bill or piece of legislature, the average voter would assume he is acting in their best interest. They are not made aware that he is perhaps voting in such a way in return for monetary benefits or votes in the upcoming election. By that reasoning then, lobby groups who take a different route, and inform the public through the media, need not worry either. It is just a different means to the same end. These groups are merely making the act of lobbying public which, according to Becker, creates an incentive to participate. I liked this article because of the different methods is illustrated that interest groups can take. They view of interest groups we studied in class were centered around lobbying directly to Congress and political activity, reference the Becker article. But this article shows that interest groups are active not only on Capital Hill, but in the communities as well. They do not have to take their cause directly to the legislator, for if they can get the voter involved then the voter can take the issue to their elected official. It is a great look into another way adovcacy groups act and can influence the political issue.

Education: Should Parents Have Options?

The question of whether parents should be given a choice about which schools their children attend is really an issue pertaining to the role of government. Should education continue to be nationalized, because the government subsidizes education? I found a website which has numerous links to articles, letters, and research. The overview can be found here. The reason this has become such a hot topic in recent years is simple according to Andrew J. Coulson. In many areas, public schools are failing to fulfill their basic functions, “achievement is stagnant or declining, public opinion is low, and community conflict over what is taught seems to be ever increasing” (Coulson). Parents and educators want a better system. “Education reformers have suggested a whole range of strategies for improving our schools, from new curricula and tougher standards, to charter schools, vouchers, and even complete privatization” (Coulson). However, it is hard to know which strategies will produce results. Coulson believes that the system must introduce some modicum of competition because “it is precisely the absence of competition between schools that stifles innovation and inflates prices.” This site also provides a link to a rather lengthy article by Milton Friedman titled “The Role of Government in Education” I have thought for some time that instating some system which would provide parents with some education choices would be a positive step. However, many people object to systems like the voucher system because they say that such a system would intensify class distinctions, make it more difficult to be sure that each child is taught the same common core values, and that in some more rural areas there are not enough students to warrant more than one school, thus, a natural monopoly is formed. Friedman dismisses all of these concerns, except the one of natural monopoly, in his article and emphasizes, “freedom to choose schools could be made available also in a governmentally administered system, but it is hard to see how it could be carried very far . . . competitive private enterprise is likely to be far more efficient in meeting consumer demand.” Education is necessary and is as a public good, in that every person who receives an education confers benefits upon other people in society. Thus, an educated person creates a positive externality, but it is impossible to charge only those people who benefit from the positive externality. The problem of free-riding will arise because people will say that they value the education that this person received less than they actually do, with the hopes that they then will not have to pay for the benefit that they receive. This is the argument for government subsidization and nationalization of education. These are necessary to ensure that every child is taught the same common core values. Or are they? I think in order to overcome free-riders it is necessary for the government at some level to have a uniform tax, which is set aside to pay for education costs. Otherwise, there would be people who benefit, but do not pay, which would create a market failure wherein enough quality education would not be provided. On the other hand, parents could be made to bear the costs of educating their own children. However, this sort of arrangement is unlikely to yield an optimal amount of education and many of the people who benefit are not made to pay for that benefit. A situation where parents bear the costs raises the question of what action should be taken when they cannot meet this obligation. Therefore, I think that government taxation and subsidization is necessary in order to spread the costs of education across all of the people who benefit. It is not necessary though for this education to be nationalized, and in fact, the quality of the education will probably be better under a system such as the voucher system, which would induce competition. In conclusion, the answer in my opinion is that parents should be offered some choices, because the competition induced by these choices would improve the education system.

Is regulation inefficient?

Looking for an interesting article, I stumbled across an article from ten years ago where America’s economy suffered from the negative side effects of regulation. The employment rate dropped when regulations such as minimum wage laws and federal labor laws were placed on the primary engines of job creation, small businesses. This is an example where politicians thought that regulation was a benefit to society but in fact it was detrimental and unnecessary. It is obvious the consumer voter was note getting what they wanted in this case. This unnecessary and inefficient regulation at federal, state, and local levels in 1993 cost the American people somewhere between $810 billion and $1.7 trillion per year even after taking account of the benefits of regulation. With these statistics, how is it possible to assume that politicians are actually acting on behalf of the public and not in self-interested ways. The problem arises when it is hard to see this heavy cost of regulation because the toll is not usually apparent. It is hidden when regulation merely leads to slower grower in employment rather than to visible loss in existing jobs. Jobs not created are much less visible than layoffs. Also, the effects of the regulation on employment can be hidden by other factors such as tax policy or general economic changes. Moreover, it is hard to solve this problem from regulation because lawmakers and officials have no explicit requirement to look at negative effects of policies before they make new rules or regulation. Even when agencies or congressional committees consider the negative impact of regulation policies on the economy, policymakers just look at the problem in a simplistic way and use faulty models and wrong assumptions. In the article it states that, “nowhere in the entire federal regulatory process does anyone consider the cumulative effects of existing regulation or the possible combined effects of new and existing regulations.” Therefore, it is actually more efficient to have a world without taxes or regulations because this article points out that the cost to employers of hiring an additional hour of labor services and the benefit to a worker of working an additional hour would be the same. Taxes and regulations only raise the cost to employers above the reward received by the employee and we see costs to government such as decreased employment. While some of these government-imposed costs provide a benefit to the employee, many of them do not. Like discussed in class, regulation could be inefficient especially when the group being taxed is a lot larger than the group that is benefiting from the regulation. In this case, regulation is inefficient because the damage in the form of slower economic growth and therefore lower employment is hidden. It becomes hard to vote against and the policy ends up being passed. Peltzman’s argument that we get regulation where we want it and that it is efficient is false in this case. Society would never want the American employment rate to drop. Visit this link to see the article: www.heritage.org/Research/Regulation/BG926.cfm

Are Interest Groups Bogging Down the Political Process?

After looking at the impact of rent-seeking on our economy at some length, I came across this well written book which really applies the idea to the political process. Not only is it a quick read, it is fascinating, particularly if you are interested in politics and the way government functions. Government’s End by Jonathan Rauch describes what ails our government today. Not only is public approval down, but the problem solving capacity of legislators has been diminished. This is all attributable to the rent-seeking behavior of interest groups. As more and more groups form and clamor for more and more favors, the political process becomes a complex network of contradictory regulations which render government ineffective. The incentive structure becomes aimed at seeking a larger share of these favors, and away from being productive. Legislators, as vote seekers, are trapped in this network: to bolster public approval they must grant these favors, but the more these favors are granted, the more impossible it becomes to get stuff done. The economic ideas of Rancur Olsen are articulated in Rauch’s book, and it provides insight, however bleak it may be, to the workings of Washington and the road we may be headed down. I highly recommend reading the book….here are just some excerpts from a few places to get the idea, but it is a quick read, and especially after the election and at a time when the US is so divided it is a wonderful book to read, Democrat or Republican. (If you are interested in reading it let me know, you can borrow it!). If the above link didn't work, try this: http://my.execpc.com/~berrestr/raugov.html#contents

Unanimity and the EU: A Recipe for Impotence in Political Affairs

This blog is a response to the article written by Emilee Carpenter about the UN. As a Foreign Affairs major, a topic that we consistently debate in my international relations classes is whether or not international cooperation is a feasible way to promote international security and economic development given that the primary unit of modern political organization is the nation-state. Just as the UN suffers from a measure of impotence when its objectives conflict with those of individual states, the EU has historically had trouble enforcing its laws over dissenting member nations. And just as with the League of Nations and the UN, the major problem stems from the EU voting laws – a matter of direct relevance to our class discussions of voting rules. The EU is comprised of twenty-five European countries, ten of which only joined this year. When the European Community was first founded following World War II, it only consisted of six countries: France, Germany, Belgium, the Netherlands, Luxembourg, and Italy. The idea of European integration originated as a way to ensure the security and defense of member nations. Early integrationists hoped that through integration, European states would become so dependent upon each other economically and politically that it would be physically impossible to enter into conflict with one another. However, while the EU has been successful in integrating their economies into one common market and under one common currency, the EU remains powerless to prevent member states from acting in their own best interests. This is evident through Britain and Denmark’s decision not to adopt the euro. Also, the Common Foreign and Security Policy, one of the three main pillars of the EU and the one pillar that involves pooling international sovereignty, remains weak and intergovernmental. True to realist thought, states remain the primary actors and cooperation only occurs when states’ concerns are aligned. The EU was hopelessly divided about the war in Iraq, with Britain and Spain supporting the US and France and Germany opposing the US. There are two reasons why the EU has no teeth to enforce its policies among member states. First, There is no EU mechanism to force compliance. The European Court of Justice can only enact fines to enforce its rulings, leaving member states considerable leverage. Further, the Council of Ministers is the main deciding authority, yet this institution exists to promote the interests of member states. In contrast, institutions aimed at promoting European interests have little decisive power. While the Commission is responsible for initiating new policy and promoting integration, the Commissioners are appointed by the individual member states. In addition, the European Parliament, the most democratic of all institutions and representative of general European interests, is a weak body with little decision-making authority. Second, and more importantly, decisions on issues of high politics, or issues most tied to national interest – including issues of national security and defense under CFSP– remain subject to a unanimous vote, whereas issues of low politics are determined by a qualified majority. As we have learned in class, the more people are required to make a decision, the more opportunity there will be for strategic behavior by any one person. Moreover, decision-making costs are higher because it takes more time and resources to get decisions made. This problem is exasperated by the enlargement of the EU to 25 states, and will particularly prove problematic if these new states work to counteract the domination of France and Germany. Moreover, the relationship between Eastern Europe and the United States may affect the balance of power within the EU, as eastern supporters of the United States may join the ranks of Britain to counter anti-American France and Germany. Until member nations agree to give up a greater measure political sovereignty and allow a majority vote on more key political issues, I believe that the EU will remain as ineffective in promoting peace and stability in the political arena as both the League of Nations and UN despite the EU’s greater measure of economic interdependency. http://europa.eu.int/

Why the Superfund's Budget is Not So Super

President Jimmy Carter signed the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA) to clean up hazardous waste sites where owners had shirked responsibility. Now, according to a speech by Thomas Dunne (delivered this past Thursday here in Charlottesville) the federal government is shirking their responsibility. The Superfund has an annual budget of $450 million. However, the fund is expected to accumulate demands costing $250 billion over the next 30 years. This means that, if the current level of funding is maintained, only 5.4% of Superfund projects over the next 30 years will be cleaned up. It is clear that demand for Superfund’s services exceeds what it is able to supply. Why hasn’t the Superfund’s annual budget increased? Niskanen’s model of the “budget-maximizing bureaucrat” helps explain. This model says that bureaucrats seek to expand the power of their bureau by expanding their budget. Additionally, bureau output is nonmarket so marginal benefits of agency output are based on perception. This means that the bureau has some power to obtain budgets that exceed the optimum level as long as three conditions are met. If any of these assumptions do not exist in reality, the bureau is less able to secure a budget where marginal costs to Congress exceed marginal benefits. This is the case with the Superfund, since the assumption that only the EPA knows the true cost schedule does not hold. The Superfund has quantifiable output. How many sites were cleaned? How much did it cost? How was this money used? This is all readily available information. The bureau’s cost schedule is known to the Congress. Therefore, funding level is based on the intersection of Congress’ marginal cost and benefit curves. The problem now is that our Republican Congress places little value on Superfund’s services. Big business is one of their main supporters. It is not in the Republicans’ interest to tax these businesses, which they rely on for campaign contributions and votes, for pollution they emit. This tax was one of the Superfund’s main sources of funding until 1995. Reinstating it would be the likely way to increase CERCLA’s budget. However, doing this has high costs to the Republican party. Benefits are small since they are highly localized to areas directly affected by Superfund sites and it is unlikely that, even in these specific localities, clean up would be attributed to the Republican party. Marginal costs of increasing CERCLA’s budget are high while marginal benefits are low. Therefore, even though Congress seems to be in control, this Superfund conundrum is consistent with Niskanen’s model.

Big Changes Seen in Choice for Homeland Security

In an article in the New York Times, Eric Lichtblau and Richard W. Stevenson report the reactions to President George W. Bush’s nomination of Bernard B. Kerik for the new secretary of homeland security. Bush created the Department of Homeland Security last year from twenty-two separate agencies. If approved by the Senate and the House, Kerik would replace Tom Ridge as head bureaucrat. Ridge is characterized as possessing a “staid, deliberate demeanor” while Kerik is expected to shake things up with his reputation as “a dedicated, innovative reformer who insists on getting results.” These descriptions emphasize the importance of the head of the bureaucracy as essentially the bureaucracy itself. It is expected that the agency under one head will necessarily represent that head, and with a subsequent change in leadership there will be reforms throughout the entire agency. According to Weingast and Moran’s congressional dominance approach, the principal exerts its power over the agency through confirmations. The bureaucracy must not be an independent entity if other bureaucracies exist that may serve as substitutes. Christopher Cox, a representative who leads the House Homeland Security Committee, explained that the purpose of the Department of Homeland Security was as “’the fusion center’ for intelligence operations” but that these operations had been hindered by competition with other intelligence-gathering agencies. Thus, since it shares functions with the CIA, NSA, and FBI, the department must pay attention to the preferences of the principal, reinforcing the principal’s ability to rule the bureaucracy through confirmation, oversight and appropriations. Kerik’s nomination is also supported for the belief that he will be able to fight for the right amount of appropriations for the department. Senator Charles E. Schumer said, “The last thing you need in that job is a bureaucrat… you need someone who’s going to go into the bureaucracy and shake it up and go to the administration and make sure homeland security gets the resources it needs. Tom Ridge is a very fine gentleman, and may have been the more obvious type of choice, but Bernie Kerik may have a better chance of succeeding at what is admittedly a very difficult job.” Thus, the congressional power of appropriations had directly caused a change in the bureaucracy, not merely from the bottom, but starting at the top. Fund-raising has been given top priority. This satisfies the assumption that a bureaucrat is not a self-sacrificer working for the common good, but a utility maximizer who wishes to maximize his bureaucracy’s utility through increased appropriations and thus his own as well.

(3rd) Party-Poopers

Many people blame Ralph Nader for Gore's loss in the 2000 election, and now for Kerry's loss in the recent 2004 elections. This article Run, Ralph, Run is written by CBSNews.com's Dick Meyer who supports Ralph's candicacy in these elections. He says, "Blaming Nader for 2000 is like blaming Steve Bartman for the Cubs failure to get in the World Series last year." Meyers thinks third parties add spice to national elections and believe they are crucial because "...skilled political mischief-makers capable of occasionally piercing the homogenized, focus group tested, corporate sponsored claptrap of the two big parties are a rare godsend. Because more voices are better than fewer voices." Downs has two categories under which third parties can be placed. The first is a party designed to win elections and the second is a party designed to influence already existing parties. It's hard for me to distinctly identify Nader's motive for running. From the article, it seems that he is disgruntled with the the two-party system, "It simply galls Nader that only two teams get to play in the big tournament. It's not in his nature to just take it without a fight." His main purpose seems to be to unseat Bush, whether it would be by winning the election or by influencing the Democrats to take a more leftward position. Analyzing Nader's effects in the elections by looking at Harold Hotelling's model of spatial location would say Nader is a possible scapegoat for Bush's victories. Kerry and Bush are strategically placed closely near equilibrium. Kerry is slightly to the left and Bush slightly to the right. With Nader placed at the far left, he captures extremists' votes, votes that could have gone to Kerry. The article Is Nader Poised to Spoil? shows that in the 2000 election, Nader won 97,488 votes from Florida, in which Bush won by 537, and in New Hampshire, Nader earned 22,198 votes. Bush won New Hampshire by 7211 votes. These figures conclude that Al Gore would have won the presidency if not for Nader. However, Nader does bring good news to radical liberals who feel alienated or indifferent by the rightward shift of the Democratic party. He offers an alternative that better represents them. Meyers agrees by saying, "Two parties, nearly as similar as Coke and Pepsi, don't satisfy all consumers." In this way, Nader gets people interested in the political process who would otherwise not participate. And isn't that what really matters in a democracy? Having third party candidates allows people who feel disenfranchised with the system to have their voices represented. So, maybe Nader is more than just a scapegoat.

Ukraine's peculiar bureaucracy

This New York Times article is about the election turmoil in the Ukraine. Recently, the Ukraine Supreme Court voted to redo a run off election because it determined that the previous run off election was corrupted by the current government. This article interested me because I related it to our recent discussions about bureaucracies and the Principal-Agent relationship. For my analysis I am considering the Ukraine Supreme Court as a bureaucracy. Their Supreme Court is selected much like ours. The President nominates certain individuals with the Ukrainian parliament having some say in the final appointment. I am considering the Supreme Court to be the Agent and the President to be the Principal. In the Ukrainian system of government the President holds more of the decision making power than the Parliament. This means that essentially he controls the three incentives that keep the Agent acting according to the Principal. (Appropriations, oversight and confirmation) In the Ukraine the president nominated Supreme Court has voted to redo the previous runoff that would have left the current president in power. How did we have an outcome where the wants of the Principal (President) and the Agent (Supreme Court) differed so much? In class we called the outcome shirking. My assumption that the Supreme Court is an agency or bureaucracy may be incorrect, but I think in the situation of the Ukraine system where the parliament has limited power it is reasonable to treat the Supreme Court like an agency of Public Policy. In this situation the Ukraine Supreme Court falls into the rational set forth by Weingast and Moran. So, why did the Supreme Court not act in accordance with the president with whom they had been loyal for so long? I would argue that it came down to the basics of money and power. It was suggested in class that the best way to influence a bureaucracy is to control its funding. At the current point in Ukrainian politics, the president was under intense pressure and it seems likely he will be replaced. His opponent champions a stronger democracy, parliament and Supreme Court. I believed that the Supreme Court realized that it stood to gain if the opponent was elected president. The president's challenger gives the Supreme Court more incentives and that is why they voted to allow him another chance to win despite going against what their current Principal would want. This reaffirms the idea that decisions in the Principal-Agent relationship are all about the incentives. Link: <http://www.nytimes.com/2004/12/05/international/europe/05cnd-ukra.html?8br>

Intelligence Bill

This article is about Intelligence Bill that is being held up in both the House and Senate. This Bill would create a national intelligence director to coordinate the nations spy agencies like the CIA, FBI, and National Securities Agency. The purpose of the bill is to create a field where these agencise share information with each other, the president, and Congress. This article is relevant to what we have been studying in class because the bill had to come out of the sub-committee to be voted on by the rest of Congress. The Bill was passed last week by the House-Senate conference committee last month, which is why it is able to come to the floor to be voted on. The bill was about to be passed until some of members of the House and Senate voiced concerns. This article also demonstrates how members of the committees want to keep as much of their power as possible. Senator Warner of Virginia was the first to voice to concerns as the bill was about to be passed. He is chairman of the Armed Services Committee and has been siding with the Pentagon who is expressing concerns about the passage of this bill. The passage of the Intelligence bill would cause a loss of oversight authority for the Armed Services committee in the Senate and the House because the national intelligence director would be responsible for overseeing some of these agencies. I understand that there are concerns about the passage of this bill because vital information will have to be shared between the agencies but this is an example where I see that being a member certain committees can cause a congressman to not look at the entire benefit but at what power they are losing a result of the bill. The bill also shows all the political manuvering that goes on to get a bill passed even if this bill will benefit the country. Loss of power for Warner and the other members of the Armed Services committee means that they may not be able to bring the same amount of money home that they used too, like Warner bringing home money for the Norfolk Navy bases. This article also demonstrates how a person's power based on the position they hold can influence public policy in the Congress. http://www.nytimes.com/2004/12/05/politics/05panel.html?oref=login http://www.usatoday.com/news/washington/2004-12-04-intel-bill_x.htm

Japanese Bureaucracies Off Track

Japan’s institutional characteristics have always revealed distinct differences from that of the United States and the rest of the world. Having a society based on cultural and historical practices, Japan’s unique customs have become apparent through the years in government policy both public and private. Its’ private and industrial sectors have always been criticized for inefficiencies related to the performance of the Japanese economy; however, these do not explain the story in its entirety. The underpinnings of the recent factors leading to Japan’s flawed economy can be traced back to the lawmakers themselves, the Japanese bureaucrats. Japanese bureaucrats are, in fact, the most crucial elements of national policymaking. Japanese bureaucracies, as a whole, are inefficient. In an article written by Donald J. Senese, “Privatizing Japan’s Railroads”, he pinpoints the elevating deficits and the rising costs as a problem within the bureaucracy. As a major steel producer and supplier, Japan was heavily praised for its railroads and “bullet trains”. It only seems reasonable that the government be the sole provider of railroads since it exhibits public good characteristics. Therefore, the management of Japan’s railroads have fallen into the hands of the government, in particular, the bureaucrats. Unfortunately, with no incentives to seek profits, the costs of operating and maintaining the railroad systems have accumulated. As these costs keep growing the taxpayers are being forced to pay more for goods and services to meet these additional costs. Senese points out that government bureaucrats, while working to improve the public good, have even more incentive to better themselves even at the cost of the public. He argues that the public interest is not being dealt with correctly by the bureaucrats as can be seen by the numerous inefficiencies and the failure of the bureaucrats themselves to help amend the situation. Senese also pointed out the inefficiencies associated with the bureaucrats control over telecommunications. Japan, through the Nippon Telegraph and Telephone Corporation (NTT), became the second largest telecommunications system in the world. After the NTT was handed over to the private sector and renamed the NTT Corporation, the public interest was dealt with more efficiently and properly. This, in turn, resulted in higher profits, lower prices, and consumers acquiring many of the benefits. The authority held by Japanese bureaucracies without a doubt surpasses that of the power of United States bureaucracies. This unreasonable amount of bureaucratic power through government monopoly prevents the existence of competitiveness, creativeness, and technological advancement associated with less bureaucratic control.