FDA De-Lights

This past summer, smokers may have noticed a change in some of their cigarette packages. For example, popular varieties such as “Marlboro Lights” and “Newport Lights” have been re-branded “Marlboro Gold” and “Newport Menthol Gold.” This is due to the recent Family Smoking Prevention and Tobacco Control Act that has restricted the use of labeling cigarettes with misleading terms that might suggest those varieties cause fewer health problems. In an effort to educate all smokers on the health risks of smoking, the FDA has prohibited the production of tobacco products labeled “light,” “low,” and “mild.” Some packages even include notices inside, such as the one depicted, elucidating any false impressions of the “light” varieties.

On the surface, it is easy to identify the affects of packaging regulations like these; bluntly stating that these cigarettes do not help in quitting smoking and that they are not any healthier is a way of making sure consumers are fully informed and are not being mislead by the advertising. This appeals to the public interest and may dissuade potential smokers from taking up these risks. However, these regulations may also help the companies that are producing them. New firms trying to jump into the tobacco industry must find a way to appeal to consumers, but with so many restrictions on what they are allowed to advertise, it is difficult to get their name out to potential consumers. Because established companies like Phillip Morris already have multiple cigarette brands out, consumers have no incentive to switch to other cigarette brands, especially if the clearly stated risks are going to be the same. This regulation protects the few companies already in the oligopoly of the tobacco industry from competition, and allows them to charge higher than optimal prices to consumers.

In my opinion, this regulation hurts more than it benefits the tobacco companies. If the FDA does its job effectively, they could deter potential consumers, not only through the explicit caveats, but because of the higher cost of taking up smoking.

Makin' It Rain

A recent Washington Post Article highlighted the recent surge in spending during the 2010 midterm election cycle. A recent Supreme Court ruling has allowed interest groups and corporations to use unlimited amounts of cash to influence the congressional races.

"In the latest sign of this year's record-breaking election season, an independent research group estimated Wednesday that candidates, parties and outside interest groups together could spend up to $4 billion on the campaign."

This trend in spending highlights the formula that votes for a candidate are a function of the spending of that candidate, the spending of their opponent, and their respective stances on different policy issues. It would appear that candidates are not taking the risk of the letting their policy positions solely secure their votes and instead are relying on spending in an attempt to buy more votes. Does this mean that voter's stances on the issues are so undecided this election cycle that it is up to campaign spending to sway their votes?

Republican leaning political groups, special interests, and corporations have given so much money that Republican candidates have outspent Democrats 2 to 1 on advertising. Is the Republican lead in the polls a result of this spending? Or are Republican positions on issues doing a better job of swaying voters? It's clear that both political positions and campaign spending are influencing voters, so in the meantime look for candidates to continue to make it rain cash.

California Governor's Race: Meg Whitman endorses Jerry Brown

The California Governor's race between former eBay President & CEO Meg Whitman and former California Governor Jerry Brown has become one of the most followed political races of this campaign season. Meg Whitman has spent over $140 million dollars of her OWN money on her campaign, outspending Jerry Brown by a ratio of 10:1. All of that money spent might have been wasted with the new campaign video released by Jerry Brown's camp. In this Youtube video, Meg Whitman remembers 30 years ago when "anything was possible" in California, but thirty years ago, Jerry Brown was governor. This is a great example of political advertising that can really damage another candidate's campaign. By using Meg Whitman's own words against her, Jerry Brown has shown that money cannot buy this election. This is also a great example of what would be considered by Mueller as persuasive campaigning because it is convincing voters that Jerry Brown's position is better, and increases the probability that all voters will support Jerry Brown. It also convinces an individual to vote for Jerry Brown regardless of his/her position on issues, which is a characteristic of persuasive campaigning.This commercial does have some aspects of informative campaigning but the overall feel of the commercial would be of a persuasive nature. Overall with election day less than a week away, Meg Whitman has a lot to overcome if she wants to win this election.

This would not be an issue of the MTA were profitable

Last August saw the introduction of a commuter tax for residents of New York City and surrounding counties. It was to be specifically levied at employers and the self employed. This tax is to be paid even if a person does not use any of the services of the Metropolitan Transit Authority. This is because this tax (which is used as a subsidy to the MTA) is the conclusion of a public decision. George Stigler’s paper on regulation illuminates that:

The democratic decision process must involve “all” the community, not simply those who are directly concerned with a decision […]. The political decision process does not allow participation in proportion to interest in knowledge.

This is more succinctly termed the universality of public decisions. It has angered a great deal of metro area because many of these people do not have any need for public transit. One CPA is quoted as saying

“I don’t think it’s enough of a number for people to say, ‘Oh my God, I’m moving out of New York,’” said Samuels, who is planning to notify his clients about the tax in October. “Just the concept alone is enough to get people up in arms in this city.”

This highlights another portion of Stigler’s work: the reason these taxes (and from the other viewpoint, subsidy) can be passed is that they spread the costs and concentrate the benefits. It’s not within the taxpayer’s interest to fight every single small tax increase, but it is certainly within the MTA’s best interest to accrue such a large subsidy. Personally this really hurts my family (my Dad gets taxed once and my Mom twice) but it’s not enough of a cost to require action from my family. At least anecdotally, Stigler is proven right in this case.

The Midterm Elections and Rational Women

This CNN article talks about the lack of enthusiasm among women voters this year as compared to men. The article reports that in a survey of likely voters 23 percent of women voters claimed to be “extremely enthusiastic” about voting while 38 percent of men reported this level of enthusiasm. With more women running for congressional seats than ever before and women in 8 states running as their party’s nominee for governor, the authors of the article seem to think the lack of enthusiasm among women voters is counter-intuitive. The article points to a couple reasons for this gap: despondency over the economy and unemployment, and races turning into character wars rather than campaigns on policy issues. The end of the article claims that women must get to the polls to make their voices heard on landmark policies issues, such as unemployment insurance extensions, that congress will debate in the next couple months.

If we think back to Johnson’s cost-benefit analysis of voting, women’s disinterest in voting this election isn’t as appalling as the article suggests; the ladies just have it figured out. The probability that each individual woman’s vote will be decisive multiplied by the benefit they expect to receive from their preferred candidate winning simply doesn’t outweigh the perceived costs of voting. Assuming this lack of enthusiasm among women translates into lesser percentages of women venturing to the polls, in Johnson’s opinion, women are simply acting rationally.

Better check the local revenue-expenditure packages next time...

A recent news article from Obion County, Tennessee, describes the frustration and anguish felt by Gene Cranick as he watched his local fire department officials watch his house burn down. Unbeknownst to Cranick, the city in which he lives does not consider protection from fires from firefighters to be a public good – that is, they found a simple way to exclude their services. The local council in South Fulton, Tennessee felt that it was prudent to annually charge its citizens $75 dollars in exchange for protective and emergency response services from the fire department. Oddly enough, the firefighters responding to the fire at the Cranick household refused to assist him in putting out the fire, which he was grossly underequipped to quell, seeing that the home-owner was only armed with a meager garden hose. Once the fire spread to Mr. Cranick’s neighbor’s yard however, the firefighters did their best to put out the flames. Even though the Cranick family offered to pay any sum of money they request, both the emergency services department as well as the fire chief refused to make an exception to the rule regarding the $75 fee for firefighting services. This story goes to show you just how many individual and local preferences can vary from locale to locale and how this makes it extremely difficult to pinpoint individual’s preferences. Thus, Tiebout’s theory of individuals revealing true preferences via moving into various locales, each with its own specific revenue/expenditure package, is exemplified by the aforementioned article, other than the assumption that all citizens have full information (regarding revenue/expenditure packages of all municipalities) prior to moving in. Needs and desires vary tremendously across various municipalities, each consisting of a unique demographic, thus making it believable that people can truly demonstrate a wide-range of preferences according to where they live. All in all, the fact that such a news story was published demonstrates our need for local governments to fine tune legislation according to the needs and desires of their constituents. I was under the impression that all Americans had the right to summon fire fighters, should the need arise; however, clearly a city full of people (minus Gene Granick) in Tennessee were in favor of legislation stating otherwise. Moral of the story – go over the local revenue & expenditure packages with your realtor prior to moving.

More Americans Vote Early - but why?

A recent review done by USA Today revealed that more and more voters are casting their ballots prior to the upcoming November 2nd election day, also colloquially referred to as day of midterm elections. The statistics provided in the news blurb indicate that roughly two million more people, across thirteen key states, came out to participate in early balloting for upcoming primaries when compared to the participation in 2006's midterm elections, when only four million voters participated in such programs. These are fairly astonishing statistics considering that although variation exists within the number of voters per election, an increase in participation by 50% in consecutive elections is definitely against the norm. The article states the implementation of new state laws, which made increased availability of early balloting at election offices, as a major cause of the increased early voter turnout. Additionally, the article mentions that Utah and Texas seem to be particularly affected by the new State legislation, as early votes accounted for 25% and 40% of the total votes for their primaries, respectively. While the aforementioned article points out some interesting statistics, it fails to explore any possible motives or rationale behind the increase in pro-early voting legislation. Likewise, the article neglects to mention any potential consequences of said newly passed legislation, other than the obvious increase in early ballot voting. Interestingly enough, literature written by Johnson and Downs, regarding voting and policy making in parties respectively, both seem to point out various curiosities brought to light by the quoted article. Johnson would argue that the probability of casting a decisive vote is no greater by participating in an early primary so that shouldn't rationally motivate more individuals to vote. On the other hand, the new legislation could have decreased the marginal cost of voting to voters, as they now have more flexible timing options with regards to dropping off a ballot, thus potentially pushing another 2 million voters over the threshold where their marginal benefit of voting > their marginal cost of voting. Either way, this does not explore the reasons why states pushed for such pro-early balloting legislation anyways - which is where some of the fundamental claims made by economist Anthony Downs come into play. First, it is important to note that the two states that saw the biggest increase in early balloting were Texas and Utah - also both considered to be 'strongly republican' states. Although the democrats are holding a majority in both the House and Senate, many political pundits expect this midterm election to shake things up, as the recent polls and trends indicate more widespread support for Republican candidates. Its important to note that both the Senators and the majority of House Representatives from both Texas and Utah are currently Republican, which then serves to strengthen the claim made by Downs that 'parties make policy in order to win elections, rather than win elections in order to formulate policies.' Naturally, the best time for both Republicans and Democrats to gain votes is when the opposing party is losing popularity nationally. Thus, the state-specific policies that made early balloting more available served to benefit the Republican candidates, as they can capture the disgruntled liberal voters votes while nation-wide sentiments are still negative towards the Democratic party as a whole. Why then would Texas and Utah, two states that almost never fail to elect straight Republicans, be so worried about capturing early votes?

In my opinion, conservative legislators in Utah and Texas passed said laws in essence, in order to further guarantee the successful election and re-election of conservative law makers. By doing so, both the political leaders and PAC/lobbying leaders can minimize their rent seeking expenditures without necessarily decreasing the amount of rent they receive, especially since early knowledge of election results allows party leaders and political rent recipient group leaders to tone down their rent seeking expenditures and turn that into something positive for themselves. So, is higher participation in early voting programs necessarily a good thing for everyone? I think not.

Does Self-Interest Define an Individual?

This NY times article published in February 2008 tries to explain what human motives define individual’s behavior while participating in a collective action. The author Robert H. Frank starts his discussion with the assumption that most people are rational actors who even when involved in a collective action prefer their own benefits to the benefits to the organization they happen to be in and are “self interested in the narrow sense”. According to the author (and as we discussed in class) this approach stems from the free rider problem introduced by Mancur Olson in his classic book, “The Logic of Collective Action”:

The problem, as described by Mancur Olson in his classic book, “The Logic of Collective Action,” is that even those who share a presidential candidate’s policy goals will reap no significant material advantage by donating their time or money… Nor can any individual volunteer — even one whose efforts resulted in hundreds of additional votes for his candidate — realistically hope to tip an election.

Even though large numbers of donors and volunteers contradict this rational economic theory and expectations of the free rider problem at first glance (for example, the presidential campaign of Barack Obama raised over $32 million from more than 250,000 individual donors and sent huge numbers of volunteers into the field), “By-Product” and “Special Interest” can easily explain these dynamics. According to these theories introduced by Olson in chapter 6 of "The Logic of Collective Action", a political organization can mobilize political activity because of some other nonpolitical function it performs that induces individuals to participate and hence get resources needed to support the activity which turns the political activity of an organization into a by-product. For instance, by becoming involved in campaigns, volunteers benefit in many ways as “They often meet interesting people, for example, or they may learn about attractive employment opportunities. Major donors, for their part, are often rewarded with ambassadorships or other prominent positions when their candidate wins”. In this case changing the current political situation in the country is not what attracts people to this activity.

However what about bazillion of other small donations that people make clearly not because of their self-interest but because they find satisfaction in the act of contributing to collective good? This article uses the approach of Albert Hirschman to address this issue. He acknowledges that self-interest is the most important motive in some periods but many people begin to feel displeasured when they continue to acquire material goods. When consumption standards go up, people have to work harder to hold their place; as people become more stressed and, eventually, when the tipping point is reached, they assign less value to the private consumption and devote more energy to collective goals ceasing the free rider problem. However, after some years as more and more people dedicate their lives to the virtue of collective action, the praiseworthy of volunteering falters and people resume to accumulate private goods and the cycle repeats… Even though this might be not the right approach to contradict the theories based on the rational self-interest of an individual, this article brings up an interesting point that even though self-interest is often a very important motive it is never the only important motive and that in some moments in history “narrow self-interest models miss the essential story line completely”.

Florida is Sick of Sore Losers

When a political candidate fails to win his or her party’s primary election, it seems fair to assume that they will not take part in the general election – they should cede to the winner, allowing them to receive their party’s nomination. This is what any gracious loser would do, but if we know anything about politicians, we know that they are not all gracious in defeat, and they will usually do everything in their power to be able to claim victory in the general election. Sometimes this means taking a dire political risk – breaking away from political parties completely.

The Florida Senate Ethics and Elections Committee is now calling for laws that will crack down on these defections. Unofficially dubbed the “sore-loser statute”, these new regulations would attempt to prevent candidates who lose their party’s primary from switching parties and re-entering the race as independents. This move was triggered by the current Florida Governor, Charlie Crist, who is currently running for the U.S. Senate.

The committee cited Mr. Crist's change in party status as an impetus for its report. The governor, who in April was trailing Marco Rubio by more than 20 percentage points in polls in the Republican Senate primary, abandoned the GOP and announced an independent candidacy less than 24 hours before the qualification deadline.

Gov. Crist’s sudden defection allows him to be placed directly on the ballot without needing the Republican Party’s official nomination. This sort of tactic essentially allows him to be defeated, yet still have a second chance at victory. What effect could this have on the overall election? In at least one recent election, the defector proved victorious – Joe Lieberman won his Senate seat in 2006 after being defeated by Ned Lamont and re-entering the race as an independent. In this case, whether Lieberman was the true Condorcet Winner is open to debate – yes, he was defeated by Lamont, but the only voters in the Connecticut primary were Democrats, not the entire population.

By seeking to require candidates to be free of party affiliation 18 months prior to the general election if they want to be on the ballot as an independent, Florida is trying to prevent these “sore losers” from having a second chance at the ballot. Would these changes be a positive for the election, or would they only serve to eliminate potential Condorcet Winners defeated in closed primaries?

Small Business, Small Lobby, Big Power

A 2008 article from the Boston Review documents the success of the National Federation of Independent Business, a lobby for small businesses and their owners. The NFIB is a relatively small lobby that has made a powerful name for itself in Washington. The success of the lobby fits with Olsen’s theories on how small special interest groups are generally more powerful when formed strictly for the purpose of gaining political influence.

“For close observers of American politics, this story fits a familiar pattern. While NFIB is relatively small—600,000 members compared to AARP’s 38 million—it is remarkably powerful. Fortune has frequently named it the most powerful business lobby in Washington, and in 2005 Republican members of Congress identified it as the most powerful congressional lobby. And just last month, Republican presidential hopeful John McCain deemed the organization sufficiently important to provide the keynote address at its National Small Business Summit.”

Olsen’s article shows that small groups tend to function better when you cannot exclude people from benefits because they avoid a substantial free rider problem. This article though highlights some problems that can arise with smaller, powerful lobbies. The NFIB doesn’t actually seem to represent the diversity of small business owners very well as it lobbies for a mainly conservative agenda. The article suggests this could be because its data collection polls are not very complex or that small business owners are not always educated and may vote in ways that go against their economic interests. Another explanation could be that since the lobby is so concentrated (a small lobby representing a large group of Americans), the members that are extremely active lobby for their own interests and not the ones of small business owners as a whole. This seems like a way for the lobby to minimize the free rider problem, but is the tradeoff between power and representativeness actually good for smaller lobbies?

The article also briefly mentions the second form of successful lobby that Olsen describes. It describes small-business organization that form locally to promote business, “community vitality” and other economic interests but end up gaining a voice in local politics. While the article is talking about local lobbies (not exactly the large lobbies that Olsen is dealing with) it represents the same concept of some successful lobbies starting for purposes other than political influence.

Is the tea party really a big deal?

Judging by media reports, the tea party could play a big role in the upcoming midterm elections. The tea party, which developed largely in response to the Wall Street Bailout, stimulus package, and healthcare reform, is not a registered party and does not have a fixed ideology, but it tends to represent far-right positions, both socially and fiscally.

Despite the attention the tea party has received, this front-page article in The Washington Post questions the movement’s effectiveness. First, The Post spent months contacting every known tea party organization. In all The Post was able to verify 647 groups, a number short of the thousands of groups some tea party organizations claim exist. Furthermore, 70 percent of the groups that The Post contacted said they have not participated in any political campaigning; they don’t have platforms, don’t support specific candidates, and don’t have a lot of money on hand. So, The Post suggests the tea party’s real power may be inflated.

The claim that the tea party’s power is overstated appears to fit with Downs’ model of voting and party ideology. If we assume the US electorate has a unimodal and symmetric distribution of preferences, it means the majority of the electorate is near the middle of the political spectrum, which is far from the far-right tea party ideologies. Simply put, the tea party represents a small portion of the population, meaning their influence is already muted.

Nevertheless, what if tea party activists turn out en masse on Election Day, while moderates abstain from voting? Downs would still be skeptical of the tea party’s impact, because even if voters abstain, his model suggests the sheer number of moderates would outnumber the tea party, even if a lot of moderates don’t vote.

Additionally, the tea party’s lack of organization embodies a situation where there are many small firms and individuals. It appears the individual cost of organizing is higher than the individual benefit, even if the total group activity would be beneficial in the long run. Perhaps this explains why tea party activists don’t have a clear blueprint for government, but appear to be simply united by their opposition to President Obama and the Democratic agenda, which throws the tea party’s effectiveness on Election Day into further doubt.

Nobody questions that the tea party has altered the political landscape and contributed to the rise of a new generation of conservative politicians. But if the empirical data suggests the tea party’s effectiveness is overstated, why does it continue to get heavy media attention? Is the media spending too much time focusing on the people who are simply the most vocal? Is some other factor at work?

Could the Democrats gain from losing the midterm elections?

With the 2010 midterm elections just over a week away, President Barack Obama is pulling out all the stops to help the Democrats maintain control of Congress. The reasoning is obvious: the party that controls Congress has a significant voice in setting the legislative agenda. Because the House of Representatives and the Senate largely rely on simple majority voting, the ability to set the legislative agenda has several perks. The party in power has a better shot at using cycling, tool utility spheres, and logrolling to manipulate the agenda to maximize their priorities. Moreover, the party in power has a better chance to create rents, and if the effects of these rents can be dissipated, legislators are left with benefits for themselves such as campaign contributions or support from a constituency that benefits from the rent.

Having said all of that, this New York Times article argues President Obama could ultimately benefit if the Republicans take control of one or both houses of Congress. Becoming the majority party in the legislature has its advantages, but as the author points out, controlling Congress comes with responsibility for the country’s problems. If the Republicans retake Congress it will likely curtail Obama’s initiatives, but having the opposing party in power would provide him with a foil, which is something he can potentially manipulate as the 2012 presidential election approaches.

To further this point, the author discusses two other periods of divided government. When Harry Truman was president and the Republicans controlled Congress, Truman successfully ran for reelection in 1948 with the argument that the Republicans were the real obstacle to progress. Nearly 50 years later when the Republicans took power in 1994, President Bill Clinton acted as a middle man between his own party and his opposition, negotiating smaller pieces of legislation with the Republicans while portraying himself as a check against radical conservatism. The concept worked and Clinton was reelected in 1996.

Of course, if the Republicans do retake one or both houses of Congress, Obama may not be as lucky as his predecessors. Some critics believe he wouldn’t be as skilled at negotiating and that the Republicans learned their lessons from the 1940s and the 1990s. Thus, while having opposition in Congress may create political opportunities for the president, it’s clear he’d like to have his friends in control, not his enemies.