Public Goods and Philanthropy

This article from the Charlottesville NBC is very striking. In the spirit of occupy Wall Street, Occupy Charlottesville has become a very serious social movement. With growing support in this local protest against corporate greed, Occupy Charlottesville has taken a longer term position in Leigh Park in downtown Charlottesville. The protestors who are staying in tents in the park have sparked some ideas about the possibility of letting homeless people make a more permanent residence in tents in any of Charlottesville’s public parks, even when there isn’t a protest happening.

The proposal would give some of the homeless people the opportunity to have a consistent place to sleep, but not everyone is on board. Though there seems to be a decent amount of support from Charlottesville residents, including some of the homeless population, the city doesn’t seem to be very in favor of the bill. Personally, I am confident that this idea, though maybe great at heart, will not pass. Though something similar happened during the great depression, the problem comes down to a public good issue. As soon as public parks allow people to make camp there, the park becomes an incredible “rival” good.

A reason for Penn State's demise

It's already been a few weeks, but the "preference outliers" in support of Penn State are still scratching their heads wondering how this Sandusky abuse scandal could have possibly unfolded over 15 years without any of the countless members of the Penn State football program willing to speak out to end the abuse until now. A potential answer? The bureaucracy of the Penn State athletic department allowed it to. After Mike McQuery witnessed Sandusky abusing a young boy in Penn State athletic facilities in 2002, each subsequent person who was apprised of the situation was able to avoid responsibility and assuage feelings of guilt by passing the buck up another level. The chain of command, and thus the dispersion of accountability follows like this: Grad Assistant McQuery --> Head Coach Paterno --> Athletic Director Curley --> VP Schultz --> President of the University Spanier. Each of these people had a responsibility to report this event to Pennsylvania authorities, each failed, but McQuery still has a job, Paterno and Spanier are unemployed, and Curley and Schultz are facing criminal charges. This is possible because of the different responsibilities of the different levels of command in a bureaucracy and the expectations of accountability that follow these respective roles.

This system exemplifies many of the inherent problems of a bureaucracy that we've discussed. The program has NOT been monitored up until this point; as long as Paterno kept winning, no one wanted to investigate too closely into the suspected allegations. The program is insulated; it functions almost as an elite club that once admitted, members will do anything (including McQuery playing golf alongside Sandusky weeks after witnessing him abuse a child) in order to maintain membership. And, with the exception of winning, there is little incentive for efficiency. Other aspects of running a major department are not the focus, and thus perform inefficiently. There is also no alternative source of information--no one along the chain of command spoke up, there was no way for the information to leak. This combination of bureaucratic elements combined into the perfect storm of passing the blame, ignoring witnesses, and doing the absolute minimum to avoid accountability. Maybe the theory of bureaucracy will help illuminate the confusion and disbelief that myself and all other Penn State fans share.

Honor

Weingast and Moran state that “the threat of ex post sanctions creates ex ante incentives for the bureau to serve a congressional clientele.” If doubt exists in the credibility of the threat of sanctions, then the incentives will be weakened. As a result, behavior will diverge from that which is desired. This same theory can be extended to countless examples, including that of the Honor System at UVa.

The Honor System and the “community of trust” it strives to maintain rest on the principle of “single sanction.” If a student is found to have cheated, he or she will be expelled. However, as of 2001, “of the students who said they were aware of an actual honor violation, 95.4 percent said they did not report it or initiate charges of any kind.” If students do not report violations then the threat of ex post sanctions has no credibility and thus does not create ex ante incentives; that is, if students do not report honor violations then there is no incentive to adhere to the honor code. One possible solution that has been explored is that of a multi-sanction system, but such a system has failed to garner the necessary support and also does not guarantee improved incentives. In order for the honor system to function effectively – with any number of sanctions – it is necessary for students to report honor violations. If increased initiatives are taken to promote honor and support students who report violations, then perhaps the status quo of letting violations go unreported can be replaced by an expectation that students will report violators. This would increase the credibility of the threat of the honor system, and, according to Weingast and Moran, decrease instances of honor violations.

Exploitation of Votes Using Small Parties

This Washington Post article, linked in the title, discusses the current dissatisfaction of Spanish voters with the ruling Socialist Party. High unemployment and the reduction of welfare programs have left many Spaniards, especially younger generations, to become incredibly disillusioned with the government because future economic prospects look bleak. Although the Conservative Party is using anti-Socialist Party sentiment to their advantage, many young voters see the parties' fiscal policies and too similar, and so stated that they were planning on "voting for smaller parties that stood little chance of winning power."

This takes us to Downs' spatial location model in explaining the existence of small parties. According to Downs, small parties are used to influence existing large parties. The small parties exist as a way for voters to threaten large parties with diverted votes if the large parties have alienated them with unpopular policies. In order to show dissatisfaction with the Socialist Party's policies, Spanish voters are planning on voting for small parties, in the hope of forcing the Socialist Party to change its policies or decreasing the influence of the party.

Informative Cainpaigning

In this interview with Piers Morgan from October, Herman Cain outlines his stance on the issue of abortion.  According to his answers in the video, he does not believe that abortion is okay under any circumstances, but he also believes that it is not up to the government: that the decision lies with the individual or family involved, and it should not be legislated.
This is an example of informative campaigning, in which candidates clarify their positions on the issues, as opposed to persuasive campaigning, in which candidates attempt to convince voters that their positions are the best and try to get voters to identify with them.  This is interesting because basically all campaigning is usually persuasive, so as not to risk alienating voters.  If informative campaigning were to dominate, someone near the median would win, but according to Mueller, persuasive campaigning generally dominates, and the two run together to become a single factor affecting the vote percentage gained by a candidate.  In the case of the Republican Primary campaign, there has been slightly more informative campaigning than in a usual campaign in order for the candidates to differentiate themselves from each other, and when candidates have revealed positions that may alienate voters their opponents have latched on and brought them to the forefront in order to draw a larger percentage of the vote.

From Preference to Policy - A Traditional View

In an ideal democracy, the preferences of a nation’s citizens would determine government policy a 100% of the time. However, with a country consisting of over 300 million people (with a wide diversity of interest and knowledge on a torrent of issues) an ideal democracy is impossible to achieve and, to be perfectly honest, most likely not wanted as it would require a tremendous amount of effort on behalf of the voter. Instead, our democracy is based on the decisions made by our elected representatives and those our elective representatives put in charge of specific operations. Nevertheless, government policy should still be roughly in line with the people’s preferences by definition of being a democracy. The question is, “is it?”

Even if our elected representatives are fully committed to carrying out the people’s choices, the likelihood that our preferences for policy are converted into results is far from certain. Because of the sheer amount of legislation that must be implemented, it is necessary for Congress to distribute the workload among different agencies. These agencies are legally liable to Congress, however the problem becomes how well is Congress able to monitor these agencies? While the article presented here might seem a little foolish, it raises a legitimate point. While I don’t doubt the general intelligence of our representatives at large, the fact is that not too many are specialized in fields outside of government and law. Agencies deciding environmental policy or nuclear waste disposal regulations are the clear experts and Congress can really only trust their judgment. This creates a certain degree of agency autonomy that Congress can only loosely regulate.

These agencies have their own utility maximizing functions that are different from Congress and are, in turn, different from preferences of voters. While Weingast and Moran have provided support for the idea that Congress does indeed possess a sufficient incentive system for keeping agency policy making decisions in line, I believe evidence for the traditional view of agency autonomy is still a more aesthetically pleasing argument if not necessarily as strongly empirically supported. If it is true that agencies are indeed somewhat autonomous of Congress, it would seem that our present governmental structure of representative democracy is not the most efficient means of transforming voter preferences into policy results. Then again, maybe turning voter preferences into 100% results isn’t the best thing for a nation anyway.

University Bureraucracies

The article titled "The Growth of University Bureaucracy Revisited" (link in title) talks about how the bureaucracies in universities have significantly increased in the last 40 years. Furthermore, it talks about how not only have the number of top bureaucrats increase but their salaries have risen significantly. It also questions how we really know if the university bureaucrats are doing a good job. If you take the top 10 university presidents in the last two years the turnover has been one or two and probably it has been voluntary. Presidents are seldom kicked out of office and their salary is constantly raised, not necessarily in line with performance.

This article alludes to a lot of the topics we discussed in class when we talked about the traditional view of bureaucracy. Universities, just as government agencies, are autonomous and thus the problems of bureaucracy arise. One of the biggest problems identified by Niskanen is the monitoring problem. It is really hard to monitor universities because output is non-market and it is hard to quantify and the university presidents' salaries are not tied to efficiency or profit because there is no profit associated with universities.

Just as in government agencies, decisions at universities are done by a senior bureaucrat (the president) who, as any other person, is homoeconomicus (utility maximizer). In order for the president to maximize his utility he wants to maximize the budget. Therefore, the decisions made by the president might not always be to maximize efficiency but rather to maximize the budget. This is facilitated by the fact that the state or donors do not see the cost curve of universities (take Penn State's non-disclosure as an example).

Overall, universities, like agencies appear to be isolated and run by budget maximizing bureaucrats. Weingast and Muran would respond to this article by saying that we don't see president turnover that often or other measures of punishment because the reward and sanction system in place for universities is strong enough that it scares bureaucrats to be in line with the broader interests.

Budget Troubles

A recent Washington Post article reported on Congress’s own frustration in meeting its budget deadline. While technically Congress should have a budget put together by April 15, this deadline is now reportedly “routinely blown.” The article outlines how the budget process is supposed to work: the House and the Senate each come up with twelve separate budgets (each one for a different agency) and then Congress comes back together and negotiates on the differences between the two to come to an eventual decision. However, in recent years, this system has failed and Congress has relied on short-term spending bills and omnibus bills that “allow greater speed but less scrutiny of agencies and programs.” This is a solution that Weingast and Moran predicted in their paper because it allows many issues to be voted on at once and thus, minimizes the chance of reneging so many people will agree to it. As a result, Congress has started to propose new solutions to help solve the problem. The ideas include shutting down Congress completely until something is passed, giving Congress two years to approve budgets, and most currently, a bipartisan super-committee.

Although the solutions to this budget deadlock seem logical and helpful, the solutions may not end up offering any relief. As we discussed in class, committees are budget-maximizing groups. That is, unlike the market sector, they do not have any incentive to keep their costs low – rather, just to keep their spending high so their budgets remain large. This obviously creates huge inefficiencies within the American bureaucracy. The current problem Congress is now facing is the simple fact that money is limited and the budgets must be more carefully constructed while each of the agencies have that continuing incentive to be budget maximizing. However, the solutions that Congress is offering to help speed up the problems may not be all that beneficial. If the three assumptions outlined by Weingast and Moran hold that agencies are monopoly suppliers, are the only ones who know the cost schedule and they follow the institutional rule of “take-it-or-leave-it” offers, merely offering more time for Congress to approve the budgets is not going to make a difference. If Congress however, could get knowledge of the 12 committees separate marginal costs, then perhaps, the budgets could become more efficient and Congress could slash budgets and start passing bills again. However, since agencies themselves cannot predict and in some cases, quantify, these costs with complete accuracy, this would be nearly impossible.