Realistic Middle School Election in Charlottesville

   On Friday, one of Charlottesville's local middle school's: Buford Middle School held their annual election to determine who would take over as president, vice president, second vice president, and treasurer for the school year. When I was in middle school, I vaguely remember checking some sort of box in my homeroom in order to vote for my desired candidate. At Buford, in the cafeteria there were electronic voting booths set up, and students were required to register to vote. They even received the famous "I voted" sticker, and a free pencil that said "voting rocks".I had the privilege of being at the school Friday during the election. As I tutored in a classroom, and even spoke with a girl who ran for office, it was interesting to hear how the students responded to the realistic voting process.
    Despite the fact that registering took "20 seconds" to complete, there were still kids who did not register. Many students proudly displayed their sticker and were already using their pencil! The new voting system reminded me of the Johnson article. I think Johnson may see this as a potential beneficial activity for the younger generation to participate in. By teaching kids the value of registering to vote at a young age, kids may have more incentive to continue voting in national elections when they are of age. It may not solve all the issues Johnson raises, but education can decrease voter ignorance. With a significantly smaller number of voters in the middle school vs. the nation, it was important for the kids to understand the value of their vote. Although the issues raised in Johnson's article remain true on the national level, I thought it was great to see middle school students be introduced to the registration and electronic voting process.

Production Externalities Taint China's Growth

This article from the New York Times describes a classic case of an externality in production. The frantic pace of economic growth in China, particularly in the manufacturing sector, has wreaked havoc on the environment. Smog contaminates the air in the most populated cities, and air pollution has even led citizens to wear masks outside. Of immediate concern is the country’s high consumption of coal. Perhaps most disturbing is a 2010 report attributing the poor environment to 1.2 million early deaths that year. In response to increasing concern, the Chinese government has announced a plan to reduce air pollution by restricting the utilization of coal and the use of cars that are not environmentally friendly.  However, environmental groups find the new standards are not far reaching enough.

China’s situation also demonstrates an element of the prisoner's dilemma, because each factory can be seen as having a dominant strategy of using cheap, environmentally hazardous methods of production in order to compete. However, with government intervention now changing incentives, production methods will hopefully move towards a Pareto optimal outcome.  

Although not mentioned in the article, the Chinese government could also consider auctioning off “licenses to pollute” as a strategy to clean up the environment. This is an idea we discussed in class that has been researched extensively in the UVa Economics Department. An auction would benefit the government both by fostering innovation in production and raising revenue at the same time. 

Benzene Emissions in Philadelphia Pose Cancer Risk

     I usually try to read the Philadelphia Inquirer every few weeks or so, just to keep tabs on what's happening back home. When I opened the website tonight I noticed an article entitled 'Greenspace: Proximity to Industrial Plants' Benzene Linked to Cancer'. From the title, it sounded like this article would be a perfect example of a negative externality of production, as large factories and refineries in the southern section of the city had been reported to have been emitting a toxic chemical known as benzene, that health experts have labled a carcinogen. This would fit the paradigm of the negative production externality, as the negative effects of the benzene on surrounding residents raises social marginal costs in the market for the refineries' output above allocatively efficient levels. This cost was being imposed on South Philly residents who were not parties to the exchange in which benzene was produced.
      However, after reading the article, unlike the title misleadingly suggests, the main culprit in benzine emissions is not the refineries, but is instead city traffic, which accounts for triple the amount of benzine emissions in the city. So, while there is definitely a negative production externality at play here, the bulk of the benzine emissions is actually a negative externality of consumption. City drivers are engaging in an activity that, like smoking, imposes an externality on the rest of the city's residents. The result is that the social marginal cost is higher than the private marginal cost to the individual drivers (gas, insurance, car payments) and the quantity of driving 'consumed' is higher than what an economist would consider allocatively efficient.

Public Plazas in New York City

Crime, violence, and drugs have always been prevalent in New York City.  Within the past few years, the public has been demanding more urban parks to improve the community.  In an article by the New York Times, the author discusses how new public plazas, commissioned by the New York City Department of Transportation, have been improving the living conditions of the city by reducing crime and increasing profits of surrounding businesses.  Public plazas are gaining popularity in Los Angeles, San Francisco, and Philadelphia as well.

People prefer these urban parks over traditional parks because they want to be able to relax and enjoy the hustle and bustle of the city simultaneously.  The parks are an impure public good in that they are non-exclusionary, however, they are only partially non-rival because as long as there is space, people can enjoy it.  The parks must be provided by the government because of the free rider problem which occurs when people are reluctant to contribute to the purchase of a good that provides group benefits.  Public goods are under provided if the government does not step in because the free rider problem leads to an outcome that is not allocatively efficient.

Lower social pressure to vote in the VA Gubernatorial Election

Virginia is one of two states holding gubernatorial elections this year, and the race is starting to become interesting.  Most interesting to me is the recent poll that Virginia voters dislike both candidates:

"Democrat McAuliffe gets a split 38-38 percent favorability rating, compared to Republican Cuccinelli’s negative 34-51 percent rating"

This is not a good sign for either candidate, just seven weeks out from the election - and these polling numbers have an interesting effect on the voter turnout that we will see in November. 

David Johnson's article "Voting, Rational Abstention, and Rational Ignorance" outlines one incentive to voting as  "social approval".   We see this when "individuals vote in order to avoid the social pressures their friends, family, neighbors, and professional, philosophical, or political colleagues would place upon them if they did not."  The social pressure of an election is determined by a whole host of things, but I believe one of them is the likeability of the candidates (or how excited voters become about their candidate of choice).  To me, the low favorability ratings of the candidates imply that potential voting abstainers will face less pressure as it will be more understandable that they did not vote.  One could see how if both candidates were extremely likeable, and people were generally very excited about the election, there would be increased social pressure to vote.  If the reason a voter is driven to the polls is primarily based on a certain amount of social pressure, it is possible that in this gubernatorial election, that pressure is lessened due to the candidates' strongly unfavorable perception. 

Rational Ignorance and the University's Future

In an email sent this morning from President Sullivan, she invites us "to continue [our] engagement in the development of this important roadmap to our future," in reference to developing the University's strategic plan to guide UVA into the future. Further along in the email she provided two links, one to a UVA Today article and one to an entire website devoted to the subject.If you are anything like me, the you read maybe the first paragraph of the president's email, noticed the hyperlinks and promptly archived it, never to be seen again.

There are substantial costs to trying to comprehend the monolith that is the strategic plan of our great school, and due to my lowly status as a fourth year there is not much I can personally do to change or implement the best policies for UVA. You might even say that the marginal cost of delving into the president's plan is much higher than the marginal benefit. This is caused by a distortion, as Johnson calls it, produced by rational ignorance. President Sullivan holds a disproportionate amount of influence on creating and implementing university policy, which means I have little incentive to gather information about the issue.

I am not completely void of incentive, however. My objective function is influenced by the University's utility, that is, we have interdependent utilities. When UVA's utility increases - in prestige, influence, etc. - my utility increases - in pride and the influence holding a degree from here has on getting a job - so maybe I ought to begin engaging. I would at least be able to sound smart around my friends.

Concerns about France's Social Security System

“Le Front National” is an economically and socially conservative nationalist party in France. This article (translated into English) posted to their website on September 17^th, 2013 discusses recent recommendations that the Social Security system in France become increasingly more privatized. Currently, France’s “securité sociale” program encompasses a National Health Program and the European governments have made clear that universal access to healthcare is part of the necessary elements to fight poverty. Because the welfare system has been in an unstable financial position, reforms were taken by former president, Nicolas Sarkozy, that have led to a decrease in the amount of repayments and medications provided by the government. To create a more efficient Social Security system that does not solely guarantee the wealthy full refund of their care and does not convert the system into private enterprises, “Le Front National” is recommending a tax be imposed on the banking system which would therefore lead to a more “equitable redistribution of wealth.”

The article points out a market failure in the French Social Security system – that the public good of Social Security is not being allocated efficiently. Jonathan Gruber tells us that one way to correct this failure and reach an allocatively efficient output is through corrective taxation as “Le Front National” is suggesting here; however, Gruber also tells us that the difficulty in measuring the actual costs and benefits of providing this public good can result in further problems including the Free-Rider Problem. Additionally, Mueller warns that as you start initiating state intervention, this intervention will only have to increase and result in a degenerative process. It is important that the current French government consider all of these potential market failures as they determine particular reforms to the system.

A Public Choice View of Government in Healthcare

On the political scene, America's rising health care and insurance costs continue to be a main topic of debate. An article published in May by Forbes magazine conveniently frames the health care debate in terms of public choice. It argues that the government should spend more money on providing true public goods and less on goods that are simply beneficial to the public. Health care clearly does not satisfy the non-rival and non-exclusionary conditions necessary for something to be a public good. It should then, in theory, be possible for private companies to provide it in an efficient way. This is why, according to the author, the government should focus on providing true public goods which cannot be provided privately and stay out of healthcare to the extent possible.

But if health care and insurance can be provided efficiently by private firms, then why have costs continued to rise far above those expected for an economy of our size? This interesting video describes components of health care which are higher than expected and claims that the area with the largest discrepancy, that of $500 billion, is due to a lack of negotiation power with companies providing health care services. In other words, there are not many alternatives for medical services and so consumers lose the leverage that competitive market theory assumes they have.

So perhaps public choice can provide a solution. The New York Times published an article on competitive bidding laws and mentions how a "pilot program had reduced Medicare costs by 42 percent." So in this example when the government focused on enforcing the free market, health care prices dropped. The free market institution is non-rival and non-exclusionary, and therefore is something that is not likely to be provided efficiently by private companies. It seems to me like the government should focus on providing as close to a perfectly competitive market as possible. The more allocatively efficient outcome should follow naturally - and with it lower costs for consumers.


Sorry for the length - I look forward to reading the comments.

Considering the Externalities of growth in Washington D.C.

    This article discusses the potential negative and positive production externalities of changing the height restrictions of buildings in Washington D.C. On one hand there's the government who thinks construction would produce a negative production externality in the form of production imposing upon the iconic monument height, and the security that comes with lower buildings in the event of an emergency. They value the city as a place centered around America's government and rich history. In opposition to the government are many consumers who see the positive production externality of producing more real estate in Washington D.C. People argue that great economic growth would come along with the relaxation of the height restrictions.
   The negative production externailities would effect third parties such as people who appreciate the aesthetic beauty of the nations capital as well as current residents of the city. These people see more construction as a negative externality to the current unique environment of Washington D.C free of high rises and large areas of consumption. More construction diminishes the value of the monuments as well as contributes to congestion.Those in opposition to the government and citizens who value the aesthetic aspect of D.C. monuments see a positive production externality from revising the height restriction. Things like diverse architecture, more places for work and business, and more residence areas within the city would allow for the large demand for consumption in the city to be satisfied. The economic growth would cause a positive production externality extending beyond the center of the city. It will be interesting to see how this building restriction issue is resolved. With the government being a large player, internalizing the externality could be a difficult task. It is important to recognize that those involved are thinking like economists as they evaluate the externalities before allowing any changes to be made.

New York changes conservation enforcement to reflect marginal benefits

The New York State Department of Environmental Conservation has decreased the number of pollution tests for factories, power generators, sewage treatment plants, hazardous waste sites, and other producers by 25 percent over the past 3 years, according to a Wall Street Journal article. The DEC enforces regulations that seek to correct negative externalities in production. Certain businesses emit pollutants that harm consumers and the environment and do not have to internalize those costs.

Inspections, which cost money, may be thought of as a cost of regulation; according to our class model, government should seek to set the marginal benefit of additional enforcement (or additional reductions in pollution) equal to the marginal cost of additional enforcement. According to the article, a DEC spokesman “cited 97 a percent compliance rate with pollution discharge permits.” This means that the marginal benefits of additional enforcement have decreased, so - by cutting the number of inspections - New York’s DEC has decreased the marginal costs of enforcement as well.

Finally, environmental groups complained that the DEC was still missing significant amounts of pollution. They are, effectively, arguing that the DEC has underestimated the marginal benefit of additional enforcement, or additional reductions in pollution; presumably, the affected industries would argue that DEC is underestimating the costs of enforcement.

Suh's Externality

Ndamukong Suh is a defensive lineman for the Detroit Lions who just received a fine of $100 thousand for an illegal block during last Sunday’s game. While being considered one of the most dominant defensive linemen, he has a reputation for being a “dirty” player accruing multiple penalties for unnecessary roughness and unsportsmanlike conduct. While the individual fine to Suh is not an externality, the negative sports coverage to the team shown in  THIS link, and many others like it that have followed Suh for the past couple years, is a negative externality of production. While Suh is producing tackles, sacks, and defensive opportunities for other players, the negative sports coverage is putting stress on the locker room relationships and the Lion’s image.

The fines levied and possible future suspensions mirror the action of the courts in the fisherman/pollution example. For Suh’s negative externality of production to be internalized, the Detroit Lions would have to offer to pay him for not being penalized or he would have to pay for the right to continue to get flagged, depending on if Suh has the right to play as he wishes or the Lions have a right to a player who doesn’t get flagged respectively. This suggestion would probably meet with strong backlash because most people probably think it wrong to offer players bonuses for being sportsman-like or inversely a player being able to pay to be unsportsman-like.