Immobile Americans

According to Tiebout, people determine where to live based on varying revenue expenditure patterns in different polities, and if someone does not like their local community’s revenue expenditure pattern they will simply move to a different area.  Based on this theory it would seem that people would often be moving, especially from the state they were born in, as they had no choice where they were born or what the revenue expenditure pattern is like in their native community.  However, as this article in The Buffalo News shows, Americans are rarely moving from the state that they were born in, and if they do move it is not a result of the state’s revenue expenditure pattern.  According to the article, only 1.5% of Americans move from the state they were born in, a figure less than that of their parents, and if they do move it is not “to find a state with lower or no income taxes.”

Instead of moving based on a state’s revenue expenditure pattern, people are moving for other factors such as weather, less expensive housing, and a new job.  The article directly contradicts Tiebout’s assumption that people face no job restrictions, since a job is one of the primary causes of people moving or not moving.  As stated in the article, decreased job turnover in the United States has been a primary reason of the lack of Americans moving, showing that people are heavily restricted by their job location.  The article opposes Tiebout’s theory that a community’s revenue expenditure pattern is the driving force behind people moving; instead it shows that state policy makers altering income taxes in hopes of attracting more people to their state is almost entirely futile, and that if a person is moving it is because of weather or a new job, not as a result of a state’s revenue expenditure pattern.

Walter Shapiro's main concern in his 1989 article entitled The Gap Between Will and Wallet is the concept of National Service. He explains that, while voluntary national service were widely popular, the support for the idea was greater than the amount of people actually willing to make the commitment to the service. A large majority of those who signed up for service programs, such as in homeless shelters of hospice centers, came from low-income families because they were more willing to except the unfavorable work for a low wage. In an effort to renew the spirit of national service as a means to promote citizenship and civic engagement, the idea for a Citizen Corps was proposed. This program would consist of 1 million high school graduates who would commit to a minimum of 1 year working of the Citizen Corps. They were given two options: work for $100/week in places such as homeless shelters and underprivileged communities, or enter the armed forces for a wage far below that of regular soldiers. This program would be a requirement to be eligible to receive any sort of federal aid for college tuition. As an incentive, those who participated in the program would receive a $10,000 voucher for each year of civilian service, $24,000 after a two-year military commitment. The response to this program varied greatly. There were those who supported the idea as a way to bring back national service and "close the gap" between the willingness and desire to provide service but reluctancy to make the financial or time sacrifice. However, many viewed this as an extreme means of government coercion to perform service, and placed the poor at a disadvantage since they were the population more likely to need the federal aid, and therefore required to participate in the program, in order to attend college.

This idea of national service can be related to our discussions in class about public goods. The benefits of national service are clear: increased civic engagement, support to lower-income and disadvantaged communities, increased citizenship, etc... However, due to difficulty in recruiting participants, the demand for national service exceeded the supply, and the supply of national service at that time was less than the optimal quantity to society. Society could be made better off if more national service was provided. Therefore, the government took action to essentially create public provision of a service currently subject to the private decisions of citizens with regards to participation or abstention front he program. The vouchers can represent a version of a subsidy to those who choose to participate in the program, since the opportunity cost of their 1 year commitment  was either the salary, likely a higher one, they could have made in their next best job alternative, or the value they placed on the higher education they could have pursued instead. The issue, however, is the method of forcing participation in the program. By making it a requirement to receive federal aid for college, those who cannot afford college, and choose to not participate are made worse off, and may likely not be able to attend college. On the other hand, those who could afford the full college tuition were not subjected to the decision between college and the national service program, and may have been less likely to join. This created a notable selection effect for participants. Therefore, Citizen Corps, while attempting to increase the supply of a public good, is not is not a fully pareto-optimal solution.

Mini-Max Regret Theory in Mid-Term Elections

When we studied voter abstention as explained by David Johnson, one of the central issues we had to confront—after recognizing the strong disincentives to exercise the franchise—was why there was any civic participation at all. Considering how low the potential payoff generally is, why isn't voter participation in the single digits? Why does anyone go to the polls? We tossed around a few different theories. The theory that appeals most to me is one Johnson explicitly considers: the expressive power of the vote. I discussed this in my last blog post about Hong Kong. However, we also considered the "mini-max regret" explanation. Under this theory, people make decisions based on regrets, regardless of possibilities and independent of possible payoffs. Given a set of choices, then (such as voting vs. non-voting), people will choose the option that minimizes their maximum possible regret. We used this model to show that the maximum regret under not voting is larger than the maximum regret under voting, and therefore people may choose to vote.

It occurred to me that this theory of conceptualizing people's actions via regret-minimization (rather than utility-maximization) might apply to all sorts of situations. In this article from The Wall Street Journal, we see there is a combination of widespread voter apathy about the upcoming mid-term elections in Congress and a strong possibility of electing a Republican-majority legislature. Leaving aside the question of voter participation, we can use the mini-max regret theory to understand why people might be voting for Republican candidates over Democrat candidates. The article states: "But the GOP's advantage springs more from intense anti-Obama feelings than from a wave of voters who believe Republicans will transform Washington." Senator Lindsay Graham confirms this sentiment. What it expresses, in my opinion, is precisely what the mini-max regret theory predicts: people often make decisions based on what they don't want, rather than what they affirmatively do want. For voter participation, people don't want the possible regret of failing to cast the tie-breaking vote; for choosing political candidates, people often make decisions based on who they don't want in office. Specifically in this case, the regret of having more Democrats like Obama in office is the controlling factor in voters' minds, rather than some positive expected utility from having Republicans in control. Although in practice cost-minimization and utility-maximization frequently go hand-in-hand, how we think about behavior changes subtly when you employ the mini-max regret theory. I believe it provides a useful framework for understanding voter behavior in the upcoming federal elections.

Voting on Bodybuilding

Three weeks ago, the International Federation of Bodybuilding and Fitness held its 50th annual Mr. Olympia competition. Similar to the electoral college in the U.S., the winner of the race is chosen by representatives instead of through popular vote. These judges are expected to be able to critique contestants better than the average person could, while still doing a good job at representing popular opinion.

However, the judges' scoreboards this year were far from popular opinion. Phil Heath, the three-time winner of the Mr. Olympia competition, was the judges' favorite this year and took home the grand prize of $275,000. On the other hand, a survey by bodybuilding.com indicates that the people wanted Kai Greene to win. Kai Greene won second place in the official competition, even though he had a majority (61%) of the people's votes in the survey above. Phil Heath only had 16% of the popular vote, and was expected to win second place.

This is similar to the presidential election of 2000, when G. W. Bush won in the electoral college against Al Gore, despite Gore winning more votes among the population. The representatives in the 2014 Mr. Olympia competition chose a candidate who was very far from a plurality, meanwhile the electoral college in 2000 chose a candidate who had a half of a million less votes among the population's voters. This makes me wonder if the benefit of having voter representatives really does exceed the cost.

The Brazilian Median Voter

The current electoral situation in Brazil is a good example of the median voter theorem in action and how imperfect information on who exactly the median voter is causes different policies to emerge. Evidently, the fact that an election is a multi-policy (and in Brazil a multi-party) game, makes it difficult for us to use Downs' model without serious simplifications. That being said, this Bloomberg piece does a good job narrowing down the issue to "change or caution."

This notion of change vs. caution is interesting because in actuality, there is no such choice - the real choice Brazilians have is between change and more change, since the ongoing economic recession in the country has made "change" a necessary platform for rational candidates. That is, while we may not know exactly who the median voter is, he (she) wants change. In that sense, parties in Brazil are all running change-oriented platforms - some argue for more profound changes, some seek less change, but they all are attempting to find the exact balance that will allow the change-seeking yet risk adverse median voter to sympathize with them.

The fact that all parties advocate some form of moderate change - e.g. keeping up with social welfare programs while promoting anti-corruption legislation - shows us the attempt to cater towards a moderate voter. The fact that parties differ in their views of what constitutes moderate policies shows how it is difficult to be at the middle of the spectrum when you don't know where that middle is. That is, with pre-election polls constantly fluctuating it has been hard to decide which platform had the most strength, and in consequence we have seen a lot of strategic movements ahead of the election as parties fine-tune their propaganda. Now, as we head into the second round, the game shifts into a duopoly and participants are able to a) get a better idea of who the median voter is, and b) promote even bigger rhetorical shifts without loosing votes as easily as in a multiparty scenarios. In that sense, the next few weeks should provide us with a lot of interesting material, and perhaps even another blogpost.

Rock and Roll and 'Rational Ignorance'

Everyone knows that economists wear their ignorance like a badge of honor.  Many don't realize, however, that rock-musicians share this passion for political naiveté. Take Tea Leaf Green's song "Vote on Tuesday" for example.  As clearly stated in the opening line, "I don't want to vote on Tuesday," the protagonist of the song holds no desire to exercise his franchise in the upcoming election for county judge.  To justify his abstention, this citizen-voter cites the fact that he "never read the pamphlet[s]" that provide information on the respective candidates.

Naturally, this song reveals the protagonist's preferences; at the sufficient level of knowledge required to make an informed decision, the rising marginal costs of education, namely the associated time costs, exceed his expected marginal benefit from voting.  Thus, given the basic, rational agent model, this voter will choose to not vote.  This strategic abstention demonstrates his rational ignorance, as he adheres to basic economic logic, maximizing his utility through avoiding the high costs of candidate education.  As described by Johnson, this voter's decision to be rationally ignorant and abstain will distort the greater voting economy by heightening the political influence of others.  Like most rock ballads, the seemingly simple lyrics of "Vote on Tuesday" actually carry deep, relevant economic lessons hidden below the surface.
-Riley

Corrupt Prison Bankers

Corruption in the American prison system has run rampant as state governments look for an easy way to cut costs. Media investigations have uncovered appalling conditions in our nations' jails by private management companies that have been contracted to run the prison system. As states look to capitalize on the prison system, the financial burden is increasingly being placed on the families of inmates, forcing them to pay for the inmate's room/board, electricity, clothes, and other necessities. Historically, the inmates' families have used a govt. system to wire or mail money to their relatives with little or no fees. But in a recent example of outsourcing, almost all states have switched over to the private market for their banking, requiring funds to go through a contracted company called JPay. The Time's article details some of the extortion-like policies that JPay is using to squeeze families out of their money. Fees to wire money can reach 45% and one woman claims that sending money for her son to buy a pair of underwear costs her $100. By all accounts, JPay is a questionable company that has a complete monopoly over the prison banking system.

JPay vs. a public prison banking system highlights the complications of making a public-good(or service) private. Changing to a private system could potentially create savings from all parties and would have made Buchanan a very happy man. But corruption, greediness, and a near monopoly has led to a broken system. Perhaps if the monopoly was broken up, an open market could find a amiable solution but for now, many families are feeling the pain from losing a public service.

Who Will Win Kansas?

According to this article, there is a high probability that the independent representative Greg Orman will unseat republican Pat Roberts as the senator of Kansas. This is an interesting issue to examine because the Republican Party has historically dominated Kansas. The first NBC/Marist poll released on Sunday shows that Orman is gaining unprecedented popularity because the Democratic Party is just as much as unpopular as the Republican Party in the state of Kansas. In addition, the democratic voters who supported the withdrawn democratic candidate Chad Taylor might want to vote for Orman because of their anti-republican sentiment. If we examine this phenomenon under the normal distribution curve, the reason that the independent party is gaining support is because they are able to capture the portion of median voters. The distribution in the two extremists of the spectrum is small, and therefore has no decisive power. Even though the second NBC/Marist poll released on Sunday shows a tie between Orman and Roberts due to the fact that 19% of democrats are indecisive, those undecided voter are more likely to vote for Orman. This is because the independent party is located closer to the left hand side of the distribution spectrum, and consequently there is a higher chance that Orman will receive support from these voters.