Confessions of a contented Bureaucrat

I've never liked going to the DMV or post office because I knew I’d come out of the experience with a horrible sense of futility at the inefficiencies of government institutions. I’ve always pictured a bureaucrat as that guy who reads a book at his desk in plain sight of a line of people queued up to receive some kind of service. Or the lady behind a desk who responds to your question with a death stare - as if asking her to do her job were the worst thing in the world. Or this guy.

You can imagine my sense of dread, then, when I realized that I am one of these degenerates of society. I work for the UVA library system as a desk assistant, and the extent of my “job” is to sit at a desk and do my own homework. While  may occasionally check in a book or answer a patron's question, the bulk of my time working the desk is spent doing homework or reading for fun. My boss consistently impresses upon me and the other student workers to log every question asked so that the positions held at the library don’t seem redundant and they can continue to get a sizable budget for their needs, but usually we really don't receive that many questions or circulation movement compared to other libraries. The worst inefficiency at the library however, is the collection of very large (and very high-tech) monitors that the library never uses but has bought for the sake of spending any surplus in the budget. 

This is a pretty clear and downright sad demonstration of what it looks like for a department of a public institution to run with little sense of competition, and where the entire focus of the department staff is on maximizing their budget so that they can have more power in the institution. I've got a deep feeling in my gut that I should be upset about this, but at the end of the day I'm employed in this system so I really can't complain about its inefficiencies. 

Japanese Game Show Prisoner's Dilemma

Today I was scrolling through my Facebook news feed when a colorful video of a Japanese game show caught my eye. In the show, 6 contestants each wearing different colored body suits compete to win a cash prize by being the first to successfully climb two flights of slime-covered stairs. It seems fairly simple, but the competitors slip and slide constantly and when they fall they bring all the other competitors down with them. At one point the yellow and the red player reach approach the top simultaneously (skip to 4:30). As they carefully crawl to the top, neck and neck, competing for the prize, the two players enter into a prisoner’s dilemma.

Because this is econ and we love making assumptions and I don’t speak Japanese I’m going to assume that if both players arrive at the top of the stairs at the same time they get to split the prize 50-50. As the red and yellow players approach the summit at the same time they each face two options: Let the other person reach the top at the same time or try to knock the other person down.

(Yellow, Red)	Let other player finish	Knock other down
Let other player finish	( ½ of prize, ½ of prize)	(Entire prize, Nothing)
Knock other down	(Nothing, entire prize)	(1/6 chance of winning, 1/6 chance of winning)

If a player decides to let the other player finish, they’ll either end up getting half the prize, or the other player could knock them down and they get nothing.  If they decide to knock the other person down, they’ll either successfully knock the other person down and get the full prize or the other person will also knock them down and they both end up back where they started with an equal chance at winning. The Nash prediction is that each person would choose to knock the other down in order to claim the prize themselves or be knocked down and start all over again. Thus the Nash equilibrium is that they both knock each other down. This moment of the show follows the Nash prediction and the two players both take the other out and return to the bottom. At the end of it all their not working together costs them as the green player takes the prize.

Group Dynamics in Greek Organizations

I’m in a fraternity, a group that I’ve enjoyed being a part of the past few years. Let’s be exceedingly generous and say that the group goal of a fraternity is to put on successful philanthropy events by making money and having fun. This sounds great, but it requires a lot of work to organize food and activities, conscribe volunteers, and advertise the event. Unfortunately, this group goal does not always align with individuals’ goals of having fun and doing as little work as possible. Moreover, my fraternity doesn’t have any selective incentives to align individual and group goals (i.e. get people to help). So instead, we try to motivate participation by saying, “You should help out,” a pretty normative statement. Needless to say, this leads to a lot of free-riding. At the end of the day, a few key people end up organizing and implementing everything. In this way, my fraternity can be loosely categorized as a privileged group with a few key individuals doing most of the work while everyone else benefits. The philanthropy event happens, and it’s pretty fun, but the potential of the 55-member group is not realized because of the lack of selective incentives.

Recently we tried to change this by implementing a point system to incentivize participation in things that people don’t want to do (like setting up/cleaning up philanthropy events). Eventually, the points earned would be added up to determine the order in which rooms in the chapter house would be picked. The argument for the point system was that it would incentivize participation (by providing selective incentives for people to not free-ride) and let us do things easier/better. The argument against the point system was that it would foster a sense of competition rather than brotherhood. It didn’t pass. For now, we’ll have to continue doling out normative statements like “Come help– you really should do this to help your fraternity,” rather than positive ones like “Come help– if you set up for this event you’ll get 50 points.” Although that can be a little frustrating, I’m thankful that we don’t have negative selective incentives (like monetary fines!) that some sororities use to prevent the free-rider problem in their group.

Professor Dominance

As an econ TA, I often feel like I have complete autonomy over my discussion sections. I write my own syllabus and determine how to allocate points- whether between quizzes, homework, or participation. I also design my discussion sections and can choose what I want to talk about and whether or not I will give practice problems. Besides one brownie meeting at the beginning of the semester, the professors almost never ask for updates on how sections are going. Each TA, who is the agent in this scenario, is fairly insulated from the principal, the professor, and I have never heard of a professor disciplining a TA. You could assume that TA’ing is a model of agency autonomy.

However, another model, that of professor dominance, may actually lead to the same results. There may be ex-post sanctions that have created ex-ante incentives to do what the professor wants. For example, when it comes to grading exams, it is in my rational self-interest to not follow the key and instead grade very easily and give my students lots of points. This makes me look like I’m amazing at teaching and saves time when grading and with student exam appeals. However, when I do grade, I try to strictly follow the key, even if it means taking off lots of points. This is in the interest of the principal. Therefore, there must be some ex-post sanction that gives me an ex-ante incentive to follow the key. This could be the fact that other students might complain about my grading to the head TA or professor, and I could get in trouble and potentially lose my job. Through the feedback of students, the professor is able to monitor the results of my work and constrain my actions in this manner, instead of monitoring my inputs, which is way more inefficient. Thus, the model of professor dominance may be more accurate of TA’ing than the model of agency autonomy.

Tabling and the Prisoner's Dilemma

As the UVA a cappella concert season comes to an end, I think back to two weeks ago when my group, the Academical Village People (AVP), was having its “concert week,” which the week leading up to our concert that we have every semester. During this week, we do things like hold extra rehearsals, post flyers, and most importantly, table on the Lawn every day of the week selling tickets. What should be my favorite activity of concert week (selling tickets) is actually my least favorite, and it’s because the Prisoner’s dilemma always rears its ugly head.

In this case, there are two choices for each group member: put group interests first and table as much as he can (cooperating), or only table when he feels like it (defecting). The ideal strategy is that every member of the group tables as much as his schedule permits and is willing to sacrifice other commitments for the sake of the group. Every member is better off under this strategy because it reduces the workload and keeps opportunity costs of tabling low for each individual member. Also, the more people we have at the table at a given time, the more comfortable and enthusiastic we are about advertising our concert, which leads to greater publicity and better sales.

Unfortunately, it never works out this way. The concert week schedule is demanding, and the rational group member doesn’t want to fall behind on his schoolwork and other commitments. He also knows that there are members who get a lot of utility from tabling and selling tickets, and thus has an incentive to free-ride. Therefore, the dominant strategy is to defect—or only table when he feels like it—because he can maintain his normal routine and still enjoy the benefits of putting on a concert. However, this forces the members who do table to sacrifice more of their time and even skip class and forgo sleep to pick up other members’ slack. These members then become frustrated, causing group morale to suffer. 

With that being said, I’m not out to get my singing brethren—ticket sales were great and we put on a fantastic concert. But if any future AVP member reads this, I urge them to avoid the Pareto-inefficient outcome of choosing not to table and COME TABLE!!!! Please. It makes it easier on all of us.

Downs and the German Election

On September 24th of this year, Germany had its 19th "Bundestagswahl," or federal election. Angela Merkel was re-elected to a fourth term as prime minister, as expected, but the composition of Germany's parliament shifted dramatically. In German elections, a party can claim seats in the parliament after having won merely 5% or more of total votes. This means that several parties are present in the German Parliament, whereas in the US there are two major parties, and representatives of smaller parties are few and far between. After learning about the German parliamentary system, I questioned whether Downs' assumptions that policymakers operate in a single-issue policy space and a duopoly is applicable to democratic governments outside of the US.

The relatively new alt-right party of Germany, Alternativ für Deutschland (AfD), won an alarming 12% of votes in this year's elections, marking the first time they will ever be represented in the German parliament. This sounds pretty scary -- AfD is known for its populist ideals and islamophobia. These election posters (with translations in the article) are indicative of the kind of sentiment that AfD is spreading in Germany. However, relating back to downs, the German parliament is also comprised of coalitions; the 5-6 parties usually present in parliament form alliances with the other parties that are roughly aligned with their views, so that they can reach a full majority on policies together. This essentially turns the German parliament into a duopoly just like the US by creating two large coalitions that are either more conservative or more liberal, showing that Downs' theory that all legislators can be roughly categorized on one dimension holds true for Germany as well. Furthermore, in the case of this year's election, we can have comfort in knowing that none of the parties in Germany's parliament intend to form a coalition with AfD, leaving them without an alliance and with little power.

Voting

Several weeks ago, during the elections in Virginia, I had the privilege of helping a friend mail their absentee ballot. It was about 1 week before the election, and my good friend was very excited about voting. I was trying to calculate my friend's marginal cost and marginal benefit of casting their vote to try to see their rationale for voting.

My friend had a marginal cost that was easily able to be calculated. The total time it took to fill out and mail the ballot was about 1 hour. I will say my friend is moderately valuable and that 1 hour of time would cost $20. Here is where I was caught off guard: My friend paid $25 for next day express shipping to ensure that the ballot would arrive on time. We were over 1 week away from when absentee ballots had to be postmarked and my friend still decided to pay a rather hefty price to "guarantee" their vote would be counted.

According to the first equation we looked at with just E(MB) compared to MC, my friend would absolutely not vote because of how small their p would be. However, once we include another variable D we will call "duty", we can see my friend's rationale for voting.

Now we can have an equation such as: E(MB) + D > MC. My friend cited social pressures and a moral obligation to defend paying nearly $50 to cast a vote. My friend said she felt like everyone in her politically active friend group would judge her if they found out she didn't vote, but she said her biggest reason to pay so much was that she does not like the way recent elections have gone and feels a moral obligation to stop the evils she perceives the opposing party inflicting upon people. Therefore, the social pressure and moral obligation to vote is greater than the nearly $50 it cost to vote.

Another interesting note is that every person in her local election was running unopposed.

I’m a Bureaucrat: A Confession

I am employed by the University of Virginia as a Rotunda Ambassador, one of those friendly people at the desk who greets guests. With the University being public, that makes me a government official. I will not deny that I am sometimes unmotivated to do a good job, but luckily I have a certain level of insulation to accountability that comes with being a bureaucrat, according to Niskanen.

My output is definitely nonmarket. I’m supposed to greet visitors and provide answers to their questions to the best of my ability. This is not measurable. This allows me to be bad at my job, as there isn’t any concrete way to hold me accountable for my abilities at the end of the day. There is also no competition in the services I supply. If guests are dissatisfied with my greeting and my information, that’s too bad for them. There’s only one Rotunda and I’m the greeter. Last is the compensation structure. Unsurprisingly, I get paid by the hour. There are days when nobody visits, like when I worked during fall bre…ahem, reading days. There are other days with many visitors, like parents weekend. I make the same amount of money regardless of how many visitors come, how many people I greet, how many questions I answer, how many times I tell people that the color of the wall is pale moonlight. So if you come in the Rotunda and I’m good at my job, then I’m probably in a good mood that day.

(Brief note: the fact that I make slightly more than minimum wage could be a result of UVa, as a government agency, overproducing, if you subscribe to the Niskanen "Traditional View")

Committees run the agencies, but party leadership runs the committees

Weingast and Moran discussed how specific Congressional committees are the ones who have control over federal agencies. But who controls the committees and the Congressmen who make them up?  In Weingast and Marshall's paper, they assume that parties place no constraints on the behavior of individual representatives. That is objectively false. Party leadership has a similar system of rewards and sanctions that encourages their members to vote in line through threatening their probability of re-election. These fall in three main categories, the last of which is relatively new and currently evolving: 1) Committee assignment  2) Campaign funding and 3) Threat of a primary challenger.

We know elected officials have one main goal: to get re-elected. To do that, they obviously need votes, which are obtained mainly through providing benefits to their constituents and campaign funding. Constituent benefits are delivered by passing legislation favorable to your district. Being on the right committee is crucial to impacting issues important to your district. Though members state their preferences at the beginning of their term, at the end of the day, the majority party leadership determines committee assignments. The major determinant of placement has shifted from seniority to party loyalty. Those who vote against the party too often can lose their membership on valued committees, as Representative Tim Huelskamp of Kansas did in 2012 when he was removed from the budget and agriculture committees. This is why we currently see so many party line votes and why the most outspoken critics of the current direction of the Republican Party are Senators like John McCain and Jeff Flake who are not seeking re-election and thus don't face the same incentive structure party leadership relies upon to force conformity onto their members.

Dam Rent-Seeking

Kaligandaki Hydro powerplant (Syangja District)

Recently in Nepal there has been a greater push for the creation of more hydro-power plants to help increase the supply of electricity. Until this past year, up to 20 hour periods per day of load-shedding were common across the country. This is not surprising given an average customer increase of 9% per year and much slower growth, almost stagnant, of the power grid. The state owned Nepal Electric Authority (NEA) has started to build more hydropower-plants in recent years to try and catch up with this demand.

The plants are built on a bidding process by contractors where rent-seeking is prevalent. Suppose that NEA decides that on River A they are going to build a hydropower station they will then start the process of looking for a contractor to build the plant. As soon as contractors get word that a new station is being built they immediately are in contact with directors at NEA and ministers to start offering employment for family members, fancy dinners, and even straight out cash bribes in order to win contracts. This leads to an increase in costs bared by the contractor which they then usually pass on in their bid, which usually gets selected. Upon completion, this higher cost of building the station is passed on by NEA to the consumers, the Nepali people, as higher price of electricity. In the end, society's welfare comes at the expense of resources being diverted from other uses in the economy.

Not Your Typical Simple Majority

A few weeks ago my sorority voted on the slate for next year. The slate consists of all of the exec positions such as President, Vice President, Secretary, Treasurer, etc. A committee puts on interviews beforehand for each position and then combines the people they think are best suited for each job to create the overall executive "slate". Everyone then comes together to vote (voting is required by everyone) on the committee's chosen slate instead of voting on each position individually. The downside is that if the slate doesn't pass, everyone has to stay while all of the candidates for each position make a speech and we vote on the positions individually (this is very time consuming). 

Our process is pretty different from other chapters, but another major difference from many elections is that instead of requiring a simple majority for the slate to pass, we require a vote of 2/3 of our chapter. Buchanan argues that different issues require different voting thresholds. Since the new slate is a very important part of the chapter-they represent our group and make important decisions-we require a 2/3 vote. Looking at the graph below, it is easy to see how why we have this requirement: 

There are two types of costs: Decision making and External. Decision making costs in this case are the costs of the large group coming together and making the decision on a vote. They are increasing at an increasing rate as the required amount of voters needed to pass nears unanimity. External costs are those that are imposed on people as a result of the actions of others. An example is if everyone is required to sit through hours of speeches and several rounds of voting if 1/3 of people vote the slate down. In this case, external costs are high. When the costs are added together and minimized, Na* (the optimal number of voters needed to pass the slate) is larger than simple majority, which is why we have the requirement of 2/3 of voters to pass the slate. 

Low Carbon Emissions in Denmark

Last semester I studied abroad in Copenhagen, Denmark. Copenhagen is well known as being a very bike friendly city, where half of its residents bike to and from work everyday. People even refer to Danes as the "Biking Vikings". The main motivation for biking in the city is to reduce pollution from cars. In fact, Copenhagen wants to become the first carbon neutral capital in the world by 2025. In order to reduce the negative production externalities of vehicles, Denmark placed a very high tax on owning them. Recently, Denmark has decided to cut taxes on the cheapest cars from 105% to 85%. 

Although Denmark's government was involved in reducing the externality, Coase would argue that clear property rights should allow parties to negotiate an effecient level of cars and pollutants in the city. However, the assignment problem of deciding who specifically is being hurt by the pollutants and how much they are value would bring about issues to his theory. From what I witnessed, Danes were very enthusiastic and willing to bike everywhere, even in cold and windy weather. Many bike stores even offered student deals so we could rent our own bikes for the semester. This allowed me to join the Danes in the bike lane.

The Fall of Communism

As I have done before, I enjoy applying theories of Public Choice to what I am learning in my Fall of Communism class. The Soviet Union’s collapse was ultimately a result of its leaders acting in their own self-interest. Given opposition movements in Eastern Europe, domestic reforms and openness, and mounting nationalism in Soviet republics, the Communist Party leaders realized that they could best preserve their power by becoming what the people wanted, thus dissolving the Soviet Union on December 8, 1991. In Armageddon Averted, Stephen Kotkin writes, “It was the central elite, rather than the independence movements of the periphery, that cashiered the Union” (107).

Ideology aside, Soviet leaders were rational, utility-maximizing agents acting in political markets, just as Buchanan and Tullock established as the foundation of public choice economics. More specifically, their actions are consistent with Downs’ assumption of political actors as vote-maximizers. Domestic reforms (in hopes of rejuvenating communism) in the late 1980s increased the channels through which citizen voters could reveal their preferences, including through public gatherings, published letters to the editor, and independent political organization. Foreseeing their ideology’s doom, Soviet leaders abandoned the Communist Party to become nationalist leaders. This continuity was true for eight out of the fifteen newly independent nations. Consumed with uncertainty, however, the following years would be plagued with policy zigzags and troubled reform. As Downs argues, these individuals formulated policies to win elections rather than won elections in order to formulate policies. Ex-Communist leaders were vote-maximizers.