Snack provision by logrolling or committees

My friend Hannah and I each have 2.5 hour long seminar classes with professors who brought snack the first day of class. Both of our professors expressed a desire that the class bring snacks in future weeks to provide a welcome break in the middle of class. Both of our professors suggested alternating who brings the snacks and setting up a schedule to decide who's week it is. In both of our classes the responsibility is left wholly to the students to organize. However, only one of the classes has had snack more than one other time. Unfortunately, that class is not mine.

The difference? My professor left it up to individuals - each person would be responsible for one day, which we were left to figure out. Hannah's professor put them in teams, where each team would be responsible for multiple days. I signed myself up for the second day and brought snacks, but unfortunately NO ONE has brought snacks since. However, I recently learned from Hannah that her class takes snack time very seriously and their team would never dream of missing their pre-assigned day.

Our situations are different for two reasons: 1. Larger groups in Hannah's class 2. Defined days for each group in Hannah's class. This is analogous to the committee structure where each particular issue is assigned to a particular group. The added structure allows for greater passage. My class is most similar to pure logrolling, where each person in the class depends on the others to fulfill their promises in the future. In my case, logrolling did not lead to a desirable equilibrium, but Hannah's committee structure did.

Bureaucratic Politics and Nuclear Proliferation

One of my favorite things is when two or more of my classes are covering very similar material. This semester, I am also taking Professor Sechser's PLIR 3080 class called "International Politics in the Nuclear Age." Recently, we have been learning about the optimistic and pessimistic views of nuclear proliferation. An essential part of the pessimistic perspective is the dominance of parochial interests among military staff and officers, who under Niskanen's economic model of bureaucracy, act as bureaucrats who try to maximize their agencies' budgets. Like most other bureaucracies, the Department of Defense is subject to monitoring problems. This is due to many reasons. First, units of national defense are hard to define, and as a result, military budgets are often determined by the quantity of soldiers, munitions, etc. In addition, the Department of Defense simply has no competitor, so there is no alternative source of information. As a result, there is no real incentive to compete and cut costs.

For proliferation pessimists like Scott Sagan at Stanford University, military officers are offensively-minded and are more likely to endorse preventive strikes against a proliferating state, say Iran if it continues to enrich uranium. This is called the Organization Theory of nuclear proliferation, which argues the more states that have nuclear weapons, the higher the chance of nuclear war. Given that military officers are offensively-minded, officers will tend more often towards advocating offensive strikes. These offensive strikes arguably require more "units" of national defense compared to defensive plans. Borrowing from Sagan's framework, the Department of Defense's military officers tend to assume that their parochial interests (maximizing their budgets) align completely with national security interests. Combining the two social science models together, the result is that in an environment of nuclear proliferation, offensively-minded military officers who seek to maximize their budgets will demand greater "quantities" of national defense such that the marginal costs are greater than the marginal benefits. In other words, there will be an "over-production" of national defense.

Enlightened House Parties

In a duplex with 10 residents, finding compromise between all the members is a difficult process. This problem becomes especially apparent when planning an event that incorporates all ten members, such as a party. For each party we have thrown over the last 15 months, we have had arguments over the party budget to spend on beverages and other party supplies. To resolve this problem, we generally discuss our preferences for party budget and find an average preferred amount to spend on the party. Public choice offers some perspectives on the efficacy of this method at determining party budget. 

On one hand, the “Miracle of Aggregation” provides that averaging all the preferences in the house would produce an effective party budget. According to this theory, the biases are symmetrically distributed between those cost-averse and those inclined to more spending on the party. As a result, the biases cancel out and the aggregate opinion is an accurate party budget.  However, if the biases are instead systemic, this system does not work, and we should instead use enlightened preferences. 

To discover enlightened preferences, we can use data analysis based on that used in the psychology discipline, as discussed by Bryan Caplan. To perform this analysis, we need to incorporate three variables for each member of the house: answers to survey questions about the party budget, demographic variables, and OPK (objective party knowledge). In our case, the demographic CV’s (control variable) are largely irrelevant, as aside from some racial diversity we are a mostly homogeneous group of 10 fourth-year college guys from similar familial and socioeconomic backgrounds. 

To assess our OPK, every member of the house will be asked right-or-wrong party questions, such as the average amount of people at our previous parties, the average amount of beverages consumed by each party guest, and the price of different types of beverages.  Once we compare the answers to our comprehensive party database collected from previous parties, we can assess individual residents’ Objective Party Knowledge. We can then run regression tests of OPK over survey questions to articulate the enlightened party budget preferences of the more informed residents. 

Finally, we can compare the enlightened preferences with the average preferences of the house to determine if the residents of the house display a pro-spending or anti-spending bias. Once we run this comprehensive analysis we should be able to make more accurate party budgets for our final semester at UVA.

Free Riding in Nashville

Thanksgiving break for me means finally getting to go home back to Nashville to see my family, friends, and live MUSIC. If you’ve never been to Nashville, let me tell you, live music is everywhere you go. From the restaurants to the public venues to the local froyo shop, live music is there. Most of the time, music in Nashville is a public good, meaning non-excludable and non-rival. It is non-excludable because any passerby has the ability to hear the music, and it is non-rival because one’s consumption of the live music does not exclude anyone else from hearing it. However, the live music in Nashville has a free-riding problem. This is when people benefit from a public good but do not pay for them. This occurs on Broadway, the center for live music in Nashville. Often times, my family, friends, and I will just go walk down Broadway to hear the live music but not actually go inside the restaurant or bars that are playing the live music. We are benefiting from the music without paying for it in the restaurant; therefore, we are free-riding. I love the free live music in Nashville and hope they aren’t able to solve their free rider problem.

It Only Took One Stamp

In light of our class conversation on Tuesday, I really got to thinking about how my economics classes have changed my behavior over the last four years. Whether it was conscious or not, what I have learned in these classes has undoubtedly impacted my everyday life. With that said, I couldn't properly finish this semester without mentioning just how influential Professor Coppock's sound-bytes have been. One nugget of wisdom stands out; my vote doesn't really matter.

Ever since I turned 18, I have dutifully exercised my right to vote. From presidential primaries to midterms to local races, I was in the booth or voting absentee. This year, however, was different. Our class discussions on the marginal benefit of voting, in comparison to the marginal cost, rocked my world. Why am I voting if it literally has no impact on the outcome? Even with the most generous of estimates, my expected marginal benefit is next to zero. The costs? A lot more than zero. Voting just didn't seem like it was in the cards this year...maybe never again.

But then I got a text from my local county supervisor. He reminded me he was up for reelection and that I needed to request my absentee ballot before the deadline. I was fortunate enough to work on his campaigns in the past and have come to really respect him. I realized in that moment that I could still maximize my utility by voting, even if my E[MB] was nothing. Particularly, I would avoid an awkward "did you vote?" conversation with him, and maybe even get some more work out of it. So I promptly signed up for my ballot, and a week later, filled in all those tiny circles. 

Then it came time to actually mail it in. Do I own stamps? Of course not. Do I know where I can get them? Sure, all I had to do was go to Newcomb in between class. Did I want to waste ten minutes out of my day and spend .50 cents on a stamp? Apparently not. That's right. The time and money it took to get one stamp was enough reason for me to not turn in my ballot...And you can bet our conclusions from class were reverberating in my mind the entire time. 

Trudeau Making Pigou Proud

When listening to a Planet Money podcast last week, I was thrilled to hear Sarah Gonzalez talk public choice in the episode “The Pigou Club”. Specifically, she investigates the Pigouvian tax. This tax pertains to negative externalities, as the economist was famous for his graph of both private and social marginal cost paired with a conclusion that problems such as pollution needed to have a price put on them. I was of course elated to feel like an expert as the background information was given, and was captivated by the application in the latter half of the episode.

Canadian Prime Minister Justin Trudeau’s 2019 carbon tax calls the aforementioned “price on” externality at around $50 per ton. In reality this should be higher, but after discussing the intricacies of political decision making this semester, it should be unsurprising to us that the government would only bear around this number. Basically, the idea is that if a government puts taxes on carbon, people will change their behavior little by little, and in reaction the government’s role can be minimized to not include many other environmental regulations and subsidies that address the same concerns a carbon tax would. The more interesting part came after the Canadian government announced this carbon tax, though, when Trudeau stated he would basically be giving back “free money” in the form of a rebate as a result of electorate pushback on these taxes before his next election. If people checked a box, they would get a sort of pollution refund. This confused me at first, but what the podcast then clarified is that these taxes still cause people to pollute less even though they get a rebate, and further 80% of people are getting back more than they paid because the wealthy tended to pollute so much more (flying more, heating big houses, etc.). Therefore, this system made lots of people much better off.

People frequently ask if this type of program would ever fly in the United States, despite the fact that some individual states are considering it. Economist Gilbert Metcalf states that making the carbon tax “reform revenue neutral” (as in, like Canada, giving back revenue through lower taxes/cash rebates instead of new spending) would potentially let this idea cross the political aisle. I am fascinated to see how this all plays out over the next few years, especially (as it was mentioned in class) because this currently seems to be an issue American politicians have not been able to get behind on a national scale.

Pessimistic Bias on CNBC’s Squawk on the Street

Every morning on the way to school growing up, I listened to Squawk Box on CNBC.  Every day without fail, the hosts would comment on the possibility of a recession in the near future.  Even strong GDP growth and low unemployment numbers were followed with cautionary comments about impending doom in the market. 

This negative outlook is a reflection of the pessimistic bias Caplan talks about in The Myth of the Rational Voter.  Non-economists have an incentive to over-estimate the severity of economic problems.  Because CNBC has to compete with other radio shows, they relay news in a way that reflects this pessimistic bias in order to get more viewers to tune in to the show.  When more people listen, CNBC makes more money from their advertisers. In sum, Carl Quintanilla and David Faber relay news that over-estimates the possibility of a recession because this reflects the pessimistic bias of the populous, which gets more people to listen to their show every morning.

Make-Work Bias at Work

I am a Research Assistant at Darden Institute for Business and Society, where we work on a constant, varied stream of research projects and ideas headed by Darden faculty. One of the current projects involves the interactions of racial bias and implementation of AI. I was asked to take the survey twice to check for errors, both last week and again this past Friday. When I first reached the question asking if I would rather employ a human or purchase equivalently efficient software, I believe that it was a question beyond economics. Surely, I thought, in a situation where the prices and output are the same, this question merely measures whether I’d rather deal with a glitchy computer or remember another office birthday. After all, most of my Econ classes focus on efficiency, and there was no foreseeable deadweight loss in my mind. Therefore, I chose to hire the person, weakly preferring to help his hypothetical family make their hypothetical ends meet. However, after last Thursday’s class on Caplan’s reading, I took the survey again with a different perspective. I realized that purchasing software over a human employee then freed up that person to go and work in other industries, allowing for increased productivity across the economy overall. I was exhibiting a make-work bias by choosing a person, as I underestimated how conservation of labor can actually be beneficial. Furthermore, the increase in my Economics knowledge did make a tangible impact on my choices, at least within this survey. This was not due to the ideological or self-serving biases, because neither my future prospects or belief systems have shifted in the last week. Therefore, this is evidence that my own Economics training is impacting the way that I think, slowly moving away from the systematically biased beliefs of the public.

Relying on Google Maps

I visited a friend in their home city of Atlanta. While we were there, he drove me around the city showing me his favorite spots, but every time we’d leave or return to his house, he pulled out his phone and typed the address into Google Maps. The first couple times, I didn’t say anything, but after a day or so, I finally began to question it.

I’ve been driving around Richmond, my home town, for a while now, and I’ve managed to memorize most of the routes near my house. If I need to get somewhere, I tend to just go off my own mental map, so I asked my friend why he uses Google Maps. His response: he never took the time to memorize any directions around his house/city. This is entirely logical in his mind because he’ll always have his phone on him. If Google is going to “memorize” the directions to any place he needs to go then why does he need to do so? Google tracks us anyways, it seems, so he might as well use it to his advantage. In his mind, he is rationally ignorant on directions and his local map.

This could have some downsides. He might not always have service or his phone might die. He always keeps a charger in his car, though, and if he really needs to, he can download maps to his phone. Constantly using Google Maps, especially in a big city, even has its perks; if an accident or traffic occurs, the app will tell him an alternate route to get around faster. That’s something his own knowledge couldn’t tell him. Instead of spending time learning the roads near him, he has the mental capacity to focus on something else. Rational ignorance determines why my friend uses Google Maps instead of memorizing the roads for himself.

Enlightened Preferences Among 2020 Voters

Unsurprisingly, based on my most recent blog post, I was rather dissatisfied with the outcome of the 2016 presidential election. At least in my mind, the Miracle of Aggregation had failed; despite over 130 million Americans voting, our nation had, to me, made an irrational choice. In particular, I was baffled by the many lower-class voters who had supported Trump, even though his policies seemingly went against their economic interests.

After reading Caplan's book, however, I have a greater understanding of the power of beliefs in determining an individual's vote. Trump, more than any recent politician, was able to effectively exploit voters' systematic biases in order to create a movement through which his supporters gained immense utility from expressing their ideology. As a result, the marginal benefit derived from supporting Trump was very high for these people, even if doing so harmed their material well-being.

Looking forward to 2020, it seems as though some Trump voters have become "enlightened." In this case, these voters were not formally educated in economics since 2016, but their lived experiences under the Trump administration may have provided them with enough knowledge to change their preferences. For example, this ad campaign is focused on Midwestern former Trump voters who now regret their decision. The ads do not mention the impeachment inquiry or Trump's erratic behavior but discuss how his policies have actually hurt people's economic conditions. For these individuals, though they may still get utility from being a part of Trump's movement, they are now more aware of the high monetary cost of voting for Trump. Thus, it is no longer rational for ideology to be the dominant factor in their voting behavior.

Logrolling for a Cause

Everyone knows that the main reason people participate in Greek life is because they have very fulfilling philanthropic commitments. Each semester, fraternities and sororities have an important philanthropy event focused on raising money for their respective causes. This semester, my fraternity planned an event for Thursday night focused on raising money to support mental health awareness. The sorority house located next to us planned an event for Wednesday night focused on raising money to increase childhood literacy. Before either of the events occurred, the sorority came to us and offered a deal: we'll go to your event if you'll come to ours.

My mind immediately went to the concept of log-rolling. Instead of exchanging votes, we'd be exchanging money to benefit our respective philanthropies. One of the problems with log-rolling is that the exchange can be non-simultaneous. Here, that problem was incredibly apparent. The sorority's event would occur on Wednesday, and ours would occur on Thursday. If we all showed up to their philanthropy event Wednesday night, they could simply renege on their promise and never show up to ours. How could this problem be solved?

The best solution I could think of (although not great for building trust) would be to have each fraternity brother come to the sorority's event and ask them for their upfront financial commitment to our event as well. Each member of the fraternity and sorority could pay for the cost of the other's event at roughly the same time (most likely over Venmo, of course), even though the sorority's event would take place first. The worst that could happen is that one fraternity brother pays for the sorority's event first, but then the sorority member does not Venmo the brother back. Of course, then none of the other fraternity brothers in line would make the exchange, and only one member of the fraternity loses his money. This is better than the other scenario in which all of the fraternity brothers make a financial commitment to the sorority's philanthropy, but none of the members of the sorority return the favor. Having this exchange one by one at the beginning of the sorority's philanthropy event would solve this problem of non-simultaneous exchange.

Luckily, we made the exchange without the above solution; both parties agreed to the terms and followed through on them, even though the sorority could have easily reneged on their promise. One possible reason the exchange worked is reputation. If the sorority reneged on their promise to come to our event, word might get around, and people would be unwilling to cooperate with the sorority on exchanging favors in the future.