Fraternity Freeriding

 I was having a discussion this weekend with the Treasurer of my fraternity and he was explaining to me what a problem it is to get everyone to pay their dues. According to him, dues collection is always a burden and there has not been a semester in which he has seen every member pay their dues. Some members never contribute, meaning as a whole we do not have the amount of money we should have in proportion to our members. Therefore the quality of philanthropic events, social events, and meals is of a lower quality than it should be. 

It was immediately obvious to me that people were just free riding. As the number in the group grows there is less and less of a reason for individuals to contribute.  The events, meal plan, etc will still go on as planned without the individual incurring a personal cost. It is difficult to exclude anyone from the enjoyment of these resources as because everyone is considered a friend and it is seen as wrong to deny a friend entrance to a social event or meal and so people can free ride. It is also non-rival meaning one person paying their dues does not inhibit another member's ability to pay their dues. Our dues as a whole then are underproduced because of this free riding problem. 

The Intelligence Community Lacks Intelligence

Being from Northern Virginia, I have several family members who have worked for the government and one in particular has worked for the intelligence community (IC). He, unfortunately, is dumbfounded by how unintelligent said community is. He has reported back that the IC as a whole, because of their classified nature, gets away with some shady business. He has been repeatedly frustrated and annoyed with the "busy work" that his team is assigned to because it demonstrates the inefficiency that continues to persist in that particular bureaucracy. He would admit that the IC's work, for the most part, is very important. However, these agencies lack proper oversight due to their secretive nature, satisfying Niskanen's model almost perfectly. Not only will these bureaucracies seek to maximize the budget, they are also monopoly suppliers of their respective information, and the true cost schedule is only known by the executives within a particular agency because of the classified nature of their jobs. These IC agencies will then seek to push Congress's surplus to 0 even though each bureaucracy is not using their resources effectively, as my family member has seen firsthand. 

This is not a new problem. The IC budget has proven to go unchecked even by Congressmen/women who create them. As it is spelled out in the jurisdiction for the Senate Appropriations Committee, these committees are influenced not only by their own self-interests ideologically (as Weingast/Moran might argue), but they also might hear out their constituencies, the public, and the President's requests for any budgetary changes. Yet, because the output for the IC is ambiguous and mostly classified, the public and even many high-ranking government officials do not even know how inefficient these bureaucracies are, and they may be arguing for unneeded increases in their spending abilities. With consistently increasing budgets and my family member's astute observations, I would be cautious -- just as the Liberty Lobby was back in 1982 -- to trust that the funds being allocated are being utilized to their fullest extent.  

Why the Shy Trump Voter Might Not Be a Myth

 As I followed the last two elections I noticed (and I'm sure a lot of other people noticed) that the majority of the prediction polls underestimated the amount of the popular vote and electoral votes that Trump would receive. One of the hypothesis set forth to explain this is the existence of the 'shy Trump voter'. These are people who are reluctant to openly state their political ideology or candidate preferences.

When it comes to expressing your political opinions there are some costs that you can incur. Family, friends, and even strangers may judge you. This could result in marginalization, slandering, or exclusion. Because of this the cost to expressing political ideology could outweigh the potential benefits for Trump voters as in the past 4-6 years Republican voters or Trump supporters have been labeled as racist, sexist, homophobic, and hateful. 

As Caplan explains; when the price of behaving ideologically rises then the amount of ideological behavior falls. Furthermore, we know that that the point at which the cost of behaving ideologically is the lowest is in the voting booth. This is because each individual vote has an extremely low probability of affecting the election thus there is a low cost to the rest of society if the voter behaves ideologically. I believe there is another reason why the cost is lowest here and it is because the cost to the individual is lowest. They can express themself openly without the fear of judgement or repercussions from other people. Because of this the prediction polls, especially those held over the phone where the respondent could be overheard, did not correctly assess the support for Trump. One article states that Republican voters were 6% less likely to say they supported Trump when interviewed over the phone versus online thus adding credibility to the claim that shy Trump voters exist. The result was that the results of the election were wildly different from the predictions since voters could behave ideologically in the booth but not in society.

Covid and Ideological Costs

I remember being in middle school and going shopping with my mom at the grocery store or the bookstore and her specifically avoiding products that said “Made in China”. I never really got the full picture on why she did this but I did understand that steering clear of Chinese goods meant paying a higher price. My mom was exhibiting one of the four economic biases discussed by Kaplan, anti-foreign bias. She added her disdain for goods that were made in China into her utility function which meant that when she was able to make purchases of goods made in the US/locally, her utility increased. 

We discussed in class how there are different levels of cost associated with acting ideologically. In a normal world, her costs are relatively low if the price difference is not significant between the two options. However, I have witnessed Covid increase the cost for my mom to act in line with her ideals. And, according to this article, she may not be alone. Many people are looking to cut spending because of loss of income or uncertainty due to the pandemic. Americans are looking to cheaper products as they lose their jobs or their wages are cut. Along with this, my mom has been much more careful about going out to regular stores because we live with my grandmother. This means sacrificing normal products for ones that can be shipped to our home - often the substitutes being made in China. Because of an increasing cost to act in line with her ideologies, she has ironically probably cut down on her spending.

Social Media Regulation through the Bureaucracy

Since the 2016 election, the CEOs of major tech companies Google, Twitter, and Facebook have been reporting consistently to the Senate Judiciary Committee over issues regarding censorship and misinformation on their platforms. The main legislative reform that has been proposed at these hearings is reform of Section 230 of the Communications Decency Act which protects social media platforms from legal liability for things posted on their platform. However, just last month, the chair of the Federal Communications Commission Ajit Pai issued a statement stating he was considering issuing an interpretation of Section 230 to address the concerns of government officials. This statement and the actions of Congress in regards to regulating big tech companies shows the conflict between the congressional dominance and autonomous agent theories

The FCC is reliant on Congress for its budget. Although Pai has not been specific on what his interpretation would be, the prevailing sentiment on both sides of Congress is for some sort of Section 230 reform. The fact that Pai as a lone bureaucrat has the power to change the interpretation of Section 230 and hasn't shows that he is under congressional control in waiting for a more specific recommendation to come down from Congress. However, the fact that he is indeed coming out in support of the specific policy solution proposed by Congress, general Section 230 reform, shows that he is indeed acting as an autonomous agent seeking to maximize his bureaucracy's budget by agreeing with the people who approve his budget. I would argue in this situation Congress is exerting more control than the bureaucratic agent, but it will be interesting to see who determines how these social media companies are regulated. 

Supreme Court Nominations Fly By

         When Brett Kavanaugh was nominated to the United States Supreme Court in 2018, I wasn’t sure he would get confirmed. His confirmation hearings were contentious to say the least, and there seemed to be a lot of pushback from the media, Democrats, and even some conservatives. When Amy Coney Barrett was nominated this year, there was also quite a bit of opposition. Although Kavanaugh had squeaked by, I had thought to myself: “would Amy Coney Barrett also make it through the confirmation hearing process?”

I should have known better. Of course! “Since 1789, 42 presidents have nominated 163 people to serve on the Supreme Court. Of those who were nominated, 126 were confirmed and seven declined to serve. Only 11 people who faced the Senate were not confirmed to the Supreme Court, and only one was rejected from serving as chief justice.” In over 200 years, only 11 rejections! Given the effectiveness of the incentive system in place, the pre-screening process for US Supreme Court nominations, prior to their Senate confirmation hearing, is incredibly robust. Thus, we seldom see a nomination rejected by the Senate. Put another way, a US Supreme Court nomination will rarely be put forth by the president if they are not extremely confident that the candidate will be confirmed by the Senate. As Weingast and Moran wrote, “the more effective the incentive system, the less often we should observe sanctions in the form of congressional attention through hearings and investigations” (pg.769). US Supreme Court nominations are a prime example of their paper in action.

 

Will the Covid-19 Vaccine Be a Public Good?

It has come out recently that Pfizer's Covid-19 vaccine is 95% effective and is awaiting approval. Naturally, the question of how the vaccine will be distributed has come up. Pfizer has reached a deal with the US government to produce enough doses of the vaccine for about 12.5 million Americans for free by the end of this year. These will go to healthcare workers and vulnerable populations. For the general public, the vaccine should be available next year and will also be paid for with taxpayer dollars.

In order to determine whether something is a public good, we need to see if it is infeasible to exclude people from it, and whether it is rivaled in consumption (meaning utility goes down as more people consume the good). The CDC states on their website that vaccination providers will be able to charge a fee for administering the vaccine, but this fee will be reimbursed by a patient's health insurance. If a patient has no insurance, the Health Resources and Services Administration’s Provider Relief Fund will cover it. Since there will be no cost to anyone for the vaccine, it is infeasible to exclude anyone from it. Once the vaccine is widely available, it will also be non-rivaled in consumption, because one more person receiving a vaccine has no negative effect on the next person receiving the vaccine. Since the vaccine will meet both of these criteria, it will be a pure public good.

Slack and Presidential Candidates

In The Myth of the Rational Voter, Caplan points out an interesting shirking phenomenon that can be exemplified by events during this election cycle. Caplan explains that elections constrain representatives only as much as voters care about a certain issue. If voters care deeply about an issue and it is interesting to them, politicians have almost no slack. If voters don't care about an issue, or find it boring, politicians have some amount of slack. During this presidential election there were certain policy spaces where the candidates had little slack and certain areas where they had a lot, and these were very different depending on the political party that the candidate represented.

One key divisive policy space was the handling of COVID-19, with 82% of Biden supporters saying this was very important to their vote in the 2020 election and only 32% of Trump supports saying the same thing. This means that Biden was held significantly more accountable and enjoyed less "wiggle room" in regards to his plans for COVID, while Trump had significant slack. This can be evidenced by the fact that many regard Trump's handling of the pandemic as going back and forth between approaches. For example, his indecision about the usage and importance of mask wearing. Meanwhile, Biden has held unchanging and staunch views on his approach to COVID, saying that he will implement a national mask mandate if he is elected. Biden's stance here strongly mirrors what his electorate has been demanding. Trump can occupy a more moderate stance on COVID policies because his electorate does not overwhelmingly demand a certain strong response. 

Another space where Biden and Trump experienced significantly different levels of political slack was the policy approach to crime. 74% of Trump supporters sited this was very important to their vote, while 46% of Biden supporters said so. Again, we can see this difference in slack reflected in the candidates' policy focus. Trump has held extremely vocal and cohesive views on "being tough on crime," as evidenced by his policy choices, such as full support for increased police rights. Meanwhile, Biden occupies a more moderate stance - for example, calling for investigations into police misconduct, but not for the police defunding that so many voters called for. 

The Miracle of Aggregation and the Wisdom of Crowds

I wouldn’t say I’ve ever been the biggest fan of group work. Yet, a few weeks ago, I took an economics exam that proved to be an incredible testament to the power of group work. A few friends and I joined forces to study together over the three days that preceded the exam. When we first began studying, we each understood an alarmingly inadequate amount of the test material. Yet, by the end of the three days, we’d developed a strong comprehension of the material, and every one of us passed the exam with scores well above the class average. I considered the desperate condition in which we’d started, and the miracle it was that we actually performed well on the test. It reminded me of a miracle that I’d learned about in my Public Choice class: the miracle of aggregation.

In politics, the Miracle of Aggregation states that the votes of many uninformed voters will ultimately offset one another and the result of the election will be swayed by the informed voters, thus resulting in a socially preferred outcome. Much like how an ignorant voter would have been unlikely to choose the optimal outcome by themselves, if my friends and I had taken the test without having studied together, we likely would have failed. The miracle of aggregation is also considered a strong example of a phenomenon called the “Wisdom of Crowds,” which suggests that, collectively, large groups of people are smarter than individual experts. My friends and I were essentially able to build off of each other's ignorance in order to obtain a concrete and correct understanding of difficult economic concepts. And so, thanks to the miracle of aggregation and the wisdom of crowds, I performed well on a difficult exam, and can now say I’ve had a positive experience with group work.

Betting Markets v Pollsters in Forecasting the 2020 Election

Leading up to the 2020 election, countless streams of polls reported candidates’ respective leads. When it came to election day, many of the highly trusted polls systematically underpredicted the presence of Republican voters. For example, Biden was polling +8 percentage points over Trump in Michigan, but when it came to election day, he won the state by a much smaller margin. Alternatively, betting markets proved to be fairly accurate election forecasting metrics. Trump carried Texas by a fairly large margin, a state where betting markets were bullish for Trump, and many polls considered it a tossup. Additionally, Trump handily won Florida, a state pollsters expected to go Blue but bettors gave to Trump. How could polling ‘experts’ consistently get it wrong, but the betting market get it right?

 

Given no systemic bias in the sample, a large enough sample size, and some knowledgeable voters, polls and betting markets should on average predict election outcomes correctly. The repeated underprediction of Republican representation points to significant systematic bias present in the polling system. Whether poll respondents were lying or disproportionally democratic, polling errors were not purely random and undermined the election forecasting process. On the other hand, gamblers put their real money behind a political candidate. With real losses/gains on the line, bettors have incentive to be rationally knowledgeable and back the candidate that they truly believe will win, regardless of their preferences. In fact the marginal cost for a bettor is much higher than it is for a poll respondent, who might let their ideological ideas influence their response. While there were outliers in the betting market (guy that bet 5 Million on Trump), for the most part, random errors cancel out and the proportion of respondents that are well informed dominate the political betting market. With the betting markets better eliminating systematic bias and creating disincentives to be ignorant, they produce a result suggestive of the Miracle of Aggregation and prove to be a better forecasting method than polls.