My Anarchist Friend Noah

 All this talk about voting got me thinking, what would my anarchist friend Noah have to say about this? So I asked him, and I pulled the following valuable insights. 

Noah doesn't want anybody in office at all. He thinks the whole government is pointless. For him to vote would be consenting to be governed by one of the two choices that were forced upon him by the powers that be. Contrary to "if you don't vote, you can't complain" (which is already a faulty argument), Noah says, "if you vote, you can't complain either."

Noah's D and B in the PxB+D-C equation are negative. To vote would be hypocritical, counterintuitive, and a waste of time. Noah doesn't vote "because he doesn't want to." What separates him from so many others is that he just doesn't care what people think about him, in his own words, he is "shwoke." He has no civic duty, no moral responsibility to vote, and clearly doesn't succumb to social pressure or else he wouldn't be an anarchist. Interestingly, Noah still has preferences over who's in office, preferring a Libertarian candidate over a Democratic one. However, even in this case, he still would not vote because he doesn't believe in the office itself. 

A lot of Noah's ideas don't make too much sense to me when it comes to voting. Maybe he's not all that rational, then again maybe I'm not either, and maybe neither are you. So go ahead Noah, down with the man! Become ungovernable.

Rivalry & Voting

    When we discussed public goods last week, we zeroed in on non-rivalry and non-excludability as defining characteristics of such a good. However, according to Buchanan’s Economic Theory of Clubs, many goods fall somewhere on a continuum of rivalry and publicness rather than a binary dichotomy of either rival or non-rival, private or public. This point is especially impactful for supposed non-rival goods, which, Buchanan argued, eventually reach a point of overcrowding. At this point, the good, though still technically available to you, gives you less than its possible utility because of the number of people you have to share it with. 

    As I read Johnson’s piece on voting, this conception of rivalry returned to mind. The ability to vote can be seen as a traditionally non-rival good; your exercise of your right to vote does not deny anyone else the ability to exercise their right to vote. The right to vote is not “consumed” when it is exercised. This principle of equal and unfettered access to the vote has been enshrined in American case law, such as Baker v. Carr, as well as in constitutional amendments. However, as Johnson points out, the utility you might get from voting certainly diminishes as more people exercise their right to vote. As more and more people use their right to vote, your vote goes from decisive to totally inconsequential. In fact, the probability that your vote will be the decisive one is so low that a rational person likely would not vote at all. These characteristics make the ability to vote seem more like a semi-rival good, one which is subject to a point of overcrowding, upon which it loses the utility it might otherwise endow. As the number of people who exercise their vote increases, p - the probability that your vote will be the decisive one - decreases, functionally reducing any marginal benefit you might derive from voting to 0. When some number of voters decide to exercise their right to vote, sufficiently reducing p, the right to vote essentially crosses a “threshold” of rivalry. After this threshold, the right to vote may as well have been “consumed,” for all the utility it offers an additional voter. 

Does the nature of "Market Makers" lean the profession towards the public good side of the public-private spectrum?

The benefits that registered market makers (MMs), or equivalent volatility suppliers, consign to the efficiency of the equity market is a concept that deserves careful consideration. MMs provide valuable liquidity to the stock exchange, and in doing so increase the functionality of the market. A primary aspect of MMs is that they are (for the most part) not profit-making entities, MMs are not speculating on the price of a stock, nor are they inclined to justify their actions with thoughtful due diligence. It is clear that a world without market makers would be a world with limited liquidity; the price formation of a particular security would be feeble, susceptible to the daily fluctuations in the proclivity of an individual to sell their securities to a buyer (or vice versa). This promotes the idea that Market Makers serve, in some sense, as a public good as the positive externalities (efficient and highly liquid markets) that result from their actions seem to surpass the negative ones.

Since the efficiency of the market depends on MMs, there is justified support for regulation via policy. One example of this is the 2019 Lead Market Maker (LMM) incentive program, a program the CBOE deployed to incentivize Market Makers to meet liquidity and market quality metrics. If Market Makers are rewarded for their ability to supply efficient markets, does that remove them from the discussion of being a public good? I’d surmise no; incentives are used often to reform and ensure the proficient caliber of public goods. Regulating Market Makers is a way that policy can ensure highly efficient markets, though sometimes this regulation has not always yielded the results policy makers would hope for. Market Makers are non-rival in consumption (one person’s trading of a security via market maker assistance does not detract from the next person’s predilection to do so) and non-excludable (anyone who trades almost any stock is subjecting themselves to an inescapable realm of MMs.). This analysis leads me to believe that MMs are more towards the public good side of the public-private spectrum than they are towards the private good side.

The American Court System = A Public Good?

            A recent topic in my Introduction to Public Policy course was Public Goods. In my discussion section, the TA encouraged us to name Public Goods. One of my classmates suggested the American Court System as an example. After a pause of contemplation, the TA agreed and moved on. I, however, spent the rest of the class thinking about the qualities of the American Courts System and how it does or does not resemble a public good. 

            In theory the Court System should certainly be a Public Good. They are a publicly financed system that is freely available to all Americans to utilize. One citizen's use of the system doesn't take away from another's and all citizen's personal rights are protected by trial in a court of law. Referring back to our Gruber readings, in Chapter 7 Gruber makes the point that most Public Goods we think of are actually "Impure" Public Goods, exhibiting imperfect non-rival or non-excludable properties. The Court System certainly is one of these Impure Public Goods. For example, Court back-log is massive issue in our society, as citizens are unable to have their cases heard in a reasonable amount of time. These problems have only been exacerbated by COVID-19 with the pace of case-work slowing further. Around the nation people are in prison, on bail, or roaming freely due to the Pandemic-driven severe back-log while they wait for their cases to be heard. Negative externalities abound with these situations. While there will always be a threshold of rivalry of use with regards to our Court System, such as number of cases a court can hear in a year, the Pandemic has pushed the American Court System further and further away from the nature of a Public Good. In some areas many non-violent crime cases were simply dropped to ease the growing court's burden. Citizen's issues are being prioritized and evaluated rather than heard. The American Court System may be partially resemble a Public Good, but it is an impure one to the core. 

"Keep Calm and Trust the Government": How a Deeper Trust in our Government Leads to Maximum Resource Allocation

 “Trust in our government” has been a popular topic in the news cycle for generations. Pew Research Center conducted a study this past May on this very issue. The National Election Study started taking data on trust in the government back in 1958. Then, roughly two-thirds of the public had faith in the federal government. Today, Only about one-quarter of Americans say they can trust the government in Washington to do what is right 'just about always' (2%) or 'most of the time' (22%). 

            Our class has studied efficient resource allocation much in the past three weeks. When , there are no externalities and no misallocation of resources. Yet when externalities are present, the government can either set restrictions or levy taxes and subsidies to try and return to . The government uses consumer votes to determine their taxes, yet the flaw with this system is consumers have little incentive to accurately reveal their preferences. Most consumers do not trust the government in general, thus they certainly don’t trust the government with taxes. Instead, utility-maximizing consumers latch onto the “free rider” principle by trying to contribute as little as possible while still using the resource. According to Charles Tiebout, “[i]f all consumer-voters could somehow be forced to reveal their true preferences for public goods, then the amount of such goods to be produced and the appropriate benefits tax could be determined” (p. 417). Because of the low percentage of Americans that have faith in the government, consumers do not reveal their true preferences and the government cannot tax efficiently. If more of the population trusted in the government, they would reveal their true preferences and be accurately taxed. Externalities would be eradicated, , and our society would be better off. 

I-5 Southbound: Wilsonville’s Worst Nightmare

My hometown is Wilsonville, Oregon – a standard suburban town south of Portland, Oregon. Wilsonville is situated along I-5, the interstate that runs down the west coast from Washington to California. Now, when I say my hometown is on I-5, I mean that the freeway runs directly down its middle. Over time this has created a major traffic problem; whenever there is traffic going southbound on the freeway, the center of town essentially comes to a standstill. Good luck trying to get from one side to the other during rush hour. Here, we have a classic negative consumption externality problem.

The issue is that I-5 consumption (drivers using the freeway during rush hour), exerts a negative externality on those in Wilsonville trying to move about town. This negative externality takes the form of increased travel times for drivers who have zero intention of using the freeway and are not compensated for the costs inflicted by others. So, during rush hour the private marginal benefit (PMB) of using I-5 is greater than the social marginal benefit (SMB). This means the equilibrium quantity of road consumption is greater than the allocatively efficient level. The solution? Putting tolls on I-5 – something that Oregon does not currently have on its freeways. This would lower each freeway driver's PMB of freeway consumption, ideally to equal the SMB. Much to my surprise, the Oregon Department of Transportation is actually in the process of considering tolls to remedy congestion problems such as this. Wilsonville may see a government solution to its negative externality problem in the near future.