What is Democracy Good For Anyway?

The last several readings have covered the numerous failures of democracy and majority rule. From low voter turnout, to rational ignorance, to cycling and intransitivity, democracy is plagued with issues that undermine several of its founding myths. Since civics class simply inculcated falsehoods like “every vote counts”, we cannot rely on widely accepted beliefs to evaluate democracy. What advantages, if any, does democracy provide over other forms of government?

When listing the advantages of democracy, most people would point to the vote as the sacred mechanism by which every individual can make their voice heard. If you don’t like something about your government, you can vote against it and move policy towards your preferences. This falls apart when you realize that there is almost no chance that any individual actually affects the outcome of a democratic election. No matter which way you vote, the outcome of every election is almost guaranteed to be decided by everyone else’s vote, not yours. This means that the individual’s preferences are completely disregarded in a democracy. If my vote represents the influence I have over my government, then I may as well be living under a dictatorship. 

Democracies are, in general, much nicer places to live than dictatorships. How can this be explained if democratic governments are not beholden to individual’s preferences? In most dictatorships, the government is controlled by a small group of powerful people. The majority of Sparta’s population were slaves, and Saudi Arabia is run by an insular royal family. Democracies, on the other hand, are dictatorships of the majority. This is a significant improvement over oligarchy. Powerful inner circles can still benefit even while the majority of the population starves. In democracies, things that greatly harm the majority like famines and total authoritarian control over freedoms are usually avoided. This still leaves room for total oppression and exploitation of the minority, the disenfranchised, and the non-citizens, however. Democracies, like all power structures, create civic religions that propagate flattering lies about the way they work. It is important to separate myth from reality and evaluate democracy on its true merits and true failures.

The Rational Voter and Social Media

 “Finger the Pulse” – a comedy segment on Trevor Noah’s “The Daily Show” – highlights the rational ignorance of voters. In this segment, Jordan Klepper attends Trump rallies and interviews supporters, asking them about their knowledge of political issues. With their response, he fires back with a witty comment, alluding to their ignorance or misunderstanding of political knowledge.

One of the interviewees admitted that she does all of her research on politics – through Twitter and Facebook that is. To this, Jordan Klepper responds that she puts facts and nonsense together. Jordan agrees with the judgement that social media platforms are inherently biased (from algorithmic and herd mentality factors) and vessel widespread misinformation campaigns. Despite this, it’s incredibly rational for this woman to utilize social media platforms for election information. When analyzing her marginal costs and benefits of gathering information about politics and candidates, it might be costlier for this woman to go out of her way and find unbiased, credible sources to politically inform her. The convenience of social media in consuming political information supports the marginal benefits one gets from using it as a news source. Additionally, through the in-app adjustments made to limit the misinformation circulating platforms, finding information outside of social media platforms has an even greater marginal cost.

Although segments like “Finger the Pulse” take a jab at ignorant and opinionated comments voters make, they highlight the preferences that people have in gathering electoral information.

Coase on Piracy

Illegal film/television streaming websites are a product of the last 20 years of technological advancements. Entire movies and television shows are uploaded online for the free consumption of viewers without legal permission or payment to the production companies who own them. These websites generate profit from advertisements, either from real brands or hackers who place malware in the ads. There are few ways for the government to regulate these websites. If one site is taken down, multiple sites pop up in its place as there are low barriers of entry. Currently, there are about 84,000 illicit entertainment sites. 

The Coasian thought model solution to this problem would be to define the property rights, hold who is liable for the damages accountable, and allow free-market negotiations to occur. This would force the quantity produced to be equal to the allocatively efficient quantity. In this case, the production companies would own the property rights, and the streaming websites would be liable. If they were to negotiate and the marginal social benefit of producing is greater than than the social marginal cost, the streaming websites would continue uploading the movies but for a cost, which would, in turn, bring down the number of films uploaded, leading to the quantity being at its efficiently allocated amount. However, if the cost is not greater than the benefit, the sites would shut down. This solution is only applicable if there are no limitations, which we know are not true. Due to the number of websites, we would face the assignment problem as we could not quantify how much damage each website produces. Neither the website nor the production studio would have an incentive to reveal this information. Further, we live in a world of transaction costs; the transaction cost of finding each website and negotiating with them would make the costs higher than the benefit of going after the website for their illegal use of the copyrighted property. Unfortunately for the production companies, they will not receive the profit from the movies being streamed on illegal websites as the costs of attempting to reclaim potential profits would outweigh the benefits.  

Revolutionary Business Seeking Investors

Dear Econ 3330 Classmates,

Every presidential election, I find myself stuck between a rock and a hard place.  I can either act irrationally and go vote or stay home and be talked down to by my politically active friends, who flex their "I voted" stickers on their Instagram stories.  Well I have had enough of this, so I will be starting a new sticker business!  My business will sell "I voted" stickers that are identical to those you receive after voting at the polls.  I would say the average social cost I incur for not voting is approximately $5.  I figure $5 is the correct amount because it is the amount I would pay for my friends to not heckle me about not voting.  Therefore, this is the price that I will set for my stickers.  From this site, I can buy 500 "I voted" stickers for $14.  This is approximately $.03 per sticker, so if I sell each seller for $5, I can make $4.97 per sticker!  This margin is incredible!  If you would like to consider investing in my business, please send me an email and we can discuss!

Sincerely,

Wilson Friestad

Graduated Income Tax vs. Flat Tax

 In the United States, we have a graduated or progressive federal income tax. This means that the more money a person makes, the greater the percentage they will pay of income tax. One of the main intellectual defenses for the graduated tax is that it is fair because those who make more money pay a higher percentage of their income in taxes, and value each dollar of their income less than those who don't make as much. Thus, it would seem reasonable that the rich would pay a greater percentage than the poor. However, that is poor economic reasoning. This argument does not take into account the utility of each extra dollar for the rich versus the poor. John D. Rockefeller, the richest man in the world in his day was asked how much money was enough for him. His response was "A little bit more." This shows that a person's wealth is not indicative of their marginal utility for their next dollar. As a result, one cannot assume another's preferences and utility rates simply based on their wealth.

Instead of advocating for the graduated income tax, those who want everyone to "pay their fair share" should push the federal government to revert to a flat tax, where everyone is taxed at the same rate. Although a situation where everyone told the government their marginal utility for each dollar would be most desirable, in reality, it is not practical, which is why a flat tax is the best option. The rich will still have to pay more than those with less money but will pay the same percentage of their income in taxes. 

When Votes "Matter"

I have worked on a couple of political campaigns at the grassroots level. This mostly involved registering voters and knocking on doors. I once worked on a campaign with an incumbent Democratic congressional candidate in a very blue area. The strategy of this campaign was to make sure that the Democratic base turned out enough. While I knocked on doors, countless voters told me they did not want to vote because the incumbent was going to win. The word "pointless" was thrown around a lot. Both voters and campaigns know that elections all boil down to swing states and districts, so why show up if you live in a strong blue or a strong red area?

Returning to the paradox of voting, many voters already think that the probability of influencing the election (P) is small. P is infinitesimal in these reliably blue and red states. The only way I and other campaign staff convinced voters to show up was by suggesting that they would dislike the candidate if the opposing party won. As a result, they would regret not voting. I did not realize that we were using the minimax regret to try to convince people to vote. From my personal experience, it is very persuasive and does increase turnout. Hatred of the other candidate drives people to the ballot more than love of their preferred candidate. In retrospect, we likely made them overestimate their marginal benefit of voting by talking to them about the consequences of a loss. 

First Year Dorms as Localities

 As a first year, I was assigned to live in Gooch-Dillard, suite-style dorms that are located on the outer edge of Grounds. I recall being extremely annoyed by this assignment and complaining about the walk to classes pretty much constantly. I specifically remember a situation in which I asked my RA why first year dorms were both randomly assigned and uniformly priced. In my mind, it did not make sense that I, in Gooch, could be paying the same amount as someone centrally located in Kent-Dabney. Furthermore, I was sure that there were people who may have preferred to live in Gooch because of the suite-style layout. When reading Tiebout, I was reminded of my initial arguments for why the assignment of first year dorms should be treated as a free market in order to maximize utility. 

Tiebout argues that with no costs of moving, full information, and heterogeneous localities (among other assumptions), people will reveal their preferences for the allocation of public goods by their choice to move somewhere. In my scenario, I am treating UVA as the federal government, the dorm buildings as localities, and the cost of housing as the taxes paid to the localities. The public goods provided from those taxes would be specific to each locality. For example, Gooch-Dillard would provide larger rooms and Kent-Dabney would provide a central location. Furthermore, taxes would be lower in places such as Dunglison in which AC is not provided as a public good. In the current system, UVA is allocating these public goods from a “federal” level and having uniform taxes. This current system is inefficient and utility would be maximized by focusing on the local level (the dorms) and creating heterogeneity between them. 

Virginia as a Case Study For Rational Abstention

 Do people vote when the issues mattered most? Political economists like Johnson say no. But how does Virginia fit into this? Unlike most states, Virginia has an election every year. Of course, it has Presidential elections and Congressional elections every two years. But many do not realize that Virginia has a governor’s election the year after the presidential election, and a midterm for the House of Delegates the year after the Congressional midterms. Thus, with an election every year, it provides a fascinating case study into voter turnout based on various issues on the ballot.

The results are clear: many Virginians are indifferent to state and local elections. 72% of registered voters turned out in 2016, but only 48% for the 2017 Governor’s race and 42% for the House of Delegates and local races in 2019. This seems peculiar – in the elections where your vote matters most, where there was even a tie in 2017 which ultimately decided the control of power in the House of Delegates, people vote the least. And these elections have important issues that decide the funding for your local schools, the police department, and other vital local services that impact us daily, and voter turnout is at its lowest. And this feeds into Johnson’s argument – that regardless of the potential benefit of a preferred candidate winning, the social pressure to vote in the house of delegates midterm and the local school board election is insufficient. And anecdotally, we can all see this. Think, how many times were you asked “did you vote? Have you voted yet?” prior to the 2020 election? I could name at least a dozen times. But would I be the first person to ask “do you have a plan to vote this November?” I would assume so. Thus, through the lens of my life and yours in our Commonwealth, we can see that Johnson was right: voting in a gubernatorial election just isn’t that cool.