Simple Majority vs Supermajority Costs

In this opinion article, the columnist is arguing for simple majority to rule in Congress for all decisions. He argues that many bills have not been passed even though the bills have had 51 supporters in the Senate and the Democrats will not get everything they want because their majority is too slim to get over the supermajority requirements, especially that associated with filibusters. He argues that simple majority should be the law of the land so as to be able to pass more laws that represent the beliefs of the majority.

However, this columnist is only looking at the decision-making costs and ignoring the external costs that Buchanan and Tullock present in The Calculus of Consent, Chapter 6. While reducing the requirement to simple majority may decrease decision-making costs in Congress as they would be able to pass more bills quicker, it will likely increase external costs. It would not be optimal to let Congress operate at a simple majority for issues that relate to individuals’ rights, freedoms, or overall welfare because the individuals' external costs will be much greater as it will have a greater impact on their daily lives. A simple majority would represent more than half of U.S. citizens, but a supermajority represents more people, and reduces the external costs associated with the vote because more people's interests are accounted for in the vote. As Buchanan and Tullock argue, there is an optimal Na that minimizes an individual’s costs. And so while this columnist makes a valid argument about the high decision-making costs associated with a supermajority, he does not address the high external costs associated with a simple majority. He only addresses the issues associated with supermajority but fails to address the drawbacks of a simple majority. He does not realize that the supermajority that Congress currently operates at might actually be the optimal Na. Therefore, it would be an inefficient move to switch to simple majority if the supermajority was Na as a move would be associated with increased costs for individual i.

Tariffs on China and American Economic Welfare

Tullock’s model of social welfare loss and allocative inefficiency due to tariffs is being exemplified by the United States’ ongoing trade war with China—especially in the context of goods that American producers depend on. We all know China is an economic powerhouse in terms of production. Thus, maintaining a relationship with them is in the interest of the United States from a commercial perspective. After all, trade creates value (Rotunda Principle #1). Imposing tariffs upon them, however, limits said value by preventing the markets for certain goods from clearing at their optimal (free-market) price and quantity. 

A January 2021 study commissioned by the U.S.C.B.C. (US-China Business Council) found that the tax on goods imported from China is restricting American economic growth. Further, a current decrease in exemptions from this policy is leading more and more firms that rely on China for key inputs to be thrown to the wolves of non-optimality. The Washington Post reports 87% of nearly 53,000 tariff exclusion requests have been denied by the Office of the U.S. Trade Representative as of mid-August. Consequently, there has been a reduction in quantity demanded in many markets amid these heightened input costs, which are being passed on to American consumers via retail price increases. That’s not the only issue. The aforementioned U.S.C.B.C. study found that the trade war with China has contributed to an estimated peak loss of 245,000 American jobs and limited real GDP potential by many tens of billions of dollars. 

Based on these findings, it is clear that the social marginal costs outweigh the social marginal benefits of this policy, so why does it remain in place? That answer isn’t as clear to me. What I am certain of, however, is that homoeconomicus would not be pleased with this market condition. 

Rent-Seeking in the Arts Market

In the art world, the value of art is defined by a small number of gatekeepers - the curators, gallery owners, and auctioneers. Therefore, the market is characterized by very subjective prices. This means corruption and collusions are incredibly common, such that art donors can turn a profit on it. Basically, when a person donates a piece to a non-profit museum, they can get a tax-write off. For example, when someone donates a piece that is valued at 10M dollars, they don't have to pay 4M taxes on 10M dollar worth of income, meaning that they save 4M from their pocket. The process of determining the art's worth is difficult and the IRS requires that each art to be professionally-appraised before the write-off. The manipulation of the appraisal process is where rent-seeking behaviors come in. Each year, among all art works donated that had been audited by the IRS, nearly 1/3 of them are overvalued by appraisers by 38%. IRS also only audit a selective amount of art donations each year, which enables donors to take chances with raising the true value of their art. This can happen very easily, where a wealthy art donor could buy off an appraiser to have the assessment price jacked up.  Essentially, a rich person could buy a piece of art for 4M, wait for its value to appreciate a little over the years, then look for an ideal appraiser, then donate the art for 10M and receive 4M in net tax benefit; at this time, they have already reached a break-even point. 

During this process described above, no additional wealth is created and the government is harmed because they lose tax revenue. This is a good example of rent-seeking that generates no value for the society in a highly exploitative market. The art market is indeed created by the rich and for the rich. 

Omnibus Bills, The Modern Day Logroll

On Monday of last week, a judge in Arizona struck down a ban on face-mask mandates by school districts. The judge's reasoning was that the ban violated the "single-subject rule" for legislation due to its being passed as part of a large state budget bill. Her exact ruling stated that "the bill is classic logrolling - a medley of special interests cobbled together to force a vote for all or none." It's interesting to note, however, that in many ways this situation differs from classic logrolling. The traditional logrolling situation involves agreeing to vote affirmatively on separate issues in order to secure support on your own issue of choice. Arizona legislators, however, included all such issues in one single "omnibus" bill. Arizona is not an outlier here; the federal government frequently debates omnibus budget bills and is currently debating a multi-trillion dollar infrastructure bill that could easily be described as omnibus legislation. Given the proliferation of such bills, we have to ask if they even constitute logrolling and, if so, are they more efficient than traditional logrolling?

I agree with the Arizona judge that this does constitute logrolling. Each legislator can include their own priorities in exchange for agreeing to pass the entire bill. In other words, they convince others to support their own priorities by voting for the priorities of others. The entire process is simply condensed. Does this improve on classic logrolling? I argue that, on the whole, it does not. On the one hand, it eliminates the issues of cheating and bluffing that Mueller describes in 5.9. You can't renege on a deal when there is only a single vote. On the other hand, logrolling on such a large scale and involving so many tradeoffs amplifies possible inefficiencies and makes Tullock's concern with government overspending that much more important. Omnibus bills seem to be the natural evolution of traditional logrolling and highlight the inefficiencies that can come with it.

Jury Voting Costs for Criminal Trials

     In the American courts system all criminal trials require a unanimous jury decision to pass down a verdict. Hence Jury voting is an interesting application of External Costs and Decision-Making Costs as described in The Calculus of Consent chapter 6.

    The External Costs in a criminal trial are disproporiantly high for the accused since a conviction can result in the revoking of the inalienable rights of property, liberty, and in some states even life. However, External Costs for the Jury are low since it is unlikely that a jury member's utility is dependent on the livelihood of the defendant. I feel the requirement of a unanimous verdict for criminal convictions is justifiable due to the severity of the external costs imposed upon the defendant under a guilty verdict; the limiting or revoking of fundamental individual rights that pre-exist government. An implication of the unanimity requirement is higher decision-making costs since all jury members must vote for the same verdict (analogous to unanimous preferences). The main cost for jury members is the opportunity cost of their time which is best illustrated in the movie "12 angry men" where the protagonist is the holdout on a guilty vote which prevents another jury member from being able to watch a baseball game that night.

    It is interesting to study a non-economic field, Law, from a Public Choice economics perspective. Curious to hear others' thoughts about how I applied the concepts of External Costs and Decision-Making Costs or anything another perspective you all have about instances of collective choice in trials/law.

Covid-19: The 2020 Election's Voter Subsidy.

    We are all familiar with the with the formula that ultimately decides whether or not a citizen exercises their Civic Duty and votes: P*B+D-C. This formula holds that if P*B+D > C, the rational voter will cast a vote in the election. 

    The 2020 Michigan turnout for the presidential election proves that the effects of and methods used to mitigate the risks of voting during the 2020 election greatly decreased the cost of voting, causing the highest voter turnout in decades. This election was just as controversial as the 2016 election in regards to the candidates selected, yet Michigan had a 14% increase in voter participation in 2020 when compared the 2016 election. 

    This is a direct result of Covid-19. People were stuck at home, out of work, or with a much more flexible schedule thanks to new work at home methods. These effects of the Covid-19 pandemic greatly decreased the cost of voting. This is best seen in the widespread use of absentee voting, where a ballot is dropped off at ones home and sent off to the polls from their mailbox. Fifty Seven percent of votes casted in the 2020 election in Michigan were from absentee ballots, a time and cost effective way to exercise one's political voice. 

    Covid-19 did the impossible and made voting more affordable. If we can learn anything from the Pandemic and Michigan's story, it is that allowing easier voting access significantly increases voter participation. This is a fact that should not be ignored by politicians devoting their life to increase civic participation!

Tiebout and the current Congress

With the new $1-3.5 trillion infrastructure bill being debated in congress, I thought back to Tiebout’s theory of local expenditures, as well as the political science theory of devolution, which similarly to Tiebout theorizes that governments make better decisions, both with expenditure and legislation, the more proximal they are to the people they affect. This theory would suggest moving government power from the Federal government to states, and from states to localities.

Knowing the tendencies of the current Congress and the Biden administration, it would be reasonable to conclude that localizing expenditure is not one of their priorities, but I would like to contrast the infrastructure bill with another bill that was passed into law in may that does focus on local expenditures.

This bill grants $315 Billion to states and localities in order for them to help remedy their communities’ issues coming out of the COVID pandemic and recession. I believe that Congress and the Biden administration were forced to realize the merits of Tiebout and Devolution in this issue, as the vast different localities all across our country need to spend money in different ways in order to for Federal assistance to succeed in its goal of repairing localities and local economies.

The last point I would like to make is to contrast the amounts that Congress and the President allocated to localized relief vs a federally administered infrastructure package which all proponents will be pointing to on the campaign trail to get themselves re-elected. Setting aside the issues at hand in each of these bills, I conclude that our current politicians only care a fraction as much about Tiebout’s useful theory as they do about being able to take credit for solving problems rather than passing the credit down to Government actors at a lower level.

Beach house and median voter

Recently me and my friends decided to go to Virginia Beach for fall break. When we were picking AirBnbs, disagreements arose. After eliminating some less preferred options, we came down to two options: one beach house that comes with a hot tub and a swimming pool at a 240$ per person 2-day rate, and a cheaper option in Norfolk at a 150$ per person 2-day rate. 6 kids with higher monthly allowances strong rooted for the more expensive option, whereas 5 of us voted for the cheaper option. The 6 people who clearly preferred the option A stated their reasonings very straight-forwardly, while people with weaker financial capabilities barely spoke up (they quietly voted for option B and took no further actions) out of embarrassment. Few moments after the voting took place, one person who voted for option B dropped out of the trip (abstention) because he felt alienated, as the group policy preference was clearly left-leaning (illustrated in the graph). Feeling also very strongly about option B, I first decided to mobilize right-leaning group members to speak up about their financial challenges and I thought maybe the left-voters will be empathetic and change their vote. But since I just learned about voting behavior in Econ 3330, I thought to myself: maybe I should instead find the median voter, and we can potentially come up with an option that is priced in between while also having some perks that may satisfy voters from both sides. I then went to talk to some people in the friends group that appeared to be more neutral on their decision, and surprisingly found out that 2 option A voters and 1 option B voter actually did not care much about about which house we end up choosing. 

That became the turning point of this vote. The median voter, one of the three people I talked to, took the initiative of speaking up in the group chat, saying that we should try harder to find a middle option, otherwise she's gonna drop out too. We will then have less people to split the cost and the price per person will be even higher and nobody wants to see that happen. We did, in the end, find one that falls just in between at a price of $200, that is in closer proximity to the beach than the previous option B, comes with one self-heating swimming pool, however has 1 less room than option A. People from both sides ended up cooperating, and reached an consensus on this new housing option under a simple majority. This experience reinforced what i learned in this class that, the median voter's vote is decisive in many instances when majority vote is decisive, the policy space is single-issued, and individual preferences are single-peaked. 

A Downs’ Perspective on the 2021 German Election

For the first time in decades, three parties will be needed to form a governing coalition in Germany. The country falls under Downs’ classification of a coalition government, where each party receives proportional representation in the Bundestag, the large legislative power of the German government. The top two parties, the C.D.U and the S.P.D, received only 24.1% and 25.7% of the majority vote, with the remainder split between four additional parties.

According to Downs’ analysis of multi-party systems, parties will strive to distinguish themselves ideologically from each other and maintain the purity of their positions. And this conclusion would normally stand in German politics, as small parties can have a real presence in the Bundestag as long as they retain merely 5% of the vote. But this can change as coalitions are formed post-election in an effort to gain a majority. Parties that have complementary ideologies/interests will find it easier to form coalitions, and this is currently seen with S.P.D’s lack of interest in forming a coalition with the AfD party, due to their extremism. 

Another interesting note from Downs’ analysis of multi party systems is his emphasis on ideology of parties. He states that voters in multiparty systems are much more likely to be swayed by doctrinal considerations than voters of two party systems. Germany’s mounting pressure for action in regards to the climate crisis and recent flooding can be attributed to the Green Party’s best ever performance in a federal election, with 15% of the vote. We can see that ideological interests based on the climate are better reflected in a multi-party system, and can have significant influence in election outcomes.