Where the Sidewalk Ends

When reading the Tiebout article, "A Pure Theory of Local Expenditures," I found myself considering the ramifications of living on the border of communities. Tiebout assumes away externalities between communities, but as someone who grew up on the border of two counties in Northern Virginia, I can attest that these externalities do exist. Though my childhood home is located in McLean, it is only two houses away from the Arlington border. With no feasible way to exclude people in McLean from the public goods of Arlington, my family was able to enjoy the sidewalks and school playground of Arlington, without paying for those goods through taxes.

One of the clearest sign of leaving McLean and entering Arlington was the presence of sidewalks. Because the neighborhood in Arlington has sidewalks and and the one in McLean did not, the sidewalk abruptly ends on the dividing line. This difference in the provision of public goods highlights Tiebout's point of people moving to the public goods they want provided--maybe people in Arlington value sidewalks more so than the people living in McLean. My family, however, was able to 'freeride' by utilizing sidewalks for walking our dogs every night, without ever having paid the higher Arlington taxes. This example shows why the assumption of no externalities is so important for Tiebout--if these externalities were not assumed away, people would choose to live where they could use the public goods without having to pay for them.

Are you planning to vote this November?

I just got a call from some person trying to campaign for Jennifer Wexton, and, I must say, I think these calls are hilarious, for a number of reasons, but that's besides the point. She asked me about issues that I'm concerned about and then, "Are you planning to vote this November?" My brain naturally started thinking about Johnson and the discussion of voting that we had in class yesterday. 

I realized I don't even know who is on the ballot (well now I know Wexton is one of them), and I also began to think about the opportunity cost of voting. I'm from Gainesville, VA, so I would have to get an absentee ballot or go back home to vote. That increases my opportunity cost. What is the probability that my vote affects this election? How much utility would I get if my preferred candidate won? This is the calculus that I might consider. Maybe social costs will also be factored into the decision. A comment might influence me as well. I wanted to start spitting Public Choice content at the caller, but I held my tongue and decided to write this blog instead. 

Rational Ignorance of GPS

    Increasing reliance on technology has reduced the necessity of maps, and general knowledge of roads. Now, it is so much easier to type your destination into a maps app. This way, you get the most direct and efficient route without having to draw up the plan yourself. Whenever I go on an extensive road trip, I pay little attention to routes, tolls, and general stops, as google maps takes all of these into account.

    GPS now allows the modern driver to be rationally ignorant. The comparative cost of creating travel plans by choosing routes is much higher than just relying on the GPS to tell you where to go, and even offers safety benefits. Knowledge of roads and their interconnection is virtually useless in the presence of navigation apps. This is similar to elected officials. They are aware of the legislation for their constituents, and make decisions allowing the voter to remain rationally ignorant, as individual knowledge of legislation carries little weight when you are not the one making the decision. The GPS acts at the legislative official when we are on the road. It calculates the route so we don't have to. 

The Man Who Hated Being a Billionaire

“I was in Forbes magazine listed as a billionaire, which really, really pissed me off.” This is a very strange, but very real, quote from Yvon Chouinard, the founder of Patagonia, a multi-billion dollar outdoor apparel company. This week, headlines highlight Chouinard’s decision to give away his ownership in Patagonia, valued at ~$3 billion, to a trust that will use future profits to battle the climate crisis. Clearly, Chouinard is an outlier in the business world, especially regarding the choices he makes about his income. Chouinard and Professor Coppock’s brother might get along quite well, since they both gain significantly less marginal utility per additional unit of income than the average person. They both prefer to spend time outdoors instead of earning more income. 

Chouinard’s decision to give away the $3 billion that were rightfully his are still in line with the basic economic principle that peopledo things when the expected utility is greater than the expected cost. In this case, Chouinard’s contributions to fighting climate change will personally bring him a marginal benefit greater than $3 billion would. This is quite remarkable to think about, especially because Chouinard (aged 83) will likely not be living to see how his dollars will make a difference. Perhaps Chouinard is an altruistic individual that cares greatly about the well-being of others, and the threat of climate change threatens that well-being.

Free Rider Problem of Laundry

This semester, I moved into my sorority house on Rugby Rd. Overall, it has been great to live with the 20 other girls, however, as I was doing my laundry recently, I noticed there was a huge issue: dryer lint was left in the lint catcher. This is a huge fire hazard and a true negative externality from doing laundry. As I was cleaning the lint from the dryer, that was not mine, I realized that this was a classic example of the free rider problem. When you have so many people in a house, you assume that someone else will be able to clean up (or clear out the dryer lint in this situation). This is a true example of underinvesting in the common good because there is a personal cost (the act of removing the lint). The laundry in the house should probably be considered to be in between a public and private good. This acts somewhat like a private good because when one person is using the machine, it takes away from the ability for another to gain from it because the washer cannot be used by the other individual. However, washers and dryers also parallel how public goods operate as it is difficult to prohibit or stop a specific person from using the laundry machines because it would require you to guard the machines all day and all night. Because the machines are seen as a partially public good, it is easy for house residents to free ride on other peoples actions as they perceive them to not be their responsibility and feel comfortable pushing the chores off to others.

There were similar findings in this study, as it shows that despite an assumption that children would serve/help their families in ways to maximize income and increase efficiency they opted to free ride on their parents doing the chores. I find this to be a helpful comparison to the situation in my house now as we operate in a loose family-like structure with chores and basic household duties. Applying the logic of this study, one could assume that we would all carry our weight around the house and do chores as it became clear that it was required (and in the case of the laundry machine, girls would clean out the lint after each dryer cycle) in order to increase the "income" and efficiency of our group. However, as indicated in this article, and demonstrated by the actions of my fellow house residents, household members are more likely to free-ride than prioritize the efficiency or income of their family unit. Demonstrating the age-old issue of free riders and the problems they create.

Subsidizing EV's and the failure of the role of government

In order to reduce the effects of carbon emissions from vehicles, the government has heavily subsidized the Electric Vehicle industry to provide incentives to consumers. However, these subsidies have failed to correct the existing market failure. The majority of the electric vehicles bought by consumers is from the upper-middle class as secondary vehicles, not the middle class as primary as was initially intended by the federal government. In fact, carbon emissions have increased due to increased use of electricity by EV's as secondary cars instead of primary. Harvard Law reports that EV subsidies, "disadvantage poor households in the US who... are largely responsible for delivering an EV's emission benefits."

The federal government is subsidizing wealthier households not the secondhand buyers, therefore rewarding those who don't tend to help in reaching emissions targets and ignoring, even hurting, those who have the potential to do so. Friedman defines the role of government as providing a means to determine rules, modify them, and enforce compliance. Poorer households are likely to ensure EV's are around long enough to reduce emissions and the economic incentives of the government need to reward this compliant behavior, not hinder it. Therefore, the government needs to re-evaluate its strategy of subsidizing the industry in order to encourage compliance with the goal of lowering carbon emissions and increasing industry demand to remove the need for subsidies in the first place.

https://hls.harvard.edu/today/current-electric-vehicles-subsidies-fail-to-reduce-overall-emissions-says-harvard-law-study/ 

Externalities of After School Snacks

    Growing up, very few things caused major fights between my sisters and me, but one thing that was a sure kickstarter was one of us chewing loudly. I have multiple vivid memories of sitting at the barstools in our kitchen eating cereal, my favorite afternoon snack, while my older sister was attempting to read a book. Sure enough, a few minutes later a fight would break out because apparently she couldn’t do her reading with my chewing in the background. Ironically, after years of not understanding her annoyance in this situation, I became aware of it myself a few years ago, and it is now one of my biggest pet peeves. I even read about a disorder called Misophonia that causes this harsh reaction, although a lot of psychologists do not consider it super legit.  

    With my present knowledge after taking some economics classes, I now see that my consumption of my after school cereal was causing a negative consumption externality, as it was impairing my sisters ability to read her book. In all those years of fighting, a Coasian solution never came about between us. I think the main thing that prohibited a Coasian solution is that we had no defined property rights. Neither of us had property rights to the counter, so therefore she could not demand I pay her to compensate for my chewing because I could’ve argued that she had no right over me to enjoy the common space. Ultimately our solution was the intervention of a “government”, which in this case was my mom who would simply tell us to stop arguing and just deal with it! In the end, I guess mother knows best!

The Role of Government in International Airspace

In Milton Friedman's "The Role of Government in a Free Society" he states, "In both games and society also, no set of rules can prevail unless most participants most of the time conform to them without external sanctions" - Friedman. I want to expand this to the international level and specifically how pilots from different countries interact with each other in the air. It is common to "intercept" other planes, whether they are jets or cargo planes. These intercepts have rules and guidelines pilots must follow in order to ensure the safety of each own's aircraft. In recent months there have been multiple reports of Chinese military aircraft "not following the rules".  Amid the rising tensions amongst China and the US over Taiwan, Chinese aircraft have flown dangerously close and have acted provocatively while intercepting US and Allied aircraft. 

This is such an issue as these actions are not decisions made by the pilots themselves, but orders from the CCP. The PLA (People's Liberation Army) operates under direct command of the CCP and decisions are not decentralized or independent as they are in the US military. Meaning the CCP is directly ordering their pilots to antagonize not only our own pilots but the pilots of Canada, Japan, and Australia. In this instance the government's role as a Rule Maker and Umpire is failing. Conformity in this sense can not be enforced by international law since one of the biggest players is blatantly ignoring safe conduct in the air. Government here can't "enforce compliance with the rules on the part of those few who would otherwise play the game" - Friedman, unless sanctions are placed on China. With the present circumstances actions such as enforcing sanctions, the goals of which would be to make Chinese Aircraft safely fly, could only lead to higher tensions and is not a viable option. If the governments of the world can't make China abide by international guidelines in the air, what will stop this obvious market failure before a serious incident occurs. 

Link to Article:

https://www.navytimes.com/news/2022/08/18/us-7th-fleet-commander-sees-increase-in-unsafe-intercepts-by-china/

Friday Night No Lights?

     Have you ever heard of the show Friday Night Lights? Even if you haven’t you probably lived through it – going to high school football games on Friday nights underneath the large lights in the stadium cheering on your team.Well, in my case this never happened. See in order to have this type of experience you actually have to have lights on your high school football field. In my town, the town council has been working for years to get approval for a plan to put lights on the field, but the houses surrounding the location of the high school field always rallies to reject the idea. They are not okay living with the negative externalities, such as longer periods of noise and light pollution, that would be inflicted upon them. Similar excuses were used when the town wanted to invest in building turf fields with lights behind an intermediate school. There were additional worries about parking spots and the environmental detriments of turf. In both cases it was decided that the positive benefits – more practice time for the team, minimal need to rent out lighted fields, profit from renting out lighted fields for longer – outweighed the negatives. 

    To me, and maybe the rest of ECON 4300, there is a possibility this could be solved with a Coasian solution. If we push aside the fact that one party is the government, then we would first need to determine who has the property rights in this scenario. If the town council has rights to the property, then in order to avoid some of the negative externalities of the lights/fields, the households impacted by the town council’s decision would pay the town to reduce the use of the lights/fields with an amount equivalent to the loss of additional profit from lights/fields. The opposite is true if the household has property rights. In that case the town council would have to pay an amount to the households in order to use the lights or fields for some portion of the night with an amount equivalent to the loss of utility the households would experience. An interesting thought experiment this problem poses is the fact that the town council requires support from the town to make their decision. If there was a compromise that was able to be reached, each side would be better off in general, simply with negotiation.

The Holdout Problem of Chore Charts

Much like in The Office, my roommates and I decided to make a chore chart, because after a mere three weeks, we are already living in filth. As dishes fill to the faucet, trash overflows, and cabinets are empty, there are plenty of chores to go around for the 9-person house. This should have allowed us to live in harmony, but after only one week, it was evident that this would not be the case. 

Here inlies the Holdout Problem. The property rights in question (our house) are held by 9 peoples, so each party has power over the other. But there are 9 chores, so what happens when 8 people do their chores and the 9th person refuses? The 9th person will be beneficiary to a clean house along with the other 8; however, the 8 who did their job will not be nearly as satisfied, as there is one glaring gap in the cleaning. This 9th person suddenly wields great power. This is similar to the fishermen example in the Gruber writings. If 100 fishermen are causing an externality, and they each are given $1 to stop it, that 100th person will demand more, because they can. It's also similar to what happens when a company is bought out. If a company has 1000 shares and sells 999 to the same buyer, that 1000th share's holder has great value, because they do not just offer one share: they offer total control of the company. 

So what are the 8 of us to do? #9 continues to hold out while we have done our jobs, and he knows we're getting antsy. Will he demand an allowance? Will he demand to have no chores the next week? Will he threaten to move out, and not pay rent? Because of #9's holdout, we fail to reach a Coasian Solution, and fail to have a clean house. 

Can Tiebout Explain the Migration Crisis?

My goal in this blog post is to use the migration crisis in Latin America to demonstrate that Tiebout might be thinking of the pattern of human movement in a backwards way. An article published today in the Financial Times reveals that the migration crisis in Latin America is intensifying, as worsening political and economic conditions drive tens of thousands up towards the US-Mexico border. I will attempt to explain how such a phenomenon does not align with Tiebout’s model in “A Pure Theory of Local Expenditures.”

Tiebout’s model frames human movement as people voting for certain communities, but the situation in Latin America shows that people vote against certain communities. It is not the particular expenditures of local US governments that are driving human movement. “Inequality and exclusion and very low confidence on the part of the population that conditions are going to improve” are the factors driving migration. When people are pushed away from their communities rather than drawn in, it does not make sense to use your zip code as preference revelation because families will move to communities that do not optimally meet their preferences in order to survive. In times of crisis, perhaps it makes sense to use geographic location to reveal what an individual's preferences are not.

The Free Rider Problem for Group Potlucks

A few weeks ago, my roommates and I decided to have a wholesome brunch at our apartment. We asked for people to bring a dish of their choosing to share with the group. This was definitely a rather large group, about 10 to 15 people. So once people said that they were going to bring things like pancakes, fruit, orange juice, etc., there was not much else on the list for other people to contribute. While it would have been helpful to have duplicates of things, someone else claiming it, thereby checking the box, created an incentive for others to not contribute to the potluck, leading to more scarce resources at the brunch. This is a good example of the free rider problem. While some people spent money to contribute to the potluck, others decided that they could still partake in it without having to bring anything. This relates back to our class discussion of the free rider problem, which we described in class as "the reluctance to contribute to the purchase of goods that bestow group benefits." While we talked about it in relation to Coase and Public goods, I still find it to be applicable here. I would call a group meal in the middle of the spectrum of purely public and purely private goods, because it is not necessarily non-rivalrous (ie one person's consumption does affect the consumption of another), and in practice, it is non-excludable to those within the group (but excludable in that you can invite who you want). While in theory, you can exclude someone you invited from eating if they did not bring anything, the transaction costs are too high (aka that is such an uncomfortable conversation). 

A potluck can definitely be seen as on the public-private good spectrum, and the knowledge that others will contribute incentivizes others to not contribute. Utility is most maximized for the individual who did not have to spend any money but still gets to partake in the food, but if everyone maximized their utility in this way, there would be no food at all! One thing I thought about when examining this issue is the idea that the more people there are in a group, the more rampant the free rider problem is. This link presents a study by an economist who asserts that despite conventional wisdom, the free rider problem is not necessarily affected by group size. While this can be true in some cases, in my particular one, I think if less people came then people would feel more pressure to contribute because it would be more noticeable if someone did not contribute. To alleviate the free rider problem for potlucks for the next time, we can act as rule makers and assert that everyone who is invited must bring something, to make it fair for everyone who participates.