"CURSE YOU PERRY THE PLATYPUS!!!!!"

 

        After hearing that Phineas and Ferb is in production for a fifth season, I began binging old episodes so I could remember the storylines. This got me wondering about Dr. Doofenshmirtz, and how he continually builds new evil inventions only for Perry the Platypus to come ruin his ingenious plans. Let me assume, as all great Economists do, that each time Dr. Doofenshmirtz remembers Perry exists and will come to stop his plans (a reasonable assumption I assert given the fact he always builds a trap). Then why would Dr. Doofenshmirtz continue to build evil inventions, given his probability of success is near-zero (and is more likely to be struck by a dog)? 

        I thought about the following expression we learned in class when trying to rationalize voting: 

                                                                    pB + [D] - C > 0

        While presented in the context of voting, I felt this concept can be used to analyze Dr. Doofenshmirtz's behavior. We can suppose that in each episode he "votes" to build his evil inventions, with p ranging from 0-1 according to how likely his invention will have an effect. Since Perry the Platypus constantly foils his plans, his p is near-zero which means he will not gain the Benefit "B" of his plan working. This means there must be some additional utility "D" which is greater than his economic costs "C" driving him to continuously vote to build an evil invention. Perhaps this utility comes from a sense of evil duty to be evil to his fellow Tri-State citizens, or perhaps he gains satisfaction from the scientific practice of building a machine. Maybe, the truth all this time, is that Dr. Doofenshmirtz loves Perry and votes to build these machines so that he can continue spending time with him.

The Marginal Benefit of Writing A Short Title Does Not Exceed The Marginal Cost Of Thinking of Said Title.

 We have discussed applying economic behavior - namely, the MB>MC condition - to voting in elections. In Johnson's simple yet effective model, the expected marginal benefit of casting one's vote in a two-option election is E(U) = P(the vote is decisive) * [(Net utility if option 1 succeeds) - (Net utility if option 2 succeeds)]. But does this equation hold in edge cases? Consider two examples:

1. In my history class, the professor had two students act out a debate of a historical controversy. The rest of the class was then able to vote on the winner with the vote totals appearing on the projector. I had a slight preference as to the winner, but was too lazy to get out my phone and cast my vote. That was, until I saw that the vote was tied! Suddenly, P(decisive) was 1 for my vote, and with a much higher E(U) I chose the winner of the debate.

2. I enjoy cooking with my girlfriend. But cooking requires choosing what to cook, so it is not uncommon for her to summon two options and ask me to select from them. If I desire one meal over another, I will vote accordingly, but what if I value each choice equally? I am forced to say that I have no preference and thus will not choose. This is not an admission that I do not like the options - I may like them both very much! But if I expect their utility to be equal, the two will cancel, and I have no reason to cast my vote.

Once in a blue moon, p=1.

        Last week, in my Intro Machine Learning class, we were asked to vote on whether raising the threshold of a K-Nearest Neighbors regression model would overfit or underfit the model. It had already been a long day, and my group was not feeling particularly confident about either answer. Instead of searching through our notes and Google to find the answer to this question, we decided to be rationally ignorant and wait until the rest of the room had placed their tally under one of the two options and just put our tally, or cast our vote, on whichever option was already winning. The marginal cost of looking finding the answer on our own was far higher than the marginal benefit of being the first group to place their tally under the right answer.

The rest of the groups took turns marking their tallies on the board and, low and behold, the votes were perfectly even. I thought to myself, “Oh no. Our p is 1”. My group all looked at each other with sheepish stares. Not only did we not know the answer to the question on the board, but we also were suddenly the deciding factor of the entire class’s consensus. In fear of placing our tally under the wrong answer in front of the entire class, we sunk into our seats and waited for further conversation from the professor. This made me wonder how often voting abstention in the US is in fact a result of rational ignorance. If we were confident in our answer, our p being 1 would've been an easy opportunity to look super smart in front of the whole class. Does the fear of making the wrong choice prevent people from voting in the same way that the prediction that your p is 0 does?

Picking the Best Spot for your CIO Table

Everyday, I see CIOs tabling but it wasn’t until after class on Thursday that I questioned their positioning. CIO tables (orange dots) advertise membership and events along the sidewalk between Garrett Hall and Randall Hall (the blue stretch). Often, these tables crowd the top left corner of the South Lawn. Thinking about the example of the ice cream carts in class and how the two vendors would end up in the middle of the beach, I was curious about how CIOs choose their table location. Based on what we learned about multiparty systems and how parties in that system will strive to distinguish themselves, I would imagine that CIOs would want to spread themselves out more than they currently do

The 700+ CIOs at UVA must compete for attention. Two factors are at play. First, ceteris paribus, pedestrians are more likely to engage with tables they walk by first. When students are in a rush, they have limited attention ”currency” to spend and don’t have time to engage with every table. This means that CIOs will target the areas with not only the highest pedestrian density but also the ones where they are likely the first table a student encounters. Intersections are prime spots to increase that chance. Still, we should expect some groups to position themselves in front of Garrett Hall with its influx of students. That brings me to the second factor: food trucks. Food trucks and the crowd of students waiting for their meals add a negative externality in the form of noise, which makes it challenging to grab a student’s attention. Therefore, CIOs are pushed towards the more quiet end of this stretch.

Perhaps every CIO is thinking about their table positioning in this way. Or, more likely, CIOs are simply copying what every CIO has done before them.

The Condorcet Quandary: Deciphering Apartment Priorities

 Blog Post #2: The Condorcet Quandary: Deciphering Apartment Priorities 

My future roommates for the 23-24 academic year and I are currently in the process of figuring out our living situation. Since there are three of us it should be pretty easy to settle disputes right? If two of us disagree on a particular location, amenity, or floor plan, then the third can break the tie. Right? Wrong.

There are three of us: Jacob, Tyler, and myself (Chase). To make things easier for us all (or so he thought) Jacob asked Tyler and I to rank our top three “must haves” for next year’s apartment: location, big bedroom, and patio area. Surprisingly in Charlottesville it is difficult to have all three, so we had to prioritize one of them:

	Chase	Tyler	Jacob
Preferences ordered from most desired to least desired	Patio Location Big bedroom	Big bedroom Patio Location	Location Big bedroom Patio

As you can see, for us as a group our preferences are intransitive. If we were to vote on what to prioritize repeatedly, we would end up in a cycle unless someone changes their vote and therefore their preference. This Condorcet paradox demonstrates the limitations of our apartment voting system. If Jacob were in Public Choice, he likely would have proposed an alternative method of voting such as ranked choice voting.

The Importance of D(ues) in Voting

I usually abstain from voting because my perceived benefits (P * B) minus costs (C)  typically suggest that it's not in my self-interest to vote. However, I made an exception during a recent fraternity vote to raise dues. The proposal was to increase our $950 semester dues by $50 per person, allocating the extra money to biweekly catered meals and an extra date function. Although I'm typically frugal, I realized that despite the low probability of influencing the outcome (My P was 1/40 or about 2.5%), the benefit (B) was substantial – approximately $100. This was due to the added convenience of six meals on Sunday evenings during the semester, sparing me the need to go to the dining hall or cook, the benefit I derive from having dinner with my friends, and finally the benefit of having a fun evening with my date and friends at the date function.

What swayed my decision was the relatively high perceived cost (D) of not voting. The voting process was public, so abstaining would have subjected me to social pressure and raised questions about my civic duty (in regard to my fraternity), as my vote could impact future semesters. I estimated my D value at $60, with $40 attributed to social pressure and $20 to civic duty. My voting cost was minimal, about $2.50, given my hourly wage of $15 multiplied by 10 minutes (⅙) thinking about my decision and filling out the voting form. Ultimately, my vote's value was $60 (1/40 * 100 + 60 - 2.5), and this number was driven primarily by the substantial D value, as PB and C canceled each other out. And since my value is significantly higher than 0, it is in my best self-interest to cast a vote for this particular instance.

Coase and Effect: Parking Woes and Property Rights

Before every UVA football game, my house sells over 30 spots of parking to customers who are willing to pay (in my opinion) unreasonably large sums of money in order to have a shorter walk to the stadium. Part of the reason my house is able to sell so many spots is that we share a backyard with our neighbors. They don’t sell parking for the game, but still use most of the parking spots throughout the week. This poses no external cost on us from Sunday-Friday, but on Saturdays it hinders our ability to efficiently pack in cars for parking, costing us roughly $100 in lost revenue. In response to this, I attempted to bargain with my neighbors, offering them $50 to move their cars to the corner of the yard for the duration of the game. I believed this would be a Pareto-efficient move, and yet I was left on read.

Analyzing my situation from the perspective of Coase’s theorem, one would expect that an efficient outcome would be bargained to if property rights are clearly defined and transaction costs are low. My lease doesn’t have any specific designations over how the spots are split up in the backyard, making property rights unclear. Transaction costs are also a reality in my situation, as my neighbors simply don’t want to negotiate despite the possibility of a mutually beneficial transaction. My situation reveals the practical limitations of Coase’s theorem; Even in a case where a limited number of parties are involved and it’s easy to quantify the effects of the externality, private bargaining still doesn’t happen due to ambiguous property rights and high transaction costs. 

Coase’s assumptions may not be true for my case, but they are still valuable, as they provide the necessary conditions for bargaining to occur. If I want to solve my problem, I will need to pursue both definitive property rights and lower transaction costs, and I plan on texting my landlord to make this happen.

Condorcet's Paradon't Make Me Make a Pun (I am not creative)

 'Twas the Friday of fall break, when all through the house, not a roommate was stirring, not even a mouse. It was because I was working, my roommate Alyssa was at studio (she's in the a school), and my other roommate Alison was on the couch watching Pretty Little Liars. All was at peace until we convened at about 10pm when I got off my shift, and we began to discuss what we should do for the night. My first pick was to watch Harry Potter in honor of Dumbledore dying, Alyssa wanted to go out, and Alison just wanted to hang out and chat. A simple majority was all we needed, but somehow we were stuck. 

As our discussions for what we wanted to do played out, I was able to pick up on everyones preferences. Since I was tired from being around people at work, I wanted a quiet group activity like watching a movie first, talking next, and going out dead last. Alyssa felt cooped up from a long day of classes and wanted activity, so going out was first, movie watching was second, and hanging around was third. Alison had spent the day on screens but likes small groups, so her preferences went hanging out, going out, and last watching a movie. 

If Alison and I voted together chatting would win over going out. If Alison and Alyssa voted together going out would win over watching a movie. But if Alyssa and I voted together watching a movie would win over chatting. So chatting can beat going out which can beat watching a movie which can beat chatting. Uh oh! No one activity beat the others, and we couldn't come to a consensus. Even though everyone had transitive preferences individually, our group preferences violated transitivity under majority rule. Condorcet and his darn paradox! If only he came up with a solution too. 

Fiending for Fried Chicken

Last Saturday,  my family was deciding where to go for dinner. Before casting my vote on our 2 final options, Chick-fil-a versus Chinese food, I considered the equation we learned in class: p*B + D - C, where p represents the probability of my vote impacting the outcome. In theory, my vote should've had significant impact. There's only 9 people in my family, so a high chance that I'd be the deciding factor. However, this would assume all votes are equal. In my family, the real power player is my 6-year-old niece. Why? Because children between the ages of 4 - 9 are extremely picky eaters. My niece's diet consists of chicken nuggets, french fries, and...that's it. 

Even if 5 out of 9 people voted for Chinese food, myself included, the part of me that sympathized with my sister's struggle to feed a picky eater knew there was no way we were eating Chinese food: p = 0. Add to that the high C (cost) I'd incur by voting: spending the better part of the next hour listening to a child scream about fried chicken. With no incentive to vote, I kept my mouth shut and decided to let my siblings fight it out. Then later that night, after things had reached their inevitable conclusion, I begrudgingly ate my Chick-fil-a sandwich.

McCarthy Ousted and Voters Utility Function

 Today there was a historic move to oust Kevin McCarthy from Speaker of the House. This unprecedented event occurred after McCarthy decided to work with Democrats and keep the government open by keeping spending at the 2023 levels halfway through November. Matt Gaetz and other far right-leaning congresspeople told McCarthy beforehand they would remove McCarthy from his role as Speaker if he tried to pass a spending bill with the Democrats.

It looks like Gaetz fulfilled on his promise because he made a motion to vacate on Monday. Even though Gaetz filed a motion he still needed a simple majority of people to oust McCarthy. The normal expected utility function of voting looks like this E[B]= P (probability that vote is decisive) x B (benefit you receive from voting) + D(the other incentive driving the bevarior). For this example we can ignore D, normally “D” is the main reason people vote because the probability that your vote is decisive is normally very small, to the extent we just label it as 0. And this is true for House as well, in theory. The expected benefit of a single vote in the House without “D” is E[B]= .0023 (1/435 representatives) x B. For a House member to be indifferent between receiving a dollar and voting the benefit of voting would have to be approximately $435. 

However, for Gaetz, the benefit of voting was larger and it was not necessarily because "B" was bigger. Gaetz knew that just a few votes would decide whether McCarthy remained speaker. This was the case because he knew that almost all if not all the House Democrats would vote to oust McCarthy and that almost all Republicans would vote to keep McCarthy. He also knew that it took a historic 15 tries to get McCarthy in office in the first place, meaning the margins were razor thin. This meant that Gaetz's probability of being the decisive vote was very high. In other words, Gaetz had a high "P". Therefore, on a rare occasion, the expected benefit of voting was very high, given that he had a reasonable B and so Gaetz rationally voted. 

Democracy Sausages

Voting in Australia contrasts in many ways to voting in the US: it's compulsory (enforced by a fine of up to AU$120), we use ranked choice voting and proportional representation, there's no voting for the Prime Minister like there is for the President here, and we vote on a Saturday instead of a Tuesday. But the most iconic difference is that at nearly every polling station, you'll find locals having a chinwag while partaking in their democracy sausage – a well-cooked snag served humbly on a roll or folded piece of bread, covered in grilled onions and your choice of barbecue sauce, mustard, and/or tomato sauce (substantially different to ketchup), purchased from local schools or soccer clubs raising funds for the kids. Democracy sausages have become so prevalent that they were declared Australia's word of the year in 2016, and for every election democracysausage.org creates maps of the sausage sizzle stalls from "crowdsauced" data.

Even if voting was not compulsory in Australia, I would still vote. In our model of determining whether it's rational for me to vote, pB + D - C ≥ 0, I am well aware that the probability p is at least 1 in 23 million (i.e. basically 0), and that the cost C of getting out to a polling place and standing in line on a Saturday when I'd rather be at the beach isn't insignificant. But for me, the D in the model stands for Democracy sausage, and the utility I derive from it is great enough that it outweighs the costs, thus my choosing to vote would be rational behavior. This choice calculus has become particularly clear to me as Australia prepares to hold a referendum next weekend in which I can declare my absence without penalty. I could have applied for a postal vote, but I decided that the increased cost due to filling out forms and mailing my ballot wasn't worth it without any democracy sausage.

Taylor Swift did in fact put Travis Kelce on the map

Whether you believe that Kelce and Swift’s romance is a genuine relationship or just a publicity stunt, one cannot deny that their connection is generating immense positive externalities for the Chiefs football team, the company selling Kelce’s jersey, and even, Kelce’s mom. Kelce has gained a million new followers on Instagram, and the couple has sparked tik tok trends where girls prank their significant others, claiming “Taylor Swift put Travis Kelce on the map.” But Swift and Kelce’s romance is not just benefiting Kelce. Reports indicate that sales of his jersey have spiked by four-hundred percent since the first public sighting of the couple, and 20% of the tickets for the Chiefs match-up last night against the Jets were sold the night of Swift’s appearance at the Bears game. Kelce’s mom, Donna Kelce, is now a face to be recognized, appearing on the Today Show. 

However, Swift’s affiliation with the NFL is not just generating positive externalities for the Chiefs, Kelce’s mom, and his jersey seller. Her presence at the games is a public good. Swift showing up at games is non-excludable and nonrival in the sense that the externalities cannot be contained to just the Chiefs. The prices for the game to be held at the Jets’ MetLife Stadium increased by 40% with a 175% jump in ticket sales (with those 20% also being sold the night of Swift’s appearance). These sales benefit both the Chiefs, the Jets, and the entire NFL. If Swift continues to attend games and allegedly date Travis Kelce, it will continue to generate positive externalities for the Chiefs, while also serving as a public good for the entire NFL.

Doctors are...bad citizens?

One might think that doctors, with their white coats and shiny stethoscopes, would be righteously (as Hippocrates would like) standing near the front of the line at the voting booths. After all, the expectation is that (most) doctors are mature, well-educated, and trustworthy. I mean, we do trust them with our lives. But a twist has left some (let’s say less Economically-inclined individuals) scratching their heads: these medical mavens have voted less than what one may expect in recent years, sometimes even less than the general population. It's almost as if they're too busy prescribing pills to prescribe political choices! And in a not so surprising turn of events, not everyone is happy about this pattern of behavior.

However, we Sherlock Holmeses of Public Choice know that there’s more to this phenomenon. Diving deeper, there's a straightforward economic rationale behind this “quirky” behavior: the voting formula (p*B + D - C) helps shed light on this. Here, (p*B) represents the probable benefit of voting for a candidate, (C) is the opportunity cost (think: time, resources), and (D) is the intrinsic joy/benefit one derives from voting. And for doctors, the math doesn't quite suggest that they should rush to the polls. Their time is incredibly valuable, making the cost (C) of voting quite high. When they evaluate the potential net benefit (p*B) and weigh it against their most valuable alternative forgone, it becomes clear why the voting booth isn't their top priority. Additionally, their lesser presence at the polls signals that the intrinsic value (D) they derive from voting isn't as compelling as it is for other groups. So perhaps maybe in this case, perhaps we imbibe a dosage of forgiveness for our busy medical counterparts.

(This message is presented to you by the American Medical Association…not actually, don’t sue me)

Sorta With Her

 

In 2016, both of my grandparents voted for Hilary Clinton in Birmingham, Alabama. Arguably, both of them knew that their vote would not decide the outcome of Alabama’s electoral college position in the 2016 election, where Donald Trump won twice as many individual votes as Hilary Clinton (Wikipedia). However, I do think that both of them voted rationally given techniques described by Mueller. 

I think my grandmother practiced expressive voting: she knew that the instrumental value of her vote for Hilary was incredibly low. However, she cares deeply & vocally about issues like Medicare, immigration, abortion, and agreed strongly with Hilary’s stances on these hot-button issues. Voting for Hilary (and talking about voting for Hilary) was a way to signal her approval towards liberal social policies, even if Hilary never won office or passed any policies. 

I think that my grandfather practiced minimax regret voting: he finds Clinton “rather unpleasant,” but finds Trump “absolutely unbearable.” The only benefit to Hilary Clinton winning was Donald Trump losing; he didn’t particularly care for Hilary to hold office, but really didn’t want Donald Trump as president. So, the only non-negligible outcome of his minimax matrix was the outcome where he didn’t vote, but the overall presidential election came down to one vote deciding the election for Trump in Alabama. The probability of this situation is, by all accounts, virtually 0. However, my grandfather must have realized he would feel extreme regret in this case, and so deemed it worthy to drive to the polls & earn his mighty “I Voted” paraphernalia. 

Borda Writes a Story

Last semester, I ran a short story contest in which UVa students submitted their stories, under certain constraints, and competed for a cash prize and to be published within a final collection. Of course, since this was a subjective competition, as the organizer I was tasked with creating a system in which the people’s submissions were to be analyzed fairly. If I were the sole judge, there would be inherent bias and skew towards something that I would want to read, so instead I picked a panel of judges to vote on who they thought the winners should have been.

Here’s where I encountered a problem, though. I wasn’t sure how to make it so there would end up with more than one winner when the voting was done. With majority rule, we might be able to vote on the winner in an ideal world, but we had 31 submissions and five judges, so even then there might not be any outcome due to a lack of consensus. This bothered me for a while until I settled on a Borda Count Method for voting. In this system, each judge would give their highest ranked story a score of 20, their second highest ranked story a score of 19, and so on, until they had 11 stories unranked, and the rest ranked between 1 and 20. After this, I summed the scores and then re ranked them according to these counts, leaving the lowest 11 out of the final book. With this method, even without a majority or a broad set of judges, we were able to achieve consensus with who the ultimate winner was as well as the following 19 people to be put in the book.

Slush fund Logrolling

In my house which I have discussed before, we pay a fixed rate for rent and utilities each month. Since utilities vary month to month, we often have excess money to spend on house needs – we call this the "slush fund". Most things that a member of the house wants to use slush funds for must pass a simple majority vote. There are also two main games in the house – Super Smash Bros™and Ping Pong. I don't play much Super Smash Bros, as I prefer to play ping pong in my free time.  A little while ago, the Smash Bros. enjoiers lost one of their controllers.  Around the same time, the net to our pingpong table broke. The Smash Bros faction proposed that we use the slush fund to buy a new controller. They knew however that this vote wouldn't pass with just their faction. One of them approached me and said that he would vote to use the slush fund to buy a new ping pong net if I voted for the controller. 

In making this offer, my housemate shows a great example of logrolling as Muller discusses in chapter 5.9. My friend wanted to exchange votes so that both issues would pass. He would not gain much benefit from the ping pong net, and I would gain nothing from the new controller, but now we would both have motivation to vote for both issues. Since the cost of each would be split among the 17 people who live in the house, our marginal benefits would outweigh our private marginal costs of getting both. This would help us both, but it would present an issue to the house. It very well may be the case that the social marginal benefit for these two is lower than the social marginal cost. This would mean that while my friend who plays Smash Bros and I would both be better off, the house would be spending more than is allocatively efficient. Luckily the controller was found, and the pingpong net was fixed with duck tape, and the crisis of misallocating slush was averted.

“But Grandma, Voting is Meaningless.”

            Last week my opinionated grandma bluntly asked, “Josh, who are you voting for next fall?” And instead of explaining to her why rationally I should abstain from voting, at that moment, I realized I will vote because of “D”. As discussed in class, we can frame a voting utility function as: pB+D-C ≥ 0 with the probability(p) times the benefit (B) of your candidate winning minus the cost(C) of voting. It was made clear that the costs of time and gas alone to the polls will far outweigh the expected benefit of voting. However, the random factor “D” encapsulates the reason why I, and many others, will vote and that is the social benefit of being labeled a “voter” by others. The reason to vote is not because it makes a difference, but to tell people you voted. Advertisements can give false reasons such as, “if we work together as a community and increase voter turnout, then our state and national legislators will listen to our needs. ” If anything, by increasing voter turnout we are silencing many people's needs by adding drops of complaints in an ocean of unique preferences.         

Similarly, my aforementioned grandma said, “If someone does not vote then they have no right to complain about the election result.” This is a common criticism of the nonvoter that Johnson brings up in Voting, Rational Abstention, and Rational Ignorance. If I paraphrased his argument I could tell my grandma, “Actually, your argument has no merit because in virtually all cases the probability that my vote will affect the outcome is infinitesimally small. Therefore, I have every right to criticize the outcome regardless if I voted or not because the outcome would have been the same.'' Yet, I won't ruin thanksgiving dinner for the same reason I will cast a vote next fall, and that is because I derive a personal benefit, encapsulated in “D,” from being seen as a voter. 

Couch-swapping and Logrolling

This week, some of my housemates and I rallied together to replace one of our old, worn-out cotton couches with a new reclining leather sofa, since we were persuaded that this would increase our marginal social benefit as a house. We had already found someone willing to pick up our old couch, and since the new sofa was going to be given to us for free, there was really no downside to this exchange.

This new couch was only available with pickup from the owner’s house in Pantops which could only be picked up with the help of Paul, our only housemate who owns a pickup truck. Unfortunately, Paul's preferences are such that he doesn’t care about the couch and hates to have to use his truck. Consequently, my housemates knew that we would have to trade favors with Paul if we had any desire to obtain this couch, since he would not help us otherwise.

Knowing Paul’s preferences quite well, we told him that we would only be willing to have a house board game night (which he had been planning) if he let us use his pickup truck. Thanks to logrolling, we were playing games with Paul an hour later as we enjoyed our new recliner. Say what you will about our tactics, but it got things done!

Tipping, Voting, and the Death Trap

I am once again writing about bankruptcy and applying economic theory.  Let us once again imagine a x1-x2 graph where we are comparing the recoveries of different tranches in bankruptcy.  Once again, there is a minimum requirement of 2/3 voting for the Plan of Reorganization to pass.  Imagine (for simplification) that there are only 3 voting classes.  Parties A and B are aligned close to each other (or in the same location) and have a utility maximum location of a high x1 value and low x2 value.  Conversely, there is party C with a high x2 value and low x1.  A and B outnumber C and have the requisite 2/3 vote to pass a favorable outcome for them.

So there's a stable equilibrium right? Yes, but not where you think.  Party C does not like to get bageled (lose all their money), so they're willing to fight, and fight a bit they do.  They send A and B an ugly pre-cursor to a lawsuit and claim they will appeal with the US Circuits on some highly suspect grounds.  At this point, C will not win any of these, but A and B also lose: they pay heafty legal fees to fight this.  A and B don't like this, and offer a deal (trade creates value): they will give C a recovery rate above zero but less than their potential legal fees for C to leave them alone.  The threat of bleeding legal fees creates an interesting arbitration opportunity here.  

Because the same players play the same game of bankruptcy, they have become sophisticated and anticipate this.  The "winning" parties offer this in the original P.O.R. instead of a post-hoc transfer.  They call this a "tip": they're offering C some cash! How kind!  C calls this a "death trap": if they don't accept this POR, they will later be offered a different POR where their recovery is 0.  They are trapped with two losing options, of which they have to pick the least bad one.  This equilibrium is unique because it is inside the triangle ABC, and this is made possible by the cost of legal fees from dissenting voters and the foresight by the involved parties.

Just Some Rationally Ignorant PPL

 In one of my classes this year, Law, Morality, and The State, we read a lot of political philosophy. With that, we often discuss topics of government which lead many of my PPL classmates to make interesting comments regarding the economy (especially when we discuss Nozick). While some of them are just a little out there, others make no economical sense whatsoever. This can sometimes make me shake my head, but after revisiting what I have learned, I realized their poor economic thinking comes from fair economic decision making. Perhaps I just need to give them more credit for their rational ignorance. 

The majority of these PPL majors are looking to go into law school or get involved in politics and are so busy doing things like taking Comm Law or working at the Blue Ridge Center that look good on applications, they don't have the time to sneak in a class like Econometrics. Especially when you consider the opportunity cost of lost wages from not going to a T-14 law school after the hit Intermediate Microeconomics might take to your GPA, they really are behaving rationally. The opportunity cost of taking more Econ classes is just too high for them. But if you ever try to tell them it would be incredibly more rational to take Public Choice than be an informed voter (or even vote in general) (wayyyyyy higher P for Public Choice), I don't think it would go over very well. 

DIP-For-Control and (Super)Majority Voting in Chapter 11 Bankruptcy

In Chapter 5 of Public Choice III, Mueller writes about the possibility of cycling equilibria with majority voting under a single issue framework.  Knowing that there is a possibility of cycling equilibria when there are many parties with separate utility maximizing locations, he discusses the work of McKelvey and the concept of one party controlling the voting process, leading to a better result (more utility) for them.  

An interesting application of this is Chapter 11 Bankruptcy and the voting on a Plan of Reorganization proposal.  Because of the unique legal structure that can "cram down" (zero out) equity and debt of a company with a 2/3 vote (most importantly not unanimous), many credit hedge funds are involved in this sector.  Imagine a graph with an x1 of a recovery for one tranche of debt and x2 of another.  Many different funds/creditors fight (and eventually vote) for higher recoveries, and the process is often costly and outcome possibly bad (funds get "bageled" or 0 value and -100% return), so controlling the process can be very advantageous.  

In the bankruptcy for Quicksilver, hedge fund Oaktree gained control by providing Debtor-In-Possession financing for the debtor to fund its bankruptcy.  I'll be brief and say that providing this form of financing gives the creditor immense legal control over the deadlines and voting procedures in a bankruptcy process.  At the end of the day, Oaktree made gains on their debt claims and owned Quicksilver itself after the bankruptcy and ended up turning it around and selling it for 2-3x their principle- they made a killing, and this was made possible because they had control over voting and steered the process into a favorable equilibrium.  

 

Backseat Economist

        Grey clouds tumbled by overhead as my two roommates and I drove to the beach last weekend. Enjoying my role as "Passenger Princess" in the back, Dom horned at traffic ahead while Justin was next to him on aux. Peaceful bliss had filled the car until Luke Combs' "Fast car" came on, prompting Justin to say, "Gosh that Luke Combs is so talented for writing this song!" The look on Dom's face after hearing that, you would've thought someone chopped his arm in two. He teased Justin for not knowing that it was a cover, and that Tracy Chapman originally wrote it in 1988.

        Tensions were simmering, but luckily for Justin, I was more than a passenger princess: I was an Economist! Better yet, an Economist who paid attention in the class about ignorance! I defended Justin, explaining to Dom that Justin's opportunity cost was higher. I cited how while Dom was taking time to learn the Tracy Chapman version, Justin was working at Chick-fil-A to earn money and bring home the extra food that Dom eats for breakfast. For Justin, putting in hours at Chick-fil-A is more important than music trivia, which is why he didn't know about the original version. I told Justin not to be embarrassed by this lack of knowledge, but instead to help find ways Dom could raise his low opportunity cost. Having done my job as a Backseat Economist, I sank back in my seat as Dom begrudgingly apologized.