What's the Deal with the Delian League?

 While studying the Ancient Greeks, I came across something quite interesting. During the Persian Wars and the time that preceded the First Peloponnesian War, interest groups were at the center of Athens and its policy. In this case, the interest group at hand wasn't one in the traditional sense, like one might think of when they refer to the NRA. Instead, this interest group was far more similar to NATO. It was known as the Delian League, and it was formed as a preventative measure against the inevitable Persian invasion in the future.

This group was quite large, consisting of most of the islands in the Aegean Sea and quite a few other Hellenic cities. Its goal was to create a force of Greeks that was enough to rival the Persians, so the selective incentive here was that by joining one would be protected against Xerxes and his foreign invaders. Protection was to the Delian League as a duffle bag is to the NRA. But soon, they realized that the Persians weren't coming back and that even if they did, Athens, the leader of the group, could handle it even without their tribute payments. In a sense, they realized that the duffle bag wasn't as valuable as the little flier had made it out to be. As a result, many islands, such as Naxos, tried to free ride and get the public good of protection without paying tribute. (Of course, this was free riding since they knew Athens wouldn't allow the Persians to enter and gain any Greek territory). Athens didn't love this and then forced membership, turning it into an Empire with taxes instead. Even back then, people hated free riders.

The Tuesday @ 9:30 Union

         As we all know, on Tuesday we held a unanimous vote to hold class on election day instead of having a lecture on the Tuesday before Thanksgiving. Is it a coincidence that this occurred at the end of our lecture on Olson’s theory on interest groups and how their size determines their success? I think our quick vote spoke to his theory. As our class was yelling new dates for class across the room to one another, I thought to myself, “this would be a nightmare in a large lecture-sized class”. In a larger group like that it would be nearly impossible to reach a unanimous decision, due to high organizational costs and free-riding. Students that refuse to contribute (or in this case vote), whether it be purposeful or not, would be considered free-riding and prevent a unanimous vote from being reached.

        In a way, our class acted like a small, monopolistic interest group. We were effective at this size because it was easier to incentivize everyone to vote as well as monitor the two folks who were absent and quickly communicate to them the situation. The social pressure present in small groups was also evident in our class. I heard one peer say “I would’ve had to be here the Tuesday before Thanksgiving anyways, but I voted for you guys!”. I am sure she would’ve liked having the full day off on election day, but since she could hear how passionate everyone else in the room was, she felt obligated to vote to move class. Overall, I think our collective bargaining as a small interest group was very successful, which is largely due to the small size of our class.

Regulatory Capture and my former employer

Following my first year at UVA, I returned home to Springfield, Virginia for the Summer in search of employment. With few options available to me, I found work at an Amazon fulfillment center (a warehouse), and started work at the end of May. For the next four months, I worked 11.5-hour labor-intensive shifts, from 6:00 p.m. to 5:30 a.m., four days a week, for the privilege to enjoy a $15.95 an hour compensation. As you can probably guess, it was a dream come true.

While I was there, I learned of Amazon's efforts to raise the federal minimum wage, which they proudly publicize. Since 2018, Amazon has held its starting wage at $15 an hour, which is over double the federally required minimum of $7.25 an hour. If Amazon is already willing to compensate their employees at a higher than required rate, then why do they lobby Congress to ask for this regulation? 

Ultimately, with massive revenues and market share, Amazon can afford to pay its thousands of warehouse workers and delivery drivers $15 an hour. At the same time, Amazon knows that some of its competitors, without such economies of scale, cannot afford the same costs. An increase in the federal minimum wage would create a barrier to entry for smaller firms incapable of producing with the same costs, giving Amazon even more market power. Who would have guessed that Amazon is acting in their rational self-interest?

The War on Margarine!

On August 7, 1886, Congress passed the Margarine Act. This imposed steep annual fees for licenses on manufacturers ($600), wholesalers ($480), and retailers ($48), and a tax of two cents per pound on the product. In 1902, Congress passed a tax on margarine five times higher than the 1886 act, and two years later the Supreme Court upheld the law’s constitutionality. Congress finally repealed the margarine tax in 1950 (poor Prof. Elzinga...), and Wisconsin became the last state to repeal its anti-margarine regulations in 1967.

Capture theory, in the context of regulation, suggests that regulatory agencies may be "captured" or heavily influenced by the industries they are meant to regulate. Now, how does this tie in with margarine?  At the time, the dairy industry held significant sway over and a large impact on government decisions. The Margarine Act was essentially pushed through by dairy interests to restrict the production and sale of margarine. Furthermore, the regulations imposed by the Margarine Act, such as coloring and labeling requirements that made margarine less appealing to consumers, were essentially a result of dairy lobbying influence on the regulatory process in order to "protect public interest." This was also a move to protect the butter industry from competition, as margarine was becoming a cheaper alternative (aka a substitute!). The regulatory decisions were influenced by the dairy industry to preserve its own interests. This is a great example of how regulatory agencies can become captive to the industries they are meant to oversee. Hopefully, this more in-depth exploration of the war on margarine got your brain churning!

Roller Coasters and Recess Bells

     If you went to Virginia public schools growing up, then you know that schools often started after Labor Day. But did you ever wonder why? No? Well I’m gonna tell you the answer anyways. The Kings Dominion amusement park lobby played a significant role in pushing for legislation that mandated public schools to begin their academic year after Labor Day. This decision, rooted in economic interests, reflects the ideas outlined by George Stigler in "The Theory of Economic Regulation." Stigler's theory suggests that industries often seek to use the state's regulatory power to enhance their profitability. In this case, Kings Dominion aimed to safeguard its financial interests by ensuring that schools started after Labor Day, believing this would boost tourism and the park's revenue.

    However, a critical analysis of this decision reveals its limited economic impact. A report from Old Dominion University found that the economic ripple effect of tourism spending during Labor Day weekend was relatively small, accounting for only approximately $40 million, or one-sixth of one percent of total tourism expenditures in the state. So essentially, the lobby has its power to exercise political control rather than to tangibly impact Kings Dominion’s revenues. The Kings Dominion lobby successfully lobbied for this law, highlighting Stigler's assertion that regulation is often acquired and operated for the benefit of the industry it seeks to protect.

Homeland economics: the tight-rope walk of trying to prepare for the future

    Since 2008 it is no secret that the United States has experienced significant economic turmoil from economic shocks such as the housing crash, covid, and on-going wars across the Atlantic. These shocks caused a reaction from policy makers called "Homeland economics". The supply chain issues from covid and the energy crisis from Russia's war on Ukraine have created the want to strenghten domestic production, so that future disruptions are avoided. Predictions of future pandemics and international conflict seem like good reasons to prepare our economy with foresight. The means of "Homeland economics" lie in industrial policy. Industrial policies include subsidies, tax-breaks, or protective regulations for domestic producers, including incentives for firms to "re-shore" production back to the USA. With the goal of fortifying the economy for long-term success and creating sustained benefits felt by society, the use of government regulation often fails to follow through on its original intentions.   

    George Stigler wrote, "As a rule, regulation is acquired by the industry and designed and operated for its benefit". When these industrial policies are created they look to model successful usages of regulation such as China or South Korea; however, without proper implementation regulation fails to benefit society. From the many examples given by Bill Gurley's presentation, it is evident that more often than not, regulation is not implemented correctly and consequently benefits the bigger, incumbent firms. Homeland economics looks to stabilize inflation and increase domestic innovation and production in industries like green-energy and microchip manufacturing; however, it is likely inflation and price levels would increase if global trade is restricted; and furthermore, domestic innovation could be snuffed out by unintended barriers while production would be controlled by a limited number of firms. Overall, I believe that trying to prepare our economy for a tumultuous future is a worthwhile cause; however, with the wrong policies in place Stigler's model suggests that private interests would out-gain public interest causing a net loss for society. If the true goal is for societal benefits and not special interests, the industrial policies in place cannot restrict entry into the markets and prices must be determined by market forces, otherwise is likely that few will benefit and most will pay. 

AC and Voting

     Living with roommates means there are certain things you have to agree upon so you can live amicably. One of those things is how high/low you set the AC. The way we determine the AC is by simple majority with runoff. We first determine what we deem as a cold temperature, a moderate temperature, and so on until we have 4 options (cold, warm, moderate, or the AC is off and windows are open). For us, we need 3 out of the 5 of us to agree upon a temperature for it to pass. Cold passes under a simple majority after a runoff. However, upon reviewing the different types of voting methods that we learned in class, I wondered if Borda would produce a different result. Borda picks the Condorcet winner more often than simple majority with runoff so I thought that the Borda method might be a better (where better here simply means: picks the Condorcet winner more often) method for determining the AC than the simple majority with runoff.

To demonstrate why the Borda method might be better I laid out my friends' preferences in the following table:

	Sam	Nathan	Zachary	Sami	Alex
4	cold	warm	Off	cold	off
3	off	cold	moderate	off	moderate
2	moderate	off	warm	moderate	cold
1	warm	moderate	cold	warm	warm

Cold= 4(C) + 4(C) +3(C)+2(C) +1(C) =14

Off= 4(O)+4 (O) + 3(O) + 3 (O) + 2(O) + = 16

Moderate= 3(M)+3(M) + 2(M) +2 (M) + 1(M) =11

Warm=  4(W) +2(W) + 1 (M) + 1 (M) +1 (M) = 9

In a simple majority after a runoff “Cold” wins. But with the Borda method “off” wins. However, in a pairwise election where it is “Cold vs Off’, “Cold” wins. In this situation it seems that the Condorcet winner is “Cold” yet Borda chooses “Off”. In this unique example simple majority with runoff chooses the Condorcet winner yet Borda does not, even though Borda on average chooses the Condorcet winner more than the simple majority with runoff.