UVA Nonvoting

    Each year UVA Student Counsel has elections and each year they send repeated emails to UVA inboxes practically pleading for students to vote for representatives and referendums. Yet, each year resulting voter turnout is rather low. Even in March of 2022, when students voted to reform the honor sanction, a seemingly substantial issue, voter turnout was only 23.75% of the student body. This clearly came at no surprise to those who make the elections rules as only 10% of students were required to vote (with 60% of the 10% approving) for the referendum to pass. To give context, the US, which has been falling behind other democracies in voter turnout, has consistently reached the mid-fifties percent in the past three presidential elections. 

    

    Why do so few UVA students vote then? At its core, Johnson's argument on nonvoting presents a fairly concise flow--nonvoting increases as time value increases and as probability of a vote mattering decreases. First, let's deal with the latter assertion on the probability of a vote mattering. If we compare UVA elections to US elections, we see the probability of a vote mattering is actually greater due to the simple fact that UVA's student body is much smaller than the US voting population. Yet, UVA voter participation is drastically below that of the US. So, if we follow Johnson's logic, the issue must occur with the the first assertion--time value. What I'm assuming here is that this is rather relative. Your time value is compared to the significance of voting ( does the outcome actually effect the you?). In this light, I presume that UVA students have high time values, not in real terms more than the average US citizen, but in relative terms as student council representative and referendum elections effect so little of student life the benefit of voting is insignificant. Even with the honor sanction reform, very few students find themselves in the position where they would benefit from reform, so for most it is a logical solution, following Johnson's thinking, to either remain rationally ignorant or spend time elsewhere via a nonvoting activity. The reality is, a students time value does not have to be that great for it to be comparatively greater than the time spent voting for Student Council and about 76% of students thought this in March of 2022. 

RSI and Motherhood

The Mueller readings for this week caught my attention in their attempt to qualify rational self-interest in voting through a taste for voting, voting as game theory, minimax-regret strategy, and the expressive voter hypothesis. Psychic value, regret, and expressive voting as theories appeared to give greater consideration to non-economic and more behavioral variables, which helped me to better understand a question I’ve been struggling with this past week: if women (especially single women) have rational self-interest, why do they have children? And what can we observe about redistribution as a public good through the lens of motherhood? In traditional cost-benefit analysis, the cost of having a child would appear to be extraordinarily high – according to the USDA, the average cost of raising a child in the US is now $233,610 (not including the cost of higher education). Other costs incurred may include damage to the body, nightly sleep, relationships with others, leisure time, and future income.

The benefits of having a child are more difficult to pin down than the costs. Maybe having a child provides financial opportunities in the future (i.e. help on the farm), or maybe having a child is an accident and the costs of getting an abortion are prohibitively high. For some, there is psychic value to having a child, if one has a “taste” for children. For others, maybe having a child is a response to the social shame of not having a child, by parents or peers, or a response to the imagined regret of not having a child. Maybe having a child is a way of expressing a preference for a partner, solidifying a commitment to another or fulfilling their “taste” for children. Maybe having a child is simply a biological tradition for humans that creates an urge to reproduce. In financial terms, however, the cost of having a child would appear to exceed the benefit of having or keeping one, implying that many women and families have an interdependent utility for their child that is greater than 1, or that motherhood is essentially a public good: extreme redistribution from parent to child is inherent to motherhood (especially single motherhood), and is not especially dependent on the mother’s marginal utility of income.

Rick and Morty, Public Choice Edition

     This September marked the beginning of Rick and Morty's sixth season. In episode two, Rick: A Mort Well Lived, Morty has been fragmented into 5 billion pieces- in the form of non-playable characters (NPCs) in the show's iconic virtual reality arcade game, Roy: A Life Well Lived. To save Morty, Rick joins as the player character Roy, and must attempt to convince the collective, 5 billion NPC Mortys, to escape the game with him. Rick must escape with as many Mortys as possible, to ensure that the whole, united Morty successfully represents the 5 billion fragments. As you can imagine, Rick's mission exhibits many of the problems encountered in public choice. 

    Although the Mortys do not line up at the polls to cast their votes, they "vote with their feet" (thank you Tiebout) by either escaping with Rick or staying in the game. We see the rational voter in of the objections to leaving: "we're basically giving up our lives to become a part of a stranger". Although voting does not generally come at such a high cost, individuals who vote incur a cost for little payoff- like becoming one five-billionth of a voice in a whole- making the act of voting irrational. Rick understands this; As he plans to leave the resistant 8% of Morty behind, one five-billionth of Morty threatens, "I'm not leaving without all of me". Rick replies, "What? Oh no, let me crunch these numbers. 8% of five billion plus one- My God, if you stay, it changes nothing! Bye." 

The Dollar General Problem

    I'm from Lookout Mountain, Georgia, in a pretty, somewhat rural area. At the end of my family's street lies a plot of land which, for years, has sporadically been a site for different construction projects. In recent years, there started to be rumors that a new Dollar General was going to be built at the end of the street. My family and our neighbors were displeased at the thought, fearing a few of the different negative externalities which it might create such as being an eyesore and bringing increased traffic to the area.

There were talks among some neighbors who were more passionate about the issue than my family about writing a petition against it being built (and I don't remember whether they did or not), but, ultimately, a new Dollar General was constructed at the end of our road. It certainly has created some negative externalities. It looks better than many imagined, but the big yellow sign certainly doesn't improve the ambiance of the area. Apparently (I didn't realize until a google search a few minutes ago) there have also been negative externalities stemming from the supply trucks getting stuck on the road going up or down the mountain, as you can read in this article: https://www.chattanoogan.com/2022/7/13/452367/Lookout-Officials-Cite-5-Incidents-With.aspx.

    My family has noted that it has actually been a convenience to have the store at the end of the road. It's nice for my mom or dad to be able to drive two minutes to grab milk or eggs if we need it. I don't know what other neighbors would say, but, at least for my family, our marginal benefit from the new Dollar General has been greater than we would have expected in relation to our marginal cost. If the same can be said for the rest of those around us, the social marginal benefit has at least been closer to the equaling the social marginal cost than originally imagined. While there may be some dead weight loss still, there is certainly less created by the negative externalities than I, among others, might have thought there would be originally.

Case of the Stolen Sunglasses

This past week, my roommate Emma has been dealing with a case of stolen sunglasses. She was wearing them on Mad Bowl a couple of weekends ago, and they were taken off her head by some of her friends. These "friends" then refused to give the sunglasses back, took them home, and have been holding them hostage for the past two weeks. Emma, being an equipment manager for the UVA football team, needs her sunglasses for gamedays or she will not be able to perform her job. She has been texting them non-stop trying to retrieve them from their house, but these friends find it amusing to keep them locked up. 

I suggested that Emma use Coase Theorem to retrieve her stolen glasses. The Coase Theorem states that when there are conflicting property rights, the involved parties can bargain or negotiate to an efficient outcome when economic conditions are ideal. It may be clear to others that Emma has property rights over the sunglasses, but if the friends try to question her, she could prove her rights with the receipt when she ordered them or photos of her wearing the glasses. If the friends feel it necessary to keep the sunglasses, then they should pay Emma $90 for using them or the cost to her when she originally bought them after taxes and shipping. However, if they find that these marginal costs of keeping the glasses exceed the marginal benefits or amusement they find in watching Emma beg, they could give her back the sunglasses, and the issue would be resolved. Coase Theorem unfortunately is a model we use when economic conditions are perfect. If they continue to refuse Emma's requests, then she may have to get the government involved to enforce her rights, or in this case ... the UJC. 

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. 

The Market Failure of Great Smoky Mountain National Park

     Over spring break this past year, I was able to visit Great Smoky Mountain National Park. Attracting over 14 million visitors a year (being the most visited national park), I thought visiting in the "off-season" would allow for ample exploration, while allowing limited encounters with other visitors. Researching online, it was claimed that there was an entrance fee of $35. However, the park has no entrance stations, and does not require parking permits, allowing for mass visitation at essentially no cost to the individual. On the descent from Mount LeConte, the effect of this absence of fees became visible, as we encountered many other visitors and the litter they left behind.

    Parks with high visitation also tend to experience associated negative externalities. Littering and general wear-and-tear to trails and roads show that through mass consumption of this park, a negative externality in consumption is generated. While individuals benefit (PMB) through visiting the park, the overall benefit (SMB) is reduced due to the negative effects of this mass visitation (SMB < PMB) . Without collecting entrance fees, the park has no efficient way to self-combat these drawbacks. This is likely why the park is now establishing an actual fee system in order to help pay for the wear-and-tear the park experiences, internalizing these negative externalities: those that visit the park now take into account the associated effects of their visitation through monetary compensation. The National Park system prides itself on the preservation of natural beauty while also making it available to the public. This is a difficult game to play due to externalities present, and will likely require more tweaking of these fees in years to come to more effectively reduce this market failure.

Comm School Construction Externalities

    For students who live on or near the Corner, the fastest way to the academic buildings on JPA (Wilson, Nau/Gibson, etc.) is to make your way down East Range until the start of Brandon Ave which shortly intersects with JPA. Renovations on the Commerce School*, however, render Brandon Ave inaccessible north of JPA therefore increasing student commute times and thus decreasing well-being for a portion of the student populous (increased commute time = decreased time spent elsewhere). 

    In economic terms, what's occurring here, is a negative production externality.  UVA, in "producing" Comm School renovations simultaneously decreases the well-being of those students in the college (not comm) who use East Range and Brandon Ave to commute to class without compensation. The private marginal cost (to UVA) is lower than the social marginal cost (the cost to UVA + the damages to affected students). Unfortunately, there is no clear economic solution here from applying Coase Theorem. Any solution would likely lead to a free rider problem. UVA is a government institution and the area closed for construction is also government land, meaning the "producer" controls the property rights. In essence the producer has all the power and would need incentive from the affected party to impose any changes. However, most students would be reluctant to make any personal investment for the common benefit of a solution, hoping to free ride off others contributions. 

*Admittedly the whole construction zone is largely for medical buildings as well, but the small section that specifically blocks the path to JPA is for the Comm School.

Not Another Pledge Drive (Please!)

As an avid NPR Morning Edition listener, there is one thing I absolutely hate about the fall: pledge drive week. I really only want two things. First, I want Steve Inskeep, Renee Montagne, and David Green to tell me what I need to know that day. Second, I don't want to pay for it. National Public Radio is an example of a public good as it is both non-rivalrous and non-excludable. It is non-rivalrous because someone else listening to NPR (or in my case Morning Edition) does not affect my ability to listen to NPR/Morning Edition. It is also non-excludable since once the radio signal is broadcast, it would be very difficult to exclude someone from being able to receive and listen to it. This puts me in an exceptional position as a consumer of Morning Edition because I can exploit one of the limitations of the Coase Theorem by being a free rider. 

As Gruber describes in chapter 5, the public sector under-provides public goods because of the free-rider problem, which occurs when an investment has a personal cost, but a common benefit. This will lead individuals to underinvest. I, as a consumer of public radio, have a reluctance to contribute to NPR during pledge week. Any contribution that I make will cost me personally and will benefit everyone who listens to NPR. Thus, I have an incentive to not contribute. Public radio is especially vulnerable to the free rider problem because there are many consumers nationwide. Because public radio is vulnerable to the free rider problem, there is a potential role for the government to improve efficiency and fund public radio. This episode of Planet Money discusses the potential need for government intervention in public radio. On the one hand, because it is a public good, there is an argument to be made for the government to step in to combat under-provision and improve the public radio being produced. On the other hand, they mention the possibility of advertisements and big donors which could both fund NPR enough for it to be produced at the optimal level. In the case of advertisements, the advertisers would be the consumers (and the listeners would be the product). Since advertising is rivalrous (when one ad fills a slot, that slot cannot go to another ad) and excludable (if the advertiser does not pay, their ad is not run), this would convert public radio from a public good to a private good. This means the government would not need to act. The conversation, unfortunately, ends without a conclusion on whether government intervention is necessary in the case of public radio. As for me, for right now, I'll continue to be a free rider. Sorry, NPR (not really). 

High School Sports Complex

Throughout my time in high school, everyone was talking about our new beautiful sports complex. The new stadium would allow my school to host home football games for the first time, and the addition of a turf field would prevent rolled ankles, dirt patches, and other inconveniences that come with a poorly maintained grass field. Serving as a public good, community members would be free to use the facility at any time of the day.

One evening, I attended a discussion between homeowners and representatives from the school district. The homeowners were upset. "You think I want stadium lights streaming through my windows every Friday evening?!" In addition to the external cost of the lights, the residents in the neighborhood argued that increased noise levels, greater traffic congestion on game days, and the eye-sore of a giant cement stadium would decrease the value of their homes and negatively impact their quality of life. In terms of public choice, it is probable that the construction process (road closures, jackhammering, etc.) of the stadium would have been a negative production externality, meaning the social marginal cost of building the stadium would exceed the school's private marginal cost. Furthermore, the ongoing use (lights, noise, traffic congestion) of the facility would also provide a negative consumption externality felt by the homeowners, meaning the social marginal benefit of the sports complex would fall below the school's private marginal benefit of using the facility. In order to achieve allocative efficiency, both the school and the homeowners were forced to compromise. The school proposed using a new lighting technology that would minimize light pollution, thereby decreasing external cost. After negotiations, the school constructed a redesigned sports complex with the new lighting technology and limited seating capacity. After considering the preferences of the homeowners, these concessions by the school district brought the allocation of resources closer to the allocative efficient level. An interesting fact about this case is that my school, a public school, is a good provided by the government. The school district accounted for some of the community's preferences by initiating the building project, while neglecting the preferences of the homeowners. In the Role of Government, Friedman asserts that the government can establish new neighborhood effects in a community "by failing to charge or to compensate individuals properly". If these negative externalities had not been addressed, this new sports complex would have left nearby homeowners disproportionately worse off.

The Warm Glow of DC Buses

    While living in DC over the summer, I often used the Metro system to get around the city. At first, I maintained the responsible approach and paid for every one of my rides, swiping the card without thinking. Eventually after around ten rides, I began to notice an expected but concerning trend: I was only one of a few people who actually swiped my card for the buses. Other riders would either enter through the exit or simply walk right past the payment machine. A clear free rider problem was at play here. The local city government, the few farepayers, and the Federal COVID stimulus had to shoulder the burden of funding this public good, and ended up under-providing the good, creating a positive externality. The fare system and its enforcement by Metro officers provided excludability for the bus rides, but, due to the Pandemic, fares were relaxed and Metro officers no longer rode on the buses. Buses became a impure public good, where it is rival but non-excludable. One person's enjoyment of the bus would affect the enjoyment of another person due to crowding, but there were no longer measures to maintain excludability. Once I realized one did not have to pay to use the bus, we had all become free riders. 

    There are, thankfully, solutions to the free rider problem, but none of them are perfect. Reinstating the laws around paying the bus fare would temporarily increase fare payments, but methods for avoiding fares like entering the exit and fighting the bus driver would return from the past. The people who take the buses have grown accustomed to riding for free in nice air conditioning for as long as they want. Buchanan, in his writings, offers some thoughts around the free rider problem. The warm glow effect and altruism are more psychological than economical but they both combine in this instance to raise the possibility for greater fare payment. They both deal with the private marginal benefit gained from "doing your part." For bus takers, paying the fare creates private marginal benefit as one contributes to not only their conscious but also the DC Metro system. For example, I noticed that whenever a bus driver greeted the passenger at the door, the person was more likely to pay, as they would derive personal enjoyment or benefit from the act of paying. If bus fare is $2, the added PMB from the warm glow effect will provide consumer surplus for a paying bus passenger. The first time I did not pay the bus fare, the person behind said "Man, some folks just don't care." She had to pay while I got to derive benefit from it in the same way. Her moral compass and ethics provided private marginal benefit in her decision to pay the fare and she derived some consumer surplus or "moral profit." She, in fact, experienced the warm glow. While not a catch all, the warm glow effect certainly exists on public transit. The real solutions, however, must combat growing distrust of local government, infrastructure issues, and decreasing Federal funds, but perhaps through the warm glow and the reinstatement of stricter fare laws can combine to mitigate a small amount. 

https://www.washingtonpost.com/transportation/2022/02/07/metro-fare-evasion-pandemic/

Pollution of the Shenandoah Watershed

For over 30 years, my family has been fishing the Shenandoah River System. One of the headwaters, the South River, which flows out of the Shenandoah National Park and through Waynesboro, has been subject of the largest environmental damage settlement in Virginia history. In the 1930's and 40's, a DuPont facility manufacturing rayon released toxic mercury into the South River which is a tribute The devastating environmental effects of toxic pollution are well-known. Although experts predicted mercury levels to decrease, the soil on the banks of the river temporarily absorb mercury, but frequent high water levels cause the mercury in the soak to be re-released into the water. Even when I fish on the South Fork of the Shenandoah River, there are still signs to limit consumption of smallmouth bass due to elevated mercury levels. 

This is an example of a negative production externality: the production of rayon reduces the well-being of othersThe social marginal cost was higher than the social marginal benefit. In our text, Gruber defines an externality as when "the actions of one party makes another party worse or better off, yet the 1st party neither bears the cost nor benefit". The Coasian solution to this problem would have been for fisherman and local businesses to charge DuPont $x/unit of pollution. This charge would increase the private marginal cost, which would coincide with the social marginal cost, thereby decreasing the quantity of pollution. It is possible that a Coasian private remedy could have worked back then, but now, 70 to 80 years later, the solution is retroactive regulation and corrective payments. In 2016, the DOJ, Department of the Interior, and Virginia state government announced a $50 million settlement with DuPont to help finance "restore the precious natural resources of the South Fork watershed". 

Corrective Taxation and Vaping

 The Corner at UVA is a marker of change in Charlottesville. Even in the three years that most of us have been here we have gained and lost crucial members. Gone are the days of late night Sheetz, Little Johns (even Sammy’s briefly), College Inn and Armando’s. In their stead, we have a ridiculously understaffed Chipotle and a new Vape shop. The Vape shop is accompanied by a delta-9 store next to Grit and nicotine sales at Cohn’s, 7-day, and Corner Grocery. Personally, I would much rather have a small late night food stop than another store selling nicotine but it seems like the only businesses that can survive are ones selling alcohol or tobacco/nicotine products. I found a research paper online talking about the increased density and proximity of vape shops to college campuses. The study by Dai and Hao (2017) https://pubmed.ncbi.nlm.nih.gov/27302700/  found that there are more vape stores near college campuses. The conclusion of the study was pretty interesting. They suggested that since e-cigarettes pose a negative health risk to young adults that are not moderated by the private market that there should be some public regulation to limit its impact on young people. The argument is similar to the negative consumption externalities from smoking cigarettes. People smoke cigarettes, there is a bad odor (with potential health risks), and when they get sick they create a burden on the healthcare system and others. The risks of e-cigarettes are still being uncovered. While there seems to be little risk of harming others from secondhand smoke, there are some health risks posed to younger users. Their health problems could also pose a burden on healthcare that is felt by everyone else. 

    As a result of limited studies demonstrating the health risks of e-cigarettes, cities in the U.S. and other countries have implemented taxes like those on tobacco products. However, the strict association of tobacco with electric nicotine introduces another problem. E-cigarettes are commonly used by individuals in order to quit smoking tobacco, and as far as we can tell from current studies, are noticeably healthier (healthier is a relative term). Current regulations don’t take into account the differences between cigarettes and e-cigarettes, or the positive externalities from e-cigarette consumption, and instead they lump them into the same category with the same taxation. The result is a tax that overestimates the harm of consumption of e-cigarettes. An article published by Yale argues that e-cigarette tax increases will push young people to smoke cigarettes. https://news.yale.edu/2022/07/19/higher-taxes-e-cigs-likely-boost-cigarette-smoking-among-young-adults Much of the discussion around e-cigarettes emphasizes its potential dangers and ignores the results of overemphasizing this harm. Government regulation that attempts to correct for negative externalities is difficult enough, but how can they properly adjust for these two related markets? And how can they possibly implement well-informed regulation on e-cigarettes when there is so little information available about their real impacts? I found an interesting paper that goes through in more detail about the problems with the current attempts at corrective taxation with vape products and tobacco products if you’re interested. https://digitalcommons.pepperdine.edu/cgi/viewcontent.cgi?article=1077&context=sppworkingpapers

   

The Externalities of Rabbits

When reading Coase's article, The Problem of the Social Cost, his discussion of the externalities of rabbits stuck out to me, as I knew that I had heard about a similar predicament in the past.  No, I didn't learn about the liability of rabbits in another economics course, rather, I had read about a very similar situation in Miss Penny and Mr. Grubbs by Lisa Campbell Ernst. In case you are not familiar with this 90s children book, Miss Penny and Mr. Grubbs are neighbors who compete for the best vegetables at the town fair, however, when Mr. Grubbs becomes jealous because years of coming in second to Miss Penny, he buys numerous rabbits and sets them free to feast upon Miss Penny's harvest.

In the discussion spanning from page 511-513, Coase discusses the fact that a person may be liable for smoke without owning the smoke, so in the same way, who owns the actions of rabbits that devour a neighbor's produce? Regarding the Boulston case which held the rabbit owner liable, Coase notes that we cannot always know who is liable for the action of rabbits, but in Miss Penny and Mr. Grubbs, the situation is slightly different because Mr. Grubbs intentionally released the rabbits into his neighbor's yard--they didn't wander over on their own. Miss Penny was not involved in the transaction for the rabbits, but she still faces an external cost in the decimation of her prized veggies. While at this part of the story, you might think that Mr. Grubbs has created a negative externality in the 'consumption' of the rabbits because the Social Marginal Benefit (SMB) is less than the Private Marginal Benefit (PMB). But the story doesn't end there! Though her crops have all been destroyed, Miss Penny makes the best of the situation and finds a plump bunny to enter in the fair. When this bunny wins first prize, Mr. Grubbs' action can be seen as a positive externality in consumption because Miss Penny was not involved in the transaction for the rabbits, but was still able to benefit from them--the SMB was greater than the PMB. The switching location of the SMB and PMB lines highlight the challenge of internalizing and accounting for externalities. Who knew that a children's book could teach so much about the complexity of externalities?!

Externalities of Dishes

I live in Lambeth, and, because our kitchen does not have much space, we have a jank setup for our dish drying. We toss a mat onto two burners on the stove beside the sink, and we use it to dry dishes. Now, say I wash my dishes and I place them on the mat to dry (sometimes its a lot of dishes). My PMC is the opportunity cost of the time washing dishes, and then my PMB is the clean dishes once they dry. However, by filling up the mat I create a negative production externality by leaving dishes on the mat that my roommates can no longer use. For simplicity's sake let's say I that I have one roommate, but the third paragraph in this blog points out how even small externalities--like those involved in dishes--can put strain on our day to day lives.

Coase might have an elegant solution to this problem involving M1, but I think my solution might be better. First, Coase: if I am liable for removing dry dishes by house rules, I can pay my roommate: let's say $10 dollars (if that happens to be the bargained price) to let me keep the dishes on the mat (and then he can remove them himself). If I am not liable for removing my dishes we don't have any house rules, and we are stupid, then my roommate can pay me those $10 and I will remove the dishes. Either way, the externality is internalized, and the efficient output is reached. Since my roommate is not an economist, this solution will be too much Econ for him to handle and is not optimal (Does his private marginal cost curve factor in the cost of doing Econ!? 'Tis a shame). Instead, my solution: the payment will occur in the form of exchanging dish removal duties. So he removes my dishes, and I remove his dishes, and we both correct each other's externalities. Only thing is, it becomes more complicated when you add two more roommates to the equation. Luckily, we are all friends and get along well, so transactions costs should be minimal. I think I have to call a house meeting now...

Coasian Solutions to Vaccines

 The recent political turmoil over COVID vaccines provides a good link between the Friedman reading and our current analysis of the Coase Theorem. Friedman wrote that “the use of political channels, while inevitable, tends to strain the social cohesion essential for a stable society. The strain is least if agreement for joint action need be reached only on a limited range of issues” (23). Clearly, the use of government vaccine mandates (regardless of your stance on them) relates intimately to this. The use of political channels to mandate vaccines was an instance of forced conformity that led to enormous strain on the social fabric: a host of papers have been investigating the increase in political polarization and other unintended consequences of the mandates. Please find two linked below.

https://gh.bmj.com/content/7/5/e008684

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4022798

Coasian solutions to vaccines may have been more prudent and may be more attractive in similar scenarios in the future. But what would such solutions look like? This is an instance of a positive consumption externality. It seems clear first of all that the "property rights" in this scenario belong to those against the vaccine (the non-vaccinated)—as free citizens, they have legal sovereignty over their bodies. Therefore, the burden would be on those affected (the pro-vaccine) to entice the non-vaccinated to receive the vaccine. It at least plausible that the pro-vaccine group could privately extend compensation to the non-vaccinated group and entice all or most of them to receive the vaccine.

Some clear problems must be taken into account, however. The PMB of a vaccine is likely very low for the non-vaccinated (since they have no desire to receive it), and the SMB is likely very high (since it will protect society from disease). If these two assumptions are correct, then the EB in this scenario is going to be quite large. This means that paying the non-vaccinated to receive the vaccine could ultimately be a very expensive undertaking, since the price each vaccine is worth to the pro-vaccine group is about the value of the EB. Moreover, the non-vaccinated generally are so because of deep-seated political or religious beliefs. This means that convincing them will take an enormous amount of negotiation and compensation (if they are even willing to compromise at all). Lastly, as Gruber mentions repeatedly in the reading from chapter 5, there would be a host of difficulties with conducting negotiations when the issue exists on such a large national (or even international) scale and involves so many individuals (both non-vaccinated and pro-vaccine).

Local Government Externalities and Coasian Institutions

     I interned for Henrico County Managers Office this summer doing white paper writing. In the course of my internship, having already read Coase's Theorem, I designed a program to be administered by the county that served as a "Coasian" institution. We had a problem with tree overgrowth on elderly individuals' property that negatively impacted adjacent property owners and their safety.  Therefore, the program reduced the transaction and search costs of the individuals to fix this problem as well as incentivizing businesses to help fix the problem. In early drafts of the paper, I had even included "Coasian Solutions" where adjacent property owners could go in on a contract to fix the problem, but with a clause that stipulated it wouldn't be fixed unless all parties agreed to prevent a hold out or free rider issue. 

    There was a producer (in this case the property owner) who had property rights, but one who was producing externalities by their inaction. The SMC > PMC creating clear dead weight loss. The correction, however, in my program, worked rather interestingly. The county would give a tax credit to a tree company to rectify the issue (similar to other county ordinance). Because there was also a slight cost to the producer (the elderly property owner) in terms of safety, they were partially incentivized to seek help through the program. The company would be compensated in tax credits (essentially a payment that made PMC = SMC) and the externality would be rectified. 

Variance in Voter Influence

In class, we discussed that there was a difference in the way voters influence policy between local and national governments. I think this can be explained economically by both the capture theory and a difference in rational ignorance. Since industries have more interest in national policies that affect them more broadly, they would "take" the influence from individual voters, and leave the voters to be more keen to helping with local policies. On the other hand, it is more rational for voters to know more about local issues than national issues that might not affect them as much. 

I think construal level theory would be more effective at explaining the difference in interest between local and national policies. Construal level is the way that the brain changes the focus on incoming information or filters out or in certain information. A construal level in this case would be linked to the psychological distance of the policies, meaning the distance one feels from them. A high construal level, or the national government, which seems like a large distance from voters, means there is a focus on desirability and exciting opportunities. In other words, voters are more likely to think broadly about policy options in terms of their general appeal, and thus know less about voting on them. A low construal level, or the local government, which seems like a small distance from voters, means there is a focus on feasibility and deliverable opportunities. In other words, voters are more likely to be more knowledgeable about the policies at hand. 

The Committee System: A brief history

The committee system implemented in the United States was modeled after the British Parliament. However, when our country was founded there were very few members in Congress, and there wasn't a need for division of labor between the different legislative processes. Originally, Congress relied primarily on the House and Senate chambers, and the bill was primarily created in and by the full chamber of Congress. The bill was then referred to select or ad hoc committees to iron out details. Sometimes even the details of the bill were decided by the entire chamber of Congress, and the ad hoc committee only performed clerical tasks. Once the ad hoc committee completed its duties, it was dissolved.

This system of creating legislation had its problems. Although ad hoc committees were flexible and responsive to the preferences of the entire House and Senate, this made them duplicative, slow, and time-consuming. As the House and Senate grew the number of ad hoc committees needed to pass legislation increased (in the Third Congress alone 350 ad hoc committees were created), and it became increasingly difficult to pass legislation. The first standing committee was created in 1789, and from there the committee system developed into the modern one we have today. Although the founding members of Congress likely weren’t thinking about it at the time, they were really creating a more efficient system by slowly getting rid of ad hoc committees, as a bill could be created without the consent of the entire Congress, saving time and allowing committee members to express areas in which they were preference outliers. 

That Screwed-up Agency (TSA)

Thursday night, 1 AM. After getting home from a Friendsgiving, I finally began packing for my flight home that was in about 7 hours. As I sluggishly attempted to choose which product was precious enough to be poured into my single 3.4 oz. travel container, I thought about the TSA. I had long been hearing claims that the TSA is mostly a waste of resources and a form of "security theater," whose main goal was to make people feel safe more than it actually prevents security threats. For example, according to the first article, when Homeland Security officials evaluated the agency by attempting to smuggle weapons and bombs 70 different times, they apparently succeeded 67 of those times.  

We all have our peeves with the TSA -- personally, it’s the “random extra security screenings” or the time they threw away the expensive 3.8 oz. moisturizer I’d accidentally packed. So articles like these once gave me hope that maybe they’d eventually loosen these restrictions, trim their inefficiencies, and focus resources on methods that work better. Our recent discussions in Public Choice regarding the Niskanen model of bureaucracies pretty much dashed that hope. The head of the Department of Homeland Security would maximize their utility by maximizing their budget, which results in an inefficient and inflated budget, operating where the marginal cost of their output is greater than the marginal benefit. In fact, if we consider that, much like with the police, the demand for outputs such as border security, the coast guard, and airport security is comparatively relatively inelastic, the potential inefficiencies could be even greater. Essentially, I think we’ll be taking our shoes off for the foreseeable future.  

Hate Changing your Clocks Twice a Year? Blame the Committee System

Ever wonder why we have this antiquated system of changing the clocks twice a year.  Daylights Saving Time was originally instituted during WWI by Germany to conserve fuel and was adopted in the U.S. two years later in 1918.  While changing time may have been useful then, the benefits are meager now and numerous studies have shown many negative consequences of it including increased car accidents, increased suicide rates and decreased worker productivity.

So the question remains, why do we continue following this disastrous tradition; why doesn't Congress do something about it?  Well many representatives have.  The Sunshine Protection Act (SPA) is a bill that if passed would make Daylight Saving Time permanent in the U.S.  The SPA has been introduced to both the House and Senate with bipartisan support in each new session of Congress since 2018.  However, the SPA has died in each houses commerce committee each time.  So why do the commerce committees not support this bill?  If I were to speculate I would say it's because the representatives on the commerce committees are preference outliers and come from states with large industries that benefit from the current system.  These representatives want to maximize their votes by not upsetting these industries and constituents of their states so they let the SPA die in committee every time they can.  Therefore unless there are significant changes in the composition of each houses commerce committee, I think it's safe to say the current system is here to stay.

Should we really let the FDA be captured?

        Biogen, a biotech company worth over $30 billion, just got FDA approval for a $56,000 Alzheimer’s drug that is not proven to be effective. When I read this, I was inundated by the stench of regulatory capture emanating from this approval. Not only does this affect those who need the drug, the average Medicare Part B (medically-necessary services) insurance premiums will rise by over 14%. Biogen might be the most recent offender, but this analysis has led me down a rabbit hole tattooed by a theme of capitalism not caring about virtue.

        What I find most stunning is that the FDA seems to see no immorality in having massive companies push through layers of internal dissension to get approval for drugs that are not fully studied or proven to be clearly effective. That seems wrong to me. Capture seems like a mostly-fair side effect of a free market system, but that doesn’t mean it should rear its head in every bureaucracy without anyone batting an eye. Normally regulatory capture deserves careful thought, but not diligent combat. In the case of the FDA, combat seems most appropriate. There’s a difference between the shipping industry seeking fixed-prices and individual companies within the biotech industry seeking barrier control. The latter deals with potentially life-saving medications that have real physiological impacts (on top of financial impacts) on a large portion of our population.

Everybody Hates the IRS

Before my dad retired, he was a senior executive at the IRS, and he reported to the Commissioner of the IRS. Part of his role involved reviewing the budget for his department so that he could present it to the Commissioner. This would then be incorporated into the final budget proposal. 

My dad noted that the IRS budget proposal was typically more than they actually needed. The budget-maximizing bureaucrat model would suggest that the Commissioner is misleading Congress about the true needs of the IRS. Congress is forced to accept their proposals. Though this may reflect the behavior of other agencies, this is not the case for the IRS. Congress typically rejects significant components of the IRS's proposal.

For the past decade, members of Congress have voted to decrease the size of the IRS. My dad complained that this has truly affected its operational capacity. The IRS has substantially cut their staff, and, as of 2017, I believe my dad still used Microsoft Office 2007 on his work laptop. Simply put, voters hate the IRS, and it is politically popular to decrease their budget. The Commissioner has learned to overestimate the proposal because he knows that Congress will only approve a fraction of the budget. The Commissioner hopes that enough will be left in the appropriations bill to keep the IRS functional. Therefore, a more appropriate assessment is that legislators will do what is necessary to be reelected.

Looking Forward: The Effects of Climate Change on Bureau Efficiency

This week we discussed how it is possible make comparisons across government agencies in regards to the legislature's demand for bureau output. Some agencies have marginal political benefits that are relatively elastic, while others are relatively inelastic; the more inelastic these marginal political benefits are, the more important the agency is, and the less efficient they can be. This is due in part to the take-it-or-leave-it nature of bureau proposals and the fact that bureaus are essentially monopolistic suppliers of their output. The elasticity of demand for agency output can also change over time. As Alex Tabarrok's seminar showed, a prime example was the relatively inelastic demand for CDC output during the pandemic which allowed for increased inefficiency. 

With this in mind, let's turn our attention to climate change and its impact on bureaus such as the Environmental Protection Agency. As we have all likely seen, the effects of climate change have become more prominent in recent years and are predicted to worsen unless significant changes are made. Thus, the marginal political benefits of environmental regulation will likely become more inelastic in the coming years. However, with a more inelastic demand comes the increased capability to shirk responsibility. So, as we near the point of irreversible damage to our climate and are in desperate need of the EPA's output, will we see a decrease in agency efficiency? Only time will tell.

Red meat: to subsidize or not to subsidize?

 We have spent some time theorizing the “why” of regulation. As we saw in class, Stigler’s “Capture Theory” provides an intuitive explanation: claiming that regulation is “acquired by the industry and is designed and operated primarily for it”. This somewhat scary idea, however, is walked back by Peltzman in his “Toward a More General Theory of Regulation”. What is clear from these works is that for-profit industries are incentivized to lobby their respective governments for industry control and/or economic support, but can only attain such if they are agreed to by vote-maximizing representatives.

Thus, a recently published article titled “Nearly all global farm subsidies harm people and planet – UN” especially peaked my interest as a public choice academic. This text lays out how the global climate change threat is being intensified by governments subsizdizing the production of red meat and dairy as well as the need to re-allocate resources towards more eco-friendly agriculture. According to a UN report discussed in the article, a stark 90% of the $540 billion in annual global support provided to farmers does more environmental harm than good. Further, an estimated $12 trillion in damage is done per year with the current level of regulation on a global basis, which greatly favors the environmentally-tolling production of meat and dairy (in terms of subsidies). 

An analysis of the effect this regulation has on total welfare across the impacted markets is necessary to determine the usefulness of these policies; we must consider whether the benefits these subsidized farmers are enjoying outweigh the costs. $12 trillion is no small number, so perhaps total welfare is being decreased as a result of regulation—as theorized by Peltzman. If this is the case, what will it take for these policies to change? And when? The answer lies in the attention the issue (or set of issues that this gets grouped in to) receives among voters and whether it will drive vote-maximizing representatives to alter their legislative course. 

Senior Bureaucrat Professor Coppock

I’m feeling oddly sentimental writing this final post, almost like I didn’t spend every week stress procrastinating them. Yes, it is possible to be super stressed about something yet still refuse to start it... I guess you know what they say about seeing the past in rose coloured glasses. 

Since Professor Coppock said he was a bureaucrat, the idea of the Public Choice Agency has stuck in my head. Let’s suspend reality. Do Profesor Coppock and the Public Choice blog post-producing agency hold up to the Traditional Model of Bureaucracy? Let’s assume blog posts are the agency’s output. Is the output hard to measure? How many are too many? How do we know the work is all of good quality. Even though Professor Coppock knows the measure of the output quality (four points hopefully, five if we are lucky), would others who are not a part of the agency know? How would one differentiate between a 3 and a 4 or even harder when it would be awarded a five? Is this class a monopoly supplier? Although I’m sure there’s another public choice class somewhere in the country making blog posts about issues, there is not another UVA public choice class writing them currently. Obviously, no other school compares to our economic prowess, so I would say we are a monopoly supplier on blog posts. Apart from Professor Coppock, there is no other alternative source on whether these posts are good or not *cue Professor Coppock screaming, “you can’t handle the truth.” Since these two assumptions regarding the monitoring problem hold up, I’m starting to believe that we just might be an agency. Let’s see, are we overproducing blog posts at a level that is not optimal in order to maximize? Of course not. Who wouldn’t want 150 so posts on public choice topics to read... Guess we aren’t an agency after all. 

The Principal-Agent Problem: I Am the Principal, the Agent, and the Problem

    My house of nine(!) people has begun to deal with the problems of shirking. All of us usually expect somebody else in the house to do the chores, which means none of the chores really get done. In contrast with the traditional (and highly time-consuming) methods of making a chore chart or having a house discussion about chore delegation, we simply get to the point where a house member can't bear the house being in shambles, so they text the group chat or members individually and delegate tasks that need to be done. 

    With this strategy, a task not being done can be blamed on an individual member, not the collective. This also leads to any one member of the house being a principal, agent, or both at any given time. The power structure is indiscernible in the house, with every member being under the will and in control of every other member. As a result of this, there is plenty of room for slack. No member owes anything to any other member so we can all misbehave, or shirk, without any real consequence. However, the social norm in place is to not redistribute tasks unless somebody offers to take the task from you because they desperately want it to be done. Whoever holds out longest, or cares the least, about any given task ends up doing the least amount of chores. 

    The industrial organization of our house does not have clear authority or any clear structure at all which leads to a lot of slack (me being a strong slacker myself). My public choice solution? Appoint a house representative unanimously to divvy up all the tasks however they wish with a month long term, with voting on the last day of every month for a new representative (or the same one if they do their job well). If someone doesn't do their task by the end of the month, they are disqualified from getting the position the next month. Sure, there might have to be stipulations to stop the representative from giving all the work to one person, among other issues, but I've run out of room to write about it so I'll just leave it to readers to work out the kinks.

The New Yorker and Selective Incentives

In class a few weeks ago, we discussed Olson’s theories about successful groups. We learned that it is easier for small groups to mobilize and overcome organizational problems, but there is a way for large groups to organize: selective incentives. Selective incentives are private goods or benefits given to people on the basis of whether they contribute to a collective good, thereby incentivizing people to join groups. They motivate members of latent groups to “act in a group oriented way”. 

 

This reminded me of the free tote bag that comes with a subscription to The New Yorker, which incentivizes many people to contribute to the collective good that is the magazine. Tote bags are really trendy right now, and some people even subscribe to the magazine for the bag alone. The bag can also have expressive value, and make people look educated or cultured. 

But I want it because it’s cute. Maybe I’ll subscribe.

Political Party Division on Committees

    In my social policy class, I am currently working on a project where you create a bill for a social issue that needs reform. Once you have selected a topic and the action needed, you must find how to best get your bill passed: finding a congressperson who will sponsor your bill. In class, we discussed the best strategy for getting the bill in the hands of the person who will best champion it. The most difficult part of this is deciding who on the committee would be best to go to. We asked ourselves questions such as "Is their state one that this issue is particularly problematic for?" and "What is their party?". When choosing a member, we were taught that party matters as you might need to choose a representative whose party doesn't usually vote for your issue to ensure that their base backs it. This is due to the immense amount of political division currently.     Looking at committees and voting through an economic lens produces a different picture regarding political parties. Weingast and Marshall state that committees align the two different parties because of their interest in the specific topic. However, we learned that party did not matter as representatives would shoot down helpful legislation to please their base. This begs the question, although they are both interested in the same topic, are they both on the committee to ensure that the other side does not negatively affect the issue due to having opposing views on it (in their eyes)? While theoretically, Weingast and Marshall are correct in assuming that since all members have a common interest, they must align on their views, in practice, the parties generally have very different views on the same issue. As we have previously have studied, political representatives are self-interested actors who will act to be re-elected. Although unlike my social policy professor suggests they might instead be acting for special interest groups rather than their constituents. Is the only answer that representatives will trade votes to get legislation they want to be passed in the future?

Amy Klobuchar and Tom Cotton as Preference Outliers

On November 5th, Senator Amy Klobuchar (Democrat - Minnesota) and Senator Tom Cotton (Republican - Arkansas), introduced bipartisan legislation that would "make it more difficult for dominant online platforms to make acquisitions that harm competition and eliminate consumer choice." Senator Klobuchar is the Chairwoman of the Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights, and Tom Cotton is also a member of the subcommittee (which is part of the Senate Judiciary Committee). The bill is called The Platform Competition and Opportunity Act and targets large tech companies such as Amazon, Alphabet, and Google amongst others. The language of the bill, however, is very specific in regards to which companies it covers. It would apply only to acquirers with market capitalizations or net annual sales in excess of $600 billion, as calculated when the bill becomes law (via a 180-day trading average). 

What's interesting, is that this specific language excludes companies like Walmart and Target, which are headquartered in Minneapolis, MN, and Bentonville, AR, respectively. They are two of the fastest-growing e-commerce platforms in 2021 (26.4% growth and 12.5% growth respectively) and are two of the largest employers in each state (Walmart is the sole largest employer in AR). In this way, Senator Klobuchar and Senator Cotton are prime examples of "preference outliers" with regards to e-commerce platform regulation, as they are well-poised to reap the benefits of legislation that gives companies in their state a comparative advantage nationwide. It is also an example of assumption 1, that congresspeople represent politically responsive interests of their constituents, in this case, the companies that are massive employers in each state and likely spend money lobbying each candidate.