Wii instead of Xbox

"The only way that I'm going to lose weight is if they make a fat tax," my overweight high school Economics teacher informed us one class.

This article in medicalnewstoday.com believes that the solution is to subsidize the construction of "safe" places to exercise. According to Coase, we could subsidize the amount of the marginal benefit to shift the quantity of places to exercise from its less-than-equilibrium position. However, we already spend billions of dollars annually to handle the excess demand on our healthcare system. You could also use Coase's work to argue that a certain amount of property rights should be assigned (in this case, amount of government-funded healthcare) and require those who use more to pay for the increase in social marginal cost. Either way, someone is going to have to internalize the cost and the more the government has to, the more the Republicans are going to dig in their heels.

Seeing as the market is where we reveal our true preferences, as a classmate put it years ago, "time to break out the Wii [in lieu of the Xbox he would discuss at length]" or maybe a treadmill. The more realistic way to get people to change is to make them economically responsible for their flab. Make being fat more expensive.

ACC Team Reallocation

Recently, the Atlantic Coast Conference has allowed the addition of both the University of Pittsburg and Syracuse University to become affiliated athletically. This addition, based on this article written by an ESPN analyst, could pose future potential problems with the allocation of teams based on a 'divisional-style' organizational format. Katz, the author of this article, explains the possible negative externalities that could be put onto Wake Forest University and the other North Carolina schools in the ACC. The author poses the possibility of a North-South divisional layout, where the geographically relative northern schools and southern schools would be grouped together, unfortunately leaving out, most likely, Wake Forest (since UNC, Duke, and NC State would be kept together). This division layout would restrict Wake Forest from competing against those other North Carolina schools, which I believe would negatively effect Wake's athletic event attendance and subsequent revenue from those attendees (ticket sales, merchandise sales, etc.). Also, these detailed decisions will be made by votes among the athletic directors from each school. When these votes are being discussed, however, "it will be hard to take these North Carolina schools and separate them." As expressed in chapter six of "The Calculus of Consent", both external costs and decision-making costs are put into consideration as individuals are working to minimize costs while making voting decisions. We know from this ESPN article that certain ACC teams could face potential high external costs, and from "Calculus" we learned that as the number of necessary voters for collective action to take place increases (in our scenario, as more teams get added to the ACC), strategic behavior during voting increases, as decision-making costs increase. So, it can be possible in our scenario for logrolling and other strategic planning to occur in the future. For example, Wake could tell UNC, NC State, and Duke that they will vote for the North-South split, leaving those three together as Wake splits off, if those three schools agree to come to Wake and play a certain number of athletic games on Wake's home field during the year, regardless of division allocation. I would expect to see deals being made between Athletic Directors of the ACC schools (especially those North Carolina schools) regarding scheduling and divisional organization.

Oil Prisoner's Dilemma Analysis

Here is an article about a real-life prisoner's dilemma that was analyzed almost 3 years ago in the midst of the Wall Street crash. The "prisoners" were OPEC + Russia and they had been making big bucks around the turn of the century. Demand for oil was increasing much faster than supply (because it is time-consuming to develop new fields to extract more oil); price was increasing non-linearly while the average cost of extracting oil to produce was barely increasing. This article states that this scenario was "bad for freedom" because wealth was being transferred from mostly democracies to mostly dictatorships. Dictators in places like Libya, Venezuela, and Iran were getting huge foreign currency reserves. But then Wall Street crashed.

The demand for oil plummeted. The economies in these producing countries started to crash too, and we all remember the global crisis that ensued. Here is the prisoner's dilemma: if OPEC + Russia collectively decided to decrease their extraction, they could limit supply and control price to increase it and we'd all be better off! But, each of these 13 members would be the best off if 12 members complied, but they could cheat and kept production the same. Therefore, there was little incentive for any one country to decrease production. Keeping extraction the same was the dominant strategy equilibrium in 2008. This global oil prisoner's dilemma could account for the lack of economic recovery that we still see today if the production companies followed the dominant strategy equilibrium. Maybe you should go buy a hybrid and hope OPEC starts cooperating in the meantime?

Lobbying - an inefficient use of resources

In Tullock’s article “The Welfare Costs of Tariffs, Monopolies, and Theft” he details the costs associated with monopolies, emphasizing the resources spent in trying to secure a monopoly or to prevent someone else from doing so. Tullock’s analysis suggests that lobbying is often an inefficient of resources so long as these resources are being used to determine the direction of a transfer of rent rather than to benefit the economy as a whole. An article in the Chicago Tribune (link in title) discusses lobbying efforts made with regard to three separate proposed coal gasification projects. The Leucadia and Power Holdings bills passed but the Tenaska bill was rejected. The difference between the Tenaska proposal and the other two proposals is that the Tenaska proposal required increased prices for big businesses. The businesses in the area joined forces to form a coalition against the bill and to produce an enormous lobbying effort including “launching a website and a marketing and media campaign against the Tenaska bill.”

Although the businesses’ lobbying efforts were successful, the resources they used in their efforts were generally put to waste. It is clear in the article that the residents of the areas surrounding the proposed plant locations have large concerns regarding pollution, with Sen. Trotter claiming the reason he did not vote for the Tenaska bill was because of his concerns with respect to emissions. The resources spent in lobbying for and against the Tenaska bill could have been used in many other ways, but it seems as though using them to improve the ability of these plants to sequester emissions would have been a practical and much more beneficial one to area residents. Then the residents could have had the jobs they needed without the increased pollution they dreaded. Although resources are not so easily transferable in reality as they might be assumed to be in theory it is obvious through Tullock’s argument that the resources expended in lobbying by the hundreds of businesses that participated in the effort could have been used in some way to benefit the economy as a whole rather than to protect the profits of the businesses from being transferred to Tenaska or area residents. The Tribune’s quotation of Jack Darin sums things up nicely: “This was kind of a lobbyist feeding frenzy instead of a smart policymaking process.”

Positive externalities from a better football team

In Friday Sept. 30, 2011's Cavalier Daily Opinion column there is an article called "Crowd control." This article, like so many dealing with Virginia football, laments the cyclical relationship between poor football performance and poor support from the crowd. It notes the "downward trajectory" of the program and suggests that fans have moved their consumption of leisure towards other substitutes (like "restaurant outings, concerts and movies"). One suggestion to fix this would be to lower ticket prices to attract fans.

The paragraph continues: "For this step to be taken, however, either the marginal revenue generated from the additional fans would have to exceed the marginal costs they induce, or the University would have to decide that subsidizing fan attendance is a good way to spend its money. Although a bigger crowd could provide a small lift to the football team and could have positive spillover effects for local businesses if it draws fans from outside of the area, it would be tough for the University to justify this measure since it most likely would necessitate sacrifices from student-athletes involved in other sports or a hike in the fees that students pay to support the Athletic Department."

The most relevant part of this article for the class is the discussion of "positive spillover effects." These are what we have talked about in our class as positive externalities. The story told here is that cheaper tickets would motivate positive effects both for the athletic program, but also for the wider community. Since the social benefit is greater than the private benefit to the athletic program, this good is underprovided. In this instance the good can be considered as subsidization of tickets. The article suggests that students or student-athletes would have to bear the burden of ticket subsidization, but this analysis shows that any increased costs could be shifted to local businesses as they receive the added benefit of increased attendance. This Cavalier Daily article demonstrates a cursory understanding of positive externalities, but the suggestion that students should subsidize attendance seems to be misguided.

Rational Abstention and Voter Fraud

A recent article in the Washington Post highlighted states that now require voters to present an ID when they come to vote in order to prevent voter fraud. Despite this new requirement, very little evidence exists to prove that identifying voters would actually make a difference. Additionally, voter rights advocates argue that the new requirement is akin to “poll taxes and literacy tests,” because some people may lack the ability to obtain a proper ID to vote.

In his essay “Voting, Rational Abstention, and Rational Ignorance,” Johnson argues that rational people will not vote in elections because the incentives for voting do not outweigh the costs. So most obviously, the new ID requirement will impose further costs on the voter and will continue to negatively impact voters’ incentives to bother with casting a vote. This will continue to push the voting rate down further in the United States—a pattern Johnson already highlighted in his essay.

The more interesting point was the amount of money spent to fight this fraud (in the case of one investigation, $1.4 million dollars) as well as a law to accompany it with little evidence of any kind of social benefit to society. In other words, there have been great costs imposed on society for a problem that more or less not actually a problem thus creating a huge deadweight loss for society. This deadweight loss for society is hard to calculate because although the governmental investigation costs can be quantified, the cost of time and effort for voters to acquire proper ID can not. Despite this, it can still be assumed that because, as the article states, there is a “solution without a problem” that a notable and unnecessary cost is being imposed on society by the government.

Open Primary Follies

While the Open Primary system has long been considered ripe for potential manipulation by Strategic Voting, the events of the 1998 Vermont U.S. Senate elections succeeded in making the system look more like a three-ring-circus than a Senate Election. In this case, an unknown candidate entered the Republican primary as a publicity stunt to support his low budget film, "Man with a Plan". No election expert in history could have predicted what would come next.

With the Republicans looking to find a challenger to the powerful and popular Democratic Senator Patrick Leahy, many looked to Massachusetts businessman and recent Vermont transplant Jack McMullen. Though denounced by many Democracts as a carpetbagger due to his short Vermont residency, McMullen was viewed as a strong candidate in a state that in 1998 was still somewhat Republican. All seemed normal until Fred Tuttle, a completely unknown dairy farmer who was seeking to promote his recent movie, entered the Republican Primary. The eighty-year-old who could barely walk, had only completed the 10th grade, and had no campaign platform to speak of, was about to make history. In his debate with McMullen, Tuttle disregarded any and all policy questions, and instead quizzed McMullen about the pronunciation of random Vermont town names and demanded he answer how many utters a cow has. McMullen failed miserably at answering any these basic Vermont questions. While still widely considered the easy front runner in the Republican Primary, his wound set into motion of of the most bizarre events ever seen in a major election.

Sensing a golden opportunity, Vermonters voted heavily in the Republican Primary, choosing Tuttle, the elderly dairy farmer, to face incumbent U.S. Senator Leahy. With many Republicans now indifferent to McMullen and Leahy assured a Primary victory, Vermont Democrats were able to flood the Republican Primary and use Strategic Voting to push Tuttle over the edge. Instead of campaigning, and in one of the strangest moves in political history, Tuttle decided to endorse his opponent Leahy and stated that he never wanted to be a Senator anyway. Even with this admission, Tuttle still received over 40,000 votes in his loss to Leahy. Had this been a Closed Primary, it is almost assured that the Republican Establishment would have chosen McMullen, even after being weakened. Instead, an influx of Democratic voters smelling blood allowed one of the most improbable candidates in history to derail any hope of a competitive Senate election in Vermont in 1998.

http://vermont-elections.org/elections1/1998PrimaryCanvass.pdf

http://www.time.com/time/politics/article/0,8599,1718795,00.html

Follow on: Could the term "Strategic Candidate" be appropriately used to describe Tuttle?