A Llama Farm Camping Conundrum

Last summer, my friend Natalie and I went on an amazing camping trip on a llama farm. When my roommates heard about my trip, they were freshly inspired by TikTok videos of people on wholesome camping trips with their friends. Determined to make the videos a reality for themselves, they implored me to take them to the llama farm.

When it was just me and Natalie, the planning process was seamless. Since the responsibility of achieving our common interest of going camping fell on our shoulders alone, with no one else to defer responsibility to, we were extremely efficient in our planning of the trip. Unfortunately, now that I’m planning with all of my roommates, I feel like I’m in one of Olsen’s “Privileged Groups,” and it’s solely up to me to deliver the collective good. As we’ve seen so many times in Public Choice, as the size of the group increases, so too does the potential for free-riders. It’s become clear that the responsibility has been deferred to me to create the reservation, gather camping gear, and plan the logistics of our trip. In this privileged group, it would seem I am the benefactor who enables the others to free ride.

As I plan our trip, I face a dilemma of marginal costs. If we were to go camping on a Thursday, we would receive a weekday discount of $10. As a result, the marginal cost of going on a Friday instead would be $10. But because we have class on Thursdays, we wouldn’t arrive at the farm until 8 pm, so we’d have less time camping. On the other hand, going on a Friday would allow us to begin our trip much earlier in the day. However, the Friday we are considering falls on the 13th. My marginal cost of going on Friday the 13th is likely greater than that of my roommates, given that I am the only one with any camping experience. Should disaster strike, I’d become responsible not only for my own safety, but for that of my ignorant, helpless roommates as well. And so, the predicament I face is this: do the marginal benefits of going on Friday outweigh the marginal costs? If you see us in the newspaper because I chose Friday, at least you’ll know that I weighed the costs and benefits like a true economist.

Minimax Regret Strategy in Interview Preparation

Given that the economy has partially shut down due to COVID and, as a result, the job market has become increasingly sparse, college grads are finding the job search more stressful than ever. I am a soon-to-be grad on the job hunt and I recently realized that my preparation methods for final round interviews are highly irrational, but that this is a fairly natural behavior. 

As you spend more hours preparing for an interview, the chance of an additional hour being the one that will swing the employer's decision in your favor decreases significantly. At a certain point the rational interviewee will realize that he/she has prepared for most possible interview questions and that the likelihood of receiving a question not prepared for and that holds a large bearing on the outcome of the interview is lower than the marginal cost of studying for another hour to prepare for even more potential questions. In a "Super Day" with up to 8 interviews, the likelihood of any one question having a significant bearing on the outcome is small. The marginal cost for the extra hour of preparation is the time and effort expended, and the opportunity cost of getting more sleep the night before or spending time on other work. The expected benefit of preparing for a job interview is the idea that you may receive a job offer if you answer all of the questions effectively. However, due to the lack of certainty and perfect information in interview situations (the interviewee does not exactly know what to prepare for), this threshold can seem ambiguous and scary. 

Due to a natural human tendency towards ambiguity aversion and my desire to find a job in a difficult job market, I have become an extremely inefficient minimax regret strategist when it comes to interview preparation. A minimax regret strategist would prepare for as many potential questions as possible, greatly surpassing the threshold where MC > MB. A minimax strategy is one that minimizes the maximum regret. In an interview prep situation, I would suffer from maximum regret if I am unprepared for a question that I could have anticipated and easily spent an extra 30 minutes preparing for, and if this results in my not getting an offer. There have been many situations where I have done essentially everything I can to prepare, however, I still choose to continue to spend time preparing so that I can walk away from the interview feeling zero regret if I do not receive an offer because I did everything I could have with the time I had to prepare. 

Making Progress Possible Again

 When we started discussing different voting systems in class a few weeks ago, I realized that my current project would not work in a ranked choice voting (Hare) system. A few months ago, I co-founded The Decency Project PAC, a pro-Biden independent expenditure political action committee (super PAC) ahead of November’s election. We are creating and running targeted ads for progressive youth voters in swing states in order to help flip these states blue in this presidential election. We encourage strategic voting. 

    Our target audience is full of young people who are vehemently anti-Trump, but might be hesitant about voting for Biden. Our premier message demonstrates our project’s belief that in order to be truly anti-Trump in this election you ought to be voting for Joe Biden. It can be found at the top of our website here. This messaging works to promote strategic voting because it is predicated on the idea that a vote for any candidate other than Joe Biden, or a refusal to vote, however well-meaning, effectively functions to aid Trump’s chance of winning re-election. We have also worked closely with another group named, “Settle For Biden.” Although our messaging is slightly different (they are more begrudgingly pro-Biden), they also encourage the same strategic voting that we do.

    Placing aside the critique of our work based on the rational voter hypothesis, I realize that our project would not work in a ranked-choice voting system, because in this system voters would not be incentivized to pick the “lesser of two evils” or be afraid of “throwing away their vote.” Voters would be able to vote according to their preferences without concern of potentially “helping out” the candidate they despise the most.

    Mueller writes about strategic voting under the plurality rule on pg. 296, stating “for strategic voting to lead to two dominant parties, however, voters must judge the chances of the third party’s candidate winning a seat to be significantly lower than for the second-place candidate.” We know this is the case in this election, and thus are confident in the importance of our message.

    A quick note: We realize that some people reading our messaging might be deciding between voting for Trump and voting third party, not voting, etc. Our messaging is not intended for this audience (and will be largely absent from their feeds from our advertisements), but it seems that our logical stance would be to support these voters in voting third party in order to take away would-be Trump votes. 

 

Blue Books vs Green Books

    Almost every college student must buy a “Blue Book” to take an exam at some point in their college career. Recently we had to purchase one for our midterm in Public Choice. These books are extremely cheap, costing approximately one dollar at any university convenience store. I went to Corner Grocery on Main St to get mine where they cost 99 cents per book. When I arrived at Corner Grocery I was very interested to see a pile of “Green Books” next to the pile of Blue Books, and this Green Book also cost 99 cents. These Green books are each made with 30% post-consumer recycled product, compared to Blue Book’s 0%.

    When I saw the two books in front of me, my economic mind began to race. I remembered that Professor Coppock said that he preferred Blue Books because blue is his favorite color. Blue is also my favorite color--my backpack is blue, I have many blue shirts, and overall I just appreciate the color blue more than other colors. But at the same time, I worried about the negative consumption externality I may be placing on society with the purchase of the Blue Book. If I actively chose to purchase the Blue Book instead of the Green book, then I was consuming 30% more non-recycled paper than I would be if I purchased the Green Book. Another cost I had to consider was whether my exam grade would truly be affected by my choice of Green Book over Blue Book, and I assumed given Professor Coppock’s fair and principled teaching approach in the classroom, that he would not penalize me for wanting to be environmentally conscious. Upon analyzing and predicting these costs I decided to purchase the Green Book. While this application of negative externality analysis may seem a bit silly and exaggerated, I do wonder why Corner Grocery would be selling Blue Books at all. On Amazon, a case of Blue Books costs the same price as a case of Green Books, so I sort of think Corner Grocery would produce positive consumption externalities if they choose to only purchase and sell Green Books at all. Maybe I should contact the managers...

The Median Voter Theorem and the American Electorate

 

An implication of Downs’s discussion of the Median Voter Theorem is that the political parties will reflect the distribution of the electorate as a whole. The example often used is that of a normal distribution, where the largest number of voters are in the middle of the political spectrum. Here, the median, mean, and mode are all the same and the median voter will in the middle of the ideological spectrum. Because the median voter decides the election, both parties will have an incentive to moderate their positions. 

This Pew survey compares the ideological spectrum of American voters from 1994 to 2017. The idealized Median Voter scenario presented above seems to fit the United States in 1994. The Median Republican and the median Democrat are both near the center of the ideological spectrum and there is significant overlap between the two bases. By 2017, however, the situation had dramatically changed. The U.S. electorate developed a pronounced bimodal distribution as Democrats and Republicans drifted from the center of the political spectrum. From this data we can predict a shift in who is likely to vote or join a party. The growing ideological distinction between the two parties may lower indifference and encourage extremists to vote. Moderates, on the other hand, will be increasingly alienated from both parties.

Section one of this report from 2014 shows how the parties have changed in response to this polarization.  Fifty years ago, it was typical for Republicans and Democrats in Congress to adopt both liberal and conservative stances. By 2014, however, there was no ideological overlap between the two groups- the most liberal Republican was further right that the most conservative Democrat. Unfortunately, as Downs argues, polarization among the parties tends to produce instability in governance, as each party will implement policies that are radically opposed by the other party (120). 

Rent-Seeking: Grade Appeals Edition

 Rent-seeking activities are typically found in the political and corporate worlds, but there are corollaries in everyday academic life. It's midterms season at UVA, which means as students receive unsatisfactory  results on their fall exams, they turn to their instructors and the grade appeals process. In an article from the Georgia State Signal, one student's course grade improved from a failing grade to a B- following the appeals process. Many universities have similar, simple processes.

Here's where the economics comes in -- the grade appeals process is simply a form of academic rent-seeking. It is an activity that uses resources (the time of both students and their instructors) to gain economics profits (additional grade points), diverting resources from otherwise valuable uses (their next exam, academic research, etc.). 

In the name of "fairness" that regularly drives political lobbyists seeking extra protection for their industries, students seek point redistribution that will not only increase their grades, but hurt those of their classmates. In curved courses, and an improvement in the average caused by an increase in one student's grade will harm others in the final tallying of their letter grade. 

This is not to say that grade appeals are not logical. For a utility-maximizing, rational student, the expected utility of a grade appeal is often very high. The process has additional merits, like potential learning opportunities before the next exam, but that is not to say that it is does not have demerits. 

Social Cost of Not Getting the Coronavirus Vaccine

Recently I was thinking about how many percent of Americans would get vaccinated if the coronavirus vaccine would be offered. According to a Pew Research survey, only %21 percent say that they would “definitely”, %30 say they would “probably get the vaccine. On the other hand, %24 of Americans say they would “definitely not”, %25 say they would “probably not” get the vaccine. Scientists worry that the low vaccination rate would not prevent the spread of the virus because the herd immunity would not be possible with that low participation rate. Experts estimate that %70 of the US population should have immunity to reach the herd immunity threshold. 

Rational people in this survey think about the marginal benefit and marginal cost of getting the vaccination when they express their preferences. %49 of people calculated their MC as bigger than their MB. What they don’t think about is the social marginal benefit of getting vaccinated. On the contrary to the voting in the elections, getting vaccinated has more decisive results in each individual’s life. Therefore, people who don't get the vaccination will probably observe someone in their social circles to get sick and may even see their elder ones to die because of the virus. This situation would cause them to feel great regret. Hence, the group state that they would probably not get the vaccine (%25) would choose to get vaccinated if the government would be able to inform the citizens about how great their regret would be if they remain to not get vaccinated. Thus, by persuading most of the %25 percent group, it would be possible to achieve herd immunity. 

Economic Dodgeball

 As I watched some analysis after the Vice Presidential Debate a couple weeks ago, the headline on a talk show caught my eye: "Breaking News: Pence, Harris Dodge Questions in VP Debate." As Downs says in The Statics and Dynamics of Party Ideologies, it is rational for political candidates to be vague about their policy platforms if it will further their own interests. And when the choices are to answer difficult and perhaps incriminating questions on national television or to give a noncommittal answer, it is pretty clear that it makes sense for candidates to choose the latter option. There is no surprise when candidates allow their policy stances to be ambiguous according to economic theory.

The candidates dodged questions about presidential incapacity, healthcare, court packing, and abortion, to name a few. In my opinion, what stands out to me is that it was considered "breaking news" that they dodged questions. How would that not be expected! On the contrary, it would have been breaking news if the candidates had not dodged any questions. That would have been singular indeed. What I think this example illustrates is that the general public, including the news anchors, knows comparatively little about economic reasoning. If they did know more about it, people would have so much more insight into the voting process, the incentives affecting candidate behaviors, and campaign strategies. And if they knew these things, it could lead to more thoughtful, understanding, and reasonable approaches to choosing which candidate to support rather than focusing on vitriol and tangential considerations.

Prisoners in our Apt: Real Life Prisoner's Dilemma

We are all spending much more time in our houses/apartments/dorms and with our roommates/families than is usual, thanks to covid (I am a prisoner of my own apartment, if you will). This article proves I am not alone. For me, this has meant headbutting with roommates a lot over things like vacuuming, who is walking the dog, and the kitchen - with the kitchen by far being the biggest point of contention. My apartment kitchen often reminds me of the Prisoner’s Dilemma. The Prisoner’s Dilemma describes a paradox in which two individuals acting out of self interest (following their dominant strategies) produce results that are not Pareto Efficient. In my situation, there are two strategies - contributing to cleaning and not contributing. Cleaning includes things like rinsing pots and pans, loading and unloading the dishwasher, and generally keeping the kitchen crumb and spill free. Clearly, one’s payoff is higher when the kitchen is clean and they do not have to take time out of their day to do the cleaning. My roommates and I all have a dominant strategy of not contributing. This is pareto inefficient (Q*<Qae). If no one contributes, we have to exist in a dirty kitchen that could lead to a situation where undesirable creatures are attracted. Clearly, if we all contributed (the pareto efficient equilibrium), payoffs would be the highest. 

(A,B)	Contribute (B)	Don’t Contribute (B)
Contribute (A)	19,7	6,11
Don’t Contribute (A)	22,1	9,3

I have a relatively low tolerance for messes so often, I will take time out of my day to make sure the kitchen is clean. What is the solution? Mueller used the prisoner’s dilemma as a rationale for government because by making sure we all play by the rules, we can get to the PE outcome. It seems unreasonable to instate rules or chore charts (whoever made one of those would definitely be the least favorite roommate). Mueller also discusses the idea that in this matrix, the cooperative solution could emerge as an outcome in a supergame - where prisoner’s dilemma games are repeated over and over. So, for now, I guess I will have faith and wait and see what happens….

Politicains Play Cops and Robers as People Suffer

In his chapter on Welfare Costs of Tariffs, Monopolies, and Theft, Tullock uses the example of theft to explore the wasteful social costs of attempting to transfer wealth or attain rent, that are ignored by the Harberger method. In Tullock's example, as thieves invest more into trying to transfer wealth from others to themselves, those people and even the thieves themselves, invest more in trying to prevent this wealth transfer and therefore, reduce the the potential returns on the thieves' investment. And though the act of purely taking or retaining belongings is not a cost to society, allocating resources towards wealth transfer and protecting against wealth transfer carry an opportunity cost that, according to Tullock, is wasteful, "from the standpoint of society as a whole"(Tullock,  47). Which is why societies put in place laws, police, and courts, to prevent this type of wealth transfer as best as possible. 

Though political parties are not thieves and homeowners, their fight to influence the government and the country can be explained by examining their activities through a similar lens. Republicans currently control the Senate, the Presidency, and have more of their judges on the Supreme court and federal benches across the country. If we consider this power as units of wealth, Republicans have much they need to protect, which explains why they are wasting no time to confirm Amy Coney Barrett to the Supreme Court right after the death of Justice Ruth Bader Ginsburg. But Democrats clearly want to take this power for themselves and have broke fundraising records trying to do so. In fact, Democrats and progressive groups raised a record $90 million, directly after Justice Ginsburg's death. Therefore, as democrats' investments have increased the chance that they will take over the senate and win the presidency, Republicans have stalled coronavirus relief negotiations and have invested time and resources into their last best chance at protecting their wealth, and in their view Americans' wealth, by putting a conservative judge on the Supreme court that may be able to use the judiciary to reduce the amount of power or return that democrats will get from their investment in controlling the white house and congress.  

Finally, though Democrats or Republicans having power or wealth is not a cost to the American public, the large amount of time and resources that both parties are using have a large opportunity cost to society as a whole. Opportunity costs are especially large now due to the fact that both parties could be investing this time and resources in fighting the coronavirus that has taken over 200,000 lives and has caused an economic recession.

Maybe if it still took 60 senators to confirm a supreme court justice or if we had public funding of elections, we could prevent this type of wasteful wealth transfer.

What Truly Caused Maine's Voting System to Change

After our discussion about different voting systems, I was curious why Maine's rank-choice voting system was passed. This seems like a very significant change to our voting system; something unprecedented. Mr. Coppock's comment about Maine's former conservative Governor got me thinking in terms of political parties and strategies used to maximize votes. It reminded me of the Democrat-supported abolishment of the electoral college and their attempts to change various American systems in order to gain power. After looking into the rank-choice voting bill breakdown, my suspicions were confirmed that the change to the voting system was less of a question of fairness due to the voter, but rather an example of a self-interested political party achieving changes that increase their chances of winning.

In the Maine rank-choice bill that passed earlier this year, it is obvious that the move to this new system was fueled by pursuing the self-interest of the party rather than the voter's best interest in mind. Simply looking at the breakdown of the voting patterns, we can see that all Republicans and Democrats voted on party lines while only one Democrat voted against the bill. The fact that a strong, conservative Governor was able to secure the victory in a state such as Maine must have been the cause of such a drastic change to our democratic system supported by Democrats. We can debate about which system maximizes voter happiness, but when it comes down to it, these types of decisions boil down to one party's self-interest in winning elections. Viewing political parties as vote maximizers rather than a representative body of 'public despots' helps the citizen understand why Republicans and Democrats support the legislation they do.

Trader Joe’s Against Rent-Seeking

After grocery shopping at my favorite grocery store, Trader Joe’s, this week, I started to think about all the things that make TJ’s so great and unique. Our discussion about rent seeking in class got me thinking about all the shelf space in grocery stores and why you see certain products more than others, and more frequently on that “eye-level” shelf. Majority of grocery stores take part in charging suppliers a “slotting fee.” This fee means that suppliers have to pay a fee in order to secure shelf space in the grocery store, and particularly more for the “better shelves.”

 

Think about it, usually the popular and go-to products tend to be right in front of you when you are looking at the grocery store shelves. You rarely have to dig deep for goods like Goldfish, Coca-Cola, Oreos, etc. – they’re all right there at eye-level. This is because these large corporations are able to buy that shelf space and hold a monopoly on it, pushing other competitors to the bottom shelves. This is a form of rent-seeking and leads to an inefficient allocation of resources. Suppliers try to outbid each other and spend resources to obtain these “rents” of the best and most shelf space from the retailers. Suppliers may even try to bribe or lobby retailers to put their product in the best location. These suppliers are looking to establish a monopoly with their product on that particular goods’ shelf space in grocery stores. This is a problem because this action may not lead to the supplier with the best, most deserving or healthy product getting the shelf space it deserves. Additionally, more slotting fees lead to higher prices for the customers. So, just to add to the list of things that make Trader Joe’s so fantastic and customer-friendly – they do not charge their supplies a slotting fee and therefore allow for the proper distribution of products on shelves and an efficient allocation of resources.

Is Lobbying "sweet" or a Misallocation of Resources?

 In Mueller’s discussion regarding rent-seeking, he identifies one way that rent-seeking may be “socially wasteful” as exerting effort and resources in order to attain greater than normal profits. Our discussion about lobbying and the potential for the misallocation of resources made me think about my dad’s job representing the U.S. Sugar beet Growers. I gave him a call the other day after class, and I can confirm, there is a lot of resource misallocation of resources happening in the sugar beet industry. The main purpose of having lobbyist for sugar beet growers is to protect them in all capacities—providing relief in years when crop yield is low, protecting them from changes in sugar price, and providing job security.

While there are many examples of misallocations of resources, I am going to share two—protective tariffs on sugar from other countries, and campaign contributions. One major effort by those representing sugar farmers is protecting them from the dumping of sugar by foreign countries into the U.S. market (which would drop the price of sugar and hurt farmers), with Mexico being the biggest example in the past decade. The U.S. sugar beet industry spends an exceptional amount of money, time, and resources to litigate for the protection of the current sugar price. It is difficult to say whether the monetary costs of protecting the sugar price outweighs the eventual benefit, but the industry claims the fight for protecting the sugar price in turn boosts the U.S. economy as a whole and provides hundreds of thousands of stable jobs to Americans. In my opinion, I may go as far to say that the lobbying group impedes trade and reduces potential consumer surplus as they push for tariffs on sugar imports.  Secondly, as lobbyists do, the organization representing U.S. sugar beet farmers host fundraisers and donates to the campaigns of members of congress. However, the representatives who receive donations do not always end up voting in favor of legislation that is beneficial to sugar beet farmers. This is an example of a large misallocation of resources in an effort to attain some “rent” or benefit that could come from some particular litigation. All in all, we can see a multitude of the problems associated with rent-seeking in lobbying, but the existence of such a function in our country goes to show that many people somehow see the potential benefits of lobbying outweighing the substantial misallocation of resources. 

Coase Still Impacting the City of Chicago

    Sports owners are constantly trying to find new avenues to increase their revenues.  Every team brings in money from ticket sales, concessions, and TV money to name a few of the largest sources of revenue streams.  However, there has been a movement towards teams owning all of the area surrounding their stadium as well.  By doing this, the team can increase revenues via restaurants, bars, and hotels that all encapsulate the full game day experience for fans.  A family can go see their favorite team play for an entire weekend and never have to leave the vicinity of the stadium for food or lodging.

    As this type of money is emerging from the areas immediately surrounding the stadium, more and more people want a piece of the pie.  Chicago is no different.  The rooftops of the tall buildings around the stadium are able to see into Wrigley Field and give the people on the roof a great view of the game.  These rooftop tickets are often much more affordable as well.  The owners of these buildings have taken advantage of the situation and sold tickets to watch the games up there.  This hurts the Cubs business as people who might normally buy tickets to the game are now paying less to watch it from outside the stadium.  This represents a Coasian problem.  In theory, the Cubs owners and the surrounding building owners should be able to negotiate a solution to the problem since property rights are defined.  However, there are high transaction costs between the two parties that inhibit a deal being reached.  Over the years, the owners of the Cubs have bought out some of the buildings and companies that offer these rooftop tickets for a view of the game.  To impede the businesses that they did not acquire, the Cubs built large obstructions such as a huge scoreboard to block the view from those locations.  When there is millions of dollars on the line, a mutually agreed upon arrangement is very difficult to reach.  With the help of Coase, this problem could have been solved in a more efficient manner long ago.