What a Waste! (Literally)

 After class today, I remembered hearing something a couple years ago that the military would have aircraft fly in circles for hours just to burn fuel and keep costs high. Under the pretense of training, pilots acted in the best interests of the "Senior Bureaucrat". After googling for a little while trying to find evidence about what I remembered, I came across an article that said during Reagan's Presidency, the Pentagon bought $640 toilet seats and $7,600 coffee makers. After the news broke, some members of Congress spoke out about the ridiculous purchases, yet nothing was done.

This is a clear example of the 5th assumption of Niskanen's model - where bureaucrats will exhaust their budget to ensure they receive as much benefit as they can in the future. Additionally, this example is indicative of how bureaucrats will overproduce beyond an ideal Q*. The marginal benefit for these purchases is extremely small - a few hundred dollars combined for the two would certainly suffice. With thousands of dollars spent, it is clear that the marginal cost exceeded the marginal benefit for these purchases, reinforcing the idea that bureaucrats are not efficiently allocating their budgets.

Will Politicians ever change?

 Earlier this week, I attended a talk on geopolitics by Noah Rothman, organized by the Blue Ridge Center. Noah's main argument can be summarized thusly: tensions are rising all over the world and most foreign powers, at least those that are not allied to the U.S., share a common goal: ridding the world of U.S. hegemony. He proposes that we cannot simply expect to have peace without a cost, and we need to drastically increase our military spending and foreign aid (to countries such as Ukraine, Israel, Philippines etc.), otherwise, Russia, China, Iran, and other long term U.S. adversaries, will work in unison to dethrone the United States as the world's leading superpower. 

He addressed this briefly in his speech, but I think there is a very pressing issue in our political system that will prevent this from happening. The reality is, our representatives are vote maximizers and the vast majority of politicians' constituents would certainly not support a further increase in the United States' foreign war efforts. Having said this, we have analyzed that politicians also act out of their own ideological beliefs, not just the preferences of their constituents. So, it certainly is possible that if a representative had such a strong conviction to propose an increase in military spending, it could outweigh their desire to appeal to their constituents. Nevertheless, it is my belief that this is unlikely to happen and even if politicians agreed with Noah's viewpoint, their desire to retain power would surely trump their willingness to forgo their political career for the sake of such a policy. 

The Ultimatum Game

 Earlier in the year we talked about pareto equilibriums with decision making. In one situation we had a triangle with each point representing different peoples preferences. In that situation there was no equilibrium because the preferences moved around the triangle. According to professor Coppock agent A should accept agent B's proposal so long as it didn't negatively affect agent A. I however disagree with this statement because I'm not accenting any proposals that benefit someone else and not me. Ted brought up a real life example of this which is a variation of the Ultimatum Game. Let's say there are two people with an equal claim to 100 dollars and both have different roles. One decides how to divvy up the money and the other has the power to accept or reject the proposal. If agent b rejects agent a's offer then neither gets the money but if they accept then the money is divided up according to the proposal. Ted said he would accept any amount of money so long as the money went straight to his bank. I refuse to accept any amount of money less than 20 dollars. If I am a rational consumer I should accept any amount of money because I get some utility even it it's only a penny. I will not reward the greedy bum who offers me less than 20 dollars because the utility gained from the money is less than the utility gained from spiting the other person.

Free Speech in Academia

Today in class I couldn’t help but chuckle to myself a little as Mr. Coppock started discussing Detroit Lion “ism” and how his mood can depend on the extent to which the world around him aligns with his ideology (i.e., whether the Lions’ performance during the season reflects his belief they are the best). It was reminiscent of a conversation I had with one of my roommates last night.

A firm supporter of empiricism and medical science, my normally soft-spoken roommate had a vehement reaction to her professor's "promotion" of home births. “She was saying that despite literature supporting home births most women still give birth in the hospital. Obviously the hospital is safer!”

Proponents of home births point to literature supporting lower maternal morbidity rates and higher reported satisfaction levels. My own belief in modern medicine makes me agree with my roommate; in the case of a medical emergency, you are almost certainly better off in a hospital than at home. I would imagine most expecting parents would prioritize newborn safety above cost or comfort. 

Not unlike politicians, ideologies professors hold can affect their actions and curriculum. While not elected, faculty review and academic oversight of professors can similarly act as a “check,” limiting slack. The tenure system itself was created in part to protect slack, allowing professors to speak freely without fear of punishment by their university. Just as politicians have been shown to best reflect the interests of their constituents when closer to reelection, I would imagine professors are likely to express more mainstream and “safe” views while they are being considered for tenure. 

Entry Regulation on the Pro Tennis Tour

Tennis governance is fundamentally broken, with the four most prestigious tournaments- the Grand Slams- each having their own organizational bodies, and the second most-prestigious tournaments- the ATP/WTA 1000-level competitions being organized by the ATP/WTA respectively.

In late 2023, with growing fears of a Saudi- backed breakaway tour, the ATP began to lobby hard for the introduction of a new 1000-level event that would take place at the start of the calendar year in Saudi Arabia, seemingly to placate PIF -backed bidders looking to get involved in the sport. The move would further congest the tennis calendar by adding to the already draining tennis season. The proposal was quickly condemned by the Grand Slams, who pitched their own ‘premium tour’ that would compose of the 4 Grand Slams and the 9 1000-level events to create an F1 style calendar that the top 100 players would compete in. While on the face of it, it may seem like an initiative designed to reduce the burden on the best athletes in the sport, it quickly became clear that this was also an initiative to block the entry of a new Saudi-based 1000-level event. Tennis Australia, the Australian Open’s organizing body, has taken the lead in this proposal of the new ‘premium tour’. With the proposed Saudi Arabia tournament being pitched for a January spot in the calendar (when the weather would make an outdoor competition feasible), Tennis Australia’s annual ‘Summer of Tennis’ tournaments would be slashed in half, with virtually all the smaller tune-up tournaments in Australia/NZ being overlooked by athletes.

The Grand Slams (acting as a cartel in this scenario) have effectively tried to leverage their position as the biggest draws (for players and fans alike) in the sport to place the entry controls on the sport, and block a proposed Saudi Arabian 1000-level competition. While this issue is far from being resolved, and both proposals remain on the table, it will be interesting to see how the situation develops in the next few months with the Australian Open right around the corner. 

The Carbon Hustle

Amid all of the post-election analysis, I’ve heard a lot of talk about climate change and the future of the energy industry in the U.S. under a second Trump administration, particularly concerning the Inflation Reduction Act signed into law by President Biden in 2022. A prominent feature of the IRA was the creation and expansion of tax incentives and subsidies for clean energy projects, which has benefited oil and gas giants who have the resources to invest in new green technology. 

There are a multitude of opinions on how to deal with the climate issue. Trump has made it clear that he wants to dismantle the IRA’s climate policies and green energy initiatives, and even members of his own party don’t wholeheartedly agree with that decision, but what’s caught my eye as a public choice student has been the response from the energy industry. 

ExxonMobil CEO Darren Woods went on the record pushing against Trump’s ideas for the IRA (ExxonMobil has been heavily investing in carbon capture technology, and the IRA provides large sources of funding for these long-term projects with its tax incentives) and instead offered another solution–more regulation on carbon. Why in the world would the CEO of one of the largest oil companies want more regulation? If you ask him, it’s because the climate crisis needs to be addressed, and more oil production would harm the domestic oil industry. I think Stigler would say, “regulation is a friend of the incumbent.” Regulation of carbon intensity could potentially create barriers to entry for foreign competitors and smaller domestic firms. Large, established firms like Exxon have the ability to, and already have been, strategically adapting to the changes in climate policies. It seems to me that special interests are pushing to retain the regulation they have already captured and are seeking more in the new market for green energy. 

RFK and Capture Theory

This week, President-elect Donald Trump nominated Robert F. Kennedy Jr. as his choice to run the Department of Health and Human Services. While RFK does not have much of a history with anything health related, he has a track-record of speaking out against large corporations, and if his nomination is confirmed, he seeks to “stop the revolving door between industry and government”. 

To us as public choice students, it should not come as a surprise that “Washington’s lobbyists are stunned Trump chose RFK Jr” given what we know about the Stigler-Peltzman capture theory we discussed in class. Within the context of RFK’s nomination, the Stigler-Peltzman theory predicts that the Senate may block this nomination in favor of the industries that RFK’s policies would restrict. 

Capture occurs here since RFK is proposing policy that would impose significant costs on industries like processed food manufacturers and fast-food chains. Due to these proposed policies, these sectors actively invest in lobbying because they have a strong incentive to safeguard their narrow financial interests and exert political pressure on the government by potentially withholding campaign contributions or endorsements for re-election. In this case, acquiring a block against RFK by the Senate ensures profit for the firms.

So, given this knowledge on public choice, I am intrigued to see whether the Senate will block RFK, or if Trump will be able to navigate around the Senate's approval.

Slack in universities?

Earlier this week my friend was complaining to me about a class which is about the topic she likes a lot, but she said the professor always seems to come a bit unprepared, and the lectures are a little disorganized. I am not making the argument that the professor is shirking but the word slack we learned in class quickly came to mind. Unsuprsingly, Tenured faculty has a much lower termination rate when targeted for sanctions than fixed-term faculties(16 percent v. 53 percent). It's also universally agreed that it's quite hard to get fired as a tenured professor. So I thought, in the rare case when a tenured professor really is shirking, can we avoid it? I thought about it, and the conclusion I reached was no.

In class, we talked about how to avoid employees from shirking. 1. monitor(have the knowledge of whats going on). 2. well-defined objectives)single dimension output) 3. frequent performance reviews. 4. secure many alternatives. Based on this metric, it seems to me that it's quite hard to avoid tenured professors from shirking, for the reason that 1. Monitor: It is often difficult to monitor the daily activities of tenured professors since there are various forms of academic work (teaching, research, etc) and can be private. 2. 2. well-defined objectives: Unlike many roles, teaching and research outputs are difficult to quantify consistently, and success in these domains is often subjective. 3. frequent reviews: Tenured professors have limited performance reviews compared to non-tenured faculty. 4. Alternatives: Yes, there may be some alternatives, but universities have limited options to replace tenured professors, given that tenure is a form of job security that makes dismissal challenging unless there is a serious misconduct.

If You Don't Like It, Take Your City And Leave!

About three years ago in Atlanta, I started seeing "Buckhead City" signs in the yards of some of my neighbors, as well as around some of the local businesses in the area. After looking it up, I discovered that these signs were referring to a movement for Buckhead, the northern part of Atlanta, to leave Atlanta and become its own city. Many people were frustrated with the leadership in Atlanta, and felt like they did not have the adequate representation they were entitled to based on the taxes they paid. They felt like the Atlanta government was acting against what they believed to be their own self interest, and they felt a new smaller city could more accurately word towards these interests.

I think in some way this would be an example of Tiebout's concept of voting with your feet. In this case the people would not actually be moving (their feet would not be very involved), but they would be leaving one city to join another where government actions line up more with the things they want. Further, the existing city of Atlanta would have seen real changes in their spending habits from this, as they would have been losing a large source of their tax revenue. Atlanta would have had to then make adjustments to raise its population after losing this significant chunk, according to Tiebout's claims.

To this point, the Buckhead City movement have not come to fruition, and likely wont. Part of this was that creating a new city would have been very costly, and would have required Buckhead to completely recreate many existing and working functions of the city of Atlanta. But another part of this was that the new mayor of Atlanta, Andre Dickens, knew this would have consequences for the city of Atlanta, and acted to make sure Buckhead residents felt heard.  In his Inaugural Address, Dickens argued for "Atlanta Unity", saying "We don't need separate cities. We must be one city with one bright future." 

I think this move from Dickens proves that Tiebout is onto something. To prevent the move from happening Atlanta had to make itself more attractive for people that would prefer to be elsewhere, to avoid severe population and tax revenue loss. In here we can see economic incentives truly do drive the formation and transformation of cities.