Voting Laws and Rational Absenteeism

Over the weekend, the Supreme Courtgave Texas the go-ahead on a strict voter ID law. The law requires that anyone planning on going to the polls will have to show a state issued photo ID. With midterm elections just around the corner, many Democrats fear that this law will further reduce the already low voter-turnout and hit especially hard for low-income and minorities who may be less likely to have this type of identification at hand.

In terms of his discussion on voting and rational absenteeism, Johnson would clearly identify this law as one that would reduce voter turnout out by increasing the costs for those individuals who may not have a license or a passport. Given the new law, if one does not have a proper form of identification, they must spend hours in line at the DMV as well as shell out additional cash in order to receive an ID so that they may cast their vote. Thus, increasing both the monetary and opportunity costs associated with voting for these people. This law is extremely controversial because it has been estimated that close to 600,000 voting age people in Texas lack state issued ID’s, the majority of which are assumed to be minorities. The law will clearly serve as a significant obstacle and deterrent to voting for these people, and is being compared to the voting taxes of the late 1800s and early 1900 that were used to prevent blacks from voting.  By raising the costs associated with voting, Johnson would claim that this law would give those without state-issued ID’s the incentive to rationally abstain from voting in the elections. Given that minority voters are typically liberal and Texas is a traditionally conservative state, the probability of decisiveness for a minority voter in Texas is already essentially zero. So, by Johnson's reasoning when you combine these additional costs of voting targeted at minorities with the existing costs of voting and the infinitely small probability of decisiveness of a minority voter, the marginal costs will certainly exceed to marginal benefits of voting and it simply wont be rational for these voters to spend the time and money to go to the polls. 

Johnson, Libertarians, and Discrimination

Libertarians often have trouble in the fight against discrimination. This article describes the situation. Basically, it comes down to the libertarian belief in freedom of association, that is, that an individual has a right to associate (i.e. trade, interact, etc.) or refuse to associate with certain individuals.
   
This principle runs into a problem when people decide to arbitrary discriminate against others based on race, sexual orientation, religion, etc. and those discriminated against seem to suffer severe psychological harm and other less severe inconveniences.
 
Although libertarians do not support government force to end this type of discrimination, they could support other methods to bring about its end. My suggestion could be supported by Johnson's analysis of why people vote, even when not gaining a direct benefit from it.
   
Johnson would say a rational individual would only take an action if its direct expected benefit and other utility gained from it were greater than its costs (B+U > C). And I think there are (at least) two ways a libertarian could make B+U greater than C, say, for the racist. An anti-discrimination society could use market forces to increase B of those who do not discriminate (by only buying their products), and the society could increase U by putting social pressure on those who did discriminate. Through these methods, society could make discrimination too costly for rational individuals to discriminate in ways the society believed were wrong. (This only works in an anti-discrimination society)

Race And Voting

A few days ago I found myself reflecting on the significance of voting, especially in lieu of our recent class discussions. I don't want to sound pessimistic, but given recent trends I can only find more symptoms of weakness in the democratic election process.

This PEW analysis of data from the Census Bureau reveals that black voter participation rates reached record highs during the 2008 and 2012 presidential elections. However, according to the theory of rational abstention it is often rational for voters to abstain from voting because the costs of voting outweigh the benefits. So why is the black voter participation rate increasing?

During the 2008 and 2012 elections Barrack Obama ran as the first black president. While the expected marginal benefit of a single individual would not compel him to vote for Obama, another missing benefit from voting just might. I think that many black Americans voted for Obama in order to avoid the markedly higher social pressure that was imposed on them by their fellow citizens. Some may argue that this is fine and that black Americans should vote for Obama because of his race. But I think that this argument is dangerous and often coincides with another commonly espoused view: Black Americans should vote Democrat.

I am worried what this means for the democratic election process in America. I always thought that democracy was a sign of freedom--an individual's right to express their opinion unhampered by the coercion of others. But today, I see the chains of social pressure indoctrinating and manipulating many Americans, reducing their freedom to truly express their views on America's political system. Perhaps the democratic election process is not the most salient indicator of a free society.

Raising the Cost of Voting

Johnson in his article Voting, Rational Abstention, and Rational Ignorance presents a situation in which it is rational not to vote. For those who don't remember, the calculation for the benefit of voting is the absolute net value of a successful outcome (V1-V2) times the probability of one's vote being decisive (assigned as p). Johnson's argument is that p will be so small in most elections, the cost of voting for an average citizen will always outweigh the benefit of voting. Therefore it is rational to not vote. However, people still choose to vote and therefore there is some unknown in the equation that causes the marginal benefit of voting to be greater than the marginal cost. This post will highlight an interesting and often less emphasized part of Johnson's argument, the marginal cost.

In this article, the author is discussing a recent Supreme Court ruling that halts the practice of early voting in Ohio. Furthermore, Ohio has gotten rid of a Sunday of voting and evening hours as well. This is significant because according to the author, "the costs associated with voting - in lost pay, in childcare, in transit fares - are higher for minorities and the poor. Which is why they are among the largest beneficiaries of early, flexible voting." With the early voting eliminated, the cost of voting for minorities increase. Johnson would say that this would make it more rational for them not to vote because with the marginal cost of voting increasing, the likelihood of the marginal benefit outweighing that cost decreases. Many will point to this contentious issue as Republicans seeking to make the costs as high as they can for those who do not vote conservative and make the costs as low for those who do vote conservative.

Election Problems Caused by Voting Rules

During class, we discussed the 1991 Gubernatorial election in Louisiana involving Buddy Roemer, David Duke, and Edwin Edwards, and how the winner of the election could be manipulated depending on the voting rules and elimination methods that are applied. This past summer, there was another election in the Deep South that caused and is still causing considerable controversy. Almost 4 months after the ballots were counted, the U.S. Senate Republican Primary in Mississippi, dubbed "The Nastiest Election in America", remains unresolved.

At the beginning of June, Mississippi state senator Chris McDaniel was viewed as a rising star in the Republican Party and was favored by many to unseat six-time incumbent Senator Thad Cochran. Both candidates consider themselves staunch conservatives, but McDaniel received the endorsement from many in the Tea Party movement, while Cochran was favored by the Republican establishment. The Republican Primary election was held on June 3, and while McDaniel won a plurality of the votes, no candidate won a majority so McDaniel and Cochran were forced into a runoff. McDaniel was expected to win the runoff, but Cochran managed to eek out a narrow victory by 1.6 percentage points.

The election rules in Mississippi are rather interesting-Mississippi has an open primary system which technically allows Democrats to vote in the Republican Primary (and vice versa) as voters do not have to register by party, but voters are only allowed to vote in one party's primary, and by law are also supposed to vote for the same candidate in the general election. This law is, of course, very difficult to enforce. McDaniel's complaint is essentially that between the Primary on June 3 and the runoff, Cochran and his supporters spent a lot of effort trying to convince Democratic voters, who had no intention of voting Republican in the general election, as well as people who had already voted in the Democratic primary, to vote for him.

This is obviously incredibly difficult to prove, and McDaniel has had a hard time just getting the Mississippi Supreme Court to hear his case (the court is currently evaluating Cochran's counterclaim that McDaniel's appeal was filed too late and therefore should be tossed out). While the election rules as they stand may seem illogical, as crossover voting is illegal but almost undetectable, they may have ensured that the Condorcet winner ends up winning the senate seat. It's almost certain that most Mississippians would prefer Cochran to any Democrat, as we will likely see in the general election next month. At the same time, when non-Republican voters are taken into account, it would appear that the more mainstream Cochran is again the preferred candidate when paired against a Tea Party favorite like McDaniel. If democratic-leaning voters could be identified, or if Mississippi had a closed Primary system where only registered Republicans could vote in the primary, the outcome could have been different.

According to several polls leading up to the runoff, McDaniel was leading Cochran among Republican voters, with some polls putting his lead at up to 8 percent. If the primary election had been limited to Republicans, then there is a good chance that McDaniel would have won. And as his party's nominee, he too would likely have won the general election with ease, even though most Mississippians probably prefer Cochran over him. Therefore, it appears that McDaniel may have been the Condorcet winner among Mississippi Republicans, while Cochran was the overall Condorcet winner. So ironically, due to the possible illegal voting that may have occurred thanks to Mississippi's questionable voting laws, the most preferred candidate in the election will in all likelihood end up retaining his seat.

Not All Monopolies Are Created Equal

This week, we read a seminal paper by Gordon Tullock on the costs a monopoly imposes on society. The actions monopolies take to preserve their economic profit—and the actions others take to secure it for themselves—waste economic resources in pursuit of a simple transfer of wealth, Tullock argues. This economic waste exceeds the textbook "deadweight loss" that we traditionally associate with the higher prices and restricted output that typify a monopolized market.

But there are many different types of monopolies, and some may be better for society than others. So argued Peter Thiel, co-founder of PayPal, in the Wall Street Journal last month. Thiel is quick to clarify that he is not extolling "illegal bullies" or "government favorites," but rather companies that innovate their way to the top, that is, natural monopolies. What differentiates natural monopolies from their nefarious cousins is that they reach their dominant position because they do something better than anyone else—whether that's producing the same product at lower costs or creating new products that no one else has thought up. These monopolies, Thiel argues, create value; they're the Apple and Google of the world, the economic equivalent of Louis Pasteur and Alexander Fleming. They provide for us goods and services we actually want. And they can do all this because they enjoy economic profits, which frees them up to worry about things other than the bottom line: things like creation, design, invention, and innovation.

Of course, Tullock's argument still applies to natural monopolies. They enjoy profits, and therefore must expend resources protecting those profits, just as others will jealously seek the wealth for themselves. The question in my mind is whether the social benefits that these monopolies produce outweigh the wasteful costs associated with the rent-seeking that inevitably dogs monopolistic enterprises. I'm not certain anyone has a definite answer to this question. Thiel is right to point out that the government recognizes the usefulness of natural monopolies, as evidenced by the fact that it virtually creates them through the patent office (even as it prosecutes other types via anti-trust litigation). Moreover, I can't intuitively see why I should prefer cut-throat competition—where prices reign supreme and innovation and quality suffer (like the airline industry)—to a world in which monopolistic enterprises use their economic profit to innovate and create. Perhaps these natural monopolies impose similar costs on society as those outlined by Tullock in his paper; but their social benefits might just tip the scales in their favor.

Compulsory Voting in Brazil

           Our class has discussed why voter turnout in democracies is so low and ways to increase voter turnout. One solution was to place fines on voters to encourage them to go out and vote but it seems wrong to force participation in one of our most important freedoms. As it turns out, there are 11 democracies around the world that enforce compulsory voting, with Brazil being the largest. Fines in Brazil have boosted voter turnout to around 80%, but it has led to some unintended results (*language around 0:25) regarding candidates. Some "joke candidates" for this year's election include Jesus, Satan, Osama Bin Laden, and my personal favorite, a man who flies around space shooting lasers out of his eyes. Every country has zany write-in candidates which pose little threat but in Brazil these candidates can actually win: a rhino was elected to city council of Sao Paulo in 1959. 
          Compulsory voting changes the Johnson equation to where B + [extra utility] = C + Fines. This leaves rational abstainers with two options to protest the election, pay a fine or vote for someone they don't care about. Clearly this is a problem where voters may become uninterested in elections and vote for the most recognizable candidate or a joke candidate. I can see many indifferent voters in Brazil just voting for the first name on the ballot to get the process over with and avoid paying the fine. This leaves the democratic system with an unavoidable flaw in the voting process. Countries that have the option to vote like the United States have extremely low turnout compared to the compulsory system under Brazil where voters make a mockery of the system by nominating joke candidates. I prefer the option to vote system because at least the voters are invested in the candidates they vote for but it seems like no perfect voting system exists.

Voter IDs: Preservation of Democracy or Just Another Hurdle for Folks to Vote?

   Elections are right around the corner. But, before Virginia voters head to the polls on November 4th, they must be sure to have the proper form of identification in tow. This will be the first election with the new voter identification law in place, and State Board of Elections reports 198,000 registered voters in Virginia do not own a driver's license. The debate surrounding the new law has mostly fallen along party lines, and the two competing arguments hinge on what factors citizens might consider when weighing the costs and benefits of going to the polls. Democrats argue that the voter identification law creates additional barriers to democratic participation, particularly for the elderly and minority individuals who are less likely to have a government issued forms of identification. While Republicans contend that voter identification is necessary to prevent voter fraud.
   The Democrats' perspective is in-keeping with Johnson's rational voter theory. It is unlikely that a voter's time will be measured at an infinitesimally low value or that the outcome differential will be very large. It is even more improbable that an individual will cast the deciding ballot. And so, for Democrats, it follows that any additional costs to voting might overwhelm the marginal benefit for its rational constituents. Even "misinformation...just a perception about what the law indicates" poses an additional cost for voters to learn what the law actually means. To minimize such costs, Democrats have been calling citizens and initiating direct voter contact to make sure that they understand student IDs from Virginia institutions and passports will also be considered valid forms of voter identification at the polls.  
   On the other hand, Republicans, such as Garren Shipley, argue that the minimal burden of identification is well worth "the certainty that comes with knowing that the person who shows up at the poll is who they say they are". Republicans believe that each act of voter fraud is a serious crime because it "disenfranchises someones vote that was cast legally". In the last election, 160 people voted in both Maryland and Virginia. In sheer numbers, voter fraud does not appear to threaten our representative democracy. However, the Republican argument takes into account the marginal benefits voters derive from simply being good citizens. These marginal benefits disappear if voters lose trust in the voting institution. The logic follows that voter identification is worth the additional cost to citizens because of the larger benefit that citizens derive from being able to trust in democratic institutions.

Water Must Cost More

A growing American population coupled with climate change has begun to constrain the water supply. The Rio Grande is running dry before it even reaches the Gulf, and cities and states throughout the West are experiencing droughts. This isn’t to say that there is a shortage of water and that all global citizens must reduce their consumption before we drink the Earth dry. We have plenty of water on Earth. It simply isn’t allocated very efficiently.

Market principles just haven’t applied to water. For too long we have thought of water as a purely public good but now we are realizing that water is excluded on a first-come first-served basis and, due to our very developed infrastructure, the only limit on consumption is it’s very, very low price.  

In order to more efficiently allocate our limited amount of water we must ensure that water is going to its most valuable uses. Normally, a Coasian solution could determine an efficient allocation. There are well-defined property rights with water municipal companies owning the right to water, but there are approximately 300 million bargainers (population of the US) and transaction costs won’t be cheap.

Alternatively, regulators may choose treat water like air pollution and enact a cap and trade policy to provide those who value it most a means to acquire it. However, right now “the allocation of water is certainly arbitrary” and implementing a new market takes time especially through bureaucracy. Therefore it may be simpler to employ a progressive price scheme on water usage as many municipals charge a flat or a regressive rate that encourages overuse.

What loopholes reveal

When we talked about Tiebout and his theory on local expenditures as a means of preference revelation, we were mainly referring to individuals and to small communities within one state or country. However, by broadening the scope of his argument, analyzing Ireland as part of the world community and firms as individuals, I will proceed to discuss Irish tax regulations.

Firms and companies establish their location according to the laws of each city or community. They seek for the set of laws that best satisfy their business model in terms of regulations, free market, and most importantly, taxes. This is the case of companies in Ireland. For many years, Ireland has had the biggest tax loophole called the “Double Irish”, in which firms can transfer royalty payments for intellectual property to a country with no corporate-income tax. Because of the flexible tax system, many foreign firms such as Google, Apple and Facebook had had set Irish subsidiaries to help them shelter Irish profits from foreign subsidiaries, which revealed their preference for a tax-avoidance. But the rules of the game have recently changed:

In an effort to eliminate the Double Irish, the government established that all Irish companies are required to have tax domicile somewhere. For companies already registered in Ireland, this will be done with a transitional period of six years, giving them a chance to accommodate their business model to new tax regulations. This policy can have two consequences: either it enhances the pressure on neighboring tax-friendly countries to enforce more strict tax policies, as the article suggests; or it will cause foreign firms to find another country where the loophole can still be made. Because the government is interested in maintaining Ireland as an attractive location for investment, they have also developed a new tax break for intellectual property capital, hoping companies like Apple will choose to remain interested in the country. If companies decide to move out of Ireland, it will strengthen Tiebout’s argument claiming that local expenditures will better reveal the preferences of an individual. The elimination of the Double Irish will reveal if companies that were originally established in Ireland did so because of tax laws, or because they were attracted to Ireland’s market. Google has chosen to stay in Ireland; the eyes are now on Apple and other tech companies as to which decision they will make.

Fighting Ebola is an Underprovided Public Good

The Ebola Crisis has caused over 4,400 deaths. The World Health Organization believes there could be up to 10,000 new cases each week within two months, unless efforts to prevent the spread of Ebola are greatly magnified. Although most of the victims of Ebola are located in West Africa, the virus is spreading around the world.

Foreign aid in Sierra Leone, Liberia, and Guinea is essential to mitigating the damage caused by this potential world pandemic. This aid would help the residents of highly impacted nations as well as other nations around the globe. This aid can be classified as a public good. Noone can be excluded from the benefits of lower risk of infection. Furthermore, one person's consumption of being protected from Ebola does not decrease another person's protection from Ebola.

The question is, who will provide the necessary aid to fight Ebola? I believe that the free rider problem is resulting in less foreign aid to countries affected the most. Further international cooperation through the United Nations may be necessary to solve this issue. This is because the benefits of preventing a worldwide pandemic likely exceed the cost of sending aid. Preventative measures, even in everyday healthcare, are often underprovided due to the free rider problem.

The "Victor's Dilemma"

In the original Hunger Games movie, 24 contestants are chosen to compete against each other in the annual inter-district competition known as the “Hunger Games” created by the capital to prevent rebellion from the districts. In this “game,” each player is placed into an artificial world created by the game makers in which they fight to survive, faced by constant challenges, obstacles, and attempts against their lives, both from the other players, and from plot twists and tools creates by the game makers. The rules to the game are such that there can only be one “victor” that goes home, and this winner is the last person left alive.

This clip from the movie shows the suspenseful moments of the final scene in which the game makers once again create one of their plot twists. Katnis and Peeta, the 2 final contestants, are from the same district, and have been acting as allies the entire game. Neither is willing to live while the other dies. In a previous scene, they had been told that the rules had changed, and that there may in fact be two winners. After being lured to their location in this clip at the cornucopia, the rules are once again changed back to the original game, in which there may only be one winner, implying that one of them must kill the other for the game to end and for there to be a victor. In retaliation, Katnis and Peeta create a plot in which they plan to both eat the poisonous berries and both dies, leaving the game makers with no victor, rather than allow one to die.

This clip can be related to our discussion of the prisoner’s dilemma in class, set up as such:

	Live	Die
Live	(1) Katnis/Peeta	(2) Katnis/Peeta
Die	(3) Katnis/Peeta	(4) Katnis/Peeta

There are two players, Katnis and Peeta, and one “government” (the game maker). Additionally, there are two choices, to die, or to live. The pareto optimal choice that would make both players the best off they can be is for both to live (box 1). However, the rules of the game are currently preventing them from reaching this position. They are also not willing to go to either box 2 or box free because they will not let the other die. Therefore, they have instead chosen to both die (box 4) making this their dominant strategy equilibrium, one that is not a pareto efficient outcome). This choice is also detrimental to society- both the districts and the capital. It is bad for the districts because they lose their members and children. It is bad for the capitol because it is a sign of rebellion, and ruins the outcome of their game. Therefore, intervention becomes necessary by the game markers (mirroring intervention by the government). Since allowing private control of the outcome by the contestants hurts them, the game makers decide to end the game and allow both players to win. This moves us to the pareto optimal outcome in the set-up (however we will learn that this is not in fact “optimal” for the capitol in the long-run, but that is another story for the next movie...)