Professor Dominance

As an econ TA, I often feel like I have complete autonomy over my discussion sections. I write my own syllabus and determine how to allocate points- whether between quizzes, homework, or participation. I also design my discussion sections and can choose what I want to talk about and whether or not I will give practice problems. Besides one brownie meeting at the beginning of the semester, the professors almost never ask for updates on how sections are going. Each TA, who is the agent in this scenario, is fairly insulated from the principal, the professor, and I have never heard of a professor disciplining a TA. You could assume that TA’ing is a model of agency autonomy.

However, another model, that of professor dominance, may actually lead to the same results. There may be ex-post sanctions that have created ex-ante incentives to do what the professor wants. For example, when it comes to grading exams, it is in my rational self-interest to not follow the key and instead grade very easily and give my students lots of points. This makes me look like I’m amazing at teaching and saves time when grading and with student exam appeals. However, when I do grade, I try to strictly follow the key, even if it means taking off lots of points. This is in the interest of the principal. Therefore, there must be some ex-post sanction that gives me an ex-ante incentive to follow the key. This could be the fact that other students might complain about my grading to the head TA or professor, and I could get in trouble and potentially lose my job. Through the feedback of students, the professor is able to monitor the results of my work and constrain my actions in this manner, instead of monitoring my inputs, which is way more inefficient. Thus, the model of professor dominance may be more accurate of TA’ing than the model of agency autonomy.

Tabling and the Prisoner's Dilemma

As the UVA a cappella concert season comes to an end, I think back to two weeks ago when my group, the Academical Village People (AVP), was having its “concert week,” which the week leading up to our concert that we have every semester. During this week, we do things like hold extra rehearsals, post flyers, and most importantly, table on the Lawn every day of the week selling tickets. What should be my favorite activity of concert week (selling tickets) is actually my least favorite, and it’s because the Prisoner’s dilemma always rears its ugly head.

In this case, there are two choices for each group member: put group interests first and table as much as he can (cooperating), or only table when he feels like it (defecting). The ideal strategy is that every member of the group tables as much as his schedule permits and is willing to sacrifice other commitments for the sake of the group. Every member is better off under this strategy because it reduces the workload and keeps opportunity costs of tabling low for each individual member. Also, the more people we have at the table at a given time, the more comfortable and enthusiastic we are about advertising our concert, which leads to greater publicity and better sales.

Unfortunately, it never works out this way. The concert week schedule is demanding, and the rational group member doesn’t want to fall behind on his schoolwork and other commitments. He also knows that there are members who get a lot of utility from tabling and selling tickets, and thus has an incentive to free-ride. Therefore, the dominant strategy is to defect—or only table when he feels like it—because he can maintain his normal routine and still enjoy the benefits of putting on a concert. However, this forces the members who do table to sacrifice more of their time and even skip class and forgo sleep to pick up other members’ slack. These members then become frustrated, causing group morale to suffer. 

With that being said, I’m not out to get my singing brethren—ticket sales were great and we put on a fantastic concert. But if any future AVP member reads this, I urge them to avoid the Pareto-inefficient outcome of choosing not to table and COME TABLE!!!! Please. It makes it easier on all of us.

Downs and the German Election

On September 24th of this year, Germany had its 19th "Bundestagswahl," or federal election. Angela Merkel was re-elected to a fourth term as prime minister, as expected, but the composition of Germany's parliament shifted dramatically. In German elections, a party can claim seats in the parliament after having won merely 5% or more of total votes. This means that several parties are present in the German Parliament, whereas in the US there are two major parties, and representatives of smaller parties are few and far between. After learning about the German parliamentary system, I questioned whether Downs' assumptions that policymakers operate in a single-issue policy space and a duopoly is applicable to democratic governments outside of the US.

The relatively new alt-right party of Germany, Alternativ für Deutschland (AfD), won an alarming 12% of votes in this year's elections, marking the first time they will ever be represented in the German parliament. This sounds pretty scary -- AfD is known for its populist ideals and islamophobia. These election posters (with translations in the article) are indicative of the kind of sentiment that AfD is spreading in Germany. However, relating back to downs, the German parliament is also comprised of coalitions; the 5-6 parties usually present in parliament form alliances with the other parties that are roughly aligned with their views, so that they can reach a full majority on policies together. This essentially turns the German parliament into a duopoly just like the US by creating two large coalitions that are either more conservative or more liberal, showing that Downs' theory that all legislators can be roughly categorized on one dimension holds true for Germany as well. Furthermore, in the case of this year's election, we can have comfort in knowing that none of the parties in Germany's parliament intend to form a coalition with AfD, leaving them without an alliance and with little power.

Voting

Several weeks ago, during the elections in Virginia, I had the privilege of helping a friend mail their absentee ballot. It was about 1 week before the election, and my good friend was very excited about voting. I was trying to calculate my friend's marginal cost and marginal benefit of casting their vote to try to see their rationale for voting.

My friend had a marginal cost that was easily able to be calculated. The total time it took to fill out and mail the ballot was about 1 hour. I will say my friend is moderately valuable and that 1 hour of time would cost $20. Here is where I was caught off guard: My friend paid $25 for next day express shipping to ensure that the ballot would arrive on time. We were over 1 week away from when absentee ballots had to be postmarked and my friend still decided to pay a rather hefty price to "guarantee" their vote would be counted.

According to the first equation we looked at with just E(MB) compared to MC, my friend would absolutely not vote because of how small their p would be. However, once we include another variable D we will call "duty", we can see my friend's rationale for voting.

Now we can have an equation such as: E(MB) + D > MC. My friend cited social pressures and a moral obligation to defend paying nearly $50 to cast a vote. My friend said she felt like everyone in her politically active friend group would judge her if they found out she didn't vote, but she said her biggest reason to pay so much was that she does not like the way recent elections have gone and feels a moral obligation to stop the evils she perceives the opposing party inflicting upon people. Therefore, the social pressure and moral obligation to vote is greater than the nearly $50 it cost to vote.

Another interesting note is that every person in her local election was running unopposed.

I’m a Bureaucrat: A Confession

I am employed by the University of Virginia as a Rotunda Ambassador, one of those friendly people at the desk who greets guests. With the University being public, that makes me a government official. I will not deny that I am sometimes unmotivated to do a good job, but luckily I have a certain level of insulation to accountability that comes with being a bureaucrat, according to Niskanen.

My output is definitely nonmarket. I’m supposed to greet visitors and provide answers to their questions to the best of my ability. This is not measurable. This allows me to be bad at my job, as there isn’t any concrete way to hold me accountable for my abilities at the end of the day. There is also no competition in the services I supply. If guests are dissatisfied with my greeting and my information, that’s too bad for them. There’s only one Rotunda and I’m the greeter. Last is the compensation structure. Unsurprisingly, I get paid by the hour. There are days when nobody visits, like when I worked during fall bre…ahem, reading days. There are other days with many visitors, like parents weekend. I make the same amount of money regardless of how many visitors come, how many people I greet, how many questions I answer, how many times I tell people that the color of the wall is pale moonlight. So if you come in the Rotunda and I’m good at my job, then I’m probably in a good mood that day.

(Brief note: the fact that I make slightly more than minimum wage could be a result of UVa, as a government agency, overproducing, if you subscribe to the Niskanen "Traditional View")

Committees run the agencies, but party leadership runs the committees

Weingast and Moran discussed how specific Congressional committees are the ones who have control over federal agencies. But who controls the committees and the Congressmen who make them up?  In Weingast and Marshall's paper, they assume that parties place no constraints on the behavior of individual representatives. That is objectively false. Party leadership has a similar system of rewards and sanctions that encourages their members to vote in line through threatening their probability of re-election. These fall in three main categories, the last of which is relatively new and currently evolving: 1) Committee assignment  2) Campaign funding and 3) Threat of a primary challenger.

We know elected officials have one main goal: to get re-elected. To do that, they obviously need votes, which are obtained mainly through providing benefits to their constituents and campaign funding. Constituent benefits are delivered by passing legislation favorable to your district. Being on the right committee is crucial to impacting issues important to your district. Though members state their preferences at the beginning of their term, at the end of the day, the majority party leadership determines committee assignments. The major determinant of placement has shifted from seniority to party loyalty. Those who vote against the party too often can lose their membership on valued committees, as Representative Tim Huelskamp of Kansas did in 2012 when he was removed from the budget and agriculture committees. This is why we currently see so many party line votes and why the most outspoken critics of the current direction of the Republican Party are Senators like John McCain and Jeff Flake who are not seeking re-election and thus don't face the same incentive structure party leadership relies upon to force conformity onto their members.

Dam Rent-Seeking

Kaligandaki Hydro powerplant (Syangja District)

Recently in Nepal there has been a greater push for the creation of more hydro-power plants to help increase the supply of electricity. Until this past year, up to 20 hour periods per day of load-shedding were common across the country. This is not surprising given an average customer increase of 9% per year and much slower growth, almost stagnant, of the power grid. The state owned Nepal Electric Authority (NEA) has started to build more hydropower-plants in recent years to try and catch up with this demand.

The plants are built on a bidding process by contractors where rent-seeking is prevalent. Suppose that NEA decides that on River A they are going to build a hydropower station they will then start the process of looking for a contractor to build the plant. As soon as contractors get word that a new station is being built they immediately are in contact with directors at NEA and ministers to start offering employment for family members, fancy dinners, and even straight out cash bribes in order to win contracts. This leads to an increase in costs bared by the contractor which they then usually pass on in their bid, which usually gets selected. Upon completion, this higher cost of building the station is passed on by NEA to the consumers, the Nepali people, as higher price of electricity. In the end, society's welfare comes at the expense of resources being diverted from other uses in the economy.

Not Your Typical Simple Majority

A few weeks ago my sorority voted on the slate for next year. The slate consists of all of the exec positions such as President, Vice President, Secretary, Treasurer, etc. A committee puts on interviews beforehand for each position and then combines the people they think are best suited for each job to create the overall executive "slate". Everyone then comes together to vote (voting is required by everyone) on the committee's chosen slate instead of voting on each position individually. The downside is that if the slate doesn't pass, everyone has to stay while all of the candidates for each position make a speech and we vote on the positions individually (this is very time consuming). 

Our process is pretty different from other chapters, but another major difference from many elections is that instead of requiring a simple majority for the slate to pass, we require a vote of 2/3 of our chapter. Buchanan argues that different issues require different voting thresholds. Since the new slate is a very important part of the chapter-they represent our group and make important decisions-we require a 2/3 vote. Looking at the graph below, it is easy to see how why we have this requirement: 

There are two types of costs: Decision making and External. Decision making costs in this case are the costs of the large group coming together and making the decision on a vote. They are increasing at an increasing rate as the required amount of voters needed to pass nears unanimity. External costs are those that are imposed on people as a result of the actions of others. An example is if everyone is required to sit through hours of speeches and several rounds of voting if 1/3 of people vote the slate down. In this case, external costs are high. When the costs are added together and minimized, Na* (the optimal number of voters needed to pass the slate) is larger than simple majority, which is why we have the requirement of 2/3 of voters to pass the slate. 

Low Carbon Emissions in Denmark

Last semester I studied abroad in Copenhagen, Denmark. Copenhagen is well known as being a very bike friendly city, where half of its residents bike to and from work everyday. People even refer to Danes as the "Biking Vikings". The main motivation for biking in the city is to reduce pollution from cars. In fact, Copenhagen wants to become the first carbon neutral capital in the world by 2025. In order to reduce the negative production externalities of vehicles, Denmark placed a very high tax on owning them. Recently, Denmark has decided to cut taxes on the cheapest cars from 105% to 85%. 

Although Denmark's government was involved in reducing the externality, Coase would argue that clear property rights should allow parties to negotiate an effecient level of cars and pollutants in the city. However, the assignment problem of deciding who specifically is being hurt by the pollutants and how much they are value would bring about issues to his theory. From what I witnessed, Danes were very enthusiastic and willing to bike everywhere, even in cold and windy weather. Many bike stores even offered student deals so we could rent our own bikes for the semester. This allowed me to join the Danes in the bike lane.

The Fall of Communism

As I have done before, I enjoy applying theories of Public Choice to what I am learning in my Fall of Communism class. The Soviet Union’s collapse was ultimately a result of its leaders acting in their own self-interest. Given opposition movements in Eastern Europe, domestic reforms and openness, and mounting nationalism in Soviet republics, the Communist Party leaders realized that they could best preserve their power by becoming what the people wanted, thus dissolving the Soviet Union on December 8, 1991. In Armageddon Averted, Stephen Kotkin writes, “It was the central elite, rather than the independence movements of the periphery, that cashiered the Union” (107).

Ideology aside, Soviet leaders were rational, utility-maximizing agents acting in political markets, just as Buchanan and Tullock established as the foundation of public choice economics. More specifically, their actions are consistent with Downs’ assumption of political actors as vote-maximizers. Domestic reforms (in hopes of rejuvenating communism) in the late 1980s increased the channels through which citizen voters could reveal their preferences, including through public gatherings, published letters to the editor, and independent political organization. Foreseeing their ideology’s doom, Soviet leaders abandoned the Communist Party to become nationalist leaders. This continuity was true for eight out of the fifteen newly independent nations. Consumed with uncertainty, however, the following years would be plagued with policy zigzags and troubled reform. As Downs argues, these individuals formulated policies to win elections rather than won elections in order to formulate policies. Ex-Communist leaders were vote-maximizers.

Free Riding and High School Sports

My high school had over 3,000 students. Sports were a huge part of our high school culture. My field hockey team only had about 25 members. With so few teammate, you had to give your all in practice or you ran the risk of coach turning practice into the sprinting scene from Miracle. The small size of the team allowed us to overcome the free rider problem, making us a more effective group. Our practices were tough, but truly prepared us for our games and this lead us to States.

Many of the girls on field hockey would run track in the off season to stay in shape. Our track team had almost 100 people on it, and it was most athletes’ secondary sport. On this team, the free riding problem was rampant. With 100 athletes and only 3 coaches, there was no way for the coaches or even the captains to ensure each teammate fully participated. Many times, on our “fun run” days, there would inevitably be kids who would hide around the corner away from the coaches’ view while the rest of the team ran. They would wait for everyone to come back, and then fall in line as if they had ran the whole thing! The large size of the team encouraged the free rider problem. Additionally, there were no selective incentives. Track tends to be an individualistic endeavor. An individual, not the whole team, qualifies for States. So it was difficult to get individuals who were not as heavily invested in track to pay in to the common goals of the team. Who knew high school track teams could be examples of latent groups! 

Social Incentives and the Gubernatorial Election

Tomorrow is November 7th, which means that Virginians will be flooding to the polls to cast their vote in this year's gubernatorial election... right? Well, maybe. Gubernatorial elections in Virginia have a history of drawing substantially fewer voters than presidential elections do. Johnson explains that the decision whether or not to vote is based on several factors, including the marginal benefit and probability of casting a decisive vote, as well as the social climate that the potential voters are surrounded by. In most cases, it is actually irrational for a person to vote because the chance of their vote being decisive is infinitesimally low.

Polls for tomorrow's election show that Ralph Northam and Ed Gillespie both have a fair chance of winning, with the latest poll by Siena Research Institute showing that Northam is leading by just 3%. This means that the probability of casting a decisive vote is certainly greater than it would be in, for example, Texas' gubernatorial election in 2014. However, Virginia's last gubernatorial election, in 2013, was very closely contested as well and still only drew just over 40% of eligible voters to the polls. I would predict that tomorrow's turnout would be similar, if it weren't for the way that last year's Presidential election went. My theory is that since last year's election was such a dramatic shock to much of the public, Virginians will approach this election with new zeal. I personally have experienced much more social pressure to vote for this gubernatorial election than I've seen for any other (granted, this is the only gubernatorial election that I've been old enough to vote in). This social pressure has been applied in the form of incessant reminders from friends, offers of transportation to polls, and emphatic phone calls from my mother. All of these factors have made the utility that I will get out of voting tomorrow increase, because I will be able to tell everyone to calm down because, yes, I did vote.

My Latent Family

When professor Coppock spoke about latent interest groups as ones that had a lot of potential but were very difficult to organize, I couldn’t help but think of my family. Just for some context, I have 2 parents, 9 siblings, 6 in-laws, and 25 nieces/nephews. We make an interest group of our own in which membership is made possible by birth or marriage, but only those who really buy in (invest time, energy, and oneself in other members of the family) really reap the benefits of being part of a family. Those who buy in end up making many various connections in fields ranging from pastoring to beer brewing, as well as receiving the great benefits of community and endless entertainment from some very eclectic people. However, even organizing those who buy in to this group is extremely difficult because of a few problems. 

This biggest issue is communicating a single message to every single member in a timely fashion. One of my brothers got married this past weekend, and the process of gathering together every single child, sibling, and cousin (totaling about 50 people) together to take a few pictures took about 15 minutes. When my brother’s wife’s family (about 12 people including cousins) gathered for their photo with the newlyweds, it took them a little more than a minute to get everything straightened away. As a latent group, it took a lot to mobilize my family to do a single task for a few minutes. As soon as the pictures were taken, everyone scattered and it became nearly impossible to do anything together with every single other member present. Even gathering everyone together for the wedding weekend was extremely difficult, as we had two families coming from overseas and someone should have taken the lead in coordinating all of our actions. However, with no centralized leader established (as there would be in a privileged group), we had to resort to using a group text to determine who would do whatever needed to be done (airport pickups, child watch duty, etc...), which often led to miscommunications. 

However, by the end of the weekend, all the seemingly insurmountable challenges of mobilizing my latent family were totally worth overcoming for the wonderful benefit that is the joy of each other's company.

Pizza Hut and Hotelling

This past spring, Pizza Hut opened a new dine-in location on W Main St. A few weeks ago some friends and I decided to stop in for their Thursday night karaoke (I highly recommend). As we left I wondered why anyone would go to Pizza Hut beside karaoke night when there are other pizza places that are much closer to, even if you’re coming from the opposite direction we came from. To the east of Pizza Hut along University Avenue is Mellow Mushroom and Christian’s Pizza, and only 100 yards away to the west along W. Main St. is Benny Deluca’s.

Hotelling’s law says that a business should get as close as possible to the largest number of customers in comparison to other firms that sell homogeneous products. If we view the route from which customers approach Pizza Hut as linear, meaning all customers must come from along one end of W. Main St. or another, and we assume all the pizza places on the street sell homogeneous products (very debatable, but helpful to assume), then Pizza Hut chose a location where few people will dine because almost everyone coming from either side will come upon another pizza place before Pizza Hut. If Pizza Hut had chosen a location to maximize customers based on Hotelling’s law they would have built their location either just to the east of Benny’s on West Main in order to capture all pizza lovers coming from the direction of downtown, or built along University Ave to the west of pizza places on the corner to capture people seeking pizza coming from Rugby Rd and UVA. The city is obviously not two dimensional and there are a lot of other factors involved in choosing a store location, but Pizza Hut put itself in a tough place to draw in diners traveling along W. Main.