Spacial Location Theory of Tampa's Designer Stores

As someone who loves to spend my paycheck shopping for clothing, I frequent the Tampa International Mall quite often when I am home for the summer or on breaks. I love Nordstrom, Lululemon, and mainly boutique stores, which happen to be on all different sides of the mall. As I walk from one end to the other, I have noticed how close together the designer or higher-end stores are in comparison to your "lower or average-priced" stores. In fact, Gucci, Louis Vuitton, Tiffany's, David Yurman, Michael Kors, Coach, Saint Laurent, Swarovski, Golden Goose, and Tesla are all located on the second level near the food court right next to one another, just within a few steps. 

This is a perfect example of Spacial Location Theory. Spacial Location theory is the idea that if there are two firms with identical output, uniform distribution, and spatial mobility, they will eventually come to locate next to one another in the middle of a specified distance to steal customers from each other and limit the distance the average shopper has to walk in order to shop in their store. If you think of International Mall as its own community, there is in fact an optimal place for these types of stores to set up as they try to poach other shoppers interested in designer items -- the exact center of the mall right next to one another. And they did just that. These designer stores have close to similar outputs (high-end clothing, shoes, and jewelry) and are drawing a similar demographic of people who want to exemplify they have money to spend on their appearance. Setting up shop right next to one another shows that these designer companies understand the need to "race to the center". Instead of being scattered around the mall, they can all converge to the median and maximize their profits, and individuals chose these stores to maximize their utility. 

How much would you pay to change the stock market?

Through the first 623 days of their respective presidencies, the stock market has looked quite different for Donald Trump and Joe Biden. Under the Trump Administration, the S&P 500 (the most common index used when determining the market’s health) was up 28.18% on his 623rd day (which is better than the average 623 day period; the average 623 day period is about (about) 16%). Under the Biden Administration, the market was down, -0.21%. Factoring inflation, this real loss is much greater, but nominally, the difference between the two is 28.39%. Now, think about this in terms of how much you would be willing to pay to change the outcome of the Presidential election. Of course, who the president is doesn’t directly affect how the stock market goes up and down, but let’s assume you have a stock market obsession; you put $10,000 into the S&P 500 each year, track it constantly, and you think who the President is has a strong, strong correlation to how the indices perform. 

To determine how much an investor would be willing to pay, we have the equations MB > MC, MB = |V2 - V1|, B = MB, E(MB) = pB (E(MB) = Expected Marginal Benefit), and pB - C > 0. From ECON 2010, if MB > MC, the action should be done. So, the Marginal Benefit equals the amount you would pay for each candidate to win. For Trump to have won, the investor would pay $2,818, or the amount his portfolio would be greater (he believes) if Trump had won. For Biden to have lost, he would have paid $21, or the amount his portfolio is down. So, we plug these numbers in for V1 and V2, and get our MB. The MB is $2,839. We know from the reading that p’s value is 1 in 10,000,000; there is a 1 in ten million chance that your vote is the deciding vote. Therefore, pB = $2,839 * 1/10,000,00, or 0.0002839; less than 1 cent. The cost, C, we will assume is $17, or the median hourly wage in 2020. Plugging into our equation, we have $0.0002839 - $17 > 0, which is false. Therefore, voting is irrational even if you put $10,000 into the stock market in 2020. But, the paradox of voting states that there is a positive third variable, we’ll call it “u”, that stands for utility gained from voting, or civic duty. Plugging that in, the equation will look like pB - C + u > 0, meaning that u has to be at least $16.9997. This is important; the way I think about it is, would this investor be willing to pay $17 to put a Donald Trump sign in his front yard? If yes, then voting is rational for him. If not, then it isn’t and the voter is stuck with his portfolio’s losses. 

Irrational Baseball Fans?

A couple weeks ago I read a little a piece in this newsletter that concerned Aaron Judge's home runs. The prices of Yankees seats were going up tremendously, partly because of the chance of catching the record breaking ball that could sell for between $500,000 and $5 million. However, if someone was going to the game just for the chance of catching the ball, it would be an irrational decision. 

The probability of choosing the right seat at the right game and then actually catching the ball is so low that the expected value from just the monetary costs and benefit is non existent. People might have overestimated their chance of catching the game ball (similar to how people might overestimate their ability to affect an election) and bought a ticket based on this. But, I think the real reason that people bought these Yankee tickets was because of the utility of going to the game and the expected utility of even seeing the record breaking homer exceed the cost of the ticket. So in the expression pB - C + D, D essentially outweighs C, as pB is tiny.

Altruism and the Free Rider Problem

    Last week a category 4 hurricane hit my hometown of Cape Coral. It was one of the worst hurricanes to hit the US in decades, definitely the worst to hit my area. Like I said in class my social media has been dominated by images of flooding, boats in people’s backyards, and now pictures of people’s favorite Memories at a lot of places that are no Longer there. Times like this are pretty nerve racking, all my out-of-state friends have been itching to go back home to see what’s left and to help our families who stayed behind. My family is all ok, limited cold water is back and they expect power to return by the 9th of October. It is hard to get food and water before a hurricane because people buy out the shelves in worry. After the hurricane there is a shortage of potable drinking water and food. I have seen a lot of scary and upsetting images but I have also seen a crazy amount of care and compassion. So many people I know have been working for free around the community to help rebuild, have raised money to buy supplies to give out, or are using their boats to shuttle people on and off the islands which no longer have road access to the mainland. 

    The wellbeing of people in the Cape Coral/Fort Myers area is a public good. You cannot exclude people from improving their wellbeing (and I am sure there are some legal routes of harming their wellbeing) and my benefitting from their well being doesn’t take away from my friends benefit. It should then suffer from the free rider problem and people should be hesitant to contribute to the costs of their wellbeing because there is a communal benefit. In our Gruber textbooks, altruism is one solution to the free rider problem. In a totally rationally self-interested world we make decisions based on the costs and benefits to ourselves. But sometimes, and I would push to argue a lot of times, we do care about the outcomes of others. That’s why even when it doesn’t make sense to contribute personal funds there are Restaurants offering free food for as long as they can make it. And I’m sure the economists will say that there are still remnants of the free rider problem, that there is still an under provision of aid, but today I am choosing to focus of the positive. 

The Voting Paradox of the Funk Parents

     “So what even is Public Choice?.” Earlier this morning I was sharing my class schedule with my mom, and she was very perplexed by the idea of this class. At first, when I tried to describe it, she thought like most people, that it was a class discussing economic policies in the political realm. In an attempt to make it more clear to her, I shared some of our topics from class, and we got into an interesting discussion about voting and rational abstention. She explained to me a very interesting example of the voting paradox we discussed in class that has been occurring within our own family.

    You see, historically, my mom has voted republican in most elections, while my dad has voted democrat in those same elections. Both of them vote in the same district of the same state - congressional district 5 of Tennessee. She explained that they are both very aware that when they go, often together, to the polls for an election, their votes cancel each other out. They know their votes aren’t decisive because they know for a fact it was matched by someone else of the opposing party. They see the irony of this and even make jokes about it, so why in the world do they keep voting? According to our readings, they are completely irrational! I asked them about their motivation and they both agreed that out of a spirit of patriotism and an appreciation for our respect to vote, we must go to the polls even if we know our vote won’t make a difference. For both of them, the utility from acting on their sense of civic duty fully outweighs the costs of voting. This does not surprise me at all coming from my mom. I know she receives large utility from doing patriotic things and her cost of voting is relatively low now that she only has one kid at home and works part time. What surprised me was to hear this from my dad. He has to take time away from his work, making the cost of voting relatively high, and isn’t the most patriotic guy compared to most people I know. Regardless, they both must receive a lot more utility than I realized from fulfilling this civic duty because they continue to go year after year to vote despite the high costs and knowing it doesn’t make any difference. 

How to Fake A Simple Majority: Russian Edition

Annexation is a tricky subject in global politics. Annexation defined by international law is as follows: when one country forcibly asserts control and sovereignty over another countries territory. Typically this follows military occupation and is unilateral, meaning that the control is announced by the occupying power; the other party has no say. On September 30 Russia announced the annexation of four Ukrainian Territories, amounting to 17% of Ukraine, land roughly the same size as Portugal. Vladimir Putin didn't use the term annex but rather that the Ukrainian territories have acceded to Russian control. This comes after the results of "sham" referendums held in each of the four territories. In order for these referendums to pass in the regions of Kherson, Zaporizhia, Donetsk, and Luhansk only a simple majority is required. The results yielded that at least 87% of voters in each province and an outrageous 99% in Donetsk voted for the land they lived in to formally become a part of Russia. 

These referendums, to no ones surprise, simply contained no pretense of legitimacy. The yes or no votes to become apart of Russia had been conducted at gunpoint. The results, intended to reflect the preferences of a majority of voters living in these four regions on the item of becoming Russian citizens, fail to do so accurately. The median voter theorem states that if voters are fully informed, their preferred outcomes can be arranged along one dimension, if each voter has a single most-preferred outcome, and if decisions are made by simple majority rule, then the median voter will be decisive. These assumptions are met and this  shows just how desperate Russia is. Not only does the coercion at gunpoint block the true preferences of the Ukrainian citizens but reveals that Russia acknowledged the real simple majority would not result in their favor. The Kremlin and the puppet leaders installed in the regions realized the decisive median voter would not vote in their direction, forcing them to strongly coerce the voting citizens. 

It's hard to fake a simple majority vote when the whole world knows the true preferences of the citizens you are trying to coerce. Russia tried to fool the world last week, the same way they did in 2014 with Crimea, once again the world wasn't fooled. 

Set Lists and Voting Systems

 As the Music Director of the Virginia Gentlemen, I am tasked with producing the setlist for the semester. When elected, I decided to take a democratic approach for song selection. Each member got to add 2 songs to the playlist, of which we voted on in order to determine the setlist. I was hoping to get at least 4 songs picked by this method. However, I did not specify how I would be counting votes, allowing for flexibility on my end. 

The members, or rather voters in this poll were told to rank their top 5 songs. My original plan was to assign points to each song based on these preferences, 5 being the highest ranking song for an individual, and 1 being the lowest, a system which I now know is referred to as the Borda Count (in this case with multiple winners). Punching all of this into an excel sheet, there were four clear songs to be chosen based on the high amount of points received. However, I did not like one of the songs that was voted through. So, using the flexibility of not revealing how votes were to be tallied, I switched the voting system to a multiple-member plurality. This way, the four songs that received the most votes were voted through. I was much happier with this setlist, and given the small number of voters in this system, I think a plurality was the correct method to use. Due to the small population size of the Virginia Gentlemen, the distribution of music preferences tends to stray from normality. By using a plurality system in determining the setlist, I appealed to the largest amount of the population. It was interesting to see how employing a different voting system resulted in a substantially different outcome. It is interesting to think that for large scale elections, the method used really has an impact on the overall result, just as it did in the small population of an acapella group. 

The Somewhat-Less-Irrational Irrational Voter

Notice: The candidate referenced is running in the 2022 Arlington, Virginia election. The sample is slightly biased, it is a convenience sample. We also cannot rely on the moms (or any human) to fully know the details of their utility functions. 

Scene: Act 1, scene 6. Setting: My living room. Appetizer hour. Book club. Cast: Juliette, 5 NoVA moms. 

** Screen flashes: "Based On Real Events" 

NoVA Mom 1: Juliette! You're of age! Are you voting in the upcoming election?

Juliette: No, I am a rational voter --or, I guess, a rational non-voter! I know my vote isn't decisive, and for me, the marginal cost of voting exceeds the marginal benefit, so I don't vote. 

NoVA Mom 2: *scowls* It is your civic duty! We have the right to vote, so we should vote!

Juliette: You have the right to own a gun, NoVA Mom 2, so do you? 

NoVA Mom 2: *silence* 

NoVA Mom 4: I like to vote.

Juliette: Obviously then, for you the marginal benefit exceeds the marginal cost. If I may ask, what do you enjoy about voting? 

NoVA Mom 4: I like to show what I like. 

Juliette: *perks up* Really?! If you don't mind my asking, what do you want to express? 

NoVA Mom 4: The representation I want. I look for the Ds, and even then, I only vote for them if the candidate is a woman or a minority. Even though Don Beyer is a Dem, he's a white man, so he doesn't get my vote. Nobody does in that race. So much for my education making me an educated voter, this is kind of irrational of me *laughs* 

Juliette: You're not irrational! You're rationally ignorant! You don't have the time to learn about the candidates and follow the events, because you work a full time job. You use expressive voting because you know your vote doesn't instrumentally matter. You derive utility from expressing your preferences, not from influencing the election. 

NoVA Mom 3 (mine): Wow Juliette, you sure are learning a lot in that public choice course! Speak English please! 

Ranked Choice Voting in NYC: The Good, The Bad, and The Ugly

    In class, we've discussed several different voting procedures. Mueller 7.1 defines several different types including majority rule, plurality rule, ranked-choice voting, and the coombs system. In real life, we see all of these different systems used to decide the winners of elections. What we can say for sure is that it is very difficult to decide a winner, and the rules of the election affect the outcome. One type of voting process that is becoming more and more popular is ranked-choice voting (RCV). With RCV, voters go into the booth and rank the candidates. In round one, if a candidate earns a majority of first-place votes, they are declared the winner. If not, then the candidate with the fewest first-place votes is eliminated and their votes are then distributed based on those voters' second-choice candidate. This process is repeated until a candidate has a majority. 

    This voting process has become more and more popular in the US. For instance, in 2021, New York City used RCV for the first time in its elections. New Yorkers were able to rank their top five choices on their ballots for each position. This election was especially important for the mayoral primary which was won by less than one percentage point. In NYC, this voting method has both positive and negative attributes depending on who you talk to. An analysis of RCV in NYC shows that this voting method led to fewer "inactive" or "wasted" ballots (in other words, a ballot that did not rank one of the two candidates left after all elimination rounds). This means that with RCV, more citizens' ranked votes played a role in deciding the final outcome of the election - 15% of ballots were inactive with RCV during the mayoral primary in 2021 as compared to 33% during the 2013 mayoral primary. In many ways, this is a positive attribute of RCV. There were many people in New York, however, who were concerned about the system disenfranchising voters who may not have time to learn the process, such as low-income voters. In fact, there were many members of the City Council's Black, Latino, and Asian Caucus who opposed RCV, calling it sophisticated voter suppression. They even sued to delay the use of RCV, though this was unsuccessful. Overall, RCV may be a good thing as it results in a Condorcet winner a greater amount of times than other voting methods like majority rule. However, when it comes to its actual implementation, issues like voter education and voter suppression may cause many citizens to oppose the system. 

Rational Ignorance in Education

 This past Friday, I was able to talk on the phone with a good friend of mine who is in his first year of medical school. As he was telling me about how it was going, he explained that this first chunk of classes he is taking is all introductory and is all pass/fail. As such, when he's been studying, he's had to take mind of how to spend his time so that he can do well enough to pass the classes without spending way too much time on school and getting a better grade than he needs. Essentially, he is having to calculate his marginal benefit and marginal cost curves for studying, and these curves look different than they typically would for him in a school setting because all he needs to do is pass these classes. 

Rational ignorance in the case of school, especially med school, where students are seeking to learn to equip themselves for a profession in which lives are at stake, seems to be an important area to examine. If future doctors are in positions, at least early in their schooling, where they don't need to learn the material really well, but instead just need to learn it well enough to pass. For this to be the case, it seems important that a passing grade would ensure students know the material which is important to know really well. I am confident my friend will be a great doctor one day, but if there are other students who are just skimming by (to the extent that you can skim by in a med school setting), it seems important that these students would still be equipped well enough by their schooling to be good doctors. I would imagine most people would prefer their doctors to be people who really learned the important information well, rather than just well enough to pass. As such, it seems important to incentivize learning in a way where the rational ignorance of these students is as low as possible (while also not making it so difficult that the supply for doctors cannot be met). On the other hand, as this article explains, time spent studying can take away time spent learning to be with patients later in med school, meaning students may have to allow for more rational ignorance in one part of their studies to be better suited for another part of their future career. It's a complicated issue, but one worth thinking through well.

Extremists and Abstention: The 2016 Election

 With all of our discussion about which candidate voters choose or why they do not cast a ballot at all, it seems fitting that we discuss the 2016 election of Hillary Clinton vs. Donald Trump. It seemed to me, and to many Americans, that this election was an extremely divisive one. With voter preferences on their extremes on each side, I would categorize the voter preference distribution for this election as bimodally distributed. The Democratic and Republican party showed no sign of wanting to associate with each other, and voter preferences were very opposed and stubborn on either side. Many of the moderates in the election decided to abstain from this election also. The extremists on either side were unwilling to vote for either and there seemed to be a slew of uncertainty of information. In fact, as Downs suggested, this refusal to converge seems to be a spark for the “revolution” on January 6th (but that would take a whole new post to get into).

    Another important part of this election as it relates to class is the rational abstention that took place in the 2016 election. In this election, 25% of people that did not vote cited “dislike of candidates”; this percent grew by about 200% from the 2012 presidential election. Downs insinuated that where elections can start to break down is when people start voting for candidates based on personality instead of issues, but I wonder what he would say about abstaining based on the personality of candidates. I would normally say that when voters abstain, it is detrimental to the democratic process because the preferences of these voters are not known. However, in a case where each candidate seems to be at an extreme, I question whether abstention is actually a more powerful way to demonstrate their preferences. It would show that there is space for a new, moderate party to be created that would either garner a large number of the moderate voters or influence one of the parties to start to converge. 

Rational Ignorance and Healthcare

    When we were discussing the idea of rational ignorance in class, I immediately thought about healthcare. As I'm sure everyone knows, healthcare is extremely complex and difficult to understand for most. There have been recent initiatives that you can read about here from NPR to increase price transparency, but as the researcher from the article says, "there is data out there, it's just not accessible to mere mortals." Finding the data and genuinely understanding it is something most of the American population is not able to do. Personally, I am lucky to be on my parents' insurance until I turn 26 -- for this reason, you could definitely call me ignorant when it comes to healthcare. All I know is I need to bring my insurance card and money for the copay when I have a doctors appointment. In economic terms, my optimal amount of knowledge is very little, and my optimal amount of ignorance is very high. This is because, since understanding the healthcare industry would take so long, and it is not really necessary at this stage in my life, the marginal benefit of trying to learn about healthcare, prices, etc. is less than the marginal cost, and the opportunity cost is very high as well, because I could be using my time more efficiently doing other things such as studying for classes. 

    In a few years, however, I will be off my parents' health insurance, and I will be on my own in understanding more about the healthcare industry. So despite the fact that my optimal amount of knowledge is so low right now, it will get a lot higher a little bit too soon. For people who do not have health insurance, similarly, it is rational to have more knowledge than ignorance on this topic in cases where they need to go to the doctor or have a special operation. While there are many initiatives to make the healthcare industry more transparent and understandable to the mere mortal, this will be an extremely long and drawn out process. When thinking about rational ignorance in the healthcare industry, it is clear that the level of rational ignorance varies for individuals at different times of their lives. Many of us are lucky enough right now to have a low optimal amount of knowledge, but before we know it this will no longer be the case.

Information Problems, Rational Ignorance, and Online Privacy Warnings:

    Most of us use the internet every day, usually from a single browser, and we have all come across privacy warnings on the various websites we visit. The US has less stringent requirements than some other countries, so we get fewer legally required pop-ups, but we are all at least vaguely familiar with the concept of “cookies” and warnings like this:

We value your privacy

We use cookies to enhance your browsing experience, serve personalized ads or content, and analyze our traffic. By clicking "Accept All", you consent to our use of cookies. Read More

This message is most often accompanied by three options: Accept All Cookies, Reject All Cookies, and Customize. As far as I understand it, some cookies are used to improve the functionality of the website and others are used for marketing and analytics. The site will save your login information so that you don’t have to type it out every time, or it will save your progress on some aspect of the site. Very useful. We want these. At the same time, some cookies contain personal information that can be used in a more manipulative way. For example, Google will track your spending habits across websites in order to serve you ads that you are more likely to engage with, potentially manipulating you into spending money you would otherwise have saved. (I don’t actually know if Google uses cookies or some other user-tracking mechanism, but the result is the same). 

The fact that some cookies might benefit the user and some might work against them makes the Customize Cookies option appear enticing, but it poses an interesting informational problem for those utility maximizers among us. Basically, it would take a large amount of time and effort to parse out which cookies are beneficial to the user and which are not for every website, not to mention the time spent physically customizing the cookie options on each of those websites. For many, it is rational to forgo learning about cookies and how they are used in favor of one of the more extreme, but less involved, options of Accept or Reject, even if it results in a sub-optimal “consumption” of cookies. Just like voters who have a low marginal utility of learning a lot about the candidates they vote for, internet users have a low marginal utility of making an informed decision about which cookie option to select, especially since the costs of poor cookie allocation are so abstract and difficult to identify.

All of this shows that the laws around internet cookie disclosure do a poor job of taking into account people’s incentives. The idea behind requiring cookie notifications is to give consumers more control over the information they give away to the websites they visit. While it’s better than nothing, the default for most browsers is still to accept all cookies. So, a user who rationally chooses not to engage with the privacy warnings will end up with a poor allocation of cookies more often than not. In this case, a libertarian-paternalist approach might be more appropriate. That is to say, if the default cookie allocation were set by law to only accept cookies that improve web functionality but reject other kinds while still giving consumers the option to customize their cookies, we could better approach an equilibrium cookie allocation without increasing the informational costs of cookie selection.

Proportional Representation & Hitler's Rise to Power

In terms of intended outcomes, the Weimar Republic was a very democratic society before its collapse at the hands of Hitler in 1933-34. Women and the working class were given the right to vote in the proportional representation system, a level of new enfranchisement that transformed the voter distribution of Germany's electorate. A multiparty system emerged with parties like the Social Democratic Party, the German People's Party, the National German People's Party, the Centre Party, the Communist Party, and many many more. According to Anthony Downs, a massive change in the voter distribution means that "existent parties will probably be unable to adjust rapidly because they are not ideologically mobile". In the case of Weimar Germany, this inflexibility led to the rise of new opportunistic parties, like the National Socialist Party.

Under proportional representation, it is much easier for a society to elect extremist voices, like Hitler. Because no one is required to achieve a majority, PR can be more representative in both a good and bad way. In 1928, the Nazi party was not represented in the Reichstag. But in 1930, the Nazi Party became the 2nd strongest party in the Reichstag with only 18.3% of the popular vote. By 1933, the Nazis were the most powerful party with 33% of the vote. Hitler achieved this popularity with a new vision for Germany that won over the growing middle class as well as vital supporters in Germany's ruling class. The PR system in the Weimar Republic was highly unstable as parties had to constantly form coalitions, adjust to the entry of new parties, and formulate unstable policy. In this type of instability, Anthony Downs argues that, "a clique of underdogs seizes power" and a "reign of terror" occurs in which "new governors want to eliminate their predecessors". Through political revolution exemplified in the rewriting of the constitution, Hitler eventually achieved general popularity in his construction of a German "National Community" and executed his own reign of terror apparent in the burning of the Reichstag and on the Night of Long Knives.

We often assume that more democracy and more representation (offered by a system like PR) is better for society. However, we must also address the fact that more representation means the validating of voices on the extremes and the facilitation of their rise to power.

Rethinking the Decisive Voter

    This week, I’d like to dedicate a few paragraphs to rethinking the idea of the single decisive voter, and the implications of there being many decisive voters on the cost-benefit analysis of voting. In public choice, we understand that, in an election that is not decided by a tie-breaker, the decisive voter is the winning party’s (n+1) voter to the losing party’s collection of n voters. The median voter theorem teaches us that this (n+1)th voter is the median voter, the central position that politicians rush towards in order to collect the majority of voters before election day. Now, consider a scenario in which candidate L has secured the vote of all voters to the left of M (the median voter), and candidate R has secured the vote of all voters to the right of M. In this tie-breaker voting scenario, if R secures the vote of M, he wins. What happens if one voter (call him a) who had previously decided to vote for R, decides to abstain from the election? The position of M shifts left by a hair, candidate L secures the vote of M, and L wins the elections.

    So it seems that voter a held a decisive power in the election after all – and, as a matter of fact, so did every other one of R’s voters, (n + M). Ultimately, n of R’s voters were crucial for negating the preferential power of L’s n voters and shifting M to the middle. I believe this broadening of the decisive voter applies even in non tie-breaking situations: in an election where L has n voters and R has n + 1 + ε voters (ε being the number of voters away from a tie-breaking election there were), then R’s n+1 voters were all decisive, and only L’s n voters and R’s ε voters were not decisive. Should one of R’s n +1 voters abstain, one of their voters would shift from the ε category to the n +1 category. All n +1 R voters were crucial for shifting the preferences of the electorate far enough away from L that R could retain the vote of M. In this scenario, the chances of your vote being decisive increase enormously: in an election with 100 voters where R wins with 60% of the vote, the probability of your vote being decisive goes from 0.01 to 0.41, and their marginal benefit of voting is 41 times higher.

    One final note on decisive voting: in a presidential election, which is played out on the stage of the electoral college rather than the broader electorate, many more voters have a chance of being decisive. In this scenario (n + 1) electors of the winning party are decisive electors: meaning that (n+1) of the winning party’s voters in each of those decisive states can be considered decisive. The chance of being decisive in a presidential election with the electoral college now hinges on you living in a decisive state, but the chances of being decisive in those states is now significantly increased.

Ranked Choice Voting in the Oscars: Awarding Mediocrity?

 The Academy of Motion Picture Arts and Sciences (AMPAS) uses ranked-choice voting to decide which nominee will win the Oscar for Best Picture. First of all, ranked-choice voting is not, as Variety claimed in 2020, “exactly” the Oscars equivalent of the Electoral College. But, unlike Variety, many of the critics of this system might actually have a point. Most, like opinion writers in Vox and Business Insider, argue that ranked-choice voting leads to boring, run-of-the-mill movies winning. They lament the fact that more daring movies that would perhaps win a plurality struggle to get ahead in a ranked-choice system. Instead, a Condorcet-winning movie that is tame but would beat the bolder movies in a head-to-head is more likely to win a ranked-choice system. This makes sense because more “moderate” or “middle-of-the-road” candidates tend to win political ranked-choice elections. Indeed, this is what is seen in the majority of recent Oscars Best Picture winners – movies like The King’s Speech, The Artist, Argo, Birdman, and Green Book are all considered broadly liked, but not particularly daring. 

However, as we discussed in class, there is no voting system that guarantees a Condorcet winner will always triumph. In the 1991 Louisiana gubernatorial election, although Roemer was the Condorcet winner, Edwards had enough support to beat him. This likely explains the recent wins of movies like Spotlight, Moonlight and Parasite that were untraditional and beat out more mild movies (e.g., Moonlight beat La La Land). When these movies have enough fervent support they can beat out movies like La La Land that might be a lot of people’s second choice (as Roemer was in 1991 in Louisiana). All this is to say, I think critics of the Oscars have an interesting point, but they can be more careful in decrying ranked-choice voting. While the system does often reward safe movies, I don’t think it’s fair to say that it’s rigged against gutsy movies.

Interested in moving to Nauru?

Nauru is unlike other countries in many ways: they do not collect personal taxes, they have no armed forces, and it is it the smallest island nation in the world (and third smallest nation, only behind Monaco and Vatican City). Another unique characteristic is that they are one of the only countries that use the Borda count in their national elections. In fact, they use a decimalized version of the Borda count called the Dowdall system, so the first choice receives 1 point, the second 1/2 point, the third 1/3 point, and so on with the last choice receiving 1/n points. This modification of the Borda count is extremely unique, and the only other time a similar system was used was in a 1925 Oklahoma primary election before it was ruled unconstitutional by the Oklahoma State Supreme Court.

Nauruans used this rare system just last week when their 7,000 registered voters went to the polls to select a new parliament made up of nineteen members from eight constituencies. Even though they have a very small electorate, voters could still choose from two to four candidates, and in the largest constituency, voters had to rank their preferences for eighteen candidates. (If you want even more economics to consider, think about the costs and benefits of learning about 18 candidates when the unemployment rate is over 90%.) If you want to see the Borda count in action, start arranging your travel now because you will need a tourist visa to be one of their 200 visitors per year! 

Mommy Martha and Her Free Riders

    I live in a house with 5 girls. We are all really good friends and living together has been a blast, but cleaning the house is not. We have assigned days that each of us cleans the kitchen and bathrooms, and every once in a while we will have a "power hour" of cleaning where we vacuum the floors, straighten up the pillows, etc. Overall we are pretty tidy people. However, one of my roommates, Martha, is very tidy. Her room is pristine. Martha is always tidying us and putting things away in the house, and has gotten the endearing nickname "Mommy Martha". While we all do out assigned jobs, Martha does much more. She vacuums everyday, cleans pans that are left in the sink, makes sure that every surface in the house is clear and cleans. 

    This is a class example of the free rider problem. We all want the house to be clean and tidy, but my roommates and I know that Mommy Martha will do the work if we don't. We lose the incentive to work because either way we will have a clean house. This creates a market failure in our house because the cleaning (the goods) is unevenly and inefficiently distributes. To fix this market failure in our house, I found this article on empoweringparents.com. This article helps outline some techniques to encourage children to do their chores. The free rider problem would not be as much of an issue if my roommates and I had greater incentive to do our chores. Who know if Mommy Martha will start paying us to clean our dishes and make our beds, but it would definitely fix me being a free rider. 

Who wants to pay $900 to live in a closet?

 The best time of year at UVA is in the early months of September and October when all of the different friend groups make the daring decision to sign apartment and house leases for the next year. Friends become enemies, enemies become friends. Around this time last year my friends and I hastily signed our lease for a lovely historic UVA home for 7 for a cheap $6480 a month. The quick nature of the lease signing meant we did not have time to determine what each person would pay for rent and finalize the rooms we would live in. Each room had features that made their renter want cheaper rent or made them willing to pay a little extra. One room still needed a door installed and was right by the front door, another was completely covered in windows and had an attached den area, one was basically a closet, and one didn’t have a closet. We all had different desires for the price and size of the room. Originally, we went on Split-Wise, put in the factors and saw the rent distribution. The reasoning behind their breakdown is discussed in this Blog.We realized that it made certain people’s rents higher than anyone was willing to pay (it was outside our triangle of possible choices).     

    Ultimately, one of my roommates was quick to the punch and made her own rent breakdown. She planned on living in one of the larger rooms. She reduced the cost of the larger rooms more evenly amongst everyone, making some of the minor adjustments to compensate for some of the smaller rooms. There were 3 larger rooms, 3 medium sized rooms and 1 small room. Her control over the agenda by choosing what the first thing we voted on was very critical. We decided on a simple majority ruling on the rent. Her offer was on the optimal line between the larger and medium sized rooms, but was not optimal for the smaller room. If the agenda had instead started with a rent distribution that was optimal for the medium and small rooms but not the larger rooms it may have passed. So, our status quo was outside of our optimal area of choices and ultimately the determination of which two groups passed the rent was based off the order of the suggestions. 

Simply Majority Problems in Choosing a Movie

 On Friday, one of my roommates had a bunch of his friends over, and they were trying to decide on a movie to watch. There were 7 or 8 total people, and I'm sure everyone knows how difficult it is to choose a movie with 2 or 3 people, let alone 7 or 8. One person had the remote, and as he scrolled through options, it became clear to me that the situation was an example of Mueller's discussion on simple majority voting systems. 

The indifference maps in this situation would be all sorts of convoluted, especially considering the fact that these folks were not exactly acting in the most rational sense (it was a Friday night). However, Mueller's point was still illustrated. Every time a new option of a movie came up, some people preferred it, and some people did not. There wasn't a single movie that had unanimity, and each time the option changed, it seemed to be a Pareto inefficient move because someone was made worse off. No movie was chosen by the group, and this illustrates the point that a widely accepted decision or even a pareto efficient outcome is difficult with simple majority collective action. Maybe its easier if we let something like this decide for us. But I don't think that would be pareto efficient either. 

The minimax-regret strategy for weekends

As the weekends approach, students are often faced with the decision between staying home, studying, and cleaning or going out, spending money, and making memories. Every week, the student faces a new dilemma in order to balance their academics with social life and extracurricular pursuits; as the semester progresses, the opportunity costs change with it. As midterms approach, students are faced with the choice between doing schoolwork or going to a party and the regrets of the options increase. Students may choose to receive a lower grade on examinations by going out every night, study every night and miss out on bonding experiences, or follow the minimax-regret strategy and balance their nights in and out. 

The minimax-regret strategy is defined by Mueller as choosing the action that minimizes the regret(the opportunity cost);the individual will make the choice that minimizes the maximum loss or regret. According to Resnik, regret can be calculated by, "subtracting the possible outcome for the option from the highest possible outcome among the different options." He applies this formula to investments in stocks, bonds, and mutual funds to demonstrate how the minimax-regret strategist will choose the option with the lowest opportunity cost and the maximum outcome. Without even realizing it, we, as the student body, make this type of decision on a weekly basis. We calculate the maximum outcome of receiving a high grade and the maximum outcome of going out and meet somewhere in the middle to minimize our regrets from how we spent our time during the weekend.

Unincentives of Voting

    We have talked a lot about how there is a lack of incentive to vote because there is such a low chance that one’s vote influences the outcome. This low likelihood makes people believe that their political opinions are not important or influential within the American political system. As a result, we have talked about other reasons as to why people decide to go vote. These include a patriotic view of the elections, a feeling that it’s your civic duty, and social pressures felt by those in certain groups. But something else that hasn’t been talked about quite as much yet are the barriers to entry that are created within the political system. I recently came across a New York Times article detailing in which states it is the hardest to vote. This article is reporting on the findings of a non-partisan think tank that calculated this ranking by looking at many facets of voting, including how early you have to register to vote, if there’s early absentee voting and if individuals can vote by mail. These barriers to entry, create something very similar to the market system, where there are laws that make it difficult to vote thus creating an environment that pushes them out of "market" of voting. This deincentivizes people from voting and pushes back against the previously mentioned incentives that people feel such as patriotism or civic activism. These factors or barriers to entry must be calculated into the formula Ui = p[IVi] + EVi in the EVi portion.  This formula considers both the physical impact that individual has on the outcome (p[IVi]) and the non-physical impact (EVi) or expressive voting has on their decisions to vote. One way that I interpret this article is that the lack of easy voting in some states could add to the feeling of civic duty that citizens in "easy to vote states" feel. This is because they feel that they have it better than others, and thus it creates like a feeling of obligation to vote when others may not have the option due to more rigorous barriers to entry.

    Overall, the impact of the emotional response (or expressive voting) that people have to voting has the largest impact on an individual's decision to vote. I feel that there are these external influences that weren't initially contained in the expressive voting idea, but should be considered as even though there are positive influences on an individual's decision to vote, the potential negative external influences should also be considered when describing and demonstrating the causes of people's voting patterns.

Speak Softly, but Carry a Big Stick: The Prisoner's Dilemma in Taiwan

 Current events have become increasingly centered around military action as of late. Russia in Ukraine and China in the South China Sea provide news outlets with a constant supply of content. As Americans, we have concerned ourselves more and more with our position in a possible conflict with China. We do not fully know their capabilities but recent Naval intelligence models suggest their current standings in relation to our force. China, likewise, does not fully know our military strength but they have a basic analysis. With this in mind, a model can be formed as neither side has perfect information and makes decisions without inter-player communication. Within our Game Theory matrix (fig. 1), the US and China are deciding wether or not to send ships to International Waters around Taiwan, or in other-words act aggressively or peacefully. The Dominant Strategy for both nations would be to send ships and act aggressively. China, however, did not act to their dominant strategy in actuality during Nancy Pelosi's visit. There was a surprising absence of Chinese naval vessels in the waters around Taiwan, but a massive showing of US force (Teddy Roosevelt's Big Stick). While the option chosen in reality was Pareto Efficient (U Agg., C Peace), the dominant strategy equilibrium here would be Pareto Inefficient, as both countries would be better off without either one being worse off. The employment of outside means, such as the UN Counsel, could perhaps create incentives in order to move towards a more Pareto efficient outcome, like in the case of the Taiwan visit. The outside incentives from foreign allies made China take the "peaceful" approach in this instance. As the aggressor, the US gains so much from the International and domestic communities in terms of respect and military support. China has few allies internationally and so must stand on their own. Time will tell what will happen in the future, but for now, there is quite a prisoner's dilemma between the two Superpowers. 

fig. 1

Bad Voters as Pollution

I read an article for a philosophy class last year arguing that bad voters (defined as those who are ignorant, immoral, or irrational), have a moral obligation to not vote. The author casts his case in a duty to "not engage in collectively harmful activities when the cost of restraint is low" (10). That is, if you could drive 2 minutes down the road to a dump, you have a moral obligation to put your trash there rather than in the river behind your house. "We should pollute less because pollution harms us all, but I should pollute less because, all things equal, it is unfair for me to benefit from polluting as I please" (12).

I think that this moral duty is fairly simple and one that we should all be on board with. I think that it is not obvious that the moral duty applies to voting, but that is a philosophical issue, not an economic one.

What makes this argument interesting to the economist is the idea that if voting poorly really is like polluting the polls, then maybe we should apply the economist's toolkit on pollution rather than the moralist's (after all, how many people have stopped polluting because a philosopher told them it was bad?).

The economist would begin—after retching and cringing and crying at the claim that individuals should try to be slightly less self-interested and more moral creatures—with the inference that if bad voting is like pollution, then we should be treating it like an externality. The justification for this is elaborated in the philosophical article as well as the Johnson article we read recently. The social marginal cost of bad voting is far higher than the private marginal cost. Or, framed another way, the social marginal benefit of good voting is far higher than the private marginal benefit. The solution might be a tax-break or subsidy given to people who show up to the polls and pass a certain "political awareness/rationality" test. Alternatively, we could have an idiot-tax on those who try to cast votes and fail a "political awareness/rationality" test. Either solution, as well as any other I've thought of, sounds dangerous to democracy.

Is eDemocracy a viable method for increasing voter participation?

In the 1992 presidential election, businessman Ross Perot won 18.9% of the popular vote, a massive share of votes for a third party candidate. One of Perot's major campaign objectives was the implementation of direct electronic democracy. eDemocracy can be discussed in a variety of ways related to the distribution of media; however, the concept (if introduced) could also have a large impact on the marginal cost of voting. At present, voters must register to vote, drive to the polling station and forgo wages to vote. In order to increase voter participation, advocates of direct eDemocracy argue that SMS text voting, Internet voting, and telephone voting would decrease the value of C in the electoral participation model p*B - C + D.

In this equation, p*B is a minuscule amount in a typical election and civic duty and personal utility are encompassed by D. Proponents of direct electronic democracy suggest that the voting remotely by the click of a button would lower the marginal cost of voting, thereby increasing voter turnout by making the difference between C and D positive for a greater portion of the population. This argument neglects to acknowledge the other important factors that would influence the electoral participation model with the adoption of direct electronic democracy.

First, direct electronic democracy would likely lead to greater skepticism of the electoral process. The execution would involve collaboration with US tech companies who have been under popular criticism. This skepticism would not only deflate p*B but would also negatively impact the value of D as citizens lose faith in the political process. Additionally, the personal utility gained from visiting the polling station and voting in-person would be lost if voting took place entirely online. To avoid this impact, a thoughtful rollout of this proposal would still include in-person voting as an option on election day. While it is easy to get behind any effort to increase voter participation, the introduction of direct electronic democracy would need to be accompanied by extreme security measures (funded by taxpayer dollars) in order to ensure the electorate's faith in the process and actually increase turnout.

The Rationality of Voting in Virginia Elections

As I have been involved in two local political campaigns in the past few years, I have been confronted with the well-known fact that that voter turnout in local/state elections are significantly lower than voter turnout in presidential elections. Data complied by the Virginia Department of Elections shows that the average voter turnout rate (% voting of total registered) in presidential elections since 1976 is 75.2%, whereas voting turnout in non-presidential elections is only 48.1%. How do we account for this? And is there any way to overcome it?

Reading these statistics over the weekend made me re-consider Muller's Public Choice Chapter 14, particularly sections 14.1.2 and 14.1.3, 'A taste for voting' and 'Voting as a game of cat and mouse'. Mueller 14.1.1 clearly defines the rational-voting paradox, and sections 14.1.2 and 14.1.3 seek to in part, explain. Section 14.1.2 discusses how voting can be a private, symbolic act. I certainly engage in voting as a symbolic act, not because I believe my vote will affect the outcome. I don't believe that the absentee ballot that is sitting on my desk as I type this will affect the outcome of the upcoming local election. Rather, I find it much more plausible that voters such as myself vote to be 1) symbolic or 2) to be expressive. Both of these explanations are true in my life- that I vote to express my support on a candidates' position, and vote because I believe it is my civic duty to vote. All this to say that in my life, and in people I have talked to since doing the reading, Muller's explanations appear to hold true. However, Muller notes that as I expect more people to abstain, it becomes more rational for me to vote. Applying this to Virginia elections, since we expect voter turnout to be lower in local elections, it would be more rational for me to vote in those elections than presidential ones. But I feel more convicted to vote in presidential elections.... I am curious to hear other's thoughts on the matter.

Externalities in Formula 1 Racing

In 2021, a Dutch court struck down environmental activists' case against the construction of a Formula 1 track when it threatened endangered species in the area. The negative externalities produced by the construction of the track were considered in a context of social and economic gain from the construction of the racetrack and ultimately the Formula 1 circuit was granted an exemption from the constraining legislation (the 2017 Nature Conservation Act) which prohibited harm caused to plants or animals from human activity. This provides interesting insight into the role of government intervention in regulating negative externalities. That is, at least from my observations, some externalities matter more than others and not all externalities are salient enough to warrant intervention – just as the negative externalities on the endangered species warranted no intervention. The Dutch court made the argument that the social marginal benefit of the track construction exceeded the social marginal cost of the endangered species lost. Or, rather, that the construction of the track would allow for an expected "economic impulse for Zandvoort and the circuit" that exceeded the benefit of protecting these species because it catered to "a sporting event with one of the largest audiences worldwide."

In the above case, the inability to assign clear property rights to either the Dutch citizenry or the circuit for the land in question keeps the parties from reaching a Coasian solution. A further problem exists here: even if property rights did exist, the racing circuit has far greater bargaining power (in terms of funding) than do environmental activists in the Dutch citizenry. Thus, an outcome in which the circuit's property rights take precedence over the environmental activists' concerns might not represent an efficient allocation of resources or a greater present and future benefit to society. 

Public Choice Theory & UVA Election Turnout

In the March 2020 UVA elections, turnout for both the Honor referendum and the Student Council presidential elections was around 10 percent. That number increased to 23.8% and 17.4%, respectively, in the March 2022 elections. Why is this turnout relatively low? One’s marginal costs of voting are, no doubt, lower in UVA’s elections than federal or local government elections, as voting can be done online. But, the half hour it takes to vote certainly contains high opportunity costs, especially for students in the middle of midterm season. The marginal benefit can be measured by the chance of affecting the outcome multiplied by the benefit of the desired result. The probability of affecting the outcome is certainly higher than for a public election, but (given the ~6,000 student turnout of the 2022 elections) is still about the same as lifetime odds that one dies of sunstroke (link). And the utility or monetary value of getting a desired outcome is also likely very small. Some argue that -- beyond lobbying and maintaining a budget -- Student Council is ineffective, and most students never have to deal with the Honor system. So, here, again, we have the classic public choice conclusion of the costs of voting outweighing the benefits.

I would argue that if, from a normative perspective, we wish to increase UVA voter turnout (which, many seem to want to do), there would be (at least) two economic ways of doing so. First, use the social pressure thesis to increase costs of not voting. This was done to a certain degree in the run-up to the single-sanction Honor referendum of 2022, which might help explain that vote’s relatively higher voter turnout. Many high-profile CIOs and students endorsed the referendum, arguing that a vote in favor of the change was a vote of anti-racism (see, e.g., this poster retweeted by now-Student Council President Ms. Cecilia Cain, containing a statement made by a majority of the Honor Committee). College students today generally wanting to be seen as anti-racist, this, I think, offers a good social pressure that increases the costs of not voting. Second, UVA and the University Board of Elections could make efforts to literally increase the monetary marginal benefit of voting. This has been done in the past by entering every student who votes into a raffle for one of about 36 chances to win a prize valued at about $30 (e.g., a Bodo’s gift card). This would increase each students’ marginal benefit by about $0.18 (36/6,000 chance to win a $30 prize). While some might decry such efforts as corrupting the ideal of student self-governance, I argue an economist would see this as a potentially effective way to incentivize voting (and as we all know, incentives affect behavior!!). All in all, as calls to increase UVA voter turnout continue, I think it would beHOOve the University and its students to consider how economic and social incentives can be a tool to impact turnout. 

 

Rational Ignorance of Bid Day

    Until today, there has been an email sitting in my inbox with a google form asking me to vote on a bid day theme for my sorority. The google form takes approximately 45 seconds to fill out, and yet for a week it sat there unopened. One might think I was simply a lazy bum, but after reading Johnson I realize that I was completely rational in this decision. You see, my marginal benefit of one “candidate” (theme) winning over the other is essentially 0, maybe 0.000001 if I had to put a number on it. I would not pay any amount of money to guarantee one outcome over another. That being said, even with the electronic format of the ballot, the cost to me to vote is still above zero, because it will cost my time and attention for approximately 1 minute, which is worth about 16 cents if I value my time at say $10 an hour. Even without multiplying my marginal benefit by the odds that my vote determines the outcome, for which the lower bound is 0.0067 (1/150 members of my sorority), it still wouldn’t be rational to take the time to vote.

    Today though, I finally filled out the google form, and you want to know why? The social pressure hypothesis. I ran into a girl from my pledge class on the corner, and she asked me what I voted for on the bid day form, and I felt ashamed admitting that I hadn’t filled it out, so I went on google forms right there and completed it! Even though I finally voted due to social pressure, I didn’t take the time to look at the attached slides and inform myself about each of the choices, I just picked one that sounded good- to be completely honest I don’t even remember which one. Yet again, I aligned with the model from Johnson, I was rationally ignorant. Thank goodness we read Johnson this week, or I would have just considered myself lazy!

Softball Externalities

    Softball has always been a huge part of my life. The house we used to live in had a batting cage. It was a way for me to practice softball from home.  It was a dream come true for parents who hate driving their kid to local ball fields to practice....or so they thought. The cage had a sound system, and I, of course, abused that sound system. I played anything from Mac Miller to Juice World to pump me up when practicing. Why put a sound system in the cage if you don't want the user to jam out? The constant blaring music was an issue. My brother was a tutor for some local middle schoolers. They would come to our house for the massive smart board we had in the basement. Apparently, it was a necessity. The blaring music kept his students from being able to focus. There were eight kids that would come over to get tutored, and I was the reason they're grades weren't improving. 

    After talking about these negative externalities, I realize that my use of the blaring sound system caused a negative consumption externality for my brother. An article by the Tampa Bay Times replicated a similar issue.  My brother couldn't tutor the kids with me blasting music in the backyard. My practice time wasn't going to change, and he was not moving his tutoring time. A Coasian solution could not be pursued, due to the lack of property rights. Neither of us paid for anything in or around that home. The solution could only be resolved by the government, and we had none. Dad was the closest thing to that, and he wanted no part of this fight. The fight still continues to this day. I play music really loud when I am home, and my brother complains.