Boston Mayoral Race

In September 2013, the Boston mayoral race included about a dozen candidates once Mayor Thomas M. Menino announced he would not seek a sixth term.  An article in the New York Times describes how Cara and Michael McGrath, a Boston couple, struggled to differentiate between the candidates.  Ultimately, education was their top priority because of their children.  Mr. Connolly, a former public school teacher and candidate for the mayoral office, stood out from the pack for the McGrath’s because of his stance on education.  However, many other voters had difficulty deciding which candidate they wanted to support.

Massachusetts is a deep blue state whose candidates have overlapping platforms and shared constituents.  For example, so many of the candidates are supporters of gay rights. The reason for the similarities in candidate platforms can be described by the median voter theorem.  It predicts that the candidate who gets the vote of the median voter will win because there are just as many voters politically to the left of that voter as there are to the right.  This gives the candidate an incentive to move closer to the opponent’s platform in a two party system in order to gain more votes.  The result is that candidates both attempt to appeal to the median voter; this makes their platforms look very similar.  When this occurs, it is difficult for voters to distinguish between candidates.

We may be ignorant, but we're rationally ignorant

Who could not have seen the hilarious Jimmy Kimmel video where interviewers would ask Americans on the street, "Which do you support more, Obamacare or the Affordable Care Act (ACA)?" It turns out, shockingly enough, more Americans supported The Affordable Care Act than Obamacare. It also turns out, Obamacare and the Affordable Care Act, are exactly the same! While most people would contend on facebook, twitter, and other social media that most Americans are just plain stupid or ignorant. I contend that Americans may be ignorant, true, but we are rationally ignorant. And there's a huge difference. 

So if a Californian wanted to take, let's say, a solid 2 hours to learn about ACA, which would probably take two hours to shift through lies, misleading facts, biased articles, etc, on the internet, he would be at a loss of a maximum of $55. But the odds of a vote deciding an election in California, according to doesmyvotecount.org, are 1/1.3 Trillion. Thus according to the expected marginal benefit of voting formula we went over in class, which for sake of space I will not write, the amount of expected marginal benefit is negligible.

Thus Americans are just in being rationally ignorant. But is there more at work?

Perhaps we are rationally ignorant because we should be. The reason I don't particularly care to delve too deeply into Obamacare is because the marginal costs of learning the high level knowledge of macroeconomics needed to make an educated decision on Obamacare would exceed many family monthly incomes! It's more efficient to use our time elsewhere to make income. We as Americans would prefer that left up to experts to determine, and act on our behalf. 

Voting in Guinea Irrational, but Commendable

                Voters in Guinea turned out in record numbers last Saturday for the Parliamentary Election, with an estimated 80% of eligible voters showing up to the polls. Rationally it makes little sense for any individual to go out and vote, especially for voters in Guinea, who faced very high costs in attending the polls last Saturday. There were complaints of very long slow lines due to technical difficulties and high turnout. However, the opportunity cost was not the highest cost, many voters had to put their personal safety at risk. Between 2008 and 2010, the people of Guinea were oppressed under a military regime, and according to VOA News, this first parliamentary election “was considered the last step in Guinea’s transition from military dictatorship to civilian rule.” In the weeks leading up to the election, many were injured and one was killed in campaign strife between opposing parties. Showing up to vote, therefore was to put oneself at great personal risk.

                Nevertheless voters turned out in droves, and there are a few reasons that may have transcended the above mentioned economic rationality. Guineans have been spending the last five years fighting an oppressive regime, and this election is an opportunity to put the final nail in the coffin, solidifying civilian rule. Therefore many feel it is their civic duty to vote, and to not vote would be comparable with supporting the enemy, showing the possibility of social pressure.  A second reason would be utility derived from voting. These elections have been postponed continually for the last two years, and it sure would feel good to just put your vote in and be able to say, “We finally did it, it’s done.” 

Cuccinelli Becoming More Moderate in Light of Gubernatorial Race

     In the most recent poll regarding the Governor race in Virginia, polls show a tight race. Right now the polls lean toward the Democratic candidate McAuliffe, but not by much. In this link, a piece written on Republican candidate Ken Cuccinelli, there is evidence that Cuccinelli is becoming more moderate in order to gain those very important median/moderate votes. Five years ago, he signed on for a bill that would essentially eliminate abortion as an option in Virginia as well as prohibit some kinds of birth control. This is seen as an extreme right view. A few weeks ago, Cuccinelli discussed his policy toward this issue and claimed he never backed the legislation six years ago and that the government should play no role in prohibiting contraception.
    Cuccinelli likely said these things because he recognizes the value of the moderate voters in the upcoming election. With such a strong stance on abortion/contraceptives, he does not appeal to the moderate voters, but only those who are extreme right. His vote maximizing choice to potentially alienate the extreme right in favor of gaining the moderate voters may be a beneficial strategy. It will be interesting to see how the election turns out, and how Cuccinelli responds to future bills on abortion rights if elected. As we also discussed in class, politicians are quick to say things along the campaign trail in order to get them elected, but often revert to policy stances they particularly prefer while in office.

The Great Bacon Debate

Although it's a little old, this is an article I read over the summer that I immediately thought of when we discussed externalities in class. It focuses on a restaurant and food truck establishment called Bacon Bacon in San Francisco, that was closed down due to a lack of required permits. The reason the restaurant didn't have the permits? Some of the restaurant's neighbors complained about the smell of bacon being cooked, especially some of the extra bits like the leftover lard at the end.

This article serves as a perfect example of external costs of production. When Bacon Bacon cooks and prepares the bacon, it creates a smell that is considered noxious by local third-party neighbors. This lingering smell is the difference between the private marginal cost and the total social marginal cost. A possible solution to this issue? Assuming the marginal benefit (revenues for the store owner, utility of bacon-lovers eating bacon) is greater than the marginal cost (the smell), the Coase Theorem states that whoever is liable should pay to reduce the smell. In fact, the article above has a line where one of the neighbors complaining "offered to help pay for an odor-abatement system," a great example of the Coase Theorem in action.

Checking Bacon Bacon's website, the outcome of this whole ordeal was that the city gave the restaurant the necessary permits. The owner, Mr. Angelus, is making renovations to the ventilation system to handle the smell. So bacon-lovers/economists rejoice, you can now eat all the bacon you want in San Francisco, at a point where the marginal benefit equals the social marginal cost.

Your Vote Could Be Worth Cash

In the realm of politics, logrolling is the process of trading votes in order to obtain the passage of specific interests. While the formal buying and selling of votes is illegal, informal vote trading occurs often because it is hard to police. By revealing their preferences through an exchange, individuals can increase their chances of winning on the more important issues to them and potentially increased their realized gains. If vote trading is a voluntary exchange, then why could this be an issue?

This article in ABCNews discusses an internet site that sells blocks of votes to interest groups that hope to influence the election. The founder of the website, James Baumgartner, a graduate student at Rensselaer Polytechnic Institute, claims that corporations and individuals are already influencing voters with their money through external means and that his website, voteauction.net, is simply "a more direct method of doing that." The voteauction.net website offered US citizens the ability to sell their vote to the highest bidder in the 2000 presidential elections. Voters would fill out absentee ballots based on voteauction.net's recommendations, send them to Baumgartner to look over, and then Baumgartner sent the ballots to the polling places. In return, the voters would get cash.  After several US states issued temporary restraining orders for alleged illegal vote trading, the system was shut down. The article goes on to list several issues with the process - in addition to its illegality. For example, the votes are overpriced, much more than the market rates. The larger issue brought up is the increasing lack of interest that voters are showing in our political process. Bob Murch, an electoral historian, says that people "no longer see any value in their votes." The low voter turnout rates and selling of their votes on the internet reinforce this idea.

PA Republicans Move to the Middle

In the swing state of Pennsylvania, many Republican representatives are doing exactly what the median voter theorem would predict - they are moving to the middle. According to this Huffington Post story, these Republicans now support a short-term extension of government spending without any policy requirements added on. While Republicans benefit, especially during their primary elections, by showing how different they are from the Democrats, Pennsylvania Republicans are showing how the desire to pick-up votes pushes them towards the middle voter, who seems to prefer compromise and working government to principled, partisan stances.

Rep. Pat Meehan, Rep. Charlie Dent, and Rep. Jim Gerlach, among others, all expressed support for a “clean” government funding bill. Other Republicans, led by Sen. Ted Cruz, want to see the President’s healthcare law - Obamacare - defunded before the government is opened back up for business. But, despite calling Obamacare “glitch-filled” and “job-crushing,” Gerlach noted that “It is time for Congress to vote on a budget bill that gets the government back to work providing all of the services already paid for by the hard-working taxpayers in my District and across the country.” In other words, Gerlach understands that the median voter in his Pennsylvania district wants the government open for business.

Milton Friedman was Right

From Charlottesville to Chicago, newspapers across the country are plastered with headlines and front-page stories detailing the recent government shutdown. Tensions rage high and an end to the shutdown does not appear to be in the near future. Milton Friedman warned about the danger of political channels controlling such divisive issues in chapter two of his book Capitalism and Freedom entitled “The Role of Government in a Free Society.”  Friedman argues:

The use of political channels, while inevitable, tends to strain the social cohesion essential for a stable society. … Every extension of the range of issues for which explicit agreement is sought strains further the delicate threads that hold society together. If it goes so far as to touch an issue on which men feel deeply yet differently, it may well disrupt the society (23-24).

This prediction of political strain leading to governmental/societal disruption has certainly proven true in the past few days! Most likely Friedman would argue that healthcare, an issue for which people hold strongly conflicting viewpoints, should be relegated to the private sphere in an effort to reduce the wearing effects of tension on society. 

Negative Externality Problem

One of my roommates, Carla, is a personal trainer and class instructor at the AFC. While she was talking to me about a problem she faced in her core class the other day I could not help but to think of Econ 333. She explained to me a situation in which I found both an externality in consumption and in production. Externality as Gruber defined it “occurs whenever the actions of one party make another party worse or better off, yet the first party neither bears the costs nor receives the benefits of doing so.” In summary, she said that whenever somebody who is sick comes to one of her classes, he/she imposes a negative externality cost on the rest of the participants. That participant is increasing everybody else’s of risk of catching a disease. Additionally, having somebody coughing and wheezing in class gets many people annoyed, thus affecting their optimal consumption of the service offered. She/he is also imposing a negative externality in production because Carla with limited resources and a time constraint has to allocate more attention and energy on she/he in order to make sure the person is able to keep up with the class. This will prevent her from helping others who might need her assistance, therefore making her service production be less effective and her performance as an instructor lower. And all of these consequences do not affect the first party: the sick person. Even though most Internet journals and blogs say that people can workout mildly when they are sick, Can I Run With a Cold?, College of Sports Medicine, they do clarify that there is a negative externality imposed in others such as infecting them. For this reason and the ones mentioned above, gym etiquette and no-no's suggest that sick individuals, avoid exercising at the gym.

Oddly enough, we (as econ majors) thought of a solution to this problem using the Coase theorem. Since it suggests that the resources will be allocated to the participants who value them the most, regardless of transaction costs. A participant could pay the sick one to not come to the class if she values the class a lot more, and if the cost for this participant equals the benefit for the sick participant, she/he would not come to the class and consumption and production of the service would be optimal. Adam Davidson states solutions similar to this one in his article “Should We Tax People for Being Annoying?” 

Will Defection Thwart ObamaCare?

ObamaCare is fresh in the headlines due to the impending government shutdown. In the early part of his article (here) James Taranto of the Wall Street Journal criticizes Ezra Klein's view on ObamaCare. ObamaCare presents an adverse selection problem for those who are at a lower risk of needing health insurance. Why should people pay such high premiums if they have a lower risk for incurring medical expenses? Pooled risk lowers the cost for people who need coverage the most, while placing the highest burdens on people who have a lower risk for needing health insurance. This redistributes costs to insure against the risk of needing health insurance. But the high risk of purchasing ObamaCare may not be worth the future reward.

The issue turns in to the prisoner's dilemma. If many people cooperate and pay the high rates now, they will reap the benefits of lower cost health care policy later when they need it. Yet Taranto argues that "the individual cost of defection will be minimal", and thus will be a likely choice. A 28 year old individual can choose to forego paying the high premiums now, but still receive coverage at the age of 53 with a pre-existing condition. But the free rider problem suggests that many people will naturally revert to this solution, and if enough people defect and refuse to cover the costs, then ObamaCare could cease to be a functional program. This risk of incurring the expenses now for a program that may not be successful later is too high. The optimal solution for the healthy, young, or rich individual would be to abstain from purchasing ObamaCare.

Spreading Disillusionment in Germany

      Last week Germany held its parliamentary elections.  According to our Johnson reading  between 1958 and 1976 West Germany's average voter turnout was 84%.  However, between 1998 and 2009 voter turnout dropped almost 12% to 70.8%.  This year it is expected to drop another 5%.   Johnson said that one of, if not the, strongest explanations for why people vote is the "social pressure hypothesis" which "states that individuals vote in order to avoid the social pressures that their friends, family, {and} neighbors...would place upon them if they did not."  Germany is facing a situation in which this very social pressure is rapidly declining.  According to a pollster in Germany, "There has been a change in mood among the public...you no longer have to be ashamed to be a non-voter." According to his poll only 7% of non-voters "had to deal with criticism from friends and relatives, while 57% indicated that friends and family don't care whether they vote or not."  The very groups that Johnson mentioned who should be pressuring their fellow citizens to vote no longer care, and even fewer of those that care are saying anything.       

     There are also tinges of Downs and a side comment by Johnson in this article.  Among economists, intellectuals, and journalists the race to the center to capture that median voter has left much to be desired from the parties.  They want to debate "big issues" while all they see from the parties is "kids' stuff election campaigns," "un-philosphical politics," and "a single 'mega-party.'''  Not only do they know that their vote is unlikely to determine the outcome of the election, they feel that even if their vote was to be the deciding vote it wouldn't really matter which party won.  The author tells us that if these just people took the time to read the party platforms they would see that there were real differences in the parties, but as Johnson says, its not worth their time. They are rationally ignorant.      

     The marginal benefit of voting is declining as voters increasingly see few differences between the two parties.   Voters don't care who wins because they don't see the differences effecting them.  At the same time, the net marginal cost of voting is increasing as the societal pressure to vote decreases. There is a net increase in the marginal cost of voting because the societal pressure costs of not voting no longer offset the tangible cost of voting.  Therefore, we are seeing the marginal benefits of voting declining as the marginal costs rise which, as expected, results in fewer people voting. 

Boehner, Reid compete to set agenda

Senate Majority Leader Harry Reid and House Speaker John Boehner are competing to set the order in which votes will be taken on a bill to fund the United States federal government for the next few months. According to an article from CNN, Boehner has threatened to revise the Senate’s version of the bill - which got rid of a controversial provision to remove all funding for the President’s healthcare law - and send it back to the Senate. This would make the government shut down while the bill was in the Senate, making him look less responsible. Reid then tried to make Boehner look responsible by announcing that, if the House rejects this current bill, the Senate has a very slow procedure that will cause the bill to not be passed in time.

Since we can assume that the Senate and House are both split with a large liberal faction, a large conservative faction, and a group of moderates from both parties in the middle, the leader who gets to set the agenda can decide what bill gets passed. Each leader wants the other chamber to have to vote last. If Reid gets to choose, he will force Republicans in the House to choose between shutting down the government or passing a funding bill that allows the President’s healthcare law to go through. If Boehner gets to choose, he will force Democrats in the Senate to choose between shutting down the government and passing a budget bill that does not fund the President’s healthcare law. Just as our model suggests, being the agenda setter in a divided voting body allows the leader to get the outcome they want.

Doctors and Rational Ignorance and Abstention

     With an ever increasing uncertainty for the future of medicine, the expected benefits of practicing as doctor are ever decreasing, while the costs of medical school continue to rise. So, one would reason that the expected difference in utility for doctors in an America that Obamacare exists versus one without Obamacare would be ever increasing. So where are all the doctors  and potential doctors in the political scene? Why aren't all doctors blasting their concerns about this legislation by all avenues possible? Won't they gain more than anyone by influencing votes and having their opinion heard? The expected benefits of such activism apparently still don't outweigh the costs.
   
     Instead, 83% of doctors in a random sample actually consider quitting their practice (here) due to Obamacare, even with the enormous sunk costs of actually earning an MD! The number of applicants for degrees in the medical field is also decreasing. Doctors may be aware that outside the field of medicine, most people don't derive utility from being informed about the new health care bills more than it would cost them to be so informed. Even if doctors could inform the public, the public may not value the information enough to actually vote on it. Doctors may intuitively understand the principles of rational abstention and rational ignorance. Regardless, based upon observable action, or inaction rather, doctors seem to value the benefits of political activism with regards to Obamacare less than it would cost to pursue the issue by political means.

The Senate Rules (Pun Unintended) - Cruz's Talk-a-thon

Senator Ted Cruz's fake filibuster lasted 21 hours and seemed to not only confuse many in the American public, but the Senator and Senate Majority Leader as well.  The real confusion came at 11:30pm when Senator Harry Reid came to floor to address some of Senator Cruz's questions and unanimous consent requests.  It appears that Senator Cruz thought his time ended at exactly 12:00pm and Senator Reid thought Cruz's time actually went to 1:00pm. 

While it may seem like the Majority Leader has complete control of the agenda, and can manipulate it accordingly - that is not always the case.  Here, both Senators attempted to adhere to the rules of the Senate but as you can see from the video, Senator Cruz had control of the floor, and if he had started his talk-a-thon as an actual filibuster, he could have prevented voting for the day for quite a bit longer.  The Senate is unique in that the fewer number of members allows for each individual's voice to be heard and weighted more.  Comparatively, in the House of Representatives, no member could speak for as long as they wanted and prevent the days agenda completely.  It is harder to manipulate the order of voting in the Senate if any member of the opposition (in this case, a tea-party freshman) can take control of the floor and refuse to yield time. 

Rosario Dawson Fails To Understand Rational Abstention

This CNN op-ed by Rosario Dawson seeks to persuade disenfranchised minority citizens to vote in this November's gubernatorial and mayoral elections by appealing to several unconvincing justifications for voting. Dawson appeals to a sense of civic duty, as "voting is the bedrock of our democracy” and a means for citizens to “take ownership of [their] communities.” However, such appeals are ineffective, as voter abstention and rational ignorance are both sensible consequences of the American democratic structure.

Dawson suggests "voting is the easiest way to make your opinion known on any issue,” yet disenfranchised voters are not moved to vote by utility gains, social pressure, or a sense of ‘civic duty’ to overcome the cost of voting and make it to the polls. A rational voter will only vote when his marginal benefit exceeds his marginal costs. The marginal costs for voters, particularly the lower-income minorities that this article targets, will be relatively high, in terms of lost wages or the opportunity cost of taking the time to educate oneself on important issues. In some locales, the marginal cost is even higher due to restrictive photo ID laws, limited voting locations and hours, and tedious paperwork. While the National Voter Registration Day initiative alleviates the cost of the paperwork, the costs will still exceed the expected marginal benefit derived from voting. The probability of a vote being decisive is extremely low, so that even if the magnitude of the value gained from electing a preferred representative is very high, the expected marginal benefit of the average disenfranchised voter will be negligibly low.  

Instead of appealing to a sense of civic duty, Dawson’s campaign would be more effective if it focused on making voting costless or increasing the social pressure on those who do not vote.

Fannie and Freddie, a public good?

As many people know, the federal government is currently trying to decide how the mortgage giants Fannie Mae and Freddie Mac should function in the future, if they should even exist at all. As this Wall Street Journal article explains, the three options currently being discussed include keeping the firms as middle men that bundle together mortgages and sell them to investors, getting rid of the firms entirely and have mortgages originate solely from private institutions, or replacing/reorganizing the firms with an institution that would basically insure mortgage-backed securities in a way similar to how the FDIC insures bank deposits.

One of the main sticking points in this discussion is that the existence of Fannie and Freddie gives American homeowners access to the 30-year fixed-rate mortgage, something that is not available in most other countries. My question is, should access to a 30-year fixed-rate mortgage and a mortgage market essentially devoid of credit risk (when Fannie and Freddie cover for homeowners who default) be a public good? This kind of mortgage market definitely could be a public good, as it is both non-rival and non-exclusionary.

The main reason to offer non-exclusionary goods as public is because of the free-rider problem. One solution might be to only offer fixed-rate mortgages and lower rates to borrowers who have purchased some form of insurance in case of default. If this is infeasible, or could not be created in a private market, the existence of Fannie and Freddie just might have to continue as a public good.

Low Voter Turnout in Los Angeles

An article in the New York Times explains how the 2013 mayoral primary election in Los Angeles produced the lowest voter turnout since 1978.  Only 21 percent of registered voters turned out to the polls.  The article speculates on the possible explanations for such a low turnout.  The suggested reasons include poor weather, fatigue from past elections, or that people are just not passionate about it.  As we learned in class, rational abstention explains why many people believe it makes sense not to vote.

Unfortunately, voting is not costless because people have to take the time and energy to get to the ballot.  If the voter values his time more than he values the benefit of the person winning, then he will not vote.  Rational abstention occurs when a voter realizes that the probability of their vote affecting the outcome of the race is extremely small; therefore, their cost to vote outweighs the benefits of voting so they do not vote.  The article describes as well how disappointed some people are in the low turnout.  Steve Soboroff, who ran for mayor in 2001 was quoted as saying, "The idea that it is socially acceptable not to vote, but people talk about where they get their shoes from, is shameful."  As we learned from class, there are three reasons that people vote: utility, civic duty, and social pressure.  Clearly social pressure does not exist in L.A. if it is deemed socially acceptable not to.  If Los Angeles can inspire their voters to take advantage of their right to vote, then civic duty may increase and so will voter turnout.

Healthcare Reform and Rational Ignorance

This recent article from Politico describes the beginning of the implementation of the Affordable Healthcare Act in Kentucky. The state has developed their own program called Kynect, and recently set up an information booth at the state fair to inform citizens of upcoming changes and answer questions. However, the article tellingly highlights how little the people of Kentucky actually know about the details of the new health care plan. Rational ignorance can clearly explain this. The Affordable Healthcare Act is very complicated to understand and taking the time to read the extensive bill has very high opportunity costs. The marginal benefit of a better understanding of the new health care system is much less than the marginal cost of taking the time and effort to decipher the plan. Therefore, most people are rational in their decision to remain ignorant about the specifics of the new law.

As the article describes, Kynect is working to inform citizens about the health care law’s implications for their lives. Events like the one at the state fair are intentional efforts to combat rational ignorance. Still, as is described in the Politico piece, much work remains to be done. A recent survey quoted in the article from the Kaiser Family Foundation “found that 44 percent of those surveyed weren’t even sure if the law was still on the books — many thought it had been repealed or tossed out by the Supreme Court.”

Voters in NJ care more about vacation

New Jersey faces a rare political event this year: the primary for the election to fill one of New Jersey's Senate seats is both in an off year and at an off time. According to the 

New Jersey Star Ledger voters in New Jersey may turn out to the polls in close to record low numbers for the mid-August primary. Potential voters like Don Nociolo, a New Jersey resident, said he would not vote because the elections are in the middle of his vacation and he already knows that Newark Mayor Cory Booker will win.

This addresses two important issues we discussed in class: Since Booker has such a strong lead in the polls, voters have little faith that they can affect the outcome of the vote (meaning the benefit of voting decreases substantially). As well, voters on vacation have a higher cost to voting, because their next best alternative to voting is getting to relax on the sands at the beach. New Jersey Gov. Chris Christie's choice of an off-year, off-month primary will drive down voter turnout in New Jersey, but voters will be making rational decisons the whole time.

Vote or Die

During the 2004 presidential election P Diddy tried to institutionalize the social pressure that goes along with voting that we discussed in class. THIS link shows the Vote or Die campaign by Diddy to try and make voting "sexy" as he puts it. This is an interesting twist on the social pressure that we talked about though. This campaign was trying to generate social pressure for people less likely to vote, mostly young voters. Also, this campaign was trying to generate social pressures in an urban environment as opposed to a smaller community where everyone knows each other. He also got A list celebrities like Paris Hilton and Mariah Carey (it was 2004 when these people were still relevant) to support his campaign trying to create social pressure for young voters.

This campaign was critiqued as glorified voter intimidation and a poor publicity stunt disguised as an attempt to make a difference. Diddy justified his campaign as trying to make a difference and strengthen our democracy, which plays on the ethical pressure aspects we talked about in class: people can rarely give a good reason why they don't vote or why they don't support a campaign trying to raise voter participation. Voter participation by youth did raise in 2004, the specific data is here, but I don't know if we should attribute this specifically to Vote or Die.