Rand Paul Maximizes GOP Voters

With the current distribution of voters, neither Republican nor Democrats seem to be gaining the upper hand due to policy choices. Nick Gillespie seems to believe the Republicans could actually become an attractive party instead of "bank[ing] on the Democrats sucking all the time." He believes Rand Paul is at the forefront of changing the reputation of the Republican Party. Rand Paul has been reaching out to black communities with issues like the drug war and holding the party closer to it's semi-libertarian rhetoric. What could occur here if the GOP takes after Rand Paul's initiative, is the Republican party could reach into the well of Democratic voters (move left amount the distribution of voters), mainly African-Americans, while also mobilizing formerly disinterested libertarians who had decided to stop voting in general (move right amount the distribution of voters). And as the Republican party, if it truly follows Paul's trend, gains these formerly unachievable votes, the Democrats, retaining their numbing policy of the status quo, would be losing some of their usual voters, due to its venture too far to the center. Such a move by the GOP would be expected by a Party that wished to maximize votes (ideology set aside).

Judges: the new target for interest groups

While we’ve been talking how interest groups can try to influence politicians to achieve their goals. Mother Jones points out that politicians aren’t the only ones making the rules or being influenced to change them. Judges are just as susceptible to being influenced by interest groups. Many laws in America are made my court cases than by actual legislation passed in congress. The article describes how interest groups have been funding money into judge’s elections who seem to rule in their favor. The hard part about funding politicians is that more people pay attention to their races, meanwhile most people in a constituency would not know much about the judges in their area if it weren’t for the ad that the interest groups pay for. With the opposition less informed there is less opposition and more of an opportunity for interest groups to get their regulations passed.

 

Becker may be right by saying that in the political sector the opposition will be big enough to work together and stop interest groups from influencing politicians unless it’s beneficial to all. However in race like judgeships where most of the opposition abstains, this means that although “n” includes the people taxed, those taxed do not also equal a vote. Whereas the number of people in the interest group more than likely equal a vote. That way the risk of investing the money in a candidate is lower, leading it to be a better alternative route for interest groups to invest their money in. If this system remains unchecked then maybe we should be worried like Olson believed.

How Green Might Save the Blue

There is no denying that the Republicans dominated in the recent midterm elections, where they took control of the Senate for the first time since January 2007 and expanded their majority in the House.  This significant defeat has Washington's democrats scrambling for any and all solutions to regain their political control.  Senate minority leader, Harry Reid may have found an answer in something not typically known for its motivating properties, marijuana.

As more and more states look to join Colorado, Washington, Oregon, Alaska, and a handful of other, smaller localities with marijuana decriminalization and legalization, ballot measures to legalize will surely make their way into the 2016 elections.  More than any other issue, marijuana legalization "is one of the biggest factors in [voter] turnout," especially among democratic voters, according to Nevada State Senator Tick Segerblom.  So, over the course of the next two years, we can expect a heightened effort by Democrats to spatially align themselves with pro-marijuana policies to "light a fire", if you will, among their constituents to get out and go vote.  By giving voters that added incentive to head to the polls, to express their pro-legalization interests, Democrats hope to reclaim the power lost this November.

"Debt"-ucation: the truth about education loans

In their paper "Industrial Organization of Congress," Weingast and Marshall sited opportunism as one of the two main costs to firms of purchasing production inputs in the marketplace. We defined opportunism as "the conscious practice of taking advantage of circumstances, often without regard to principles or morals."

Opportunistic practices can take on many forms in many different situations. One example comes up in this article discussing the illegal and immoral practices of a college chain that has left many students in serious debt (This is a very long article, but it is only necessary to read the first half or less to get the main idea and see the relevance to public choice). As the article explains, Corinthian colleges is a college chain that serves as the parent company to many colleges around the country. Its colleges, such as Everest University, act as its "agents" to the employ admissions officers as manipulative sales agents to persuade prospective students to enroll, promising a better future, job security, and better salaries. Rather, these sales tactics are "designed to capitalize on their [the students'] poverty and their trust in an accredited university" (paragraph 12). Students take out large loans with the expectation of support from the university in obtaining the means to repay these loans, but are instead ending up thousands of dollars in debt with no escape route, and are graduating without any good job prospects, often returning to low-paying jobs or unemployment. Students are even misled to believe that they are secured by certain grants and financial support, when really these grants are simply large loans, leaving them in debt they were not aware existed.

The opportunism in this situation is clear. People who have no intention of enrolling in these colleges are manipulated and persuaded through unethical sales tactics by admissions officers and university marketing teams who take advantage of the circumstances of lower-class citizens in order to meet strict enrollment quotas designated by their employers. They have asymmetric information and hidden intentions that are not revealed to students upon enrollment, causing students to end up in "contract commitments" they cannot afford. While law suits have been filed, and Corinthian colleges is being shut down by the federal government, this does not relieve the many students of their loan debts up to tens of thousands of dollars. The costs of opportunism these students have incurred are far higher than any benefit they received from these colleges.

The Sway and Power of Interest Groups

In his article “Public Policies, Pressure Groups, and Dead Weight Costs,” Gary Becker argues that interest groups do not dominate policies and that there is no reason to be wary of them. However, a study conducted from 1981 to 2002 on 1,779 issues found that interest groups can have a major influence on public policy. The evidence found that business-centered groups and economic elites had the greatest impact, compared to ordinary citizens and groups that try to appeal to the masses. The power the interest groups have, as Olson says, comes from “their characteristic and primary function,” which “is to advance the common interests of groups of individuals.”

Becker demonstrated that interest groups are not a cause for concern because they enact more pressure against inefficient policies than pressure for them. The research by Gilens and Page supports this claim: “A proposed policy change with low support among economically elite Americans is adopted only about 18% of the time, while a proposed change with high support is adopted about 45% of the time. When mass-based and business-oriented interest groups oppose a policy, the probability of its being enacted is only 16%, rising to 47% when they’re strongly favorable.” As Becker argued, these groups will fight against policies that will result in a deadweight loss.

Interpreting Keyston Pipeline From Stigler's Perspective

Last Sunday, the republican senators in office discuss that they expect the 114^th congress. Senator Shelley Moore Capito specifically mentioned that she would like the white house move on “Keystone pipeline, tax reform, a transportation bill". Among these three policies, Keystone pipe is a particular sensitive issue because it hurts farmer’s interest but benefits U.S oil industry. The biggest U.S beneficiary from carrying out Keystone pipeline project will be the giant oil company Exxon. There were many pressures in the imposed by the democrats on president Obama for him to not pass this project. However, with the victory of Republican Party over Democratic Party during the mid-term elections, president Obama now might face higher pressure from both parties than he had ever before.

This case illustrates Stigler’s argument for government intervention. In his point of view, different industry group captures government policy in order to establish barrier of entries, and therefore maximize their profit in the long run. The fact that the biggest beneficiary of building keystone pipeline is Exxon means that oil industry is seeking for the approval of this policy. They might have already incurred the cost to support campaign for a U.S senate candidate who happens to be a republican. Consequently, the republican senator Shelly Moore Capito wants this project to be approved. In other words, the republican policy makers are captured by the interest of the oil industry.

The Battle of the Broadbands

Two days ago, the FCC and broadband providers were challenged by President Obama’s petition for net-neutrality, that is, that all traffic on the Internet should be treated equally. For several years, the FCC has been increasing regulatory policies on Web traffic, benefitting Internet service providers (ISPs) by allowing them to charge for the use of “fast lanes” and discriminate against small content producers that cannot afford the pay. However, Obama believes that the Internet should be treated as a public utility, giving equal access to everyone and eliminating the power of ISPs as gatekeepers.

The battle is between two powerful industries: broadband providers on one side, such as Comcast, Time Warner, Verizon and AT&T Inc., and web giants (Google, Facebook, and Amazon) and smaller tech companies (Etsy, Tumblr, Kickstarter) on the other. Upholding Stigler’s argument, the regulation is being sought out by the latter industry. However, whether Obama’s petition will pass or not will require analyzing Olson’s pressure factor. Up until now, only broadband providers have expressed their strong opposition to net neutrality, some even have threatened to challenge it legally if passed. Because the broadband industry is composed of a selective number of providers, they are more likely to organize an exert pressure on opposition. The industry of web giants and smaller businesses, on the other hand, is composed of more actors and hence will have more trouble organizing, some will opt to free ride. For instance, Google, Facebook and Amazon have yet remained silent and showed little support for smaller companies like Etsy and Kickstarter. If they overcome organization problems and determine selective incentives, resulting in more pressure, then victory could tilt towards net-neutrality… Lean back, because the battle has just started.

Reexamining Minimax Regret

Now that Gillespie has conceded the Virginia senate election, Democrats can breathe a lot easier than they were on Election night. Given the slim margin by which he was a head, it is probably safe to say they are all glad they voted. So I think it is time to revisit minimax regret as a solution for the paradox of voting. For certain, Mueller (and Professor Coppock, for that matter) lays out the devastating criticism that people don't seem to operate on minimax-regret, but I think you could try to support the argument with the way that campaign ads frequently go negative. Under this argument, the negativity marks a candidate as someone undesirable, so as to encourage voters to support his or her rival, since they cannot stomach the possibility of his or her winning. This is obviously far from proven, but it makes for an interesting thought..

In fact there's an episode of Futurama that hits on exactly this topic. (I can't link it because one or two of the jokes are iffy.) What if Richard Nixon--via bizarre legal shenanigans--managed to subvert term limits and run for President again? Futurama being the kind of show it is, the election comes down to a single vote, only for Nixon to win because none of the main characters go to the polls. Even when the chips are down, the main characters act on expected marginal benefits instead of on potential regrets.

Which is where this comes back to the Virginia Senate race. Even this "near upset" ended up with Gillespie conceding, because less than one percent of the electorate still to comes to over 16,000 voters. Only one of them needed to vote to prevent Gillespie from winning. Remember, Warner was up in the polls most of the time. It is entirely possible that some Democrats stayed home (driving the margin of victory down), because they believed that Warner was certain to win.

When Deregulation Fails

Comcast, Time Warner, AT&T, and Verizon are the major Internet providers of our country, and this small number is alarming. In 2002, the FCC reclassified Internet access from the heavily regulated telecommunications industry to information services, which is unregulated. The hope was that providers would compete more but the opposite happened. The large corporations don’t compete, and when compared to South Korea, Hong Kong and Europe our prices are higher and our speeds are slower. The only five American cities with speeds and prices competitive to Europe’s are provided by companies outside the big four named earlier. 

Recently we discussed industries and interest groups seeking regulation through rent seeking to gain monopolistic profits as detailed by the late Gordon Tullock.  However in the Internet industry, the small number of providers and their inaction to go after each other’s markets has created a functional oligopoly. They have no need for regulatory capture because a fully competitive market doesn’t exist. Furthermore, a large reason firms seek regulations is to limit entry into the market, according to Stigler. These firms can simply rely on the lack of public fiber networks to discourage new competitors. Now, Europe has required the owners of the pipes to the Internet to lease space to their rivals to encourage competition and this idea is based on Jean Tirole’s recent Nobel-winning work on regulation.

America has a conundrum where the lack of competition is creating a need for regulation. This is one of the rare examples where it seems the real world is behaving opposite of the models.

ALEC- Corporate dating for lawmakers

        While there is a gridlock in Washington, state lawmakers have been passing bills more than ever. Behind the scenes, there exists a conservative group called ALEC, the American Legislative Exchange Council which is one of the most powerful interest groups in the country. It was founded 30 years ago by a conservative activist and public choice aficionado Paul Weyrich; he states that the Republican Party benefits from low voter turnout, something we saw in last week's election.
        Most importantly Weyrich knows the economic power of regulation, something ALEC excels in. ALEC combines some of the countries most powerful corporate donors with over 2000 state representatives, including a majority of the leaders of the Republican party. ALEC uses this relationship to pass the most influential bills in the country, like bringing Florida's Stand Your Ground law to a over a dozen other states. What makes ALEC significant is that it provides direct communication between lawmakers and their donors, instead of representatives tiptoeing around so they won't offend corporate interests. ALEC even drafts the bills for legislators, so they only have to fill in the blank for their state and push it through to a vote. Because ALEC has almost complete domination over traditional red states, it can push through and pass any kind of legislature it wants.
      ALEC is a perfect example to support Olsen's argument of why we should be scared of regulations by interest groups. State legislatures work in near anonymity but wield a tremendous amount of power when deciding our law. Corporations are preying on uninformed American and are secretly pushing through an incredible amount of legislation that hurts our society. Becker would argue that the public would push back and fight against these regulations, but how can society fight back if no one knows ALEC exists?

Fences, Trains, Angry Students, and Stigler

In this blog post, I'd like to share a relevant example of Stigler's capture theory that is happening right here on grounds.  I know I am not the only one to lament the construction of the 7 foot metal fence that now prevents UVA students from crossing the train tracks on their way to class.  Cutting across the tracks saves some up to 15 minutes of time per cross; with the fence, students will lose hours of time a week taking meandering routes to class and the corner.  The fence's construction illustrate's Stigler's point that regulation is sought out by the industry and is designed and operated for its benefit.  As NBC local news reports, the railroad that uses the track, CSX Buckingham Branch Railroad, sought out the regulation from local government, working with UVA to cite concerns over student safety.  While I do understand this concern, it is important to point out that no UVA student has ever been seriously injured or killed in years of track crossing.  Another potential reason for CSXBBR's new-found concern is the competitive advantage the fence might give them over other railroads and shipping alternatives.  A fence guarantees there will be no students around the tracks, and thus the trains passing through will be able to go faster than before, improving their shipping service.  The Virginia state government pays for the fence, the railroad incurs the benefit, and taxpayers are told their students are safer.  Of the four kinds of favors that Stigler mentions an industry might seek, the fence is most similar to a cash subsidy.  The railroad incurs the benefit of the fence that cost $350,000 in state grant money.  Perhaps CSX Buckingham Branch Railroad would have preferred the more open ended and direct form of cash subsidy that Stigler mentions, but the railroad nonetheless will benefit greatly from the fence initiative.  That is, if the UVA police can stop students from tearing it down.

**Thank you to Russell Bogue, blog post guru, for the inspiration behind this post

Loretta Lynch and the Evolution of the Median Voter

If we assume that Obama, despite not being eligible for re-election, will still implement policies that are likely to preserve the image of the democratic party with the majority of voters, then the nomination of Loretta Lynch for U.S. Attorney General is a positive sign that the median American voter is evolving.

It is hard to think that 30 or even 10 years ago a president would feel "comfortable" nominating a female African American as the Attorney General. The fact that Obama is willing to do so shows that much of the negativity that may have previously been associated with this ethnicity and genre combination is fading away (slowly). Otherwise, the choice of Loretta Lynch would be political suicide - especially when the President's approval ratings are at all-time lows. Consequently, we can infer that the American median voter is evolving towards a more accepting and open political actor.

Such evolution of the mindset of medium voters is very welcome in our political environment, as without it we would neither have true incentives towards meritocracy in government, nor would we have ease of political negotiation between different citizens, as they would not view each other as equals. Furthermore, the shift in this ethnicity/genre dimension is likely to be correlated with broader evolutions in many other important dimensions of democracy, and thus Loretta Lynch may be here to shows us much more than just a new Attorney General.

Gentrification: Why "Voting With Your Feet" Might Be an Option For Some and Not Others

   Gentrification refers to a shift in urban population from poor to wealthy. It is a contentious topic that poses a significant challenge to both urban planners and local politicians. This past spring, local political leaders acknowledged that the latest wave of gentrification has occurred at an increasingly rapid pace and to the detriment of cities' long-time residents. This article explores how cities' attempt to attract young professionals out of the suburbs and into city limits has been successful—but perhaps too successful. In order to appeal to the next generation of upper class citizens, city funds have been used to institute tax breaks for luxury condominiums and to build new bike lanes, dog parks, and sports fields. The influx of wealthy individuals has caused home prices to skyrocket in cities across America, and, as a result, working and middle-class populations are increasingly feeling the pinch.  For example, in South Philadelphia, Rene Goodwin saw the value of her home rise from $90,000 to $281,000 in just a single year. Even more startling, then, is the fact that, one-fourth of Boston's citizens are facing similar challenges.
   The pattern of gentrification in American cities relates to Tiebout's model of consumer-voters. Over the past years, it would appear that city governments have selected a revenue-expenditure pattern that appeals to the preferences of wealthy citizens. These individuals, in turn, have voted with their feet and moved into luxury developments that are being built right beside and within working class neighborhoods. The gentrification process demonstrates that the individuals who might come closest to meeting some of Tiebout's demanding assumptions—namely full mobility and a large choice set of communities—are the wealthy. Middle and working class folk, on the other hand, do not have this opportunity, and their ultimate decision to move is much less a matter of choice and much more a matter of external pressure.

The Deadweight Losses of American Food Policy

A Washington Post op-ed viciously attacked President Obama on the grounds that he does not have a comprehensive food policy in place.  Instead, the federal government is funding the Affordable Care Act while simultaneously subsidizing the agricultural components of disease-causing junk food.  For example, the federal sugar subsidies decrease the costs of soda production, a drink whose consumption is related to obesity and diabetes.  The contradictions that exist within the federal government’s approach to food policy extend further than the ACA.  Farming is one of the primary emitters of methane, a “potent greenhouse gas” but EPA rules are voluntary for agriculture.     

It appears that the author is describing the deadweight losses associated with regulatory rents that have been sought by various industries.  The author cites instances in which the Obama administration attempted to protect the public good but failed.  Such failures include trying to regulate antibiotic use in agriculture, which would reduce negative health effects but likely raise costs for farmers.  The increase cost to farmers may have prompted lobbying against such a policy.  President Obama also pursued policies to protect farmers and consumers from “agribusiness oligopolies” by using anti-trust laws, but this also failed.  It is very possible, if not likely, that farms that stood to lose from these policies lobbied against them and were able to prevent their enactment.  However, since these policies had potential public benefits, their defeat maintains the significant deadweight losses faced by citizens.