Virginia Political Economy

Gerrymandering: Bringin' Down(s) the House?

Downs’ model posits that competition in a two-party system forces candidates and parties to adopt a range of policies covering the entire left-to-right political distribution to appeal to as many viewpoints as possible, while keeping their net position at the center where the largest number of voters is amassed.  This model does, indeed, seem to approximate the behavior we see from Democrats and Republicans in the general election for President, suggesting the population of Americans that vote in the presidential election tends toward a normal distribution.
    But can any party be fully satisfied adopting positions barely distinguishable from the competition? Surely, parties would rather be able to maintain their political integrity and still win the election. Numerous barriers prevent this from happening in the general election, but as Jeffrey Toobin argues in The New Yorker,  the Gerrymandering of Congressional districts has created a situation that, in fact, encourages parties to cater to the extremes and ignore our beloved median voter.
    Gerrymandering leads to many solidly one-party districts. Both Democrats and Republicans have worked over the years to protect their incumbents, rather than force them to compete in more balanced Districts. As a result, Congressional primaries focus on the interests of people on the extremes, not the electorate in the middle. This allows, if not forces, candidates to take more extreme positions politically, and leads to the House being filled with more extreme, partisan members on both the right and the left. (See figure 3 in Downs. Is a revolution imminent?) This polarizing occurs because voters in Congressional primaries are mostly hard-core party members with more extreme positions than the general public. Knowing the election is won in the primary, the candidates move away from the center to appeal to such hard-core “base” voters. And without any (or at least, any signficant) competition from the other party, candidates have no incentive to moderate their views or to compromise because there is no opposing force pulling them towards the political center. If anything, their strongest incentive is to move even farther from the middle, as their competition in the primary is often even more extreme. Thus, in the House races candidates are positioning themselves politically for very different reasons than in more “normal” elections, like the election for President: to appeal to highly partisan primary voters and to fend off same-party opposition instead of to the viewpoints of the constituency as a whole.

Frightening food for thought: What happens when this tendency towards extremes is paired with the power afforded the majority by the House Rules Committee to agenda manipulate?

Congress and the music industry meet again…

Music thieves of the class relax, this time it’s not about piracy.  For now it’s the externalities of the degrading lyrics of hip-hop music and the solution that government censorship could provide.  Armed with all the outrage and anger that derogatory entertainment thrives on, gangstas, congressman, music industry executives, and other significant leaders met in Washington on Tuesday to save the youth of America.

First rule of Coase: decide who is liable.  After many insults were tossed around, there was no consensus on which attending group to blame, no surprise there.  Essentially, it was agreed that the root of the problem is the drugs, violence, and crime present in society, not the media, but that the media is perpetuating this problem.  The number of angry parents and moralists is high – which lucky ones will step up to foot the bill and pay off the music industry?  Sorry Coase, I think I’ll free-ride this one. If the number of people who want dirty lyrics gone becomes high enough, I think collective action is the cheapest most efficient way to get around the free-rider problem and high decision costs, but the fact that the choice for government censorship at this meeting was a unanimous “no” shows that we probably have not crossed that line yet.

The point is that our culture values this music very highly, possible higher even than the safety of our communities.  For the naysayers out there, they can "take a stand and do that" with Master P.  Coase would be proud.

Ah, Classic Externalities...

This just seems like a classic externality problem. Residents in Washington, DC are beginning to complain about additions to area rooftops. Be they developers who are hoping to turn a small single-family home into a condominium to gain profit or just homeowners who want more space, people are adding additions to the top of their homes. This has prompted complaints from other residents and so-called "community organizers" that the additions break up the roofline of the neighborhood, are aesthetically displeasing, or diminish the historic character of some neighborhoods.

For Coase, clear property rights are an important component of finding market solutions to externality problems without resorting to collective action. In many of these neighborhoods, zoning regulations function as delineations of property rights with respect to the height of houses. As the article notes, these additions, or "pop-ups," are "legal, as long as neighborhood zoning allows for greater height, which is how a developer added three floors to what was once a four-story building."

This has not stopped some people from seeking to rectify future negative externalities associated with so-called pop-ups through collective action. Many are lobbying to either change zoning laws or declare neighborhoods "historic," a designation that imposes greater restrictions on alterations a property owner may make. That does not mean that there aren't people who would agree with Coase, that externalities are reciprocal and can be rectified by action on either side. As one developer said about his new pop-up "If they don't like it, they should have bought it themselves." Or from Coase's perspective, at least paid the developed the additional anticipated income to be gleamed from the pop-up.

Provisions to the State Children's Health Insurance Program- A necessary redistribution?

According to the September 22nd CNN article,  last Thursday, President Bush threatened to veto the expansion of the State Children’s Health Insurance Program.  This program would provide health care coverage for families who can’t afford it on their own, but can’t quite qualify for Medicaid.  Democrats claim that the expansion will provide health care to 10 million children in five years by increasing the tax on cigarettes 61 cents.  Bush is opposed to complete federalized health care and he claims that this state-federal program will increase spending too much (20%).  He also claims that this may provide health care publicly to families that could have afforded it privately.  If this bill does not get passed, 15 states will run out of funding by the end of September.

Obviously this program couldn’t be locally provided, and according to the Tiebout model, a program with such weak tax-benefit linkages such as these, should be provided at the state or federal level.  It would seem more logical for this bill to be vetoed if the redistribution was from the rich to the poor, but this, however, is not the case.  Raising the cigarette tax is not directly targeting one income-based group of people; rather it is targeting a group of people with preferences that are generally deemed unfavorable by society.  Therefore, people will self-select into paying this tax and in return $35 billion will be added to the SCHIP aiding an additional 4 million children.         

Russia's New Class of Public Goods

In class we have discussed many goods with positive externalities, such as education and vaccinations.  These are goods where the quantity actually produced is lower than the allocatively efficient quantity, and thus represents a market failure.  The Russian province of Ulyanovsk would like to add another good to that list: babies. 

Faced with a low birth-rate and a shrinking population, the governor of one central Russian province has instituted a system of incentives to encourage couples to have more children.  The parents of children born on Russia's national day, June 12 (nine months from last Wednesday) will be eligible to receive such prizes as an apartment, car, fridge, or television set.  These prizes, or subsidies, offered by the Russian government show that the private costs to couples of having another child is too high and in turn, is preventing society from reaching what the Russian government views as the socially optimal population level.  These subsidies attempt to lower the costs to couples of having another child.

Also notice that under this schedule of incentives, babies born to unmarried parents aren't rewarded as highly as those born to married ones.  Perhaps the government thinks that married couples are more likely to respond to these incentives than unmarried couples or that babies born to married couples are of higher value to society, or perhaps that there is shortage of babies born to married couples relative to those born to unmarried couples.  I guess we will have to wait nine months for the results.

“Fair Tax Act of 2007”

Friedman shows how government intervention can benefit society in a number of ways. For example, it provides a means for modifying rules, mediating differences, and enforcing compliance. The government is trying to help society by meetings all of its collective needs. However, the government can also use its rule making power to satisfy the wants of specific groups. The government is self interested and a utility maximizing agent just like the individual as discussed by Buchanan and Tullock in “The Calculus of Consent.” For example, the “Fair Tax Act of 2007” shows how Goode is using his political power not only benefit himself, but also his supporters. The “Fair Tax Act of 2007” is a national sales tax that would mostly hurt the middle class taxpayers if passed. The tax is considered a regressive tax because the rich would be paying a smaller percentage of their income than the middle class. The “Fair Tax Act” shows how government intervention can hurt the collective needs of society through involuntary transfers.

I think that the tax shows the government overstepping its boundaries because it is not thinking about the collective needs of society. Goode is acting in a self interested and utility maximizing way by supporting this tax that would give a “tax cut to a very small number of very well-off Americans.” Rather than focusing on what’s good for society, Goode is thinking about the money or votes he is going to receive from the supporters of this tax if he can get it passed. There is a hidden agenda that the public does not see which skews Goode’s decisions and hurts the collective needs of society.

The article also provides a good example of “redistribution of taking” as well. Goode’s supporters are using him as a vehicle to get the state to steal through involuntary transfers. The tax will provide the rich with a tax cut, while making the burden heavier on the middle class. The rich are able to achieve this benefit because they have political resources, such as money. These political resources can be used to bribe or lobby the government. In return the rich will get what they want. Therefore, the rich have a major advantage because they can use their political resources to get benefits like the “Fair Tax Act of 2007.” As Mueller discusses, both groups could be worse off depending on how much the rich spent lobbying Goode. These political resources could have cost more than the actual benefit they received from the tax cut, which would make them and the middle class both worse off. Therefore, the rich are only benefiting from the tax cut if their political resources are less than the benefit they receive. It would be interesting to see how much the rich spent in order to get Goode to endorse this tax. There is probably a pretty good chance that the rich spent more lobbying for the tax, than the actual benefit they received. Overall, the article shows that governments can take actions that go against many citizens as a result of not having the unanimity rule, which prevents involuntary transfers.

Self Enforcement

This one was too easy...  When I got back to my office today, the very first item I read was a weblog entry that linked to this Citizen's Self-Arrest Form.  Seriously.  It seems that at the "University" of Oklahoma, the campus police expect individuals to arrest themselves. 

Note the great incentive for doing this: to "provide a savings of tax dollars."

Sure, we can save a lot of tax dollars if we hire no police and we just police ourselves (think about that you under-age drinkers).  That is quite an effective and credible enforcement mechanism!

Here is the source, a weblog written by two economists. 

I just can't figure out why Rhett Bomar didn't turn himself in.

Highways- A Public Good?

Gary Lawkowski

One common argument for government intervention in the market place is that the power of government is necessary to provide public goods. A pure public good is defined as a good which is non-rivalrous in consumption and infeasible to exclude use.  To many people, roads constitute a public good, and thus necessitate government action to ensure their provision and upkeep.

In his book Capitalism and Freedom, Milton Friedman challenged this assertion with respect to highways. Now, in Northern Virginia there is a project Friedman and other free market advocates would be proud of. In order to reduce traffic, construction is beginning on "express toll lanes." The lanes will use HOV entrances and exits and three new access points, allowing for limited points of entry and exit. These toll lanes were originally slated to be primarily private ventures, with full funding coming from the private sector, however cost overruns resulted in government giving in to temptation by providing some funding to the project. None the less the lanes, which are still slated to be operated and maintained privately, illustrate Friedman's argument that highways can be provided privately due to limited entry and exit points.

This project also illustrates a Coasean solution to the externality of traffic. While Coase would probably take issue with government financial support for the project, I believe he would support the principle behind it. As initially conceived, people who value avoiding traffic at a certain level would voluntarily pay a fee to take "HOT" lanes rather than sitting in regular lanes or relying on government coercion in the form of taxation and construction of new roads to rectify the problem.

Welcome

Lee Coppock

Welcome to the weblog for ECON 333.  You can begin posting after you sign up as an author.