Virginia Political Economy

Why So Much Stability?

Mueller Chapter Five presents cycling theory’s revolving-door hypothesis in two-party elections. Assuming multi-dimensional issue space, challengers can adopt different, more popular platforms than incumbents, so that “cycling in a two-party system should appear as the incumbent’s continual defeat" (234). Mueller then rebuffs the theory by revealing how incumbent governors win 3/4ths of re-elections and challenging parties never win as much as 40% of elections in any decade. Consequently, Mueller dubs Tullock’s pondering about two-party elections, “Why so much stability?” as appropriate (236).

Alan Abramowitz’s article offers a revealing model of voting behavior that helps explain the revolving-door hypothesis’s inefficacy.  Abramowitz’s Electoral Barometer formula has predicted the popular vote in 14 of 15 presidential elections since WWII combining “three indicators of the national political climate…the incumbent president’s approval rating at mid-year, the second quarter growth rate of the economy, and the length of time the president’s party has held the White House.” The formula reads: EB=NAR + (5*Economic Growth) including a subtraction of 25 when the incumbent party has held office for two or more terms, with positive and negative scores predicting victory and defeat in the popular vote respectively. Unlike the revolving-door hypothesis, which suggests challengers readily defeat incumbents in two-party systems from spatial mobility, Abramowitz contests that these three reliable indicators of the national political climate are better determinants of election results. In fact, he does not factor incumbency disadvantage into his barometer until the incumbent party has held two terms. Although presidential elections fluctuate somewhat more than gubernatorial contests, with 6 Democratic victories since WWII and 9 Republican, Abramowitz’s formula offers explanation for Tullock’s question about stability. Whatever their platform, opposing parties will have trouble securing victory if an incumbent is popular, the economy is growing strongly and only consecutive terms create distaste for an incumbency. Moreover, the unpredictable booms and busts of an economy lessen the significance of revolving-door platform change if an independent variable like economic growth strongly influences voting behavior.

Interestingly, the barometer read -63 in late May due to the slow 1^st quarter growth of the economy, Bush’s low approval rating, and two-terms of a Republican president. If McCain were to overcome this “triple whammy,” it would be “an upset of unprecedented magnitude.” Yet, McCain is the first non-incumbent president or vice president to run in over 50 years, and Obama is the first African-American presidential nominee in our history. If two-party voters “are likely to view personality, or technical competence, or some other nonideological factor as decisive” (127) like Downs' Chapter 8 suggests, then perhaps McCain’s bipartisan image and experience, and unquantifiable racism against Obama will make both the revolving door hypothesis and the Electoral Barometer’s predictions for non-incumbent victory false.

Medium Voter Theory- Catholic Vote

http://washingtontimes.com/news/2008/sep/21/quo-vadis-catholic-vote/
(This article is admittedly conservative/Republican biased)

The discussion in class about medium voter theory got me thinking a lot, in particularly about the catholic vote. As a Catholic from a Catholic region, I understand that Catholics most align with Democrats economically and in many other ways (they are located in more urban sectors, tend to be middle to upper class, migrated to the country much later than many protestant groups). However, they are a great example of a contradiction to medium voter theorem in that some social issues may decide their voting preference.

The article above and some I listed below highlight the importance of the Catholic vote (the large Catholic population in the U.S. and its concentration in many swing states). The articles also chronicle how the Catholic vote is often determined by key social issues: abortion and to a lesser extent same-sex marriage. The church has consistently stood against abortion and same-sex marriage; and has encouraged its parishioners to vote accordingly. This goes a long way in saying that the medium voter theory is flawed or needs amending. Clearly, there is not a single continuum on which people lie which will decide who they vote for (based on distance). This shows that voting patterns may be more accurately modeled as multiple continuums of varying degrees of importance to the voters (it is easier to assume that the continuums are independent). Politicians could then try to optimize they votes they receive by placing themselves optimally on each continuum.

This article/issue also highlights another key point, many issues are not continuous. You are either for or against abortion (or life or choice or whatever bias is placed in the language). You cannot be kind of for gay marriage or kind of against it. In this sense, politicians (if trying to optimize votes) must think of their stance more in terms of a classic game with a discreet set of choices.

I thought it would be very interesting* to see what the outcome would be if the Democratic candidate was pro-life, anti-same-sex marriage (either or both). They would certainly take the Catholic vote. The question is how their traditional base would react. I believe the medium voter theorem would say that liberal voters would still vote Democrat (because they're closer). Pyschologically, it may upset them so much that they would vote oppositely or not at all (alienation) (it would almost certainly decrease voter turnout). It would also be interesting to see how the Republicans would react (because they would have incentive to nominate a pro-choice, pro-same-sex-marriage candidate.) (Side Note: According the medium voter theroem, either party has a significant incentive to withhold its nomination until the other party acts, and pick a candidate that slightly deviates from the opposition in as many issues as possible.)

*By interesting, I don't mean to belittle the importance of abortion or same-sex marriage and its allowance or denial, as I know that is very important to many people (including myself). From solely an economic perspective, it would be interesting to see how it would affect the outcome of the election.

Ray Cwiertniewicz (I'm not sure if we're supposed to sign this).

http://www.slate.com/id/2184378/
http://weblogs.newsday.com/news/local/longisland/politics/blog/2008/08/dnc_biden_the_catholic_vote_an.html

"Barnyard externalities"

According to this article, "The hunt for the odourless pig," after a fairly recent supreme court decision limiting the number of farms under the watchful eye of the EPA, many states are taking action to ensure that the negative externalities produced by massive farms are controlled or appropriately managed.  The main concern, as cited by the article is proper waste management which affects the water supply of neighboring communities(negative externality).  These same farms that will be regulated by both the EPA and local governments want to be sure that they don’t incur “arbitrary penalties under the clean air act and other laws” and are paying to have Purdue University, under supervision of the EPA, conduct national emissions studies. 

As a result of these studies looking into the effects of mega farms, one of Purdue’s own, Albert Heber, began examining the problem of barnyard stink.  According to the article he is trying to curb “the stink” via modification of animal diets and biofiltration, which leaves helpless graduate students to the task of smelling animal waste from the resulting trials.  But I ask the class this: what would any of us do to make it in our field?  If your career path is a series of building blocks, then doesn’t it make sense that in some professions those building blocks might be a little more SOLID?

Sports Externalities

         For my first post, I thought it would only be appropriate if I did something about sports.  This article talks about how MLB and MLBPA (Major League Baseball and Major League Baseball Players Association) were denied their challenge of the use of players' names on fantasy leagues.  Their argument is that the fantasy sites are making money off of using players' names for their product, but the MLB nor the players are receiving any benefit from the use of their names. Therefore, there is a positive consumption externality. The social marginal benefit from the use of the players' names is more than the private marginal benefit of the players themselves.

          It is interesting that the MLB went to the courts instead of trying to resolve the issue privately.  The courts ruled against them due to the First Amendment but I wonder if they could have reached a mutual agreement and received some compensation if they would have gone directly to the fantasy companies.

          Personally, I think about my fantasy football league everyday. I check my team about twice a day, and about 10 times on Sunday and Monday.  I even have text messages sent to my phone about injury updates and fantasy player stats. (Excessive? Maybe. But last year I got embarassed and I vowed that it would not happen to me again). Is the NFL or the individual players getting compensated through my constant thoughts or the advertisement revenue that the site consumes? No. But sports makes millions of dollars anyway; so should they?

I'll Be Back

Promises the California Budget Problem of 09.  California Gov. Arnold Schwarzenegger is threatening to veto the budget which just passed through the California state Congress.
The 2009 Budget already contains huge decision making costs.  It took a record 78 days to pass this bill.  However, Schwarzenegger feels that the external costs of this budget are too great to allow the bill to pass.  His veto would send the bill back to the congress where a two-thirds vote would be required to pass this bill by overriding his veto.  Ironically, this veto could add zero benefit while adding only more costs.  The Congress claims they have the two-thirds majority vote to override his veto if he decides in favor of blocking the bill.  If so, more decision costs would be added onto this already expensive bill.   The situation now facing Arnold is whether the new decision costs incurred by him forcing a revote would be worth the risk that no old external costs  would be cut from the budget.  However, if Schwarzenegger veto was not overturned, a new budget could later be passed whos externatilite costs dropped by more then the decision costs increased leading to a better outcome.

the problem of overfishing

In the short run overfishing passes lower costs to consumers, but in the long run overfishing can lead to the extinction of certain fish. Fisherman are so concerned about lowering their costs and making a few extra bucks that they overlook the fact they may wipe out a species and have nothing to fish for in the future. The fact that fisherman do not take into account the impact they are having on future generations produces a negative production externality. The private marginal cost is lower than the society marginal cost.

In an effort to correct for this externality, the MSC was formed to certify sustainable fisheries. The process to become certified is expensive and often the government or the producers have to pay for it, but once they pass MSC tests a label is placed on their fish to make them more marketable. The hope is that people will learn about this label and only buy fish that carry the MSC sustainable fishery label, but still a lot has to be done to raise public awareness of these labels and the problem. If all goes well then the private marginal costs will move up towards the society marginal costs and lessen the problem caused by this negative production externality.

Shortchanging the Future

We all know what an important topic drilling in Alaska has become, what with high oil prices, global disruptions in supply, and a… delightful… vice-presidential candidate. And part of the chatter is devoted to what actual, if any, benefits would fall to Americans. The New York Times recently featured an op-ed article discussing just that through a cost-benefit analysis.

The article is careful to include the negative externalities of drilling in the costs, including possible adverse environmental effects and even the “loss of the intangible benefits Americans get from knowing that the Alaskan refuge and outer continental shelf have been left untouched.” When all is said and done, the benefits seem to far outweigh the costs, which include the negative externalities (even the ones I thought were incalculable). The article then suggests that the excess benefits can be used to protect the environment somewhere else.

But I think the article misses a major point: the article doesn’t mention the externalities imposed on future generations. By drilling in Alaska, Americans today will lose “intangible benefits,” but so will all future generations, a cost that ought to be taken into consideration. Obviously, calculating a cost like that is no easy task, but I don’t think that means it should be ignored altogether.

The Effect of Oprah's Influence

Oprah Winfrey announced her latest pick in her Book of the Month Club. Oprah Winfrey of "The Oprah Winfrey Show," of course. The newest book is David Wroblewski's "The Story of Edgar Sawtelle."Oprah has scheduled Mr. Wroblewski for a broadcast Q&A discussion with the approximately 2 million members of her book club. She had nothing but positive and gushing reviews for the book.

Oprah Winfrey's loyal and expansive audience will most likely rush to go out and buy this book, too, due to her endorsement. This is a clear example of a positive consumption externality, where Oprah's consumption of David Wroblewski's book will increase his financial (and perhaps personal) well-being while she will receive no compensation from him for her endorsement. In this type of market failure, the social marginal benefit curve lies above the social marginal cost curve, leading to an inefficiency.

Texting and Training

    I have observed drivers text messaging while flying down the interstate, and although I don't condone it,  I will humbly admit that I am guilty as well.  After perusing the web for a bit I was shocked to learn a bout this tragic incidence of texting while operating a train.  This hyperlink further explains the situation, but basically the operator's failure to acknowledge a stop sign because of his text message resulted in the death of 25 people in the state of California.  Clearly there is a huge social cost involved when we decide to operate a vehicle due to traffic.  The social cost only increases when one decides to text while driving.
    California has since banned texting while operating a train.  It was surprising to me that a law had to be enacted for this issue because the social costs of texting seems so high already that a law would not even be necessary.  You would think that people would naturally recognize these costs, which would prevent them from texting all along.  Possibly the 'love is blind' phrase comes into play here as the article states that "Mr. Sanchez was text-messaging with a teenage train aficionado".  Can love overrule some of the basic principles of economics when it comes to humans acting rationally and observing social costs?  Or does it just reinforce the principles through the idea that Mr. Sanchez simply gained more utility through text messaging than through operating the train?
    Lastly, it is important to consider the government's role in this situation.  There are transaction costs that must be incurred through enforceability.  It is highly unlikely that policemen would be hired to watch for this as they do for speeders on the interstate.  It would probably be too costly for train companies to monitor every text message sent by every employee.  On top of that, the opportunity cost of monitoring texts is too high because of productivity would decrease dramatically.  So what prevents people from texting while operating a vehicle?  Clearly the extremely high social cost imposed on other drivers does not.  Should the government pass laws that impose fines for those who text and drive?   Whatever the case may be, it is important to recognize the dangerous social cost involved with texting and driving.

Global Externalities

Working for the Environmental Protection Agency this summer made me very aware of the global warming issues faced by today’s society and efforts being taken to reduce these issues.

Global warming is one example of a negative externality that affects billions of us every day. Heat-trapping pollutants in the atmosphere emitted by thousands of different sources can eventually have a severe impact if measures aren’t taken to reduce them. This article focuses on a very large source of pollutants, Asia as a whole, and the negative externality it imposes on the United States and the rest of the world. If Asia stays on its current course, its short-term air pollutants alone will specifically impact warming localized in the United States due to certain weather patterns. Pollution being a typical example of a negative externality, it is interesting to see a case where the actions of one continent can be distinctively detrimental to a country on the opposite side of the world.

Although there is a general idea of two main parties involved in this exchange, the problem is obviously still very complex. As in most large cases dealing with externalities, one can be sure that the free-rider problem would take effect in the reduction of global pollution, especially because a large effort is required for a relatively small output.

Is this a case where government should bypass the laws of economics to save the environment from global warming and its possibly irreversible effects? Due to the fact that property rights over the Earth’s atmosphere are not well-defined (to say the least), it would seem the answer is yes. The real question is how bad must the externality get to elicit proper action?