Virginia Political Economy

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Don't Trust a Table-er

As I was walking home after class on Thursday, I was bombarded with the usual “table-ers” attempting to pass out their flyers with the lure of some type of food, and received this flyer from a table with a particularly large and alluring candy bowl. Instead of throwing away the flyer, which is what usually happens, I decided to read it and was shocked at its irrational logic. I would like to refute each reason given on this flyer, of “why I should vote” in the upcoming gubernatorial election.

 

1. UVA is a public school, yes, but the majority of its funding comes from private donors as it is moving toward becoming a purely private school in the next 10 years. Also, since I will be graduating this year, I will not have as much vested interest in the school and its funding from the state.
2. I did vote last year in the state of Virginia, which actually was a swing state in last year’s presidential election, but I highly doubt my individual vote out of the votes of millions had a “big impact” on the final decision.
3. Statistically speaking, the probability of me getting in a car accident on the way to the voting polls is greater than the probability of my individual vote “breaking the tie” in the upcoming election. The dangerous cost of voting clearly outweighs the expected benefit and utility of my preferred candidate winning the election. (Unless I used a minimax regret strategy….)
4. “Civic duty” is a vague term that still doesn’t explain the irrationality of me voting in an election in which the probability of my vote making a difference is  slim to none.
5. Ok, I get candy, which is pretty exciting considering I love free food, but after Halloween weekend, I will be in a sugar coma and won’t want to see a piece of chocolate for weeks. Also, the marginal benefit of consuming one candy does not outweigh the cost of voting and registration which is time consuming and tedious.

 

None of the reasons for voting given by the UVA legislative Affairs Committee are economically sound. With all this being said, however, I will actually vote in this year’s election. My minimax regret strategy has started to take over and the potential regret I would feel if I didn’t vote and I could’ve been the tie breaker is leading me to the polls. (or maybe it actually is the candy…)

Public Health Care Option: AMA vs. Its Doctors

In class last week, we talked about Olson’s claim that people join a group because of common interests; however individuals within the group also have personal interests that may or may not coincide with the group’s interests.  This idea can be applied to doctors facing the new health care proposal.  Doctors must decide whether or not they personally support the public option.  As we also discussed in class, many doctors are members of the AMA, or American Medical Association.  The AMA has been consistently opposed to the public option because they are worried about the government putting too many limitations on doctors.

However, recent studies have shown that 63% of doctors nationwide, including a large portion of doctors that are members of the AMA, support the public health care option.  These doctors’ interests directly contradict those of the AMA, and therefore they may not act in the best interest of the group, but rather in their own interest.  Without support from their members, the AMA will not be as successful as a whole.  It will be interesting to see if the AMA continues its opposition to the proposal, or if they decide to better represent the interests of their doctors.  In order to thrive as a group, they must find common ground somewhere.

I try really hard not to like Mickey D's.

    In high school we always referred to the cafeteria meat as mystery meat because quite honestly sloppy joes tasted like a combination of chicken and rubber, and if you dropped your hamburger patty on the floor it literally bounced.  I can tolerate a lot of pretty gross things but I refuse to eat feces, feathers, chicken feed, and fragments of dead organisms that accumulate on chicken farms.  According to an article in the LA Times this week, one to two million tons of this precise combination is fed to cattle every year, and that is why food and consumer groups are trying to get the FDA to outlaw this method of feeding cows.  This regulation would benefit the public at large by reducing the incidences of mad cow disease and contamination as well as improve overall health.
    This regulation can also be seen as an example of the capture theory because the article mentions that, “McDonald's Corp., the nation's largest restaurant user of beef, also wants the FDA to prohibit the feeding of so-called poultry litter to cattle.”  McDonald's is tired of all the negative press they have been getting in recent years and therefore is a strong proponent of a bill preventing farms from using this type of feed.  If everyone was forced to change their practices it would hurt the smaller firms more, because a lot of them just cannot afford to have quality feed for their cattle.  All consumers would benefit in terms of health, be hurt in terms of cost, and McDonald's would benefit on all fronts. Stigler mentions that it is only rational for firms to seek their own interest and this is precisely what McDonald’s is doing by supporting a bill to increase quality of feed. This regulation would harm local beef producers and also prevent local farmers from entering the market.
    The article finishes with a quote from the professor emeritus of food safety at UC Davis saying that we should feel lucky because in the old days, “what came out the back end of the cows was eaten by pigs, and what came out the end of pigs was eaten by chickens…anything that hit the ground was fair game.”  And that is precisely why we should all steer clear of mystery meat, and in the end a double cheeseburger from the dollar menu might just not be worth it.

Governor race question importance of vote motivation

    In class we have been talking about who is actually going to vote on November 3^rd in the Virginia governor election.  In this article “Va. Governor’s Race May Lack Voter Excitement”, they discuss that the republican party feels that winning the election is all about voter turnout and motivating the republican citizens of Virginia.  Although Virginia went democratic last year in the presidential election, they believe this will not hurt, but help motivate republicans to go vote. The party in the White House has always lost the Virginia’s governor race since 1977, could this be do to lack of their parties vote motivation?

With the minimax regret strategy, you can see that Republicans have more to lose.  The republicans are more likely to take action and go vote because they have a higher potential regret.  Since Obama is already in office and the democrats are dominating and pushing for higher taxes and more regulation from Washington, the republicans in Virginia want a republican governor to stand up for them.  So the McDonnell campaign hopes that this will motivate individual republicans to go out and vote on November 3^rd.  If they do not vote, Deeds wins, and there vote would have mattered than they will have a very high regret. 

            On the other hand the article claims that Democrats are less likely to vote because they are unworried.  Since Obama is already in office, they have won the past two governor elections, and hold both senate seats, the individual voters have less to lose.  In the article Tom Davis, a Former Republican Congressman, says, “With Bush gone at this point, he was the energy source for Democrats in terms of donations, turnout and voter motivation. He's gone. They got rid of him. So they're complacent”.   If this is correct the individual democratic voter has less motivation to vote, since the cost of voting probably outweighs the individual benefit, seeing that their potential regret isn’t too high. 

Questionable Voter Turnout in Afghan Runoff

On August 20th, Afghans went to the polls to elect a President from a pool of 51 individuals. After more than a million votes were thrown out due to suspected “irregularities”, the results gave Afghan President Hamid Karzai 49% of the votes and challenging Independent Abdullah Abdullah 32% of the votes. Under increasing pressure from the United States, last week Karzai called for a runoff between himself and Abdullah. However, the Taliban has renewed its threats “to attack polling stations and close roads on the day of voting” (November 7th). In our discussion on voter rationality, we mentioned that “the probability of being run over by a car going to or returning from the polls is similar to the probability of casting the decisive vote” (Mueller). Clearly, in this context, the probability of being injured somehow or of having to travel farther to get to the polls is significantly higher than being hit by a car simply because of the Taliban’s well-known, militant stronghold over the country. So, why did 5 million Afghans (although a small proportion of registered voters) show up to vote?

As TIME reports, the costs of voting in the upcoming runoff are increasing in more ways than just threats from the Taliban. While extensive measures are being taken to reduce fraud (“tamper-proof boxes and indelible ink”), “Afghanistan’s election commission has decided to cut the number of polling stations by about 2,000 out of 25,000”. Many rural voters in regions with available polls still face an equally prominent obstacle to voting in that “it’s too late” for those living in the mountains because the snows and ice have set in preventing them from getting to the polls.

Weather conditions aside, TIME points out that the most significant barrier to a high voter turnout is simply voter apathy. Voters are turned off by “the long wait for results, political accusations between parties, and a prevailing sense of international intervention”. Only 5 million of approximately 12-16 million registered voters turned out in the first round. Of the initial 5 million, certainly a large portion will be discouraged to vote again by the controversial first round results feeling their vote won’t matter or will have no effect on the legitimacy of the results.

All of these factors taken into account, voters will still turn out and maybe in increasing numbers if one reconsiders a particular explanation to the voter paradox that Mueller believes to be insufficient. The hypothesis is that “the greater the number of other voters I expect will rationally abstain, the more rational it is for me to vote” because the more likely my vote will matter. Mueller refers back to the psychic benefits from voting (civic/moral duty) as being a stronger determinant because voters are “uncertain about the costs of voting for other citizens”. But in the context of the upcoming Afghan runoff election, the costs of voting are clearer than ever, as discussed above.

Debate over Regulation of Financial Industry

Treasury Secretary Timothy Geithner recently defended the Obama administration’s plan for an overhaul of the regulation of the financial industry. The legislation drafted by the Treasury Department and Rep. Barney Frank, chairman of the House Financial Services Committee, would give federal officials power to seize and dismantle large financial firms whose failure would pose a risk to the economy. The plan also would allow regulators to impose tougher requirements on these large firms to reduce their risk of failure and make it less attractive to become so large.

This article is relevant to our discussion of Stigler’s theory of economic regulation. The Obama administration is trying to use the public benefit view, saying that the legislation is intended to protect the public from another economic crisis.  Geithner even noted that “we need to build a system in which individual firms, no matter how large or important, can fail without risking catastrophic damage to the economy.”  Taxpayers were very angry after the last bailout, so putting rules in place would increase transparency about how the government would deal with a similar situation in the future. Frank also argues the plan will reduce the moral hazards that are now present at institutions deemed too big to fail.

Many Republicans are skeptical of this plan, including the fact that it places no limit on how much money the government could spend after it stepped in to prevent a bankruptcy. Republicans challenge the notion that the plan is in the public interest, saying that taxpayers will be first in line to bear the losses when the government gets involved. Additionally, some firms are worried about the government overregulating their industry, so it is possible they will try to “capture” the government and get them to change the bill so that it primarily benefits them. It will be interesting to see how this plays out over the next few weeks, and if Frank’s bill is able to pass without radical changes being made to it.

Regulating Childhood Obesity

    With growing numbers in childhood obesity, government officials have begun to wonder how they can halt, or at least slow down this epidemic.  Last month the Institute for Medicine and the National Research council announced new plans for local governments to fight childhood obesity. These plans included zoning and land regulations that would restrict where fast food restaurants could place their stores.   Part of the reason for such regulations is because statistics show that when looking at communities of lower socio-economic status, there is quite a large inclination for fast food restaurants to be in those areas.

       Further reports from committees geared towards preventing childhood obesity have offered multiple strategies to local governments to help promote healthy eating and increasing physical activity for children.  Some of these plans include placing a higher tax on unhealthy food, “to discourage consumption of foods and beverages that have minimal nutritional value.” Here are some other plans that have been offered:

-     Mandate and implement strong nutrition standards for foods and beverages available in government-run or regulated after-school programs, recreation centers, parks and child care facilities (which includes limiting access to calorie-dense, nutrient-poor foods).

-     Implement a tax strategy to discourage consumption of foods and beverages that have minimal nutritional value, such as sugar-sweetened beverages.

-     Promote “breastfeeding friendly communities” and adopt practices in hospitals modeled after those used by the United Nations Children’s Fund and the World Health Organization.

-    Adopt land use and zoning policies that restrict fast food establishments near school grounds and public playgrounds.

    A few classes back, Professor Coppock spoke of economic regulation. Specifically, we talked about George Stigler’s article on The Theory of Economic Regulation.  There were three alternatives or reasons for regulation: it was for the public benefit, there is no rational explanation, and capture.  After reading this particular article, I would say that the regulations the local governments would place on the fast-food industry, whether it be higher taxes, or zoning laws, would be enacted to benefit society, or the public, at large. 

    However, until these regulations are implemented, we better not get in the way of some children and their pork products.

Waxman-Markey Bill Developed Because of "Green" Rent Seeking

The U.S. Chamber of Commerce is opposing the Waxman-Markey Bill, legislation that would promote green practices at the expense of economic stability.  The author claims  that this bill has been strongly lobbied for in Washington and as a result only benefits those firms that have a vested interest in “green” technology.

The bill proposes such practices as mandating that 20 percent of our energy come from renewable sources by 2020, vastly increasing energy costs for the average consumer.  In addition, $30 billion would be spent to subsidize wind turbines, solar energy, and other energy sources.  It is not hard to see that producers of wind and solar energy will benefit most from this bill, companies such as General Electric.  As the article states, “This bill is pure 'rent seeking' by GE.”

Whether or not you support the Waxman-Markey Bill, it is hard to deny that this bill will greatly benefit those companies with a vested interest in “green” business practices.

Regulation of Functional Foods: Public Interest or Capture?

Regulators in the United States and Europe have recently targeted food companies for questionable claims about the health benefits of their products. The products under increasing scrutiny are functional or fortified foods, which conflate the division between food and medicine by offering specific health effects (lower cholesterol, better digestion, stronger bones, reduced cancer risk, improved attentiveness, etc.). These items typically command higher margins and are attractive to consumers pursuing a healthier diet.

What is the motivation of the Food and Drug Administration and the European Food Safety Authority to require companies to provide better evidence to corroborate these alleged benefits? It could be, as the public interest view of regulation would suggest, that these officials are genuinely interested in protecting consumers from misleading health claims. George Stigler would beg to differ. For large, established food companies the cost of funding research to appease regulators is far less burdensome than it is for smaller new entrants. It's thus possible that the largest food companies have captured this regulatory crackdown to keep out new firms. In another explanation motivated by the capture theory of regulation, it's possible that firms offering products with tangible health benefits are pushing for the stricter rules. If these firms have scientific evidence that their products are healthier, they would be interested in exposing the specious health claims of competitors. As companies such as Nestlé and Groupe Danone put fortified foods at the heart of their competitive strategies (Danone's corporate mission statement is "Bringing health through food to as many people as possible"), it seems reasonable that they would like to keep fraudulent health claims out of the market.