Virginia Political Economy

The food industry's hold on the USDA leads to false nutritional facts?

Author and CNN writer Jonathan Safran Foer composed two essays for CNN.com on the consequences of eating meat. In the second, Foer discusses the "distorting influence of the meat industry on the information about nutrition we receive from the government and medical professionals". He begins his essay by criticizing the American Dietetic Association for "taking a conservative stand" on portraying vegetarian diets by "leaving out well-documented health benefits attributable to reducing the consumption of animal products". He brings evidence to the table that completely dispels the "myth" that meat-eaters consume a healthier level of protein. And Foer's claim as to why the ADA and other health agencies don't try to get more vegetarians out there is simply due to a conflict of interest: "Our nation gets its federally endorsed nutritional information from an agency that must support the food industry". Foer cites a public-health expert, Marion Nestle, who argues that the food industry will lobby Congress to eliminate regulations perceived as unfavorable... and will co-opt food and nutrition experts by supporting professional organizations and research".

For example, the National Dairy Council is the marketing group for Dairy Management Inc., "whose sole purpose is to 'drive increased sales of and demand for US dairy products'". The National Dairy Council promotes dairy consumption despite proven negative effects of dairy consumption. The worst part about it, says Foer, is that the US government has allowed the Council to become "arguably the largest and most important suppliers of nutritional-education materials in the nation". An even more controversial example is the US Department of Agriculture, a government department that lobbies to make factory farming the norm in America, that is also the sole decision-maker when it comes to determining federal "nutritional guidelines". 

It's an interesting situation because it seems like the food industry doesn't even have to lobby the USDA hard to get the regulations (or lack of) that they want simple because it's the USDA's job to promote the food industry. However, the USDA is also the institution we have placed in charge of informing us when certain foods are dangerous! "The USDA has a monopoly on the most important advertising space in the nation, those little nutritional boxes we find on virtually everything we eat." And through the USDA, the food industry has "crafted our national nutrition policy, which influences everything from what foods are stocked in the health-food aisle at the local grocery store to what our children eat at school."

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.

Beating a Dead Horse: Rent-seeking Edition

In my previous post, I wrote loosely on President Obama's tariffs on Chinese tires. Unfortunately, Obama's policies cannot seem to get on the good favors of economists because his policy decisions have further implications that economists frown upon.

Obama's tariffs back a complaint filed by the United Steelworkers union. What has pundits scratching their heads over the tariffs, however is that none of the U.S. tire companies--who have operations in China--have publicly supported the complaint. If our President sought to help America’s tire-makers, the reality is that they have more or less given up on making low-end tires at home in favor of importing them (often from joint-ventures in China). American consumers will have to pay more and the motor and garage trade will be harmed. But most confounding of all is the fact that these tariffs are highly unlikely to revive the American tire industry; firms can simply import cheap tires from other low-cost countries like India and Brazil.

President Obama has now signaled to all other industries and unions that he may be in support of further protectionist measures. Whether he actually is--or isn't--does not matter. Whether the lobbyists actually extract the resulting economic rent or not does not matter. But what can certainly be said is that interest groups will most definitely divert more of their resources to seeking this economic rent; resources that could have been put towards research and development or simply even producing more goods. But now they won't.

This problem of potential future rent-seeking is further exacerbated by the fact that it did not seem especially costly for the United Steelworkers union to have the President pass these tariffs. So as a result, the likely outcome is that more lobbyists will try to do the same, opposed to the situation if it seemed extremely time-consuming and costly for the USAW to have their way. Even if there is one firm participating in rent-seeking activities is market inefficient. But there will be much, much more. And that is certainly no favor that Obama has done for the American people.

Beating a Dead Horse: Deadweight Loss Edition

Today in class was the recent topic of Obama's tariff imposition on Chinese tires. Along these lines we discussed the implications this event has in terms of deadweight loss.What resulted from Obama's actions was an angry China threatening to impose trade restrictions of their own.

There is a certain parallel to this story and it happened 40 years ago. In the 1960s, Europe placed high tariffs on imported chickens to combat rising U.S. sales to Germany. In retaliation, President Johnson placed 25% tariffs on imports of foreign-made trucks and commercial vans. For some reason or another, these trade restrictions have not gone away even to this day.

But companies find ways around the deadweight loss. Most companies, such as Toyota, Nissan, and Honda went the straightforward route and simply built plants in the US.

But Americans are more clever than that. Transit Connect vans made in Ford Motor factories in Turkey are imported to the US. What customs officials do is they check a bunch of features to determine whether a vehicle's primary purpose might be to move people instead. Since cargo doesn't need seats with seat belts or to look out the window, those items are on the list. So Ford ships all its Transit Connects with both, calls them "wagons" instead of "commercial vans." They then install and remove unneeded seats and windows; the entire process costs the company hundreds of dollars per van, but the import tax falls dramatically, to 2.5 percent, saving thousands.

Of course, this does not remove all the deadweight loss. But it is certainly a smart way to circumvent market inefficiencies created by government policies.

The Hollywood "Hit" Swing Vote and the Median Voter Theorem

So, I was looking at this movie critic website called Rotten Tomatoes, and I saw a movie called Swing Vote. I happened to be watching it at the time, so I decided to take a look.

it appears that many "critics" seem to think that the movie wasn't so great, judging by its 36% rating. Though the movie may not have been the very best, it seems that none of the critics considered how well the movie demonstrates the Downs-popularized median voter theorem, judging by the fact that upon a cursory inspection, it appears none of them mentioned it in their remarks.

The movie's plot is that one guy, Bud, in New Mexico ends up deciding a presidential election because the electoral college is tied, the rest of the state is tied, and Bud needs to recast his vote (which his daughter actually cast) because of a voting machine malfunction. Overnight, both candidates begin making every compromise and pander that they can to reach Bud, the median consumer-voter. Clearly, the similarity to the median voter theorem is staggering.

Perhaps the ratings from these "critics" would have been a bit more favorable had they realized how demonstrative the movie is in this regard. Their oversight is, quite frankly, unfair to the movie.

Strategery at the United Nations

According to Article 27 of the United Nations Charter, the Security Council's five permanent members--China, France, Great Britain, Russia, and the US--must vote unanimously to pass substantive resolutions. With unanimity as the prevailing decision-making rule, external costs imposed on any permanent member must be zero. Just as Tullock and Buchanan's model demonstrates, there are correspondingly high decision-making costs that an individual country faces with such a rule. When a given resolution comes up for a vote, each permanent member holds a monopoly of consent and opportunities for "strategery" abound. In order to extract additional gains from a country sponsoring a resolution, permanent members of the Security Council have an incentive to hide their real preferences.  

At the opening of the UN General Assembly last week in New York, President Obama managed to gain the support of Russia in adopting sanctions against Iran for that nation's continued pursuit of nuclear capabilities. Russia had been reluctant in the past to support such sanctions. It has been suggested by commentators that this change of position for Russia may have come about as a result of the Obama administration's recent decision to scrap plans to place missile-defense radar in the Czech Republic and missile interceptors in Poland. Such defense measures have long been a source of tension between the US and Russia. While the American administration has indicated that no deal was struck with the Russians, Tullock and Buchanan's model predicts that such decision-making costs are to be expected where unanimity is the rule.    

Life, Liberty, and The Pursuit of Free-Riding

Illegal aliens never cease to enjoy all the perks of being a legal alien or citizen of the United States (especially with health care); after all, who wouldn't love to free-ride off one of the most powerful and wealthy countries in the world?

Back in 2005, Madeleine Pelner Cosman wrote a paper, "Illegal Aliens and American Medicine" in which she describes the free-rider problem with respect to the United State's medical care. Cosman writes:

"What is unseen is their free medical care that has degraded and closed some of America’s finest emergency medical facilities, and caused hospital bankruptcies: 84 California hospitals are closing their doors. “Anchor babies” born to illegal aliens instantly qualify as citizens for welfare benefits and have caused enormous rises in Medicaid costs and stipends under Supplemental Security Income and Disability Income."

With illegal aliens free-riding, non-free-riding consumers inevitably incur higher costs (direct and indirect).  A direct cost to non-free-riding consumers would be higher taxes to cover the costs incurred by the free-riders.  Indirect costs include longer travel time to receive medical treatment, overcrowding of hospitals (in the case of overcrowding, each individual is imposing a negative externality on one another due to finite resources and the cost of time), less doctors, etc.

There is no surprise free-riding illegal aliens support the efforts of policy makers to extend medical coverage in the United States.  If through health care reform, health care becomes more of a public good, then illegal aliens, naturally, will stand to benefit.  Therefore, measures must be taken towards limiting illegal aliens from free-riding, if there is hope of successful health care reform.

Senator Combating Externalities, is Misunderstood

Illegal immigration has been the elephant in the room for the United States. And despite the various proposals such as a 700-mile fence, we've still not managed to kick the elephant out of said room.

The US would like to minimize illegal immigration for obvious reasons. Living in the US has many benefits: greater social mobility, job opportunities, higher standard of living, and numerous public goods. But to enjoy these  benefits, there are certain costs that must be incurred such as undergoing background inspections. Illegal immigration circumvents these costs and allows people to free-ride on the benefits.

Sen. Kent Conrad (D-ND) had recently come under fire for some of his statements regarding the Health Care reform provisions. But this was not to bar immigrants, or at least all of them. The goal was to prevent undocumented immigrants from receiving further federal subsidies.

So it is unfortunate that Sen. Conrad had received much backlash. The senator was only trying to reduce market inefficiencies by preventing another positive externality.

A Voting Issue

The election is coming up and I don’t know how to vote. I’m not speaking of the Presidential election, but of a question pertaining to county taxes. The language is here, but the issue is whether to change the law to require unanimity to levy a tax on real property. As it stands right now, 7 of 9 members are required to levy taxes in Montgomery County, MD.

This is tough for me because unanimity should protect against external costs and it is nice to have the protection from unwanted taxes. On the other hand, if I think the tax is beneficial, requiring unanimity can lead to a hold out problem, which could block the tax.

Another thing to think about is the fact that I also need to vote to have the councilman who will represent my interests. The problem here is imperfect information when it comes electing a candidate. I do not know how my councilman will vote on every issue. What’s more, I don’t know if it is worth the opportunity costs to find out. I’ve spent enough time researching the presidential candidates, and I’m still confused; I don’t know if I have time to research a local election too.

Personally, I think 7 out of 9 representatives in the county seems to be the ideal size of votes needed to pass. Unanimity adds too many decision-making costs, but 7 of 9 votes seems big enough to allow the council to protect me against external costs even if my specific councilman does vote how I would like him to. Chances are I will vote against this amendment. Does anyone disagree?

What if it's a tie?

http://news.bbc.co.uk/2/hi/americas/7626471.stm

With our discussion of rent-seeking and previous discussion of constitution formation and the politics of consensus, this BBC article is particularly relevant. The article focuses on the potential chaos that has a good chance of ensuing in this election. Who better to explain, in simple terms, how our government would function in a deadlock election than a British news source? Oh wait, excuse me, than our own Larry Sabato?

Should a tie of electoral votes occur, 269-269, which has occurred in several contests including the 1796 election of Thomas Jefferson versus John Adams, Congress steps into play using the same procedure as the first tied election in 1796. Called the “unit rule,” the House of Representatives is responsible for electing the President, while the Senate elects the President of the Senate, the Vice President.  Because the United States was originally set up as a confederation, no longer will the votes of individuals in the House be relevant, but the state as a whole. This presents a problem that many of the larger states, including California, would be in a deadlock themselves and have to forfeit their vote. Theoretically then, only smaller states would have a say: Rhode Island and South Dakota for example. The unit rule is a legacy of our own Constitution formation and has the potential to create quite a stir. Even more interesting will be the potential rent-seeking or logrolling of states should our Presidential election be decided in Congress. If the confusion continues for long, and it could persist into January or February, we could have our first female president: Nancy Pelosi.