Monthly Archive

I have been thinking about Bryan Caplan’s assertion that voters are altruistic (which I have discussed before). Caplan’s argument relies on the fact that the probability of any vote being decisive is very low, so the individual costs of voting altruistically are low, while the psychological benefits may be large. I have realized that this theory is not only empirically testable, as Bryan discusses in his book, but also experimentally testable.  Here is one experiment which would test this theory:

Gather a group of 20 people in a large room. Have them sit down and play icebreakers and otherwise get to know each other for 30 minutes and then vote by secret ballot (secret from the other people, not the experimenters) between two measures. The people choose between a measure that gives the group $100, evenly distributed, and a measure that gives the group $200, somewhat unevenly distributed, with some people receiving less than the $5 they would have received from the first measure. The voting instructions explain what the reader would receive from each measure and the general distribution from each measure. After voting is completed, the sums are distributed privately. The group then socializes for another 10 minutes (they should be prohibited from discussing the voting), and then the experiment is over.

People who would receive more from the egalitarian measure than the uneven distribution measure who vote for the uneven distribution measure voted altruistically. Likewise, people who would receive more from the uneven distribution measure than from the egalitarian measure who vote for the egalitarian measure also voted altruistically. Many similar experiments could be conducted to determine more precisely the circumstances under which people vote altruistically, if at all.

I would love to run this experiment, but I don’t have the resources. I wonder if anyone has already done similar experiments.

It is common knowledge that gas stations which get most of their business from long distance highway travelers have somewhat higher gas prices than those which do not. The reason for this is that it is costly for travelers to compare prices between gas stations, even close ones, because travelers may not know where other gas stations are, and they are often in a hurry. This creates a sort of pseudo-monopoly rent for the stations, because stations cannot compete with each other on price. If stations competed on price, their monopoly rents would largely disappear.

Occasionally a gas station has a location so that it can show its prices to highway travelers, but this is not often the case, and it is difficult for travelers to make the decision to exit in time because those gas stations are often very near the off ramp. Highways often have government owned signs which advertise the presence of gas stations on upcoming exits. Gas stations usually display their prices very prominently, often on a sign much taller than the actual station, so why don’t these signs ever display the price of gas for each of the stations? I see two possibilities:

1. There is some technical barrier to displaying or updating prices on the signs.
2. The government that sells the sign space to gas stations has an effective monopoly on sign space and therefore gets the monopoly rents from the stations.

I think the first possibility is unlikely, because I can’t think of any plausible technical barriers. I think the second possibility is much more likely. If it is state governments or the federal government who own the right to sell sign space, they have an effective monopoly on it. However, if it is more local governments, such as cities, who own the spaces, then they don’t have a monopoly, and allowing stations to display their prices should increase the business that the stations do and therefore increasing taxes and the value of sign space. If local governments owned the right to sell highway sign space, I would expect signs to display gas prices. Because highway side gas price signs are not common, I suspect either state governments or the federal government own the right to sell sign space.

UPDATE:
I think I was hasty in posting this. The monopoly rents that a sign space monopoly gets are independent of whether the signs display prices or not. A monopolizer would simply have high prices for sign space, and that would raise the cost of having a gas station near the highway, which would raise prices.

Thinking about it more, I think the government is not acting like a monopoly, but gas stations do enjoy pseudo-monopoly rents.

John M offers a convincing explanation for why the government restricts price signs: “Billboards were once an infamous eyesore which have largely been reduced and eliminated through (I’m pretty sure) regulation. Basically the government has to restrict signage because if it didn’t, you wouldn’t be able to see the passage at all because billboard use would be nearly maximized.”

Though it seems like allowing a small increase in sign space for gas prices would not be very obstructive, and the resulting price reduction would be popular.

The Daily Score points to Walk Score, a super neat web utility that grades any location on its walking distance from a number of common businesses like grocery stores, coffee shops, bars etc.

My Seattle home got 69; the place where I am staying in Pasco got an 8; what’s your score?

Why must private property rights be publicly provided?

I have been thinking about this question for a while now. Most political economic theory takes it for granted that property rights have to be created and enforced by a government, and I certainly agree, but I have not heard a clear and concrete theory for why private action will not create a system of property rights. It seems intuitively obvious, but it is difficult to come up with a clear explanation. What is the market failure?

Does anyone have an explanation? Has someone explained this before?

The Instant Runoff Voting/Ranked Choice Voting in Washington blog points to an article about the King County (my home county) Charter Review Commission which considers improvements to the county’s constitution every ten years, and it is currently considering moving King County to some form of ranked choice voting.

There are a number of interesting things in this article:

• I didn’t know that the King County constitution got reviewed every ten years; I think that’s pretty cool. I will note that this sort of thing supports John M’s claim that more local governments simply govern better.
• The article author is woefully uninformed about ‘proportional representation.’ As the commenters note, he fails to differentiate between the result of elections (proportional representation) and the method (ranked choice, which does not even produce proportional representation).
• I think this bit from the local Democrats was just asinine:

We’re against ‘instant runoff voting,’” Weiss said on behalf of local Democrats. He warned that proportional representation “will blur party lines.”

“It’s meant to cut in on the two-party system. The two-party system has worked pretty well,” Weiss said. “We’ll do everything possible to drive a stake in the heart of instant runoff voting.”

I am glad the King County is considering ranked choice voting, it would certainly be an improvment over first-past-the-post voting, especially for single-seat offices. Establishing local electoral systems where third party and independent candidates can win is an important step in moving towards a country wide political system where the major political parties can actually change over time. Local third party successes will allow third parties to build reputations for being able to win and eventually allow them to seriously contest more important offices.

I will point out that Direct Representation would be a much better approach to proportional representation for multi-seat offices, especially since by-district ranked choice voting does not produce proportional representation.

I’ve been enjoying reading David Reevely’s blog, The EcoLibertarian. As the name implies, Reevely discusses mostly environmental issues, global warming, water pricing, congestion, with a little bit of Canadian politics thrown in, all from a libertarian/market oriented perspective.

I have heard Giuliani called a libertarianish presidential candidate, but I am not convinced:

Citing his years as a federal prosecutor, Mr. Giuliani said the courts often turned down his requests for wiretapping suspects. “I am real comfortable with that almost as a general rule,” he continued. “With the slight exception that a prosecutor and president are different, and there may just be times where a president has to use his own judgment in order to protect the American people and we have to use a little room for that.”

Judicial oversight is not an irrelevant issue.

Every blog needs at least one catchy post-theme, and since I have written about a few other topics which have me pretty well baffled (like here and here), I am going to make “Economics Mystery” a (hopefully)catchy post-theme. So here is the official first Economics Mystery post:

In the U.S., some sort of greenhouse gas (GHG) emission limiting policy seems more likely every day. Earlier this month, a group of senators proposed cap-and-trade legislation, and now even President Bush is now ‘considering’ a domestic cap (link), though I am not sure if that means endorsing or proposing legislation or if it means working though the EPA in some way.

The economic mystery is why relatively small political entities have adopted GHG emission caps. Global warming seems like a fairly clear cut case of a public good problem, and I would not expect small regional political entities to bear the costs of limiting. The benefits of establishing GHG emission limits or GHG emission prices are widely distributed and non-excludable, and the costs are born almost completely by the region adopting the limits. As Mancur Olson points out, large groups usually have difficulty providing for non-excludable goods. He also points out that if there are a few large players, the very two or three largest might rationally provide for small amounts of collective goods, but I don’t think this effect accounts for the local limits that have been established by regional governments. If it were, California would never establish emission limits (link) before the United States as a whole. Read the rest of this entry »

The Bush administration is again seeking to expand the sphere of presidential power. Not only has the president made several new dubious assertions of executive privilege, but the president now also claims that those assertions are unreviewable by a judge because charging agents of the executive branch with contempt of congress, which would be required in order to have a judge review assertions of executive privilege, requires the executive branch to enforce the law. The administration claims it will not enforce the law, relying on a 1984 Justice Department opinion that:

The President, through a United States Attorney, need not, indeed may not, prosecute criminally a subordinate for asserting on his behalf a claim of executive privilege. Nor could the Legislative Branch or the courts require or implement the prosecution of such an individual.

The Bush administration’s position that one part of executive branch cannot prosecute another part is dangerous to the rule of law. The position traces back to unitary executive theory, which claims that the president holds all executive power. A unitary executive with powers of executive privilege essentially renders the president beyond oversight by congress because the president can always invoke executive privilege and refuse to prosecute himself for contempt to avoid judicial review for executive privilege assertions.  This seriously threatens the rule of law because without strong oversight, the executive branch has enormous power to apply the law arbitrarily.

As a side note: the unitary executive theory is plainly not technically correct. At the very least, congress always holds the power to impeach the president, which is an executive power because congress can initiate enforcement.

Lynne Kiesling points to an interview with the creator of Digg.com, Kevin Rose. I found this part especially interesting:

Already you can get recommendations from friends, but soon the system will start recommending stories that you might have missed or that you might find interesting, based on what you’ve dug in the past.

That would add a pretty substantial private good onto the existing public goods provided by Digging, because Digging interesting articles will improve the quality of articles Digg suggests to you. Adding a private good should internalize the benefits and increase the supply of Diggs. I don’t use Digg right now, but I’ll be sure to start when this comes out.

In London, congestion pricing information is going to be used for spying. From the BBC (link) via The EcoLibertarian (link):

Anti-terror officers will be exempted from parts of the Data Protection Act to allow them to see the date, time and location of vehicles in real time.

They previously had to apply for access on a case-by-case basis.

I like congestion pricing, but as with all government programs, there is plenty of room for abuse. What’s wrong with having judicial review?

In response to my last post, Chris asks why resource scarcity is needed before homesteading should kick in. Here’s why I think so:

First, I should say I don’t consider property rights to be “natural,” at least in the ethical sense. Property rights exist because they are useful, and they are always created and upheld by society. The way they are created and upheld may be through formal government or through informal social pressures, but property rights always need social agreement.

Second, the fundamental reason for property rights is to solve the problem of scarcity. Without de facto property rights, people have little incentive to consider resource scarcity, the limitations of resource availability. Property rights create this incentive by assigning exclusive use. Exclusive use means that the owner of a resource derives all (or at least most) of the benefit from using a resource which means the owner has a strong incentive to maximize the benefit from using the resource, and that requires considering its scarcity.

Homesteading should not be used before scarcity develops because there is no reason that people should consider limitations on resource availability when there are no limitations. If a resource is not scarce there should be no property rights over it, and if there are no property rights, there is no need to decide initial allocation. In fact, the notion of property rights over non-scarce resources is rather unappealing. What if the first person to discover America instantly owned it all simply by claiming it? If scarcity is not required before homesteading kicks in, it is impossible to limit the types of resources which can be owned. There is an infinite number of things we could call “resources,” but a limited number that are scarce. Should I be able to travel into space and simply claim ownership over a big chunk of it, next to the earth? Of course not; space isn’t scarce (yet).

UPDATE:
Stephan Kinsella has made this same argument and also pointed out how intellectual property rights are different than other property rights. Ideas are not scarce.

Both cap-and-trade and emission taxing schemes are a way of establishing property rights over the right to emit green house gases (GHGs) into the atmosphere, but, at least in the US, cap-and-trade seems like the likely scheme to be established. If anthropogenic global warming is real, then the atmosphere as a waste sink and as an environmental good is a scarce resource because there are two competing benefits, so establishing property rights will help solve conflicts between those benefits. Establishing property rights brings up the question of initial distribution. Who should get the initial rights to emit GHGs?

To allocate initial property rights, libertarians often rely on the homestead principle, which is that a person can gain ownership over an un-owned scarce resource by being the first to use it. Unfortunately, the homestead principle is a little fuzzy here; it is difficult to tell whether the public or emitters were the first to use the atmosphere as a scarce resource. Clearly the public, as a collective and represented by the government, has some claim to the initial allocation since people use the atmosphere as an environmental good every day and have forever, but I think polluters also have some claim, though smaller than the public claim, because low CO2 emission levels probably have a negligible warming effect, and businesses have been emitting CO2 for a long time. It is for this reason that I am less concerned about handing out permits to current emitters as others are, for example, Coyote of Coyote Blog.

Now, if the current level of GHG emissions is higher than optimal (and that presumption is the basis for essentially all global warming legislation), allocating permits to emitters for the amount they currently emit is not consistent with the homestead principle, but neither is allocating all rights to the government. Since we don’t really know when the atmosphere became scarce, there has to be some relatively arbitrary judgment.

Jeff sends me a link (here) regarding the work of Rufus Pollock, a PhD student at Cambridge. He thinks the optimal length for copyright protection is 14 years. This fits with the vibe I got in my industrial organization class. The article has a link to Pollock’s essay on the subject.

A bi-partisan group of senators have proposed legislation set up a cap-and-trade system to curb CO2 emissions (link). I’m more or less an anthropogenic global warming agnostic, but if you want to reduce CO2 emissions, this is one of the intelligent ways to do it.

I have yet to read the bill, but, surprisingly, from what I have read, it appears to be better than the Canadian Conservative party proposal (link), which was a mishmash of different mechanisms, though it did include a cap-and-trade scheme.

Executive privilege has made a lot of headlines recently. The White House claims that Harriet Myers, as a former advisor to the president,  “has absolute immunity from compelled congressional testimony as to matters occurring while she was a senior adviser to the president”(link). Congress, of course, objects to this. I think that broad executive privilege makes political outcomes worse, and if a new constitution were being drafted, broad executive privilege should be eliminated (though it’s not mentioned in the American Constitution now).

The most popular reasoning for executive privilege is that advice given to the president must be immune from legislative and judicial probing for the president to receive candid advice. White House spokesman Tony Snow affirms that this is the White House’s reasoning (link):

There does have to be, for politicians who have very difficult jobs, the ability to get honest counsel from people who are working for them. That is all this is about. This is not about trying to throw a big smoke cloud over how the government works.

The argument seems sound until you try to come up with some examples for when this power might improve the results of inter-branch conflicts. Should the executive branch be immune from having to testify before congress in the current state attorney firing scandal and other similar scandals? Partisan firings are certainly not good for the rule of law. Reviewing the historical uses of executive privilege listed on the wikipedia entry provides no compelling examples either. I cannot think of any scenario where unchecked executive privilege would improve the political outcome. Government secrets improve governance only when technical secrets are necessary to maintain national security.

Now, Congress could conceivably abuse its subpoena power by subpoenaing everything a president did, but any situation where the legislature is so at odds with the executive that it seeks make the executive’s job as difficult as possible would constitute a breakdown in the political system that executive privilege could not solve. Consider that the executive can abuse its veto power in a similar way but chooses not to.

Occasionally search warrants and other legislative or judicial interference might endanger national security, and in such circumstances it is reasonable to limit probes on the executive branch, but all such executive privilege claims should be approved by an independent judge with appropriate security clearance.

This is an application of the constitutional rule I have proposed before that the government should not be allowed to keep any non-technical secrets, and technical secrets should only be allowed when they are necessary for national security.

A Seattle-PI article reports:

Since 1996, gas consumption per capita in the state has fallen about 10 percent, down to 7.9 gallons a week in 2006, according to an analysis of government data completed by the Sightline Institute, a Seattle-based think tank. That’s the lowest level since 1968.

And the reason, the data suggests, is that the rising price of gas 

The article also quotes Environmental Economics‘ Tim Haab suggesting higher fuel taxes.

The Sightline Institute’s report, the annual Cascadia Scorecard, is here. I had not heard of the Signline Institute before, but browsing Sightline’s website reveals they support several good market-based transportation and pollution solutions, congestion pricing, a carbon emissions tax and pay-as-you-drive car insurance. Their blog, The Daily Score, also looks quite promising. As an interested Washingtonian, I’ll be keeping an eye on this think tank.

Here is Bryan Caplan’s survey paper on the evidence for non-self-interested voting. He concludes that the effect of self-interest on voting is small and sporadic.

Caplan also mentions that a Sears and Funk piece in Beyond Self-Interest also provides a very good survey of the evidence, though since it is in a book, it is harder to get a hold of.

Shelfari lets you keep and share a virtual list of books you’ve read, including the ability to comment on and rate books.

I forsee Shelfari getting a Facebook interface.

I just finished reading and reviewing The Myth of the Rational Voter. Most of classic Public Choice theory assumes that voters vote in their self interest, in his book, Caplan explains why voters vote altruistically:

Consider. First, altruism and morality are consumption goods like any other, so we should expect people to buy more altruism when the price is low. Second, due to the low probability of decisiveness, the price of altruism is drastically cheaper in politics than in markets. voting to raise your taxes by a thousand dollar when your probability of decisiveness is 1 in 100,000 has an expected cost of less than a penny.

I find this logic convincing, but it brings up another question: why does the plurality electoral formula generate only two political parties? Does voting altruistically for a candidate who has a chance to win feel better than voting for one that does not? Read the rest of this entry »

I finally read Bryan Caplan’s book, The Myth of the Rational Voter: Why Democracies Choose Bad Policies, and I found it is very good. Caplan argues that Democracy has problems not because representatives fail to do what voters want or because, as much of Public Choice theory assumes, voters vote selfishly, but because voters have systemically biased conceptions about economics and other policy areas, and they fail to correct their views because they are “rationally irrational.” Read the rest of this entry »

David Border has an opinion piece in the Washington Post praising the Supreme Court for upholding the constitutional right of groups, such as Wisconsin Right to Life, to run ‘issue ads’ close to elections. As Broder points out, the ruling will almost certainly significantly reduce the effectiveness of any campaign finance law.

I share Broder’s support for free political speech and his general opposition to spending restrictions, but I object to his alternative remedy.  At the end of his article, Broder endorses a different way to reduce the influence of ‘Big Money’ on elections; he suggests that

a system of public finance — taxpayer-subsidized campaigns — would enable candidates to cope with the inevitable intrusion of outside voices into their races.

I have no doubt that taxpayer subsidized campaigns would help candidates deal with “outside voices.” The problem is that giving candidates public money would necessarily increase incumbents’ ability to ignore all outside voices, including those of the voters.  Read the rest of this entry »

For quite a while, I have wondered why public residential waste collection is so much more common than private collection. Monopoly arguments don’t sway me very much because private companies should be able to compete for individual routes effectively, if not individual residents.

Literature on the economics of private residential waste collection is sparse, but an old Cato paper offers an explanation I had not considered:

In my discussions with members of the refuse-collection
industry, however, the explanation most frequently
offered for public-sector intervention (either municipal,
contract, or franchise operation) was the public’s desire
to have only one truck come into their neighborhood once
or twice a week and pick up all the refuse.

I also learned that Fairfax county had (and appears to still have some) private refuse collection. It doesn’t seem to work very well, but I can’t identify a good reason why it doesn’t.

I’ve written up a decription of Direct Representation, and placed it in the new “Articles” section. Feel free to comment.