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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.

• 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.

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