What Fun!

In my post last Sunday I emphasized three margins to help you assess presidential election strategies. The turnout margin for Republicans turned out to be decisive, making the other margins irrelevant nationwide. It sure is fun to be right!
Even though the other margins are irrelevant nationwide, the Democrat’s fraud margin is getting interesting play here in New Mexico. Our politically ambitious governor has a huge stake in turning our state blue. How many of the 19,500 “provisional ballots” will be valid? Who decides on whether or not a ballot is valid; and how much individual discretion can the deciders exercise? What percentage of the “valid” ballots will go for Bush? Is the percentage of these ballots for Bush statistically possible? We may not be so dumb that we cannot answer these questions precisely. And if the result turns out to be out of the range of statistical possibility, what will that do to our governor’s reputation? You yourself can watch as the results are tallied. This is fun. Stay tuned.

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Assessing Election Strategies

Thankfully the election will be over in two days. The presidential election appears to be quite close. However it turns out, the economic way of thinking may help you assess the success or failure of each party’s strategies.
Economists think at the margin. Margins are net changes from an existing situation. Taking the existing situation as the 2000 presidential election, what strategies may make a difference at the “margin?”
Get out the vote: Post 2000 election analyses suggested that the Democrats were far more effective at getting out the vote. If that is the case, then Republicans likely have more to gain at the margin than do Democrats. Advantage Republicans
Engaging in Fraud: It looks like Democrats are taking political entrepreneurship to new heights! Republicans may be engaging in fraud, too; but so far they have not been caught. How many extra votes will the Democrats get from the “living dead,” dogs, or those “voting early and often?” We will probably be able to tell by examining election results where fraud is suspected. Advantage Democrats.
Legal Challenges: Armies of lawyers from both parties are poised to challenge results in battleground states. One new tactic being tried by Democrats is to challenge results based on voters being “disenfranchised.” “Provisional ballot” rules are somewhat vague and could lead to high-stakes political war. If you want more detail on what is going on check here or here. Advantage: unknown. If the Republicans were sitting on their hands, there would be a large Democrat advantage. The net marginal effect will probably depend on how well each side is able to persuade the public of the righteousness of their arguments. This should be quite interesting if the election is close.

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Crazy is Popular these Days

“Lyndon LaRouche is an ex-con who thinks brainwashed zombies have been sent to kill him, Dick Cheney is a tool of Satan and September 11 was an American military plot. Guess what? You’ve paid him millions to run for president.” This was the lead in to the October 24th Washington Post Magazine cover story on LaRouche by April Witt. It doesn’t amaze me that there are such crazy people in the world. What really amazes me is how far they get in life. If you haven’t spent time on a college campus recently, you might not know just how popular LaRouche is with the college crowd. It’s truly amazing. The story is long, but well worth the read.

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Apropos

“I could think of no worse example for nations abroad, who for the first time were trying to put free electoral procedures into effect, than that of the United States wrangling over the results of our presidential election, and even suggesting that the presidency itself could be stolen by thievery at the ballot box.”
–Thomas Jefferson

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Thank God our Power to Vote is Limited!

The election is nearly upon us and now seems an appropriate time to remember why democracy is so messed up.
Imagine three voters with three different opinions about the Iraq war. Our voters are Abel, Bobby and Carl. Abel is a dove. Her first preference is to have a small number of troops in Iraq. If she can’t have her first preference, Abel wants to keep troop levels where they are now. Her last preference would be an increase in troop levels. Bobby doesn’t like change. He would like to see the number of troops remain as they are. If he can’t have this, his second choice is to increase the number of troops to many. His third preference is to decrease troop levels to few. Finally, we have Carl. Carl’s first choice is to have many troops in Iraq. But if he can’t have this, Carl would like to see few troops there. Comparing the current conflict to Viet Nam, Carl believes that the worst choice we can make is to leave troops at their current, intermediary level. For him, it is best to have either many troops or just a few. Summarizing, our voters have these preferences:
________Abel____________Bobby_____________Carl
1st_____Few_____________Current____________Many
2nd____Current__________Many_______________Few
3rd_____Many____________Few_______________Current
Let us assume that Abel, Bobby and Carl all live in a direct democracy governed by the simple majority rule. What will be the outcome of the election? Let us say that this November, the choice presented to the voters is between many troops and the current level (the option few troops is not on the ballot). Abel and Bobby will vote for the current level, winning the election over Carl’s vote for many troops. Let us then suppose that in December, there is another election, this one asking voters to choose between the current level and a lower level. Abel and Carl will then vote for few troops, beating Bobby’s vote for the current level. Finally, in January, voters are asked whether they prefer few troops to many troops. Now, Bobby and Carl will vote for many troops while Abel will vote for few.
So, without changing underlying preferences, voters will first vote to keep troops at the current level. They will then vote to decrease the level. Then they will then vote to put troops at the highest level. From there, they might vote to put troops back at the initial level. Voter theorists term this problem “cycling.” If we saw it in a person rather than an electorate, many of us would conclude that he or she were crazy! Someone preferring milk to juice and juice to water, ought to prefer milk to water! Notice, moreover, that each of the individuals in our little democracy has completely rational preferences. It is only when we try to aggregate preferences that we run into trouble. I should note that democracy doesn’t always produce this odd result. But it is quite possible under reasonable assumptions. Vote rules other than simple majority can make the cycling less likely, but none can rid us of it.
Perhaps we can avoid the problem by letting voters vote for all three options simultaneously? To see how this might work, assume that 30 percent of the public has Abel’s preferences, another 30 percent has Bobby’s and the remaining 40 percent have Carl’s. Now, if given all three choices, 40 percent of the public would vote for many troops, 30 percent would vote for current levels and another 30 percent would vote for few troops. The electorate would choose many troops. But, referring again to the chart, we see that though the election selected many troops, 60 percent of the public would have preferred current levels to more! (Gore supporters angry with their Nader-voting friends no doubt understand this frustration.)
As far as we know, this problem with democracy was first discovered by a French nobleman named the Marquis de Condorcet in 1785. Though cycling (also called Condorcet’s paradox) received some attention at the time, people seemed to forget about it. The mathematician, C.L. Dodgson (better known as Lewis Carol to readers of Alice in Wonderland) rediscovered the problem in the late 1800s. But again the idea was lost. The economists Duncan Black and Kenneth Arrow independently rediscovered the possibility of cycling in the middle of the 20th century. Though volumes have been written about the problem in academic forums, it has been almost entirely ignored in everyday discussions about democracy.
For me, cycling takes its place alongside many other problems with democracy such as tyranny of the majority and tyranny of the interest group. Given the fairly obvious undesirability of other forms of government, I suppose we are left to deal with it.
We can take solace in the fact that our Constitution severely curtails the power of everyone’s vote. We cannot, for instance, vote to deprive someone of life, liberty or property without due process. Nor can we vote to establish a religion or infringe upon the right to bear arms. There was a time when courts held that we could only vote to have government do those things which were specifically enumerated in the Constitution. So let us celebrate the Constitution which limits our power to vote and lament the passing of an age when the Constitution limited much more.

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The Nobels

Today, the Royal Swedish Academy of Sciences announced that it will award the 2004 Nobel Memorial Prize in Economics to Finn E. Kydland and Edward C. Prescott. Kydland and Prescott have made some fascinating and important contributions to macroeconomics over the past quarter century. They are often referred to as founding fathers of the Real Business Cycle school of macroeconomics. Earlier schools of thought had held that the economy grows at some underlying steady rate and that it was the macroeconomist’s job to make sense of fluctuations around this rate. Real Business Cycle theorists, however, reject the “underlying rate of growth” argument and instead claim that it is impossible to separate economic growth from economic fluctuations. In 1986, Prescott wrote: “The policy implication of this research is that costly efforts at stabilization are likely to be counter-productive. Economic fluctuations are optimal responses to uncertainty in the rate of technological progress.” In other words, policy makers should leave the economy alone and resist the temptation to “manage” economic growth. When politicians tinker with the economy, they create more problems than they solve. In an election season rife with rhetoric about stimulating the economy, it would be nice if someone paid attention to these insights.
Without question, Kydland (age 60) and Prescott (63) deserve their prizes. Still, as the Nobel cannot be awarded posthumously, it is disappointing to see that the Academy passed over some older and equally deserving scholars such as Armen Alchian (90), Thomas Schelling (83) and Gordon Tullock (82).
On a personal note, as an Arizona State alum, I am particularly proud that my school attracted Edward Prescott (though not before I graduated). Furthermore, I should disclose that as a current graduate student at George Mason, I am taking a class from Professor Tullock. (I have little reason to think the octogenarian will be surfing the web, so rest assured, I do not lavish praise in hopes of a higher grade!)

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Corruption and Virtue in New Mexico’s History

I’ve been reading Jim Powell’s FDR’s Folly. It is an economic history of the New Deal. First of all, I would highly recommend it to all interested in an economically and historically sound recounting of the New Deal. (If my word doesn’t carry enough weight, you may be interested to know that it comes recommended by two Nobel Laureates in Economics).
Anyway, I found a little tidbit about New Mexico rather interesting. There is a chapter which describes the way New Deal relief spending was hijacked by political interests, so that all too often aid went not to those in need but to those most likely to get the Roosevelt Administration reelected. Powell quotes historian James T. Patterson as writing, “Democrats in New Mexico, where politics were raw and open, were especially demanding. From the start Democratic Governor Arthur Seligman requested—and got—lists noting the political preference of all relief and [Civilian Conservation Core] workers in the state.”
Despite this obvious black mark, New Mexico did redeem itself. Disgusted with the way New Deal spending was being used for political purposes, the US Congress passed the Hatch Act in 1939. This prohibited federal employees and state and local employees administering federal programs from using their power to influence the outcome of a political campaign. It made it illegal for these employees to offer jobs to political campaign workers or to manage political campaigns. And the author of the Hatch Act? Why, Democratic Senator Carl Atwood Hatch of New Mexico, of course!

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Are we European?

In its June 19th edition, the British magazine, The Economist offered its take on New Mexico’s political landscape: “The Spanish families and Indians were members of Roosevelt’s New Deal coalition and have remained Democrats since; in almost European fashion, they tend to view the government as beneficent. The Anglo newcomers are more dog-eat-dog individualists.”
The article (sorry for the subscription link) is the seventh in a series on swing states in the upcoming US Presidential election. In the by-line, New Mexico is said to be “perhaps the oddest of them all.” Well, no argument there!

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A Day of Deliverance

“The second of July 1776 will be the most memorable epoch in the history of America. I am apt to believe it will be celebrated by succeeding generations as the great Anniversary Festival. It ought to be commemorated as the day of deliverance by solemn acts of devotion to God Almighty, solemnized with pomp and parade, shows, games, sports, guns, bells, bonfires and illuminations from one end of the continent to the other from this time forward, forever more. You will think me transported with enthusiasm but I am not. I am well aware of the toil and blood and treasure that it will cost us to maintain this Declaration and support and defend these States. Yet through all the gloom, I can see the rays of ravishing light and glory. I can see that the end is worth all the means. And that posterity will triumph in that day’s transaction even though we should rue it, which I trust in God we shall not.”
Such was the opinion of John Adams, expressed in a letter to his wife Abigail. No, John wasn’t wrong on his dates. The 2nd of July, 1776 was the day that Richard Henry Lee’s resolution declaring independence from Great Briton was actually adopted by the Second Continental Congress. Two days later, on the 4th, Congress adopted Jefferson’s draft of the actual document: “The Declaration of Independence.” Somewhat by historical accident, we have come to celebrate the later date and not the earlier one.
For more on America’s founding, including original documents, historical background, biographies and quotes, see some of the following:
The Founder’s Constitution (maintained by the University of Chicago Press and Liberty Fund)
From Revolution to Reconstruction (by the Department of Humanities Computing, University of Groningen, The Netherlands)
The Avalon Project (by the Yale Law School)
The Founder’s Almanac (by the Heritage Foundation)
Whenever you decide to celebrate, we at the Rio Grande Foundation wish you a very happy Independence Day!

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Women’s Work

A federal judge has ruled that a sex-discrimination suit against Wal-Mart Stores can proceed as a class action, which could lead to a huge loss for the megastore. Up to 1.6 million women could join the class action, and at a few thousand apiece it could cost Wal-Mart billions.
Baltimore trial lawyer Peter Angelos made enough from his asbestos lawsuit work to buy the Orioles. Lawyers’ fees in this case could buy the entire American League.
This is not the first big case involving women’s wages. Coke, Home Depot, and Texaco have paid more than $100 million each in such lawsuits.
Now I don’t want to quarrel with any of these decisions. Who knows what went on? How could American courts be wrong? But I call your attention to a larger version of this alleged discrimination, the oft heard claim that women earn, on average, 70 percent of men’s salaries. NBC News this evening cited this figure as a virtual national scandal. Should an Equal Rights Amendment pass, you can bet that lawsuits would follow gigantic enough to make Senator John Edwards dance with anticipation
Any economist worth his or her salt will immediately wonder where this 70 percent number came from and how it would be changed if it accounted for differences in experience, education, difficulty of jobs, and the other factors that affect the demand for a person’s labor. This requires rigorous analysis, not just quoting some data.
But where do you find such analysis? Well, you go to one of my favorite websites, www.iwf.org, the home page of the Independent Women’s Forum. This organization published a report called “Women’s Figures” that challenges the 70 percent shibboleth, and they keep up to date on other such issues, presenting a clear, market oriented analysis in a lively format. Yes, they are conservative women!
Maybe women economists should get a raise!

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