Friday, June 29, 2012

The Health Care Decision

I think one can learn a lot by reading the decisions of Supreme Court cases. The Supreme Court is the most meritocratic branch of government, so reading the opinions of the Justices is like reading the best papers in the field of law on a particular, policy-relevant topic. The Affordable Care Act (ACA) case is certainly one of the most important in at least a decade, and the Court doesn't disappoint, issuing three opinions that outline three separate approaches to the Supreme Court and the role of the Court. The pdfs can be found here. If you read anything at all, be sure to read Chief Justice Roberts's explanation of his judicial philosophy, pages 7-12 in the pdf. It's the opinion of the Court that won, and among the three decisions, the most detailed judicial philosophy. (For the rest of the post, page numbers will refer to the pages of the opinions, not the page in the pdf).

The opinions can be divided into three separate categories, and I will outline those categories and what I feel the differences in judicial philosophy are. In future posts, I will talk more about differences in decisions and the specific economic implications of the ACA itself. This is an important point: just because a law is Constitutional or legal does not make it good policy. Roberts makes this point numerous times throughout his opinion. For instance:
We do not consider whether the Act embodies sound policies. That judgment is entrusted to the Nation’s elected leaders. We ask only whether Congress has the power under the Constitution to enact the challenged provisions (Roberts, p. 2).
Members of this Court are vested with the authority to interpret the law; we possess neither the expertise nor the prerogative to make policy judgments. Those decisions are entrusted to our Nation’s elected leaders, who can be thrown out of office if the people disagree with them. It is not our job to protect the people from the consequences of their political choices (Ibid. 6).
A word of warning: My opinions are based on one reading of the opinions, and I may have missed some of the legal details in my reading (they are 200 pages long!) and the "score-keeping."

Wednesday, June 20, 2012

When a Vote Ends in a Tie

Some economists have trouble answering the question "why do people vote?". The problem comes from the fact that the chance that one person's vote is pivotal to an election is so small that if there is any cost at all to voting, most people shouldn't bother going out to vote, but if voting is costless, everyone should vote. Of course, the easy way out is to assume people just get utility from the act of voting. I particularly like the idea of the "swing voter's curse" (e.g. Feddersen and Pesendorfer). The idea is that if some part of the population is "partisan" and votes no matter what, uninformed independents should cast ballots in order to just cancel out the partisan vote and the rest should abstain in order to give the informed independents a better chance of deciding the election. This type of model predicts strategic abstention, decent sized voter turnout (but still not really large enough unless you assume a whole lot of partisans), and can yield more voting in national contests and more abstention in local down-ballot contests even when voting is costless.

However, sometimes it's nice to remember that just because a single voter is almost never pivotal does not mean there are never elections decided by one vote. This morning the Wall Street Journal published a front page article titled "Elections are a Crap Shoot in Texas, Where a Roll of the Dice Can Win." It is all about recent elections in Texas that ended in ties. Sure, the elections were local, and voter turnout was very low, but it's still neat to see these examples. It would be interesting to see statistics on how many elections end in an official tie and have to go to some tie-breaking rule. If the Journal found several examples in Texas this year, there are bound to be more.

According to the article, it seems that in Texas both candidates need to agree to a game of chance or a run-off/second election needs to be held. My first thought when reading the article was "If you really think you're the better candidate, why risk losing on a flip of the coin? Why not just demand a second election?" But then, of course, you just had an election and tied. In addition, run-off elections are costly (even for a very small town a cost of 10,000 dollars is cited, not to mention the extra campaigning time which is costly to the candidates, as well) and I can see an equilibrium where voters punish candidates who request run-offs by voting for a different/the other candidate if the marginal benefit of picking the "right" candidate does not exceed the cost. Thus, candidates actually could have a weakly better chance of winning by agreeing to put their future job in the hands of chance; thus, we should see both candidates readily agree to roll the dice.

Sunday, June 10, 2012

Law and Economics, Chicago-style

Q: How many Chicago School economists does it take to change a light bulb?
A: None. If the light bulb needed changing, the market would have done it by now.

... Ronald Coase—still writing in the field at the age of 101. “Coase is a god in China,” says Omri Ben-Shahar.

Chicago Law isn’t all about law and economics. President Barack Obama, after all, taught there from 1992 to 2004.
More zingers in "Will Success Spoil the Chicago School?" I think I am going to have to keep that light bulb joke in my back pocket.

Friday, June 1, 2012

"Toward a Moral Economy"

On Thursday, the Lumen Christi Institute hosted a public symposium, "Toward a Moral Economy: Policies and Values for the 21st Century." The keynote speech was given by the Archbishop of Munich, Reinhard Cardinal Marx, and responses were given by Professors Roger Myerson and Kevin Murphy (both UChicago) and Russell Hittinger (University of Tulsa).

SUMMARY:

The Archbishop's keynote framed the debate around his interpretation of current Catholic social doctrine which calls for a "global social market economy" regulated by a "global subsidiary government" based on "values and the common good." (For definitions, see below.)

In their responses, both Professors Myerson and Murphy emphasized the importance of managing "the rules of the game" versus managing "the outcome of the game." Myerson focused on how rules influence welfare and the importance of political structures and reputation in working toward a moral economy. Murphy focused on growth as the most important goal of policy. In addition, he emphasized that managing/regulating the fundamental rules of competition rather than economic outcomes of it actually better achieve the moral ends for which the Archbishop advocated. Inputs versus outputs approach.

Hittinger focused on whether a subsidiary world government is even a possibility.