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When is a filibuster not a filibuster? December 7, 2012

Posted by tomflesher in Micro, Models, Teaching.
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A filibuster is a legislative technique where a lawmaker who is in the minority will block passage of the bill. Historically, that required talking continuously on the legislature floor, as that would prevent anyone else from doing anything. In the US Senate, a bill can be filibustered simply by declaring it so – the filibustering Senator doesn’t actually need to talk. The Senate is considering a rule change to move back to historical, “talking” filibusters. In either case, a filibuster can be broken by a 60-vote supermajority (called cloture), but a talking filibuster can also be broken by the filibustering Senator getting tired and quitting. What’s the economic difference between these two rules?

The fact is that talking imposes an extra cost on the filibustering party. When people are

The model:1

First, like all good economists, let’s make some simplifying assumptions. Say there are two parties, the Bears and the Bulls, and that there are 59 Bears and 41 Bulls. Assume that everyone votes strictly along party lines, so every vote comes out in favor of the Bears 59-41. That’s not enough for a 60% majority, so under the current system, the Bulls can filibuster every bill without stopping other legislation.

Parties aim to maximize their political capital, which is generated in two ways:

  • Passing bills. The more partisan a bill is, the more capital is generated. A bill that the entire country would agree to pass has zero partisanship; a bill only Bears would vote for has a very high partisanship. The minority party generates goodwill based on voting for bills, but it decreases when the bills are more partisan.
  • Public perception (goodwill). Filibustering leads to a negative public perception. This is directly related to how partisan a bill is – filibustering a totally nonpartisan bill (discount bus fares for war widows) would lead to a highly negative perception, but filibustering a very contentious bill would be offset. Similarly, a filibuster stops all business, so the longer it goes on, the angrier people get.

The Bulls’ capital generation would look like this, with the “talking filibuster” term last, P=Partisanship and D = Days spent filibustering:

C = - P^2+ 41*P - \frac{1}{P}*D^2

Under the current system, days spent filibustering is 0, since nobody actually has to filibuster. That is, the marginal cost of filibustering a bill is 0. If a bill passes, the Bulls generate 41 political capital per unit of partisanship for voting, but lose some capital for losing the vote. If a bill has Partisanship of 20.5, then the Bulls are indifferent between filibustering and allowing the vote; anything more partisan will definitely be filibustered, and anything less partisan will be voted on.

If talking filibusters are required, though, the whole thing gets much more complicated. Adding a marginal cost for being on TV filibustering makes the minority party far less likely to filibuster. The marginal political capital generated for filibustering for one day is

MCapital = -2*P + 41 + \frac{1}{P^2}

The Bulls are indifferent between filibustering and allowing the vote when Partisanship is about 20.5012. That’s just what we’d expect – that it takes a more contentious bill to justify a talking filibuster than a silent filibuster. Then, let’s take a look at a two-day filibuster:

MCapital = -2*P + 41 + \frac{4}{P^2}

A slightly longer filibuster requires a slightly more controversial bill, requiring Partisanship to be 20.5048. Finally, let’s take a look at a 90-day (3-month) filibuster:

MCapital = -2*P + 41 + \frac{8100}{P^2}

That would require a bill of partisanship 26.338. The model displays the expected features: that it takes a more contentious bill to merit a filibuster at all, and longer filibusters require much more contentious bills. If we raise the costs of doing something, it becomes used less often.

Note:
1 As far as I know, this isn’t stolen from anyone, but if it’s similar to one currently in the literature please let me know so I can do some reading and properly credit the inventor.

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Scribbling in the Margins December 5, 2012

Posted by tomflesher in Micro, Teaching.
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3. Rational people think at the margin.

That’s one of Mankiw’s Ten Principles of Economics. (#3, in fact). What does it mean?

The usual definition of “marginal” is “additional.” In other words, the marginal cost of something is the cost of buying another one. So, we can rephrase Number Three as “Rational people think about the next one of whatever it is they’re thinking about.” We can also think about marginal benefits.

How much would you pay for a Dove Dark Chocolate bar?1 Whatever your answer, that’s the benefit that a Dove bar affords you. Currently, I have zero Dove bars, so the first Dove bar I bought would give me a benefit. Economists measure benefit in two ways: either in utility, which is an abstract concept of “happiness points,” or in dollars, which are, well, dollars. If I’d pay $1.50 for a Dove bar, then my marginal benefit for a Dove bar is $1.50. Because this sounds simple, economists sometimes make this sound more complicated by calling it money-metric utility.

After I eat the first Dove bar, I really wouldn’t want another 0ne – at least, not as much as the first. I’m willing to pay $1.50 for the first one, but $1.50 would be too much for the second. I might buy two if they’re on special for two for $2.50, but I wouldn’t pay much more than that. That means I value the second Dove bar at $1.00, or the benefit I’d get from two bars minus the benefit I’d get from one bar.2 This is pretty normal – marginal benefits, or marginal utility, is decreasing in quantity for most goods. That’s just a fancy way of saying that the second one isn’t as good as the first, and the third isn’t as good as the second. The technical term for that is diminishing marginal returns.

The marginal cost is just the cost of the additional bar. Usually, stores have one price per bar, no matter how many you buy. My local grocery store sells Dove Bars for $1.25 each. Since I’d pay $1.50 for that bar, I’d buy it, and I’d be better off to the tune of $0.25 because I got $1.50 worth of utility for only $1.25. (Economists call that $0.25 consumer surplus.)

Should I buy the second one?

If you make the decision all at once, you’d say that I value two bars at $2.50, so why not? Here’s the problem: that gives me a total benefit of $2.50 at a total cost of $2.50, for a consumer surplus of $0. If I buy the first bar, I get a consumer surplus of $0.25. Buying the second bar amounts to paying $1.25 for something I only value at $1, so I’d get a consumer surplus of -$0.25. Thinking at the margin allows me to spend that last $1 on something I actually value that much.

The fundamental criterion for making decisions in economics: do something  only if its Marginal Benefit is at least as much as its Marginal Cost. In other words, don’t buy something unless you’re at least breaking even.

Note:
1 Okay, that’s a 24-pack. How much would you pay for a 24-pack? Probably not more than 24-times-your-valuation. But we’ll chat about that later.
2 Mathematically, marginal benefit is defined as \frac{\Delta(Benefit)}{\Delta(Quantity)} , with Δ meaning “change.” Here, the change in benefit is $1.00 and the change in quantity is 1.