Bastiat’s Bastions

A progressive measure that came to modern democracies in the last part of the 1800s was the secret ballot. If employers, landlords and others who held power could see how you voted, then they could retaliate if you did not support “their guy.” Imagine what it would be like if the local elected sheriff or district attorney could easily tell if you voted for them or not. Well, it looks like the Dems want to end the secret ballot in union elections and let intimidation rule once more.  Remember, that the secret ballot protects the workers from intimidation by the unions, but also by employers.  See this story from Fox News (yeah, yeah, I know, but this is the kind of story that is hard to lie about). 

Added comment 3/3/2007:  I heard this comment on NPR’s “Marketplace” (read it or click on “listen to the program”) program, a comment by Bob Moon, while driving to beautiful Hattiesburg, MS for the Louisiana and Mississippi Political Science Association, to, as coincidence would have it, present a paper on the secret ballot and bribed votes in England.

Here is a story about voter intimidation and bribery from one of the earliest democracies, that of the Roman

Republic about 100 years or so before the rise to power by Julius Caesar. This is an excerpt from a paper I did several years ago with Gary Pecquet (U. Central Michigan) and Tom Dalton (U. Arizona), titled, “The Secret Ballot in Rome as a Threat to the Political Oligarchy: A Seeming Exception to the Heckelman-Yates Rule.” No need to go into the Heckelman-Yates story (as you probably don’t care), but the point is that the Roman “good ole boys” had plenty of room to intimidate voters, and they often had plenty at stake. The politicians could declare war, especially war against a rich and poorly defended adversary. Without the secret ballot, voters were not free to vote how they wished, because they could get beaten or worse, because the stakes were often very high. Well, here is the excerpt:

4.6 The Secret Ballot in

Rome

A key turning point in the political evolution of Roman politics was the adoption of the secret ballot for candidate elections in 139 B.C. and legislation 131 B.C. (Linderski 1985, 91). Before the adoption of the secret ballot, “new men” must have had a very hard time outbidding patrons for votes because the voters would remain at the mercy of their landlords after the election. The secret ballot weakened the barriers to entry and allowed “new men” to compete more freely in Roman politics. The secret ballot did not need the support of established politicians, as those voting on the secret ballot were the voters themselves, it only needed one Tribune to propose the secret ballot.  Incumbents and established candidates may favor laws against bribery because they expect that the costs of gaining office may be reduced, increasing the rents of elective office. However, if the laws are interpreted unequally, incumbents or established candidates may not favor a law that reduces that unequal treatment, as the secret ballot makes it equally difficult for challengers and established politicians to pay for votes expecting to receive them.   The Tribute Assembly adopted secret ballot laws for candidate elections in 139 B.C., judicial assemblies in 137 B.C. and legislative Assemblies in 131 B.C. (Linderski 1985, 91). After this, voters would inscribe the initials of their choice on small clay tablets, and drop these into large voting urns. At first, a broad approach to the voting urn compromised the secret ballot because it allowed observers to stand by voters and intimidate them as they passed in the line to deposit their ballots. In 119 B.C., Marius, acting as Tribune, enacted a law that narrowed the passage to the urns securing the integrity of the secret ballot. (Botsford 1968, 389 and Yakobson, 1999, 130) The secret ballot, not only released the voter from the contractual agreements of the patronage system, but in a military society the ballot protected voters from any reprisals by the potential commanding officers (Yakobson 1995, 427). Moreover, the Roman voter enjoyed more anonymity than modern voters. Roman votes were never recorded below the tribal level. There were no reported results by smaller voting units such as precincts for politicians to reward or punish. Even so, powerful Roman nobles and cliques fell short of the power that modern ruling parties now possess. (Yakobosen 1995, 434) Yakobson (1995, 438-439) contends

The secret ballot allowed the voter to take bribes from the different candidates and be free to vote the way he liked. The voters would no doubt often reward “the highest bidder,” though it should not be assumed that this was the sole consideration that determined his choice. The voter could not be held to his promise or penalized for failure to keep it; nor could he be asked—or pressured—to vote for a candidate upon a promise (which might not eventually be kept) to pay him later, but he had to be paid, in advance, a sum large enough to compete with the bribes likely to be offered by other candidates.

Following the adoption of the ballot laws, bribery, actually increased. While it is unknown to us which form of bribery increased, the direct or indirect payments, that is, the private good or the group public good, our model suggests the latter. Divisores collected bribes from all candidates and distributed them throughout their tribes. Bribery became a form of advertising that voters expected from all serious candidates. Lintott (1990, 14) summarized the democratic nature of Roman political bribery, “When ambitus (bribery) begins to appear in the second century, it is as a disruptive intrusion for those who have the established power, but for the electorate itself it was not only profitable but liberating, as it created the assumption that their votes were on the open market.”  Before the secret ballot, unequal enforcement of the campaign spending laws, then, produced a large differential between the costs of voting for the established candidate and a “new man,” putting the challengers to a decided disadvantage. In effect, the unequal enforcement of the campaign spending laws had the effect of establishing a tariff on votes for challengers, erecting a large barrier to entry for challengers.

In elections, we will either use the secret ballot in some form  or voters will suffer some form of intimidation.  Which do we prefer?

MC 

Chavez remains committed to taking what is not his or Venezuela’s as you can see from this article from the AP news service.  While Venezuela may “compensate” the oil companies for their shares, the oil companies’ losses of majority interest will not be compensated. 

Moving entitlement protection from property and contract law where exchanges are voluntary to tort law, where exchanges are not voluntary, as is the case with nationalizations, when it is only a matter of “might makes right,” should be viewed with a great deal of skepticism (see my earlier post on the Banning of Butts in the Bayou State). Of couse, the real effect, that Chavez does not recognize, is that foreign investment in Venezuela and other Latin American countries where Chavez’s populism is likely to encourage nationalization, is likely to come to a screecthing halt.  And many of these countries are unlikely to be able to support the same level of investment through their own generated funds through savings, as the poor have a difficult time saving and investing.

Expect a disaster.

MC

Chavez goes even further in pulling the wool over the eyes of the Venezuelan voters.  The Vandal of Venezuela, the Furious Fuhrer, and the Great Thief, steals from the rich, and unlike his supposed idol, Robin Hood, keeps what he steals to remain in power, not to help the poor (remember, if the Marxists were right, the North Koreans would be well fed, instead of starving and having to extort the world with nuclear weapons to feed their overgrown army).  Chavez, to remain in power, has begun to harshly enforce the country’s price controls on food.  We have already pointed out how he has threatened to nationalize grocery stores if they do not comply with his edicts.  

The problem is that that is a rather empty threat.  Either grocers comply with the price controls and face extended losses, so that their businesses become worthless or they break the laws and lose their businesses.  Either way, they lose their businesses.

So, some businesses will decide they may as well skirt the law.  What does Chavez do?  Increase the penalty.  Throw the offending business owners and managers in jail. 

What Chavez’s price-fixing edict reminds me of is one by another dictator, the Roman Emporer Diocletian.

In the year 302 A.D. the Roman emperor Diocletian “commanded that there should be cheapness.” His edict declared:

“Unprincipled greed appears wherever our armies, following the commands of the public weal, march, not only in villages and cities but also upon all highways, with the result that prices of foodstuffs mount not only fourfold and eightfold, but transcend all measure. Our law shall fix a measure and a limit to this greed.”

Why do you think Diocletian found food prices higher wherever he marched with his armies? What result would you anticipate from the command that “there should be cheapness?”

What result do you anticipate from Chavez’s edict that food prices stay low?

MC

  

We saw how Chavez in Venezuela has pulled the wool over the eyes of many of Venezuela’s poor, promising the riches of the oil fields and the riches of food distributors.  Now Bolivia is getting in on the “nationalization” act, better known as theft, turning private businesses into public enterprises, and here, without so much as compensating the current owners.  Taking what does not belong to you, what belongs to others is theft, plain and simple.  You may not like the way that someone else acquired their present holdings, but unless it was by out and out theft, “nationalization” is nothing but government sponsored theft. 

MC

Smoking behavior and its effects of non-smoking is constantly in the news. The latest news is from the mighty halls of Congress where Rep. Tancredo’s (Republican) cigar smoke drifted into Rep. Ellison’s (Democrat) office and a member of Rep. Ellison’s staff called the Capital Police to investigate. The rule on smoking in Congressional offices is that the Congressman decides makes the smoking policy for his own suite of offices. That seems like a decent rule.

Here at Nicholls, things are a bit different.The first edition of the Nicholls Worth in 2007 led with the headline “Smoking ban causes decline in bar sales.” Not only has the Nicholls Worth provided Nicholls economics students with a good example of complementarity of goods (goods that tend to be used together), but other important issues are raised in their editorial on the smoking ban. The editor clearly sees through the smoke that clouded the thinking of our state legislators (surely those guys in

Baton Rouge were smoking something much stronger than mere tobacco when they came up with this one). The editor sees that both smokers and non-smokers have rights and that these rights are reciprocal. If we allow smoking, we grant certain initial rights to smokers that end up harming non-smokers. If we ban smoking, the rights of the non-smokers are upheld, harming smokers. Smoking in a public place, where some innocent by-standers are harmed by the production or consumption of someone else is an example of a general class of problems with not only markets, but all forms of social exchange, a problem that economists term “externalities.” With externalities, costs (or benefits) are imposed on those “external” to the original exchange, someone other than the buyer or the seller, a sort-of innocent bystander problem. In situations of external costs, the buyer gets the good without paying all of the costs of his actions and ends up consuming more than he or she would if he had to pay full cost.

As an aside, note that people are now claiming that those who consume fossil fuels, such as gasoline, are creating external costs through the creation of greenhouse gases, such as CO_{2 .} These greenhouse gases lead to global warming, they suggest, and fossil fuel consumers should (that is a very normative “should” by the way) be forced to pay full costs of their actions via instituting a tax on carbon meant for combustion.

Well, all of this leads us to something called the Coase Theorem. Ronald Coase, in 1960, suggested that there was a problem of this whole notion of externality, which also is called “social cost.” The problem, he said, was due to this reciprocal nature of externalities. We can cater to the smokers, costing the non-smoker, or to the non-smoker, costing the smokers, as was noted by the Nicholls Worth editorial. So, no matter which way we set the “rights,” there will be external costs. Coase suggested that if the very act of trading (making transactions) was costless, it would not matter who had the initial right that the other side would pay to get their way, that either way, we would end up in the same place, further, that we could not improve on that situation without harming someone—which is what economists call “economic efficiency” or “Pareto Optimality.” The idea is that if the non-smoker preferred not to be bothered by the smoke of others more than the smoker preferred to be able to smoke, the non-smoker should be willing to pay the smoker to refrain from smoking. So if there were no costs to cutting a deal with the smoker, we would end up in the same place if we gave the smoker the right to smoke and the non-smoker could buy him out or if we gave the non-smoker the right to have no-smoking to start with, and after the dealing were done, we would be at an efficient position.

One of the main points of Coase’s theorem, and one that is pointed out by law professors Guido Calabresi and Douglas Melamed in their very important work, Property Rules, Liability Rules, and Inalienability: One View of the Cathedral (Harvard Law Review, 1972), is that there are often cases of what Coase called high “transactions costs,” and when these costs are significant, economic efficiency is served by setting the rights in such a way as to arrive at the rights that would occur if there were no transactions costs, because the costs of cutting a deal are just not worth the bother. Transactions costs should be understood as just costs of cutting the deal as separate from what people face with the deal itself. Lawyers’ fees for coming up with terms of the contract would be a form of transactions costs. The opportunity cost of waiting in line to make payment would be another type of transactions cost. Another way, then, of understanding transactions costs is a cost of trading not received by the other side of the exchange.

Here is a little of what Calabresi and Melamed had to say:

The first issue which must be faced by any legal system is one we call the problem of “entitlement.” Whenever a state is presented with conflicting interests of two or more people, it must decide which side to favor. Absent such a decision, access to goods, services, and life itself will be decided on the basis of “might makes right” – whoever is stronger or shrewder will. Hence the fundamental thing that law does is to decide which of the conflicting parties will be entitled to prevail. The entitlement to make noise versus the entitlement to have silence, the entitlement to pollute versus the entitlement to breathe clean air, the entitlement to have children versus the entitlement to forbid them – these are the first-order of legal decisions.

They go on to point out that once the state picks who has the right to something, such as the right to smoke or the right to clean indoor air, the state must then decide how to enforce those rights. Three methods for protecting people’s entitlements that Calabresi and Melamed suggest are:

Property rules, which involve the law of contracts, where the price is set by the free working of the market system, rather that by government or judicial edict. The terms of trade or the rates of exchange are set through bargaining or through the market.

Liability rules, which involve tort law, where the price or exchange rate is set by a judge or some other dispassionate third party. The terms of trade or the rates of exchange are determined by a judge or uninvolved third party.

Inalienability, which means no exchange of rights can take place at all, no matter how much one side may be willing to pay the other side to get his way.

Largely what Calabresi and Melamed talk about is the balancing of costs to non-smokers of this second-hand smoke and the costs to smokers of not being allowed to smoke. While it might make sense to have such bans in some public spaces, extending the notion of public space to the privately owned bars and restaurant seems to be a stretch because these places are owned by some private citizen(s). We should note that it is exactly these restaurant and bar owners who have the most to gain from setting the smoking or no-smoking rules because they are in a position to balance the costs of smokers not being able to smoke with the costs of non-smokers breathing second-hand smoke. Whether it is ok or banned in their establishments is a decision to be made by the owner with an eye on demand by their customers and the demand lost by making one decision or the other. Banning favors the non-smokers, and restaurants may wish to cater to non-smokers and do away with smoking in their place of business, but they must face what happens to their paying customers. Does the business, on net, gain or lose revenues? Allowing smoking, of course, favors the smoker. Still, if it meant that much to non-smokers, they could always pay smokers to stop. In a competitive environment, some restaurants or bars could always ban smoking in their establishment and gain many of the avid non-smokers as a result, and others could specialize in catering to smokers. With a private ban ordered by the owner of the business, the business owner could still be persuaded into changing his decision if it could be shown to be worth it.

We should note some other conclusions of Calabresi and Melamed concerning where the rights fall.

That economic efficiency standing alone would dictate that set of entitlements which favors knowledgeable choices between social benefits and social costs of obtaining them, and between the social costs and the social costs of avoiding them;

That this implies, in the absence of certainty as to whether a benefit is worth its costs to society, that the cost should be put on the party or activity best located to make such a cost-benefit analysis;

That in particular contexts, like accidents or pollution, this suggest putting costs on the party or activity which can most cheaply avoid them;That in the absence of certainty as to who that party or activity is, the costs should be put on the party or activity which can with the lowest transaction costs act in the market to correct an error in entitlements by inducing the party who can avoid social costs most cheaply to do so; and

That since we are in an area where by hypothesis markets do not work perfectly–there are transaction costs–a decision will often have to be made on whether market transactions or collective fiat is most likely to bring us closer to the Pareto Optimal result the “perfect” market would reach.

However, an out-and-out ban on smoking in bars and restaurants, as our legislature has passed, puts the entitlement protection that Calabresi and Melamed discuss into the realm of “inalienability,” where no one can act to trade to correct errors in entitlements. The law creates prohibitive transactions which make it more or less impossible for smokers and non-smokers in a bar to make any trades that will lower the total costs of smokers not being able to smoke and non-smokers facing second-hand smoke. Who is in the best position to act to reduce these social costs? The owner–just like the Congressmen get to do in their own offices.

In the interest of full disclosure, I should tell you that several times when the issue of cigarette tax increases for the state of Louisiana came up in the legislature, I was asked to testify before the House Ways and Means Committee concerning my research on the effects of state cigarette tax hikes. The Tobacco Industry did pay me as an expert. My main publication on this was “A Note on Estimating Cross-Border Effects of State Cigarette Taxes” RM Coats – National Tax Journal, 1995, where I estimate two crucial tax elasticities of cigarette demand that allowed me to estimate the effect of state cigarette taxation on the change in cigarette demand to and from other states. In my testimony, I noted that I was an avid non-smoker. I should also point out that my research on cigarette taxation has been cited by those on both sides of the issue.

MC

In the latest issue of the Southern Economic Journal, Robert Ekelund, John Jackson, Rand Ressler and Robert Tollison write about the death penalty in their article “Marginal Deterrence and Multiple Murders.”  The effect of the death penalty on murder rates, the subject of their article, is probably not what most students would guess economists might think about all day.  What has already been shown consistently in previous economic studies of crime and punishment is that murder rates are lower where:

(1) it is more likely murderers are arrested
(2) it is more likely murderers are sentenced
(3) it is more likely murderers are executed

Each factor alone reduces the murder rate. For example, holding sentencing rates, execution rates, and other unmentioned factors constant, the higher the chance of being arrested, the lower the murder rate.

In basic economics classes we discuss why it is the marginal cost of actions – the additional cost of one more unit of the activity – that affects behavior. For the same reason, teachers wisely use a set of progressively tougher penalties against repeat offenses in their classrooms. If, as the article points out, the marginal cost of the first murder is as high as it can possibly be (death), then the marginal cost of any subsequent murders can only be zero. Stated differently, if you are likely to be executed if arrested from killing one person, there is no extra penalty for the next murder. If the punishment for a single murder is very extreme, the result is likely to be more multiple and serial homicides.

Consider applying the same logic when thinking about the movement to increase the punishment for first-time child molesters.

With one of us being the father of three children, we surely do not want the courts to hand down light sentences for child sex offenders. A 60-day sentence given to a man who had repeatedly raped a young girl in Vermont is obviously irresponsibly lenient. The people supporting Jessica’s Law, including Bill O’ Reilly of Fox News fame, would agree. Jessica’s Law, named for Jessica Lundsford of Florida, requires convicted child-sex offenders to serve a sentence ranging from a minimum of 25 years to a maximum of life for a first offense. A version of Jessica’s law was recently passed here in Louisiana.

In keeping with the theme of our posts, there are often overlooked consequences of a change. The reduction in the number of first-time child sex offenders is “what is seen.” But “what is unseen” is frightening and alarming. Consider the reprehensible dilemma facing a low-life having just committed a sexual offense against a child. If arrested and convicted of child rape in Florida or Louisiana (Jessica’s Law states), the offender will face a minimum of 25 years in prison. Might this offender consider the fact that murdering the victim (the prime witness) will likely reduce the probability of being convicted of the sexual assault?

If the offender ends up being convicted of murder he may face execution, but execution usually only occurs after 20 years or so of waiting on death row, till all appeals are exhausted. At the time of the crime, the penalty for murder does not seem that much worse than a 25-year minimum penalty for child molestation. In the language of economists, the marginal cost of escalating the crime from sexual assault to murder is quite low. Unfortunately, Jessica Lundsford’s rapist found the reduction in the chance of being convicted worth killing Jessica even before Florida passed its tough minimum sentences for child rapists.

We are not suggesting that Jessica’s Laws should be repealed. However, we are pointing out that while these laws reduce first-time child rapes, they also increase the rate at which children are murdered by their molesters. A proper discussion or analysis of Jessica’s Law should take both “the seen” and “the unseen” consequences into account.

Morris Coats and Chad Turner