Friday, March 18, 2016

The Corrupt Bargain of 2016

I recently came across a clever article on how the Republicans could nominate Trump and then elect someone else. The plan is simple in principle, tricky in execution:

1. The Republicans nominate Trump, the Democrats nominate Hilary.

2. The anti-Trump Republicans run a pair of third party candidates, say Kasich and Cruz. They get on the ballot in Texas, Ohio, and perhaps a few other states where both major party candidates are sufficiently unpopular. They stay off the ballot in any state where their presence might help the stronger of the major party candidates, probably Clinton.

3. They get enough electoral votes so that neither Trump nor Clinton has a majority, which throws the election to Congress. The House chooses the President, the Senate the VP, from among the three leading candidates. Kasich is chosen as President, despite coming in third in both popular and electoral votes, and Cruz, or possibly Trump's running mate, becomes Vice President.

When I described the scenario to my history major son he informed me that it had already happened—almost two hundred years ago. In 1824, Andrew Jackson got forty-one percent of the popular vote, John Quincy Adams got thirty-one percent, with the rest of the votes going to Henry Clay and William Crawford, all four running as candidates of the Democratic-Republican Party. Jackson was looked down on by the more civilized elements of his party, viewed as a lowbrow populist and bully. 

Remind you of anyone?

Jackson had a plurality of both popular and electoral votes but no candidate had a majority of electoral votes, so the presidential election went to the House, which chose Adams. Critics claimed that Clay had thrown his support in Congress to Adams in exchange for being offered the position of Secretary of State, widely viewed as making Clay heir to the White House. They labeled it The Corrupt Bargain.

Having had the presidency stolen from him, as he and his supporters saw it, in 1825, Jackson ran again in the next election, this time as the candidate of the (new) Democratic Party. And won.

So maybe it's not such a clever idea after all.

Hawaiian Taxes, Vertical Integration, and a Research Project

Not a Sales Tax

I recently spent a few days in Hawaii, teaching some classes and giving a talk at the Iolani school. In the process, I learned something interesting about the Hawaiian tax system. A major source of state income is the general excise tax, a tax, in most cases of 4% (4.5% on Oahu), on the gross revenue of firms. At first glance that looks like a sales tax, but it has rather different implications.

Consider the taxation of bread. A farmer grows wheat, sells it to a miller, pays 4% tax on the money he receives. The miller converts the wheat into flour, sells it to the baker, pays 4% tax on the money he receives. The baker sells the bread to customers, pays 4% tax on what they pay him. The wheat has been taxed three times, for a total tax of (because of compounding–taxes on taxes) 12.5%. The miller's contribution, the value added to the wheat by milling it, has been taxed twice. The contribution of the baker has been taxed once. Depending on the relative amounts of value added at each stage, the total tax on the bread is between 4% and 12.5%.

Suppose, however, that the bakery is a vertically integrated firm, owns its own farm and mill. That makes the transfer of wheat from farm to mill and of flour from mill to bakery internal to the firm. Only the final stage, the sale of the bread, produces revenue to be taxed. Now the total tax on the bread is only four percent.

Which means that one effect of the excise tax is an artificial incentive for vertical integration, making firms in Hawaii larger than they would otherwise be.

A Theory of Exploitative Taxation

While on the subject of taxation in Hawaii, an interesting conjecture occurred to me, which I thought someone else might be interested in pursuing. Consider two adjacent states that are equally attractive in terms of climate, culture, and the like. They compete for taxpayers. If one of them has higher taxes and does not use them to produce a correspondingly better level of services, it will lose citizens, and taxes, to the other.

Consider the same story, with one change—one of the states is, for reasons independent of taxes and government services,  a pleasanter place to live in than the other. It can collect taxes and use them in ways that produce no benefit to the taxpayers—to buy the votes of state employees, say, with generous wages and pension benefits. As long as the cost of the higher taxes is lower than the value to taxpayers of the state's natural advantages, they have no incentive to move. 

Hawaii has unusually high state taxes per capita. It is also a very pleasant place to live—comfortable climate, lots of beaches. 

To turn my conjecture into a research project, you need data of two sorts. One is some measure of the level of exploitative taxation in each state—tax collected minus value of services to the marginal taxpayer/resident. The other is some measure of each state's natural advantages. If the theory—think of it as an elaboration of the Tiebout hypothesis—is correct, the two should be positively correlated.

Sunday, March 13, 2016

Concerning The Moon is a Harsh Mistress

I was recently interviewed on the subject of Heinlein's very interesting novel. The audio of the interview has been webbed here.

Saturday, March 12, 2016

Thoughts on the Election Campaign

Various ...

Suppose Trump arrives at the convention with fewer than half the delegates and so doesn't win on the first ballot. Many delegates, including many of his, will be free to vote for someone else on the second ballot, and almost all will be free on the third ballot. His delegates are not selected by him but by the state party machinery; although they are obliged to vote for him on the first ballot, what they do thereafter will depend on the party's internal politics. It could get complicated, given that the obvious alternative at this point is Cruz, who is almost as unpopular with the Republican establishment as Trump. But my guess is that if the Republican leadership wants to deny Trump the nomination at that point, they can do so. 

There are two reasons they might not. One is that they might think Trump is more likely to win the election than alternative candidates—that, according to Ben Carson, is one of the reasons he endorsed Trump. The other is fear that if Trump's supporters think the nomination has been unfairly stolen from him enough of them will stay home on election day to throw the presidential election, and possibly congressional elections as well, to the Democrats.

That raises the question of what counts as stealing the nomination—not in the eyes of God but in the eyes of Trump supporters. If Trump starts with almost enough votes and a lot of his delegates defect on the second ballot, that might do it. If there are changes in the rules that appear designed to keep Trump from winning, that might also do it.

The current rules, as revised for the 2012 convention, limit nomination to candidates who have a majority of the delegates in at least eight states. That would almost certainly eliminate everyone but Trump and Cruz, might limit it to only Trump. A change in that rule that let someone like Romney be nominated and win would be entirely legal, as I understand the rules. But it might not look that way to Trump supporters. A change that let in someone who ran, didn't do very well, but is more acceptable to the establishment than Cruz, might be seen in the same category.

Can Trump be elected? The obvious answer is "no," but I am not sure it is correct. He did a great deal better in the primaries than almost anyone expected. His claim is that he can get support from Democratic voters. If true, the question will be whether he gains more votes by attracting Democrats than he loses by repelling Republicans.

My explanation of why Trump and Cruz are the two Republican candidates still standing ties into my old explanation of why people vote. Also my explanation of why sports teams are linked to cities and universities.

Part of the reason to attend a football game is the pleasure of partisanship, of cheering for your team. Identifying a team with a city or a university provides a preexisting body of partisans. Every four years a game is played out across the nation with the fate of the world at stake. You can not merely cheer for your team, you can play on it, even if in a very minor role, for the cost of an hour or so of your time. Who could resist?

Apply the same approach to the nomination campaign. The decision of who to support is based not on who supports what policies but on whose team you enjoy identifying with. You wants to be on a strong team, a team with a confident, aggressive leader. Trump and Cruz fit that pattern considerably better than Bush and Rubio. Trump's repeated references to "little Marco" were entirely unfair—but effective. Being physically big fits the image of a strong leader.

I watched the beginning of the most recent Republican debate and thought Trump did a clever job of deflecting, arguably reversing, what should have been an effective attack against him. He claims that H1B visas and free trade agreements steal jobs from American workers. But he himself brought in foreign workers on H1B visas to work at his companies, outsourced parts of what he was doing to foreign countries.

The obvious response would be to deny it or claim the charges were exaggerated. Trump's response instead was that, as a businessman, it was his job to make money for his firms within the existing rules, good or bad. He went on to argue that, because he had experience taking advantage of bad rules, he knew how to stop other people from doing it—and would. "Set a thief to catch a thief." Or, alternatively, when presented with  lemons ...  .

Monday, March 07, 2016

Two Views of the World

One of my hobbies, for many years, has been  the Society for Creative Anachronism, a group that does historical recreation, mostly from the Middle Ages and Renaissance—cooking from medieval cookbooks, telling medieval stories, fighting as a sport with (non-lethal) sword and shield.

A long time ago I noticed an interesting split between two different ways of viewing the organization. One, summarized as “pay to play,” was that participation ought to require membership, payment of annual dues to the national organization. Anyone not willing to bear his share of the burden by doing so ought not to be allowed to attend feasts and tournaments, receive honors, fill offices within the organization.

The SCA runs on volunteer labor. Seen from the other side, “pay to play” meant being unwilling to accept donations of labor unless accompanied by donations of cash. Someone who helped cook a medieval feast for a hundred diners or spent several hours washing dishes and cleaning the hall afterwards was bearing his share of the burden. Someone who paid his annual dues to the national organization and came to every event expecting to be fed and entertained was part of the burden being born. That was my position, argued at some length in a letter I wrote on the subject more than thirty years ago.

I was struck, then and later, by how sharp the division in views was–sharp enough to eventually produce something close to a civil war within the organization. To some people it was obvious that being part of the Society was defined by paying dues and having a membership card. To others it was equally obvious that there was a difference between the SCA Inc., a non-profit chartered in the state of California, and the Society, a social network. The Corporation  might serve a useful function, but membership in it did not define membership in the Society and cash contributions to it made up a tiny fraction of the resources on which the Society ran.

The same division was one of the themes of my first novel, a historical with invented history. An alliance among three polities has, for several decades, been holding off an expansionary empire. The king who created that alliance dies. His son views the world in terms of tables of organization, believes that he can rely on anyone in allegiance to him, can not rely on anyone who is not. He accordingly attempts to convert his father’s allies into subjects, with unfortunate consequences.

Harald, my protagonist, is a prominent figure in one of the allied societies, with no formal authority, no tax revenues, nobody in allegiance to him, but a lot of friends. He views the world as a network of relationships.

The first long chunk of the novel is the conflict between two men and two views of the world. My protagonist’s side is illustrated by the case of Stephen, one of the most powerful of the provincial lords just below the King. Formally he is loyal to the ruler, in practice a friend and ally of Harald. As Harald puts it to a member of the third polity, a  military order that the king is trying to get control over, “you could go north; Stephen's a fine man for failing when it suits him and I can't see him hunting you with any enthusiasm.”

The equivalent, in the SCA, is a quote from someone in the West Kingdom, the oldest of the Society kingdoms:

“The King’s word is law. But if the King orders a pit dug in the middle of the list field, it may take us four months to find a shovel.”

Reigns in the West last for four months.

Wednesday, March 02, 2016

Maybe the Republicans Shouldn't Unite Yet

There is a lot of talk at this point about the desirability of Republicans who don't want Trump to be nominated uniting around a single candidate. One problem with that proposal is that the candidate that the establishment wants to unite around is at this point Rubio, while the only candidate anywhere close to Trump in delegate count is Cruz.

But there is another problem. Suppose all but one of Trump's opponents pulls out of the race. Some of their votes in future primaries will go to Trump. He is currently getting close to half the votes in primaries—with those extra votes he might go over half. That could easily result in his getting to the convention with a majority of the delegates, at which point the game is over.

The analysis is complicated by the fact that some primaries are winner take all. For those, Trump is better off with multiple opponents splitting the vote. But for primaries where delegates are apportioned to candidates roughly in proportion to the votes they get, multiple opponents result in fewer delegates going to Trump. And the case of winner take all primaries is complicated by the fact that different candidates are popular in different states, as yesterday's results make clear. If Rubio drops out, Trump takes Florida. If Cruz had dropped out, Trump would have had a plurality in Texas, and there may be future winner take all states with the same pattern.

Of course, even if Trump doesn't arrive at the convention with a majority, he may still win. Christie is the first major figure to switch sides but may not be the last.