Prisoner’s Dilemma- IX: The Johnson Act v.s. IGRA (The Distal Prisoner’s Dilemma)

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The Johnson Act and Challenges to Class II Gaming:

Under the Indian Gaming Regulatory Act (IGRA) 1988, there are three distinct classifications of gambling conduct on tribal soil. Class I games are generally of little economic value to the tribes operating gaming establishments; are associated with intracultural ceremonies. Class I games are unregulated by any nontribal institution (p. 8). In contrast, Class II games fall within the range of bingo and associated games (tip jarspull tabs, and card games) (p.3). However, any banking card games such as Blackjack and Baccarat fall outside of the category of Class II gaming along with traditional casino-style games such as slot machines (p.4). Class II games are free of state and federal regulation providing the form of gambling is not prohibited (p.1341). Pursuant to IGRA, the tribe establishes local ordinances governing the operation of Class II gambling. All local regulations need to be approved by National Indian Gaming Commission (NIGC) (p.1341). The final class of tribal gaming is Class III, including banked card games and traditional casino games (p.4). Per IGRA, the tribe must enact a tribal-state compact to provide Class III gaming services (p.305). Arguably, games such as slot machines are significantly more profitable than Class II games [1].

Over the years, some controversy has surfaced regarding what games fall under the umbrella of Class II games. Despite IGRA acting as a well-intentioned compromise, providing the tribes with the right to pursue gaming enterprises and balancing for safeguarding tribal gaming from criminal influences (p.2), it failed to foresee technical advances in the gaming industry. By the 1990s, digital aides to accompany Class II games such as bingo and pull-tab were devised, making them superficially similar to Class III games such as slot machines and video Blackjack. After years of length, court battles it electronic versions of Class II games are now recognized as distinct from Class III forms of gambling. Class III games incur substantial transaction costs of negotiations with the state the tribal territory resides within.

The attempt to prohibit electronic variations of Class II games, such as bingo, is justified by the Johnson Act. This law enacted before IGRA banned the use of gambling devices in establishments in the Indian country. The Johnson Act was soon challenged in the courts; by various tribes providing Class II gaming services. One prominent case was Citizen Band Potawatomi Indian Tribe of Oklahoma v. Green, 995F.2d 179, 179 (10th Cir. 1993). The Oklahoma Supreme Court affirmed the district court’s decision that video lottery terminals would not apply to the IGRA waiver of the Johnson Act since Oklahoma outright bans such gambling devices. The court sided with the state, but it did open the door for video pull-tab and bingo terminals by making such an exemption contingent on the state loosening restrictions on these actives. After the Citizen Band ruling, Oklahoma passed the Amusement and Carnival Games Act, this liberalized gaming in Oklahoma (p.7). Unfortunately, the tribes struggled to negotiate a compact much beyond expanding to off-track horse racing (p.8). The tribes were still languishing in a purgatorial dead-end from the pressure of the social conservatives of Oklahoma (p.8). The East Shawnee Tribe “…developed a paper pull-tab game that utilized an electronic reader to scan paper pull-tabs and display an image on a video screen when the machine dispenses the paper pull-tab..” (p.9). The tribe circumvented their gaming commission and requested a ruling from the CFR court. The CFR’s favorable ruling did not dissuade the U.S. Attorney Lewis of the Northern district from viewing “…such devices as an unlawful class III electromechanical facsimile of a pull tab game..” (p.9). Subsequently, the District Court ruled that this variant of an electron pull-tab game was a Class III game (p.10). The U.S. Attorney Lewis ignored the ruling raided the tribe’s casino. The East Shawnee and the government came to a settlement dismissing the charges and returning all seized funds (p.10).

In 1996, the NIGC chairman decided that the “..electronically broadcasted bingo game…” MegaMania was a Class II game (p.10). Then in 1997, the DOJ and Oklahoma tribal leaders met to discuss the limits of electronic bingo games while the NIGC concurrently expanded the list of electronically assisted games that fell within the Class III category (p.10-11). Lewis ignored this decision and organized a raid on casinos owned by the Seneca-Cayug and Cherokee Nation. Lewis also went so far as to pursue a case against MegaMania devices used at tribal establishments in California (p.11). Resulting in United States v. 103 Electronic Gaming Devices, No. 98-1984-CRB, 1998 WL 827586 at *10 (N.D. Cal. 1998). The Ninth Circuit threw Lewis’s case out citing that the interconnected terminals were an aide and therefore was Johnson Act compliant. After several years of appellate courts finding that IGRA permits Class II games to utilize electron aides, NIGC made the 2002 amendment to IGRA formally codifying this conclusion (p.12).

The Obvious Prisoner’s Dilemma:

The long and drawn-out battle over the classification of tribal-hosted electronic-aided bingo games is a clear example of how the interests of bureaucratic agencies do not always align. Bureaus function under the auspices of the same department, compete for funding and institutional support. This situation demonstrates a scenario where orthogonal agencies are at odds; due to having diametrical incentives structures. The NIGC was intended to operate with constrained autonomy when IGRA was first enacted. But NIGC independence is significantly hampered by the shared regulatory responsibility dispersed between the agency, the Department of the Interior, and the DOJ (p.305-306). As is evident from the previously described struggles for tribes in Oklahoma, the relationship between the NIGC and the DOJ is contentious.

Prisoner’s Dilemma exists because the DOJ exists to offensively combat illegal activities associated with improper operation of gaming facilities (p.323). Simultaneously, NIGC solely exists to provide an on-ramp for tribes to seek liberalization of gaming for economic development (p.323-324). Neither of the incentives structures is compatible; this can explain the ample examples of defection on the part of both parties. The NIGC actively helps the tribes by expanding the number of games utilizing electronic aides regulated as Class II (fewer legal hurdles). In contrast, the DOJ enforces the gaming laws, even if that means taking overly broad or narrow interpretations of the current statutory code. Both government entities could have coordinated mutual compromises versus adversarial strategies for managing tribal gaming regulations. This lack of consensus generated a multilayered cat-and-mouse game between the NIGC/tribes and the DOJ.

The Distal Prisoner’s Dilemma:

The less conspicuous Prisoner’s Dilemma is an intertemporal one involving one set of congressional representatives versus another. The Johnson Act and IGRA are incompatible pieces of legislation that generate intricate policy conflicts (p.315-318). Since the two laws are incongruent, IGRA is a defection from the previous Johnson Act. In IGRA, it is implied before the 2002 amendments that the electronic aides were exempt; it was not clear enough to dispel any controversy. Either clarification of the exemption in the original law or having it match more closely to the criteria of the Johnson Act would have been a “cooperative strategy”.

Distal Prisoner’s Dilemma is an indirect mutual defection that engenders poor outcomes. The defections are generally temporally stratified and are not an instantaneously implemented noncooperative strategy. Either through congress’s ignorance of the law or zealotry to regulate tribal gaming, they are working against their own previously established legislation.

Bootleggers & Baptists: XXXVIII- Prop. 5 (California, 1998)- Tribal Gaming

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Proposition 5 (1998):

Most legislative proposals seeking to permit or expand state gambling have generated controversy. Proposition 5 (1998) delivered on creating a notable amount of contention in California. The referendum aimed to allow tribes to form gaming compacts with the state, allowing them to provide Class III gaming (casino-style) services to their patrons. Per the provisions laid out in the  Indian Gaming Regulatory Act (1988) (IGRA) under Sec. 2710 of the act. The more granular objectives of the proposition included:

  1. Allow tribal casinos to install or keep video-style slot machines, operate lotteries, and run card games.

2. Require the governor to approve such gambling arrangements with any tribe requesting them.

3. Require tribes with gambling operations to contribute a small percentage of their earnings to a fund benefiting statewide emergency medical care programs, communities near tribal casinos, or tribes without gaming.

4. Turn over to the tribes’ primary responsibility for overseeing the casinos. State regulation would be limited, but tribes would reimburse the state for the cost of state oversight.

https://www.sfgate.com/politics/article/STATE-PROPOSITIONS-Proposition-5-2983468.php.

The tribes had a lot to gain through the passage of Proposition 5, but in contrast, non-tribal gaming venues and adjacent industries had the potential to be big losers. This tension resulted in the Prop. 5 campaign engendering record-setting election spending in California. Per an October 1998 report, surpassing the spending on insurance reform bills in 1988, amassing a gargantuan $84 million in campaign expenditures. The rivalrous campaigning of tribal and non-tribal interest groups lays down the substrate for Bootlegger and Baptists’ (1983) coalition dynamics. The union of business and moralistic factions are most salient on the side that opposed the referendum. Since gambling is associated with crime and moral decay, attracting Baptists to act as moralizing agents is like shooting-fish-in-a-barrel. Once a curious individual dives deeper into it, the invested interests of the opposition become a web of predictable and unlikely Bootleggers begins to emerge.

The Baptists:

The most conspicuous moralistic voice in the anti-Prop 5 campaign was Stand Up for California, a grassroots political action organization with conservative leanings. Since 1996, the organization has been a vocal opponent of expanding tribal gaming. The organization even acted as a consortium of moral anti-Prop 5 arguments, publishing articles ranging from trade associations, law enforcement organizations, and even the California Council on Alcohol Problems expounding upon the ills of tribal gaming. It is even suggested (on the California voter Information Guide not by Stand Up) that environmental protection issues; resulting from tribal gaming establishments being exempt from California environmental regulations (p.23). The implication is that environmentalists would object to the measure. The 1998 Voter Guide indicates a diverse array of moralistic arguments against Prop. 5. Including but not limited to the potential for crime, violation of state labor laws, the lack of bargaining power on the part of local citizens/governments, the lack of taxation, and even arguing that the revenue gained from gambling proceeds only helps a minority of tribally affiliated Indians (p.21-23).

The Bootleggers:

The organization Stand Up reduced its political activity during this campaign to avoid cooperating with “…Nevada gambling interests…”.; demonstrating the organization’s commitment to moralistic communitarian causes. Regardless of whether they wanted an alliance with gaming interests, simply by taking a passionate position on the issue, they formed a tacit coalition. However, the relationships between the various varieties of Bootleggers are far more intricate than the networks of Baptists. It is open to debate whether some of these actors are BootleggersBaptistsDual-Role Actors, or even if they are Covert Bootlegger (p.190).

The Bootleggers with the most linear relationship to the anti-referendum campaign are those with overt ties to the gaming industry. Several in-state interest groups donated money to shutdown Prop. 5. The involvement of gaming interests in the appurtenant state of Arizona and nearby Nevada is attention-grabbing. It is easy to surmise that many of these firms feared a loss in revenue from California residents having more local casinos. One notable gaming firm that contributed to the campaign was Aztar, the now-defunct gaming and hospitality management firm previously headquartered in Phoenix, Arizona (p.3-4). The list of luminaries included donors such as Caesars Las Vegas, the Rio, and Hilton Hotels (p.4). A careful observer may find it puzzling that a construction company based out of Framingham, Massachusetts (p.4) donated to the Prop. 5 counter-campaign. That is because the Perini Building Company built many of the famous casinos in Las Vegas, including Luxor and the northern expansion of Caesars Palace (p.5).

Another group backing the opposition was the labor unions. Many readers may question what organized labor would have to gain through blocking tribal gaming? The unions had two main objectives in the opposition campaign. First, the unions operated under the political action organization COPE (Los Angeles County Council on Public Education) since “…Indian casinos are not required to apply the National Labor Relations Act guidelines as other private employers are..” (p.24). The second reason why the tribes created such a powerful enemy was by the fact that “… many tribes refused to bargain with unions…” (p.24). Keeping in mind the doctrine of tribal sovereignty, they were well within their rights to refuse such negotiations; but they engendered a Prisoner’s Dilemma. Through working against the unions, the tribes incentivized organized labor to defect by working against their interest in an uncharacteristic (p.24) amount of activism devoted to defeating a tribal gaming bill.

Conclusion:

Despite the best effects of the opposition campaign, Prop. 5 still passed in November 1998. The measure achieved victory by winning 62.38% of the vote, leaving the opposition at 37.62%. This demonstrates that even calculated and strategic counter-campaigns cannot assure success in the political arena. It also should be noted that the tribes did overall spend more on Prop. 5 advocacy than their opponents did refute it. While it is shrewd to avoid any social justice justifications for permitting tribal gaming, but for many tribes, it is crucial for their economic development. Native Americans, as of 2020, have the highest rates of poverty among any ethnic group living within the United States. Loosening regulations constraining tribal gaming is a tenable solution to help improve the economic circumstances of native peoples. Versus relying on handouts or ill-fate government programs that could only exacerbate their current economic struggles, we are allowing indigenous people to help themselves by getting out of their way. It is also worth noting that tribal casinos are not “for-profit” in the traditional sense. They might not overtly operate as charities. The casinos are “state-owned” since the establishments are owned by the tribal government. The proceeds function like tax revenue, funding infrastructure, programs, and other tribal initiatives (p.2).

The Folly of The Pilgrims

In commemoration of Thanksgiving, I am re-blogging my entry addressing my thoughts on the classic FEE essay Our First Thanksgiving (1959).

Inverted logic

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I sincerely encourage all of my regular visitors to read this classic essay published by the Foundation for Economic Education.  It was originally published back in 1959, detailing the socialistic tendencies of the inhabitants of the Massachusetts Bay Colony. The essay explains how once the puritans did away with their collective system for allocating resources conditions began to improve.

The essay is entitled Our First Thanks Giving and it provides a unique history lesson regarding the holiday that has become in the modern-era a feast centered around football, food, beer and light conversation. However, it is important to never forget the struggles of the Pilgrims. The same system of resource distribution that failed the Pilgrims in the nascent years of the Massachusetts Colony is being proposed today. These policies are merely being presented in different packaging. Our puritan forefathers believed they could bring…

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Prisoner’s Dilemmas- VIII: The Golden Child (Sibling Rivalries)

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Per a 2020 study, approximately 70 % of all surveyed parents admit to preferential treatment to one of their kids. The context of this biased parenting can range from intentional behavior to subconscious reflective behavior; such dynamics create a perverse incentives structure for the parent’s children. Despite this fallacy being prevalent, that does not eliminate the harm that it inflicts upon family dynamics. Anytime incentives are aligned for two people to work against one another, there is a strong potential for a Prisoner’s Dilemma. However, since each “player’s” incentives align with defection doesn’t mean that such strategies yield optimal outcomes. The same holds when it comes to interactions among family members.

Two notable defection strategies are implemented in sibling rivalries. The first salient strategy would be both siblings pitted against one another, vying for their parent’s affection. The two siblings simultaneously attempt to win the praise of their parents. Even if that means that they do so at the expense of their brother or sister. One example would be highlighting the shortcomings of the opposing sibling and comparing them to their achievements. For example, one sibling emphasized their straight A’s, and their brother Johnnie is a C-student. Based upon the author’s anecdotal observations, this is the most common form of noncooperative strategies implemented in sibling rivalries.

 Another strategy that is slightly less common; but mildly prevalent is the double defection strategy. In this game-theoretical framework, the disfavored sibling does not attempt to conform to the expectations of the biased parent. The disadvantaged sibling opts to defect by rebelling against the rules and norms of the household. The recalcitrant sibling effectively defects concurrently from both the favored sibling and the biased parent; by defying the parent and taking a hostile stance against their sibling. However, both siblings could work together to create a more harmonious household. They could work together to evenly divide the chores around the house and stick up for one another when one parent is being too harsh on the other sibling. Instead of allowing the chaos of competition to fray the relationship of the family members. 

Prisoner’s Dilemmas- VII: Hoarding

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The event of toilet paper shortages of March 2020 was our societal initiation into the peculiar COVID-19 era. Now that we are currently facing global supply-chain shortages, people are once again starting to engage in hoarding behavior. The attempt to accumulate scarce goods when confronted with shortages is an understandable response. However, is it a good strategy? From a superficial standpoint, hoarding seems like an optimal strategy, especially when assessing the present market conditions. But being fixated on the current supply shortages does not take into account downstream consequences of hoarding behavior. Whether it is the toilet paper shortages of 2020 or the current supply shortages of 2021, all supply shortages present us with a Prisoner’s Dilemma. This observation is most likely true of all supply shortages past, present, and future.

By definition, a Prisoner’s Dilemma is a situation where players (in this scenario shoppers) believe it is in their best interest to adopt noncooperative strategies; but create suboptimal results. For example, consumer’s hoarding scare commodities can have the following consequences:

 1.) Consumers’ opting to hoard a scarce product will only exacerbate current shortages.

2.) The intensified stress placed on the supply chain from hoarding will be reflected in skyrocketing prices (absent any price control measures, e.g., price gouging laws).

3.)  Private firms may decide to place purchasing quotas on specific scarce goods.

4.)  The increased potential for violent interactions when attempting to obtain scare goods.

While many people may think buying every last roll of toilet paper is a good strategy, several potential ramifications suggest otherwise. Hoarding results in forms of strategic purchasing that pits shopper versus shopper. Consequentially, engenders many social and economic externalities.

The Intrapersonal Collective Action Problem- Submission Accepted by The Journal of Brief Ideas

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As economist Thomas Schelling astutely points out in his paper Egonomics or the Art of Self-Management (1978), people are often conflicted in their decision-making by current satisfaction and long-term goals. Since these goals are contrary, it is almost like two different people exist within the same person, the present and future version of ourselves. Both variants of the same person have stratified along a temporal chain of life events influencing the current decision-maker. The current version of ourselves can only anticipate but not fully know what our future self would prefer. We can only do the best we can to contend with potential future wants and current desires.

Since we are navigating the clashing wants and needs of our future versions of ourselves with our current self, this seems to resemble an intrapersonal collective action problem. Traditionally economists have viewed collective action problems in the context of political decision-making. An individual is vying between current wants and future goals; in their decision-making, there is a potential for both sets of objectives to be at odds. A person is then susceptible to be indecisive or making concessions that find a middle ground (intrapersonal logrolling) between current and future aspirations.

Clark, Peter. (2021). The Intrapersonal Collective Action Problem

The Economic Lessons From Trading Halloween Candy

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Economist Art Carden wrote a brilliant Halloween-themed essay for the American Institute for Economic Research. In Carden’s essay How Kids Create Wealth By Trading Halloween Candy; he details how voluntary trade makes all participants better off than they previously were. However, Carden uses an unorthodox example to demonstrate this point, children trading Halloween candy. As mundane as this simple example may seem, it serves as a powerful analogy defending unfettered trade. When we opt to exchange one commodity (most commonly money) for another product/service, we tend to value the commodity we are giving up less than the good we seek to obtain. This maxim implicitly validates the  Subjective Theory of value, first formulated during the Marginal Revolution in the 1870s. Children trading candy with their friends demonstrates far more than the subjective nature of value. It also indirectly dispels the flawed arguments of protections, bringing the old king’s gold fallacy to its knees in capitulation. The medium of exchange may intrinsically hold value, but this value rests in the goods and services that we can buy with it. A bar of gold may be valuable to us, however to man isolated on an island in a Robinson Crusoe-style model of autistic exchange (p.84) the gold bar is of little value. A man deserted on an isolated island has nothing to gain in trading the gold bar (no trading partners).  Clearly illustrates the fact that subjective worth of money exists in its utility for economic exchange. For a trick-or-treater who dislikes Twix candy bars, this variety of candy has no value as they would be more satisfied with  Reese’s Peanut Butter Cups. However, their friend who has the opposite candy preferences between the two types of chocolate candy would want a Twix over Reese’s cups. What both trick-or-treaters can do is trade their stock of Reese’s for Twix bars and vice versa. Similar to how we exchange with friendly nations that have a comparative advantage for goods that we desire. But stubbornly holding on to the candy that the trick-or-treats do not prefer is not doing them any favors. Much how forcing domestic production of goods the U.S. does not produce efficiently is economically inefficient and a waste of resources.

If trade isn’t an option, she’s simply stuck with a lot of candy she doesn’t want to eat. With access to a market consisting in this case of her brothers and friends, she can swap the caramel-containing candies she doesn’t want for non-caramel-containing candies she does. She is better off. Her trading partners are better off. There’s an important lesson here: by getting candy into the hands of those who value it most highly, the kids are creating wealth.

It’s a mistake to think that wealth consists of stuff. Wealth, rather, is whatever people value. For someone who likes Snickers bars, Snickers bars are wealth. For someone who doesn’t like Snickers bars, they aren’t wealth–unless they can be traded. If they can, the excess Snickers bars become wealth because they can then be swapped for something better.

https://www.aier.org/article/how-kids-create-wealth-by-trading-halloween-candy/

Editorial Graveyard- Part III: The Bootlegger and Baptists of Woke Capitalism

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Op-Ed submission was rejected by the Foundation For Economic Education for being too “abstract” and “academic”. The corresponding paper proposal for George Mason was also rejected. I am currently working on another proposal for GMU focused on intellectual property.

Introduction:

Bruce Yandle’s Bootlegger and Baptist (1983)  theory of regulation presents a practical explanation for why such unorthodox coalitions are effective vehicles for camouflaging rent-seeking behavior by a firm. In brief, armed with the public appeal of the moral arguments posited by the Baptists, the Bootleggers can quietly lurk in the shadows, funding initiatives that will advance their self-interest. In other words, the ethical advocates create a smokescreen that provides cover for the business interests, superficially obscuring the stigma of corporate advocacy, since few examples of political action invoke the ire of the average citizen than policy campaigns that line the pockets of big business.

           The trend of “woke capitalism”, however, is bringing the Bootleggers out of shadows and into plain sight. CEOs are now openly standing in unison with political activists, speaking out against topics ranging from police brutality to environmental issues. The Bootleggers can work openly with the Baptists to promote a positive image while still silently providing monetary support in the background. Moreover, the social justice messaging of “Woke Capitalism” extends beyond corporate activism and is observable in the product market and advertising. Some companies, for example, adopt marketing that emphasizes social consciousness to secure the business of Gen-Z. A clear example is Gillette’s 2019 advertising campaign addressing “toxic masculinity”. Typically, companies use this tactic to target younger consumers with higher preferences for ethical products and brand authenticity, requiring companies to go beyond philanthropy and mandating community services hours for their employees; their woke ethics are thereby conveyed in their branding.

The Four Main Categories of Woke Capitalistic Coalitions:

           The most recent alliances forged between business interests and political activists take the form of four main taxonomical categories. Some of the various types of Bootlegger and Baptist coalitions feature collaboration between firms and activists. Other coalition types  form within the technocratic structure of the corporation or emerge between different departments within the organization. Woke coalitions thus have several notable classifications of “woke” corporate alliances. Two further subcategories include proactive and reactive forms of rent-seeking.

Reactive Coalition Models:

           The reactive models for “woke” coalitions include two subtypes of collective action organization, the interaction between external actors and collaboration between internal employees. The first variety of reactive coalitions are rent-seeking alliances formed to restore the company from a sullied reputation caused by criticism, the objective being to mitigate the loss of sales and reputation amid public controversy. Some firms thus attempt to distance themselves from the controversy through their activistic partnerships. By way of example, Bank of America in the past was accused of engaging in “discriminatory” lending practices. To counteract this negative publicity, last year BOA pledged to donate $1 Billion over the next four years to community programs to address economic and racial inequality. Such an act of philanthropy can easily make the general public forget about the firm’s past indiscretions.

The second type of reactive “woke” coalitions are the intracompany factions designed to divert attention from potentially costly internal controversies. In instances of hostile work environment ligation, the legal team, the human resources department, and executive management band together to deescalate the publicity nightmare. Human Resources and management work together to legally distance the company from a harassment incident and shield executive management from more scrutiny and accountability. Legal navigates the statutory and tort concerns and works internally to establish an anti-harassment campaign intracompany. A prime example of an internal diversionary coalition was Vice media’s response to sexual harassment claims. After settling several cases, the company decided to form an advisory board to educate employees on diversity and proper workplace deportment. Even if such an initiative on the part of the human resources department failed to soften the bad publicity, at least it may decrease the probability of another incident.

Reactive Coalition Models:

Finally, the last two variants of “woke” coalitions aligning business interests with moral advocates to facilitate proactive forms of rent-seeking. Similarly, these proactive coalitions can be delineated into examples of internal and external collaboration models. Proactive partnerships form to capture potential gains and avert the costs of prospective controversies. The most salient example of such external cooperation would be firms standing behind a woke cause, anticipating that such an alliance will obscure the firm attempting to shape current regulation (regulatory capture).  A notable example was detailed in the Fall 2021 issue of Regulation magazine, which showed how providers of cloud computing services IBM and Oracle joined forces in 2017 to advocate for the passage of  the Stop Enabling Sex Traffickers Act (SESTA) and the Fight Online Sex Trafficking Act (FOSTA); effectively becoming bedfellows with various factions of human rights activists. Both laws intended to attribute liability to digit platforms for any user content that promotes sex trafficking. The article’s author Thomas A. Lambert speculates that IBM and Oracle could have done this with the hopes crafting potential exceptions to the platform liability portions of SESTA and FOSTA.

Additionally, we cannot forget the proactive inter-department coalitions that are emerging within corporations. For example, several companies are hiring diversity and inclusion “coaches” as a peripheral subset of human resources. The demand for this job role has become so prevalent that a number of colleges offer programs to become a certified “diversity practitioner”. The human resources department defends the existence of these staff members by emphasizing the need to educate employees to avoid instances of harassment and discrimination. The diversity coaches preach the virtues of cultural sensitivity and other tenants of the “woke” philosophy, thus producing a self-reinforcing spiral justifying further diversity initiatives.

Conclusion:

 Superficially, these alliances between big business and “woke” activists seem relatively benign, but in reality, these coalitions have profound consequences for the integrity of capitalism and the rule of law. The four types of woke B&B coalitions described above undermine capitalism and the rule of law because woke capitalism has made it easier than ever for business interests to create the façade of morality but are unjustly bending the rules-of-the game in their favor. Wokeism provides the veil obscuring corporate America’s hand in the legislative till. Generating more anti-competitive laws that undermine both the rule of law and free trade. 

The emphasis on firms getting involved with “woke” causes not only disguises crony capitalism and rent-seeking behavior, but also distracts companies from their primary custodial duty to their shareholders. As Nobel laureate Milton Friedman expresses in his own Friedman Doctrine , a firm has a duty to maximize its profits for its shareholders. After all, these individuals have invested in the company expecting a higher return. Without this financial support the firm could not achieve its current level of success. Diverting funds that could be used for investment in capital to increase productive efficiency for political activism is tantamount to theft.

The Paradox of Implicit Logrolling Has been Accepted by the Journal of Brief Ideas

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The process of Implicit Logrolling (Buchanan & Tullock,1962) is a form of indirect vote-trading that heavily relies on the bundling of wedge issues. By way of tying specific groupings of policies to attract targeted demographics of voters to a political platform. This political strategy is especially effective in capturing the commitment of single-issue voters. These voters need to tacitly accept the rest of the policies on the political platform to have their one area of interest acknowledged. This is why implicit logrolling is such an effective mechanism in shaping the American political landscape.

Most analysts ignore how voters reconcile selecting programs and political candidates that hold logically inconsistent views. For example, an individual that defends abortion rights on the grounds of a bodily integrity argument concurrently favoring vaccine mandates. Here is where the Paradox of Implicit Logrolling comes in; voters then must rationalize these discrepancies due to the lack of logical consistency. In vote trading, the individual voter expects to make some concessions. However, when these concessions present logical and philosophical contradictions, few people question the conflict. In short, the paradox describes how people are willing to accept contrary political positions if parceled with a party or policy they favor.

Clark, Peter. (2021). The Paradox of Implicit Logrolling. https://doi.org/10.5281/zenodo.5606090


Bootleggers & Baptists: XXXVII: Salmon in Alaska (The Fight Against GMO Food)

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Genetically modified food is a flashpoint in the public debate over the wholesomeness of the modern diet. Many speculate that consuming GMOs has been linked to several various health problems. Few people question whether there are any benefits to producing genetically modified food products. There is a bit of irony here since most anti-GMO activists also happen to be exponents of environmentalism. In certain situations, GMO food could feasibly be sustainable alternatives to dwindling supplies of natural food sources. One salient example is in the market for edible fish. 

The Fall 2021 issue of Regulation magazine details the struggle of AquAdvantage to obtain approval from the FDA for their edible genetically modified salmon. However, even after nearly 13 years of pending FDA approval, AquAdvantage still has other legal hurdles to clear, obstructing their entry into the market of consumable fish. This threat is coming from the political and business interests in the state of Alaska. Sen. Lisa Murkowski (R–AK) assuming the veneer of consumer production advocate; argues that consumers need to know what they are consuming. Murkowski:

“… attached a rider to the FY 2019 appropriations bill that required genetically engineered salmon approved before the labeling standards created by the U.S. Department of Agriculture’s National Bioengineered Food Disclosure Standard regulation to include the words “genetically engineered” in its market name — a requirement seemingly intended to spook consumers…” (P.3).

The “moral” concern expressed by Murkowski; creates a dynamic conducive to Bootlegger and Baptist’s (1983) coalitions. Murkowski can be considered a Baptist for articulating consumer protection concerns for the stringent labeling requirements. She also could arguably fall into the category of Duel-Role Actor if her consumer protection advocacy is sincere. After all, Murkowski is a politician and has an incentive to appease her constituency. Consumer protection advocacy is a win-win strategy. Since the average voter may superficially perceive this initiative as being in their best interest, of their health and safety, continue to vote for Murkowski. But arguably, the most more powerful voter-bloc she will need to win would be the salmon fisherman and hatcheries. The industry surrounding food-grade salmon production is estimated to generate $600 million annually in economic output. Making it quite evident who the Bootleggers are! However, placing restrictions on genetically modified salmon creates a bit of a Prisoners Dilemmaas the U.S. producers cannot meet domestic demand for salmon, 90 % of all salmon sold in America is imported.  

Op-Ed Published: Water District Rates Arizona

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Editor, Casa Grande Dispatch:

The Arizona Supreme Court has finally settled the controversy regarding the legality of setting uniform rates for consolidated water districts in the October 2021 ruling Sun City Home Owners Ass’n v. Arizona Corp. Commission. The Sun City HOA claimed that the setting of uniform rate was an act of discriminatory pricing, violating Article 15, Section 12 of the Arizona Constitution. After being compared to the other communities serviced by EPCOR for municipal water services, Sun City has historically had some of the lowest operational costs. Most municipalities experienced a decrease in rates, while Sun City was the exception. The increase in the price of water service offsetting the cost to other communities functions as cross-subsidy.

The state Supreme Court did not rule in favor of the HOA, but there are further ethical and economic concerns to evaluate. For one, the rate-setting power conferred by the state Constitution (Article 15, Section 3) to the ACC mirrors the congressionally allotted privilege of chevron deference at the federal level. This judicial doctrine does differ from the powers allocated in the Arizona Constitution; chevron provides judicial power to bureaucratic agencies; in contrast, the state permits quasi-legislative authority, a rule-making power that is inappropriate for a bureaucratic agency to wield. Hence why we have a legislature. Economic exchange determines prices (the law of supply and demand) and not the edicts of lawmakers or bureaucratic agencies. Town governments and EPCOR need to negotiate the rates, not state agencies.

Focal Points- Part IV: Truth, The Ultimate Focal Point!

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In-game theory, the concept of a focal point is a conceptual locus of convergence in the absence of pre-arranged communication. Generally, these mutually agreed-upon center points are culturally contingent. Although, there is one focal point that transcends culture and is arguably the ultimate point of unspoken convergence; that is truth. Some social commentators claim that truth is relative, quickly dispelling the argument that truth is a universal focal point. The facts are the facts. When something is axiomatically true, it is self-evident. To claim that truth is subjective is a puzzling assertion. We cannot simply deny the laws of mathematics, then suddenly, the rules governing the order of operations become invalid. The assumption of truth being subjective confuse methodology with results. Pluralism is valid so long as it reflects the truth. For example, there are multiple ways to solve an equation, but only one correct answer.

When people formulate rules, they must do so in a manner congruent with the immutable laws of the social and natural sciences. Otherwise, we will fall victim to the natural consequences of violating these eternal laws. Truth is such a magnetic focal point that it is inescapable. Sure, it is possible to contrive a convincing delusion, but while delusions may dissolve, the truth remains fixed. Regardless of whether we are truth-orientated immutable facts pull us in like the force of gravity bringing us back down to Earth. We can fight gravity; however, even when interpersonal communication is absent, any semi-rational person already knows that such resistance is inevitably futile.

Prisoner’s Dilemmas- VI: Job Interviews & Telling the Truth

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The game-theoretical concept of a “Prisoner’s Dilemma” applies to situations where no overt defection has occurred. Many readers may be perplexed by this assertion since, by definition, Prisoner’s Dilemmas entail “players” selecting uncooperative strategies. However, there are scenarios where the selection of a specific approach could lead to non-optimal outcomes. But such a strategy would not be considered a direct form of defection. These strategies are analogous to a defecting because the participating economic agents are moving away from a given focal point; rather than converging upon it. Even though the participants are not directly undercutting each other but inadvertently select noncooperative strategies. One salient example of this is any situation in which both parties choose to lie to the other. Both agents believe it is in their self-interest to obscure the truth, but doing so will only engender more problems.

A novel application of this theory would be in job interviews. Why? The hiring manager and the applicant concurrently have incentives to distort the facts. The prospective employee stands to benefit from embellishing their credentials. Likewise, the hiring manager might think it is shrewd to exaggerate or overemphasize the company culture when it is difficult to find a qualified candidate. When used in unison, the consequences are disastrous. The new employee will not be unqualified for the position and will also have unrealistic expectations for the job role. Ultimately, creating more issues for the hiring manager and the jobseeker. Telling a lie may not be a direct form of uncooperative behavior, can often yield similar results.

Bootleggers & Baptists: XXXVI- Woke Capitalism and Coalitions of Opportunity

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            The Bootlegger and Baptist (1983) theory of regulation present a practical explanation for why these such coalitions are effective vehicles for camouflaging rent-seeking behavior by a firm. Armed with the public appeal of the moral arguments posited by the Baptists, the Bootleggers can quietly lurk in the shadows, funding initiatives that will advance their self-interest. The ethical advocates create a smokescreen that provides cover for the business interests, superficially obscuring the stigma of corporate advocacy. Since few examples of political action invoke the ire of the average citizen than policy campaigns that line the pockets of big business.

           The trend of “woke capitalism” is bringing the Bootleggers out of shadows and into plain sight. CEOs are now openly standing in unison with political activists speaking out against topics ranging from police brutality to environmental issues. The Bootleggers can work openly with the Baptists to promote a positive image while still silently providing monetary support in the background. The social justice messaging of “Woke Capitalism” extends beyond corporate activism and is observable in the product market and advertising. Some companies adopt marketing that emphasizes social consciousness to secure the business of Gen-Z. Typically, companies use this tactic to target younger consumers with higher preferences for ethical products and brand authenticity, requiring companies to go beyond philanthropy and mandating community services hours for their employees; their ethics almost be conveyed in their branding.

           The most recent alliances forged between business interests and political activists take the form of four main taxonomical categories. Some of the various types of Bootlegger and Baptist coalitions feature collaboration between firms and activists. Other coalition types that form within the technocratic structure of the corporation; are between different departments within the organization. Woke coalitions have several notable classifications of “woke” corporate alliances. The main subcategories include proactive and reactive forms of rent-seeking.

           The reactive models for “woke” coalitions include two subtypes of collective action organization, the interaction between external actors and collaboration between internal employees. The first variety of reactive coalitions are rent-seeking alliances formed to restore the company from a sullied reputation caused by criticism. The objective being to mitigate the loss of sales and social currency amid public controversy. Some firms directly attempt to distance themselves from the controversy through their activistic partnerships. The second type of reactive “woke” coalitions are the intracompany factions designed to divert attention from potentially costly internal controversies. In instances of hostile work environment ligation, the legal team, the human resources department, and executive management band together to avoid a publicity nightmare. Human Resources and legal work together to legally distance the company from a harassment incident. Legal working on navigating the statutory and tort concerns while HR works internally to establish an anti-harassment campaign intracompany. All the while shielding executive management from more scrutiny and accountability.

           Finally, the last two variants of “woke” coalitions aligning business interests with moral advocates to facilitate proactive forms of rent-seeking. Similarly, the proactive coalitions can be delineated into examples of internal and external collaboration. Proactive partnerships form to capture potential gains and avert the costs of prospective controversies. The most salient example of such external cooperation would be firms standing behind a woke cause, anticipating that such an alliance will obscure the firm attempting to shape current regulation (regulatory capture). However, we cannot forget the proactive inter-department coalitions that are emerging within corporations. For example, several companies are hiring diversity and inclusion “coaches” as a peripheral subset of human resources. The human resources department defends the existence of these staff members by emphasizing the need to educate employees to avoid instances of harassment and discrimination. The diversity coaches preach the virtues of cultural sensitivity and other tenants of the “woke” philosophy.

           Superficially these alliances between big business and “woke” activists seem relatively benign. However, there are profound consequences for the integrity of capitalism and the rule of law. This paper will demonstrate how the four types of woke B&B coalitions undermine capitalism and the rule of law. Woke capitalism has made it easier than ever for business interests to create the façade of morality but are unjustly bending the rules-of-the game in their favor. Wokeism provides the veil obscuring corporate America’s hand in the legislative till. In effect, generating more anti-competitive laws that undermine both the rule of law and free trade. 

Bootleggers & Baptists-XXXV: Multiple Listing Services & Real Estate

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It is well known that trade associations and related organizations have an anticompetitive effect on the market. One salient example of such consequences is American Real estate. Per Vol. 44, Issue 2 of Regulation Magazine, the rules favored trade association, National Association of Realtors (NAR), has created an implicit tying-agreement. The NAR established the networks known as Multiple Listing Services which home listing with a NAR-affiliated realty agent are posted (p.28). Frequently potential homebuyers are persuaded to avoid purchasing homes listed outside of the MLS network, referred to as For-Sale-By-Owner (FSBO), in a practice known as steering (p.28, 30). In such a system, the commission for the broker is not only predetermined but also “… the listening agent must make a blanket-unilateral offer in advance to pay the buyer’s broker’s fee… despite not having information on the services provided…” (p.30). It should be noted that tying agreements are often scrutinized by the U.S government (see the USA v. Microsoft Corp, No. 97-5343 (D.C. Cir. 1998)).

As another variant of anticompetitive market behavior, there are generally moral arguments for supporting the measure. This means that advocacy for maintaining this system is subject to Bootlegger and Baptist’s (1983) dynamics. Concurrently, while some argue that the MLS system from a consumer interest standpoint inevitably NAR realtors are the ones that benefit. Our Bootleggers realtors profit handsomely. Not only does this practice allow the buying brokers from having to negotiate fees, but American realtors are paid “… two to three times higher than in other developed nations..” (p.30). Effectively operating as a transfer of wealth from the consumer to the service provider (p.30). However, some realty companies such as Clever Real Estate assume as a Dual-Role Actor. Such a firm is a beneficiary of the current trade practices; they also argue that the MLS system is more convenient for sellers to expediently sell their homes

Bootleggers & Baptists: XXXIV: The Supervisor Spot at Work

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Everyone is familiar with the concept of soft power in office politics. An individual lacking any formal authority but has the ear of management. The author of this brief essay has found himself in this peculiar situation. While I may have a relatively meager position at our company, my manager still seriously regards my input. If I have a concern, he is quick to find a remedy. The evidence of my implicit influence became evident when my boss was looking to fill a supervisor spot for our team. After a candid off-hand conversation, I expressed my preferred co-worker for the position. Then was subsequently told, “I like your logic”. Fast forward two weeks later, my preferred candidate was announced to be the new supervisor. 

It is possible I misconstrued the events that transpired in the supervisor selection process. My perception of having any influence over my manager’s decision could merely be a delusional illusion. Irrespective of my impact on this decision, this was a clear Bootlegger and Baptist (1983)  dynamic. At this point, it should be evident who the Bootlegger and who the Baptist is. My manager possessing the moral advocacy for the favorable candidate for the supervisor makes the Baptist. He seeks to hire an individual with the best potential for success within the position, the most qualified person. I hate to admit it; I was more motivated by self-interest. I am the salient Bootlegger in this coalition. I based my advocacy on wanting a supervisor that would not micromanage me. I had little concern for the candidate’s qualifications.

Suicide as a Natural Right -Part IV (a): Social Capital

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Following Dr. Block’s supposition that a person can commodify themselves and effectively sell or alienate themselves (p.6), we must address the issue of capital destruction. The economic costs go beyond losses in productivity but also have more subtle ramifications throughout the economy. The act of suicide destroys a person’s body; however, the intangible assets lost are arguably the most detrimental. Most notably, in the form of squandered human capital and social capital. While these forms of social capital are refutably mere constructs, they still seem to possess a priceless qualitative value. In the absence of the knowledge, credentials, and necessary social networks financial success is not possible. 

Commodifying these abstract concepts applies them to John Locke’s postulations regarding wasting resources (p.12). But if the value of commodities is subjective, we have to evaluate Locke’s assumptions regarding frivolous resource consumption. Furthermore, if we accept this notion of wasteful consumption, we must apply it to other areas of resource allocation. For example, investing too in production can be considered a wasteful form of resource allocation. Under Locke’s theory, if extrapolated, we should bar entrepreneurs from making overinvestments in their firms. Not only would such a law be unenforceable, but it also suffers from the Hayekian Pretense of Knowledge. Neither the businessman nor the lawmaker has access to perfect information. How would the lawmaker even know if a business owner engaged in malinvestment until the downstream effects have come to full fruition, paralleling the flaws of proactive legal sanctions? Entrepreneurial decision-making is enveloped in uncertainty. To quote the great Frank H.Knight:

It will appear that a measurable uncertainty, or “risk” proper, as we shall use the term, is so far different from an unmeasurable one that it is not in effect an uncertainty at all. We shall accordingly restrict the term “uncertainty” to cases of the non-quantitative type. It is this “true” uncertainty, and not risk, as has been argued, which forms the basis of a valid theory of profit and accounts for the divergence between actual and theoretical competition. (p.84)

To preemptively declare a form of capital use or manipulation as “…wasteful..” is fallacious. At best, we can attempt to use market signals as a guide for appropriately deploying capital. Whether an investment was prudent or foolish will only be known once the downstream consequences are evident. In this respect suicide is just a form of managing the “… social..” capital structure through the informal destruction (p.21) of such social assets. Allowing people to dispose of capital at their own free will allows for the unfettered restructuring [1] of productive activities utilizing human and social capital. Allowing the substitution or destruction of “..social..” inputs. 

Foot Notes:

  1. A reference to the Austrian Theory of Capital

Suicide as a Natural Right- Part III: The Externalities Argument

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Part I:

Part II:

Most legally mandated suicide prevention measures fixate on its impact on society. An individual assuming an externalities defense of the involuntary hospitalization of those with suicidal tendencies falls prey to a fallacy that all prohibitions of vices are subject to operating as a preemptive measure. Prompting the question, what is the committed offense outside of the state statutory code? What most Libertarians would refer to as victimless crimes. Enforcement of victimless crimes does not remedy the loss of property or harm to any non-consenting third parties. Rather, such laws have the unfortunate propensity of conflating potential consequences with actual damage done. Most arguments for maintaining the federal ban on illicit drugs emphasize prospective ramifications versus actual outcomes. Even drunk driving laws fail to meet the criteria for a violation of our private property rights. Operating a motor vehicle while intoxicated only increases the odds of bodily harm and destruction of property, but it does not guarantee this consequence. 

US civil law no longer recognizes personal suicide attempts as a criminal offense. However, the criminality of physician-assisted suicide varies radically by state. Suicide is no longer a crime. Suicide prevention laws are completely constructionist inventions. More importantly, it also fails to fulfill the criterion for violating another person’s natural rights. Arizona has an involuntary commitment law codified under Title 36 of Arizona Revised Statutes. If there is no crime committed, can detention be perceived as lawful?

Such fits the definition legally sanctioned form of kidnapping. The basis of the logic of the Fourth and Fourteenth Amendments provides fodder. If it were not for Title 36, it would be considered unlawful confinement. The only rational inference is that these mandates are the illegitimate byproduct of legal positivism. The standpoint drove by a “moral” concern for potential externalities. Codifying morality is never a justifiable reason for exercising the authority of governing institutions!