Prisoner’s Dilemmas-XXIII- Quiet Quitting

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By now, most of you are aware of the new workplace phenomenon known as Quiet Quitting. Forbes defines Quite Quitting as “..unsatisfied employees put forth the least amount of effort possible to keep their paychecks…”. Most employees might think they are clever for only doing the bare minimum, but managers have their strategy for handling underperforming employees; Dehiring. Instead of outright firing the troublesome employee, management directly acknowledges their dissatisfaction with the job role. The hope is that this might prompt them to find another job.

Dehiring has been described as a win-win scenario because it acknowledges the mutual frustration of the worker and the firm. Side-stepping the legal and psychological hurdles of navigating the labor laws governing terminating a subpar employee. However, what if either employee isn’t getting the hint? Managers tend to be ineffective due to poor communication skills, which could muddle the succinct message of “Please find a new job!”. If there is any breakdown in the messaging, both worker and their boss; will result in a Prisoner’s Dilemma. The ineffectual expression of shared frustration will make this process protracted and end in an actual firing.

The reward for Mutual Cooperation: R= .5

Either the employee or manager could hope; if they play hardball, the other will eventually fold. The manager ultimately hopes the employee will change their ways, it is always easier and cheaper to have a current employee change their attitude than find a new hire. Concurrently, worker wishes that rules will loosen up, higher pay, or lighter workload, banking on the fact that their boss “needs” them.

Both parties holding these zero-sum strategies are being obtuse; neither outcome is realistic. The best approach would be for each coalition in this game (company/management vs. unhappy worker) to directly and honestly express their concerns. Not only would this path be more efficient, but if the manager is faithful to the etiquette of dehiring, the problematic employee should have time to find a new job. 

·     Punishment for Defecting: P=0

It would be improbable to have a central authority that can definitively prove and punish either the manager or the worker for using passive-aggressive or unclear communication. Since this is a game-theoretical model, for the sake of simplicity, let us assign the punishment value at zero.

·     Temptation to Defect: T=1

As mentioned previously, it is tempting to adopt the longshot strategy; after all, either coalition gets all their preferred conditions met; with exerting the least effort possible. It is easy to view ambiguity as an excuse to hold out for a no-compromise solution. 

·     Sucker’s Payoff: S=-1

In a no-compromise strategy, it has win-take-all dynamics. The costs of buckling for either coalition are high. Arguably, the monetary costs are much higher for the firm, but the subjective evaluation of the worker’s disutility of conforming to their boss’s parameters would be difficult to measure. 

Condition 1:

· T>R>P>S

· 1> .5> 0 > -1

Condition 2:

· (T+S)/2<R

· (1+-1)/2 <.5

· (0)/2 <.5

· 0 < .5

Overall, it appears as if the Quiet Quitting controversy, sloppy communication combined with employees and employers giving into their desire to be lazy and have all their preferences met engenders a Prisoner’s Dilemma. 

Bootleggers & Baptists: LXI- SBF and the Fall of FTX

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Sam Bankman-Fried, the founder of the cryptocurrency exchange FTX, once masqueraded as the regulation-friendly face of the crypto markets. SBF was known for his openness to regulation and willingness to work with lawmakers; he not only wanted to graciously assist our elected officials in Washington with guiding policy but was also “socially conscious”. Sam was a vocal proponent of effective altruism and possessed a Benthamite concern for maximizing social benefits to help the most people. This wunderkind 30-year-old was too good to be true

Whether it was Bankman-Fried donating large sums of money to the Democratic party (the purported political advocate for the economically disadvantaged) or his views on veganism and charity, it was all a façade, a thin veneer masking his actual conduct. Per Reuters:

“… The turmoil at FTX has seen at least $1 billion of customer funds vanish from the platform, sources told Reuters on Friday. Bankman-Fried had transferred $10 billion of customer funds to his trading company, Alameda Research, the sources said.

New problems emerged on Saturday when FTX’s U.S. general counsel Ryne Miller said in a Twitter post that the firm’s digital assets were being moved into so-called cold storage “to mitigate damage upon observing unauthorized transactions.”

Cold storage refers to crypto wallets that are not connected to the internet to guard against hackers…”

As investors fled the platform and Binance pulled the plug on bailing out FTX, it is clear that SBF misrepresented the financial health of the exchange and its business practices. All of these developments are reminiscent of the Enron scandal. A corporation rubbing elbows with congress to engage in regulatory capture and foster a positive public image. While concurrently; creating a smoke screen obscuring the company’s off-color conduct.

The economist Bruce Yandle’s theory of Bootleggers and Baptist (1983) coalitions perfectly describes the Machiavellian tactics utilized by Mr. Bankman-Fried. After all, perception is what matters. If investors were not distracted by his social advocacy and success, they might have spotted the red flags. As observed by Yandle, there is often a demand for regulation. Often from parties that prima facie would oppose such measures (p.13). Why? This gives industry elites the to help shape rules that will benefit their bottom line and yield good publicity. Frequently, these scenarios are win-win for the firms involved. SBF proposed a licensing system for Defi (decentralized financial technology); per Erik Vorhees

“..self-enforced rules and blacklists would only serve established exchanges that could afford to pay for compliance…”

SBF simultaneously worked to craft regulation that FTX would benefit from while appearing to share some of the concerns of crypto-phobic politicians like Elizabeth Warren. Progressive politicians are the Baptists in this scenario. SBF’s arrogance ended up being his own Achilles Heel, ultimately revealing his true colors, those of a covert Bootlegger (p.190). 

Bootleggers & Baptists: LX- Arizona Senate Race

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In recent Arizona election news, Libertarian senate candidate Marc Victor has withdrawn from the race and openly endorsed Republican Blake Masters. Much like other circumstances in politics, there is a moralizing rationale for Victor’s capitulation and an obvious beneficiary of his exiting the race. There is Bootlegger and Baptists (1983) dynamic in this development in the Arizona mid-term election.

Victor left the race and lent his support to Master to avoid a spoiler effect; a phenomenon where third-party siphons off votes from a major party candidate. This is an enduring problem for Arizona Republicans for a while, hence the passage of HB 2608 (2015). This has only been exacerbated; by the fact that the Democratic party made numerous donations to Marc Victor’s campaign. By any metric, Victor calling it quits to avoid a spoiler effect has the normative underpinning of moralistic reasoning [1].; he is a Baptist in this scenario.

The Bootlegger in this situation is indisputably clear, Blake Masters. One less candidate in the race means more votes for Blake. Masters has been after the Libertarian vote before Victor even dropped out of the race. He has been dog-whistling and pandering to certain Libertarian sensibilities that are still congruent with the new strain of right-wing populism (no one will accuse him of being soft for wanting to “End the Fed”). Even leaning on his ties to the Ron Paul movement back in college. His strategy to capture the voters of a right-wing leaning third-party is a shrewd move on his part; if the polls are accurate, this will be a tight race. Per Five-Thirty-Eight, Mark Kelly currently holds a meager lead over Masters, Kelly polling in at 48.4 % and Masters trailing behind at 46.8%.

Notes:

  1. Victor may have been concerned about the effect of his third-party campaign on the election results, he may only be a superficial Baptist. Why? Per Reason, Victor did receive threats from supporters of his opposition. This fact cannot be dispensed with when evaluating his decision to exit the Arizona senate race.

2. Data source Five-Thirty-Eight. Figure A.

3. Figure B. data was processed in Microsoft Excel.

Figure A

Figure B

Contra-Populism: Part III

Do not let the hollow promises of populist ideology fool you! Populism of the right or left is antithetical to the individual liberty cherished in Classical Liberalism and Libertarian philosophy. For one, populism frames policy in collectivistic terms rather than individualism. Populism tends to advocate for policies that support Positive rights (a right to an economic good, e.g. Social Security) over Negative rights to protect the individual from interference with exercising their rights (free speech). Much of what populists advocate for is the retribution of wealth and market privilege instead of individual freedom. Policies such as Single-Payer Healthcare and tariffs impose costs on all voters. This is because populism holds the interests of the group; without unanimous consent. Sure, by choosing to live within a certain jurisdiction you may be tacitly consenting to the laws. However, the rise in populism has spurred an increased demand for state intervention to provide more economic privileges. The problem is that the preferences of the “average voter” cannot be known, as every voter has their own opinions and preferences (p.20). Ordinary voters are not unitary actor, but many individuals with different political proclivities; populism assumes too much about what is best for all of society (p.16).

It is not just the threat of majoritarian tyranny that makes populism perilous to liberty, but populism also requires conferring more authority to the state. This may seem ironic with all the “drain the swamp” rhetoric of the Trump presidency. Even in applying rudimentary logic, more collectivism requires a more centralized authority to be enforced and implemented. The unified will of the people is not recognizable; it takes the personified form of a “strongman” leader embodying the general will (p.20). They generally shift towards autocratic regimes (p.20) since implementing and justifying factually flawed and illiberal policies necessitates large sums of political authority. Beyond the threats of authoritarianism, the elites still benefit from waves of populism. The elites can hide behind the fluid nature of populism and allow majoritarian sentiment to shape crony policies that benefit narrow interests (p.171-172). For example, the supervillain of retail Walmart’s (not the author’s opinion, but a commonly held belief)CEO publicly stated the minimum wage was too low. Raising the minimum wage has been a longstanding talking point of the populist left. In true Bootlegger and Baptist (1983) fashion, Walmart stands to gain. Why? Because a higher minimum wage means more automation and fewer salaries. The bonus is that not only will the firm gain monetary from saving money while maintaining the veneer of having concern for those in the lower income brackets. 

Contra-Populism- Part II

The best explanation for the recent tide of populist sentiment is the self-propelling dynamics of the social desirability bias and irrational rationality. The social desirability bias in psychology is when survey participants shape their responses to make themselves look better. Elected leaders portraying themselves as champions of the people can conform their campaign promises to what makes them more appealing to voters. As candidates that consistently miss the mark on the opinions of their voters don’t stay in office long(p.21)! Even middle-of-the-road elected officials drift away from the median to keep their heads above water in political waves of populism (p.4). The unmoored and amorphous qualities of populism; make it flexible to the changing tastes of the public. The malleable nature of populism makes a “thin ideology” (p.171) that political opportunists can easily manipulate. By definition, a populist candidate must pander to the interests of regular people, regardless of how detrimental the consequences are. Hence, populist candidates typically support raising the minimum wage and import tariffs; superficially, these policies sound beneficial. There is ample evidence that both suggestions do more harm than good. Most of the “majoritarian” solutions to economic issues are predicated on emotional appeals rather than solid facts.

Professor Bryan Caplan’s Rational Irrationality not only dovetails today the social desirability bias in populist politics but forms a symbiotic mechanism for perpetuating these policies. Rational Irrationality is when voters have intense biases and disregard evidence contrary to their strong beliefs. The reason for illogical rationalization is that as long as the individual costs are low (per Alex Tabarrok political decision-making lowers the individual costs of policy). Caplan surmises that there is a demand for irrationality in the political process (p.7), as the voter will barely notice the costs of the policies they favor, providing clarity on why we people support bad policies. However, this can cause voters to adopt disastrous policies (p.152). Through tailoring attractive policies that lean into the concerns and biases of the typical voter, populist candidates can win the approval of their prospective constituents, generating a synergistic feedback loop of detrimental interventionism in the economy and other spheres of life. 

The Confusion Between IP and IP Laws

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Intellectual property is a valid form of property rights; however, most of the flaws are not with the inherent claims to ownership of the intangible property; but rather the laws allocating these rights. The duration and definitions of what constitutes IP rights can seem arbitrary (p.25). All because the Copyright Act of 1976 mandates the peculiar terms as being:

  • “…For works made for hire and anonymous and pseudonymous works, the duration of copyright is 95 years from first publication or 120 years from creation, whichever is shorter (unless the author’s identity is later revealed in Copyright Office records, in which case the term becomes the author’s life plus 70 years) (p.1)…”

This exercise in line drawing is riddled with flaws and subject to the capricious whims of invested interests (the rent-seeking behavior of Disney). Conversely, it is inane to suggest that because the property is not tangible, therefore; we cannot own it because the property lines are not clearly defined (p.2). If IP is non-rivalrous it would be considered a public good (p.534). This is ironic since many Libertarian critics are hostile towards IP  and also reject the notion of public goods. Even intangible property is rivalrous and excludable. The confusion is that consumption intangible property is not rivalrous, but the ability to profit from IP is. The first entrant into a new market will be the one to reap the most benefit from the innovative product, service, or process. Consumers will generally see anything afterward as a cheap imitation (unless they can drastically improve the product). 

The above statement should not be confused as an appeal to legislative fiat or other state measures to resolve this conundrum. But it is foolish to pretend that IP is analogous to a public good. We can alienate it (in the Lockean sense) through tacit acknowledgment of the first of the idea, patentable process, trademark, etc. Paralleling the first use provisions implied in the prior appropriation water rights regimes in the western United States. The first to put the concept to practical use could claim ownership. Admittedly, the transaction costs of such an informal system would be high. In other words, the government needs to clarify IP rights? Maybe. Hypothetically, producers could eliminate ambiguity through user contracts and licensing agreements (disputes which can be adjudicated in a private or polycentric legal system).

Prisoner’s Dilemmas: XXII- Anti-Discrimination Laws

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Professor Bryan Caplan makes some impressive observations in his 2020 essay The Anti-Jerk Law. Caplan uses the hypothetical example of an Anti-Jerk law to emphasize the fallacies of anti-discrimination laws. At their core, both the fabricated example of the Anti-Jerk law and current discrimination laws suffer from numerous flaws. Instances of discrimination are not clear-cut, much like how your boss is a jerk is subject to interpretation. But if juries are predisposed to sympathize with instances of discrimination or the censure of a mean boss, this may “… lower the de facto burden of proof…” in ligation cases. More importantly, firms might be less apt to hire individuals that can make discrimination claims. Resulting in more indirect discrimination, creating a cobra effect. Laws and policies; designed to reduce discrimination, increasing discrimination.

Effectively, anti-discrimination laws are prone to create Prisoner’s Dilemmas. Why? Employers and Employees(ethnic minorities, religious minorities, transgender people, homosexuals, women) are predisposed to work against one another. Firms are ligation adverse and seek to avoid lawsuits costs and bad publicity. On the other hand, minority employees (emboldened by anti-discrimination regulations) have laws incentivizing them to pursue maximum damages for any perceived incident of discrimination. It is evident that both incentive structures are at odds and will cause both parties to choose to defect (using the vernacular of game theory) rather than cooperate.

The Calculations:

The above scenario is a zero-sum game; due to neither party wanting to compromise and the perception of winner-take-all dynamics. To numerically determine that this scenario is a Prisoner’s Dilemma, we must validate that the situation satisfies the two conditions expressed by Nordstrom; 1.) T>R>P>S and 2.) (T+S)/2<R.

Defining The Variable:

· Reward For Mutual Cooperation: R =.5

The value of .5 has been assigned for the gains of cooperation because the values expressed are predicated on a significant potential stance of discrimination ligation. The firm could take a chance on a risky employee and an employee could tolerate mild forms of discrimination (insensitive jokes, run-of-the-mill micro-aggressions) and not sue. Functioning as an archetypal compromise, neither party is pleased with the arrangement but still better than non-cooperation. 

· Punishment for Defection: P =0

There is little to no proper punishment for defection. For the hiring company, it is difficult/ nearly impossible to prove that they choose the 20-something, recent college graduate, male over a riskier job application (from an anti-discrimination standpoint). There is virtually no actual punishment despite the formal parameters of discrimination laws. For the employee, since the social norms are aligned with anti-discrimination legislation, the social costs for suing are low (but there might be monetary costs associated with legal action which are difficult to quantify. 

· Temptation to Defection: T=1

The firm has a lot to lose by hiring an employee with a high probability of suing them; the employee has a lot to gain in situations of discrimination.

· Sucker’s Payoff: S=-1

Both parties can lose a lot if the other does not compromise. 

Condition 1:

· T>R>P>S

· 1> .5> 0 > -1

Condition 2:

· (T+S)/2<R

· (1+-1)/2 <.5

· (0)/2 <.5

· 0 < .5

Prima facie, it does seem as if numerically and qualitatively that anti-discrimination laws are inclined to create Prisoner’s Dilemmas.

Government Law Evolved From Extortion?

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Why did humans make the transition from customary law to formal statutory law? There is an exhaustive body of literature examining this issue, but in his paper Economic Freedom and the Evolution of Law (1998)Bruce L. Benson provides some intriguing insights. Benson tackles this question from a Hayekian perspective, asserting that modern legal institutions are the byproduct of social evolution.

The paper presents the gradual shift as the byproduct of “entrepreneurship”; individuals with leadership qualities were able to persuade a group of people to adhere to their governance. What makes this persuasion credible, especially in the absence of a state? Benson suggests that such a leader or political faction would have a comparative advantage in violence (p.219). Audaciously, detailing how the development of formal law has its roots in extortion. In these primordial legal regimes, those who acted as law enforcement officers were those who lacked entrepreneurial/leadership skills but had an advantage when it came to violence (p.220). In effect, operating as a legal application of the division of labor.

Any astute observer will also recognize there is a stark difference between voluntary acceptance of such leadership and when imposed by force. One problem with having a high concentration of authority monopolizing the capacity for violence is that such an institution is hard to disrupt. Even more concerning are the perverse incentives that arise due to the desire to retain this authority. The contribution of tributes or taxes from those seeking protection may create reasons for the leader and their law enforcement officials to engage in rent-seeking behavior to keep their monopoly in place. (p.222). Bring a great degree of clarity to why Benson categorizes this arrangement as a form of extortion.

Focal Points V: Popular Culture

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Futurist and businessman Peter Schwartz in his book The Art of the Long View (1991,1996) suggests that firms should attempt to navigate uncertainty by constructing possible scenarios depicting the best- and worst-case scenarios for the business. Schwartz’s proactive and unorthodox approach to business suggests that we accumulate market information from an array of various sources to formulate a model that has the greatest degree of acuity possible.

One unlikely taproot for market information and patterns per Schwartz is popular culture. From Long View:

“… You may think popular music affects only kids. But those kids are all over the planet, and the effects last their entire lives. I once went to a Paul McCarthy concert that was, in effect, one big Beatles sing-along with people in their forties. The psychedelic mindset of “Lucy in the Sky with Diamonds”, and the delicious view of the world in “Here Comes the Sun” deeply affected the culture.

Today, I pay attention to rap music and world music –­ the fusion of ethnic threads from all over the equatorial world. I don’t think that business people will have to start putting “rap-speak” into their employment applications, but rap music will dramatically affect business nevertheless. These are not love songs; they are songs of anger. That rage begins to surface, with some still unknown racial event as the final trigger. ( This book was written several years before the Rodney King riots in L.A. that gave expression to that anger)….”

It seems as if Schwartz may have inadvertently stumbled upon a focal point or Schelling Point when he justifies utilizing contemporary culture as a potential bridge for the information asymmetries in consumer markets. Pop culture is a point of convergence for us all, whether for productive uses or purely entertainment. Being ignorant of pop culture can impact your social life; celebrity culture, sports, current music, and obscure references from popular movies; dominates topical conversations among Americans. It even has a hand in shaping circumstances in domestic politics. This statement is substantiated by the shrewd observation made by Andrew Breitbart: “Politics is downstream from culture”. It might be worthwhile to be aware of the newest pop culture trends.

Prisoner’s Dilemmas XXI: (Part A): The Fiasco on the Vineyard

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The Martha’s Vineyard Immigrant debacle encapsulates the hideous nature of contemporary politics. It is a saga that depicts partisanship, hypocrisy, and lack of concern for effective policy. Both conservatives and the quixotic-minded and progressive residents of Martha’s Vineyard are responsible for this situation.

The controversy began when Republican Governor Ron DeSantis (using tax dollarsflew 50 migrants to the left-leaning tourist island of Martha’s Vineyard. The coordinator of the island’s homeless shelter has publicly expressed that their facility does not have the resources to provide services for the new arrivals. Even stating that the influx of migrants will exacerbate the current housing crisis. Economist Tyler Cowen addresses the scarcity of affordable housing on the island in his latest OP-ED piece:

“…Real estate is very expensive. And the island is strictly zoned, making it hard to build a lot of dense, low-cost housing…

Wages there are below the Massachusetts average, and living expenses are prohibitively expensive. Those realities stem from decisions about land use made by the island’s population. (I am OK with such community-supported zoning restrictions when they apply to very limited local areas, such as Martha’s Vineyard, and there are many options to look elsewhere. The problem arises when they start infesting a larger part of the U.S., as they have.)..”

Stringent zoning ordinances and below-average wages are a recipe for a housing crisis. In 2012, the average home was valued at “..$535,000 but average Islander could afford only $310,000..”.The cost of housing is prohibitive even for U.S. citizens residing on the island, never mind impoverished immigrants looking for better opportunities.

It is difficult to refute that this situation fits within the definition of a Prisoner’s Dilemma because two defecting coalitions made the scenario worse by not compromising. If anything, this occurrence might be a multifaceted Prisoner’s Dilemma; DeSantis owning the Libs isn’t the only game contributing to Martha’s Vineyard fiasco. The progressive islanders have conflicting desires politically, they effectively have had an intra-temporal Prisoner’s Dilemma with themselves. This is where Tyler Cowen’s observation, but the community’s hypocrisy regarding income inequality, comes into play. Because the island’s residents vocally support progressive policies in the name of economic justice. But concurrently, favor zoning ordinances that restrict the supply of homes and artificially inflate the cost of housing.

The model for Validating the Intra-institutional Prisoner’s Dilemma

Applying the model used by Nordstrom to validate Prisoner’s Dilemmas:

Condition 1:

The temptation to Defect (2= Signifies implementing both favorable zoning and left-wing economic policies)> Reward for Cooperation (1= The island recognizes the opportunity cost and amends its zoning laws; only one of the preferred policies is implemented)> Punishment For Defection (0= The majority of residents do not see that both policies cancel each other out)> Sucker’s Payoff (-1= The costs of creating political division by not favoring both varieties of policies).

T(2)> R(1)> P(0)> S(-1).

Condition 2:

(T+S)/2<R

(2+-1)/2 <1 ; (1)/2<1; .5 < 1

Even though the Fiasco on The Vineyard does numerically match the two conditions for a prisoner’s dilemma, this application of the PD incentives dynamic was creative. Game Theory purists might claim that it is erroneous to apply this lens so abstractly. However, the attributes of this intra-coalitional game do look like a cooperative game superficially. But the fact that local government and the constituents are attempting to balance conflicting interests. This situation may even validate Peter Clark’s Paradox of Implicit Logrolling (2021); however, there may be other factors at play. Per the public choice literature on rational ignorance, voters still select policies and elected officials even though they face severe information asymmetries. 

The DeSantis versus Martha’s Vineyard game will be reviewed in part B.