Bootleggers & Baptists: LII- Pro-Gun and Pro-Roe Actvists Form a Coalition

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The Dobbs draft leak has seemingly added more fuel to the abortion debate over the past week. The real point of contention stilting the embers of the current renaissance in the commentary on Roe v. Wade was the passage of the Texas Heartbeat Bill (Senate Bill 8) last year. The state legislature passed a law that would effectively operate as an informal ban that skirts judicial review; since enforcement was being handled through the deputization of private citizens. Senate Bill 8 is a spectacle of legislative ingenuity; even knowledgeable detractors must admit this point. The design of the Bill is particularly pernicious and could be manipulated for partisan retaliation. For example, last year, California Governor Gavin Newsom talked of engineering his variant of SB 8 tailored to target ghost guns and semi-automatic rifles. The only thing gun owners have going for them in defense against such an action is that the Second Amendment is an enumerated right, meaning they do not need to only rely on stare decisis.

An unlikely coalition formed in 2021 to combat the passage of Senate Bill 8. The kind of coincidental political union that only further justifies the utility of Bruce Yandle’s concept of Bootlegger and Baptist (1983) coalitions. The California-based Firearms Policy Coalition joined the Texas pro-choice faction to oppose the legislation. Even going so far as to author an amicus brief critical of SB 8. Per Statista, of the Republicans, polled 50% owned a gun; 61% lived with a gun owner. Odds are, members of the Firearms Policy Coalitions are right-wingers that would not typically work with the pro-Roe camp. The flawed structure, logic, and versatility of SB 8 could put gun rights in jeopardy. Who would be the Bootleggers and the Baptists in this scenario? Anytime there is a collaboration between different stripes of political activists, these roles are interchangeable depending on the observer’s ideological proclivities. A more even assessment would be that both merging factions are Dual Role Actors (2020). As the pro-gun and the pro-Roe camps, both are defending moral arguments but simultaneously benefit from achieving their own separate policy goals.

Bootleggers and Baptist:L- CBDC

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One of the hot topics in global discourse aside from the Ukraine conflict is research into CBDC (Central Bank Digital Currency). Several countries are researching deploying a CBDC and some have even implemented trial run experiments with centralized digital monies. Back in January, the US Federal Reserve published its CBDC white paper Money and Payments: The U.S. Dollar in the Age of Digital Transformation (2022). Hypothetically, if initiated, the Fed would distribute retail CBDC through private intermediaries (primary dealers). Per George Selgin: “Those private intermediaries would then be responsible for managing customers’ central bank digital currency (CBDC) holdings and payments…”. Allowing the Fed to avoid managing the front-end customer service concerns (something government entities typically handle very poorly) and reallocate this function to private firms.

Baptists:

The overall rhetoric surrounding CBDC has been cautiously optimistic. Especially, when squared against the comparisons made between CBDCs and stablecoins. Federal Reserve Chair, Jerome Powell, has backtracked on his anti-stablecoin stance. Presumably, he still is championing a central bank currency over. Despite the institutional tensions between stablecoins and CBDC, the Fed; could be considered a Dual-Role Actor in the Bootleggers and Baptists (1983); if it is not categorically correct to deem them Baptists. There is a strong possibility that the Federal Reserve and all affiliated employees stand to gain from curbing the success of privately issued digital currencies but also sincerely believe in the virtues of the United States issuing its own. There are several arguments in favor of a government-backed digital currency supported by Fed economists and academics alike. For example, it would make assessing taxes on purchases made with digital currencies easier to determine (p.156). Also, many experts claim that a CBDC would achieve price stability, an attractive feature when you consider the historical volatility of various well-established private cryptocurrencies. It would be easier to combat money laundering and financing for terrorist activities(p.11). Probably one of the more laudable arguments for a CBDC is the argument of financial inclusion for the unbanked (p.157). All of these claims have a moralistic tone, making the Fed and CBDC friendly economists potential Baptists.

Bootleggers:

Labeling Fed officials as the Bootleggers is analogous to shooting-fish-in-a-barrel and makes for linear analysis. Plus, yes, the United States central bank and all of its economists have much to gain through promoting a CBDC; however, it is not entirely evident that they are disinterested in the moral arguments for protecting the public from the purported dangers of a private digital currency and the cause of financial inclusion. But there is a group of beneficiaries that are much less obvious to the superficial observer; hackers. A CBDC would be highly centralized, making it more likely that there could be a single point of failure in a security breach (p.17). Even though the public and permissionless blockchains are only quasi-anonymous on distributed ledgers of cryptocurrencies such as Bitcoin, they are trusted, specifically for these validation channels in the consensus protocol are decentralized. In contrast, a CBDC would need to comply with KYC and AML requirements making it necessary to “…store personal data..” on specific nodes; “… highly likely to be exposed to a single point of failure, which can result in the indirect leakage of personal data..” (p.18). Due to the legal provisions outlined in financial monitoring laws, turns CBDCs into an aggregated database for financial and personal information if improperly designed.

Bootleggers & Baptists-XLVI- Chinese Humanitarian Aid to Ukraine

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China has become a focal point in public discourse in recent years. In the years of the Trump administration, tensions escalated (during the tariff wars), as president forty-five took China to task for economic policies that undermined American interests. Internationally, China has garnered negative press for a laundry list of human rights violations, one particularly egregious example being the genocidal policies targeting the Chinese Uyghur. On the world stage, China’s reputation, sullied by ghastly optics. What can the manufacturing giant and Asian Tiger do about the mounting number of public relations quagmires?

Despite the superficial impression of a Sino-Russian alliance; officials in Beijing refuted that the nations were allies in the wake of Putin invading Ukraine. China even opts to provide humanitarian aid to Ukraine; it would be spurious to claim that this diplomatic gesture is purely altruistic reasons. When Chinese Foreign Minister Wang YI repudiates prior claims of a broken alliance by stating that Sino-Russian relations were “rock solid”. What variety of four-dimensional chess are Chinese officials attempting to play regarding the Ukraine situation? Certainly, some form of non-monetary rent-seeking on the part of China. It is reasonable to examine whether Bootleggers and Baptists (1983) coalition dynamics are applicable.

The prospect of China concurrently acting as a moralizing agent and a beneficiary (Dual-Role Actor) is mildly tenable but unlikely. It is more probable that China does not have any genuine compassion for the Ukrainian people and sees them as a strategic pawn for fostering a positive public image. If this is the case, China would not be a Dual-Role Actor, but a Covert Baptist (p.190). The nation acts in a moral capacity purely for its own ends. Potentially, doing so to smooth over the bad press engendered by their extensive list of human rights violations. This possibility seems unlikely. For years the international perception has carried much weight with Chinese officials. It is more likely that China is attempting to distance itself from Russia for the sake of self-preservation. China is trying to navigate the murky waters of retaining its diplomatic relationship with Russia without being placed in the cross-hairs. This is a precarious position to be in, especially when your prominent trading partners are the western nations placing sanctions against one of your strategic allies.

Bootleggers & Baptists: XLV- Baptists, Economists, Careers, & QE

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What is Quantitative Easing?

Quantitative easing (QE) is the controversial and unconventional monetary policy tool first introduced in the United States in 2008 [1]; as a countermeasure to the Great Recession. The practice of Quantitative easing (QE) is where a central bank purchases long-term government securities, corporate bonds, mortgage-backed securities, and other assets from banking institutions with newly created money. The ultimate goal is to boost the money supply encouraging lending in a sluggish economy by lowering interest rates. The Federal Reserve’s strategies for managing interest rates are divided into pre and post-financial crisis eras. Before 2008 how the Federal Reserve maintained interest rates were different (operating under a corridor system). Per the New York Federal Reserve:

Before October 2008, the Federal Open Market Committee (FOMC) communicated the stance of monetary policy by announcing a target for the federal funds rate. The Fed would then use open market operations to make small adjustments to the supply of reserves so that the effective federal funds rate (EFFR) would print close to the target set by the FOMC. This type of implementation regime that relies on reserve scarcity is often referred to as a corridor system (as explained in this article). Under this framework, depository institutions, or banks, were incentivized to hold as few reserves as possible since they did not earn interest on their Fed account balances. Reserve balances that banks held in their Fed accounts added up to a very small amount, as can be seen in the next chart. The banking system operated with aggregate reserve scarcity and relied on the redistribution of reserves in an active interbank market.

Amid a phase of quantitative easing, the Federal Reserve injects massive quantities of money into the economy through large-scale asset purchases on the open market, increasing the risk of interest rates becoming too low. In the post-crisis, the Fed has opted to implement a Floor System, where the central bank pays interest on excess reserves (IOER) for funds held by member banks at the Feder Reserve beyond the mandate reserve requirements. Procedurally assists with stabilizing the interest rate (Fed funds rate) even when the Fed pumps vast amounts of liquidity into the economy. The excess money held by Fed-associated financial institutions acts like an interest rate floor; through paying on IOERs the opportunity cost of holding money is eliminated. Effectively, maintaining the target interest rate. The Fed’s convoluted attempt to skirt the Law of Supply and Demand, the Federal Reserve, nothing more than an attempt to have its cake-and-it-too (avoiding a liquidity trap and concurrently stimulating the loans market).

The Baptists and Economists of QE:

The monetary establishment expresses that QE is a necessary and effective policy instrument. The promoting of this interventionist policy has created fertile ground for Bootlegger and Baptists (1983) coalition dynamics. Much of this pro-QE sentiment is perpetuated by the research of Federal Reserve economists. It is hard to pinpoint clear Baptists in the pro-QE coalition, several parties that benefit from defending the practice.

In some instances, politicians who champion QE could be viewed as Baptists, arguing for it as means of stabilizing the economy. However, politicians stand to benefit from the unorthodox monetary policy in the form of Fiscal QE (coined by George Selgin), directing the money created through QE to non-macro-economic objectives (e.g. funding the Green New Deal through QE). There is the potential of politicians assuming the role of “pure” Bootleggers and Dual Role Actors. But while QE could be used to “achieve” macro stability (full employment, etc.) and other extraneous policy goals, it operates as a double-edged sword. It is important to note that the inflation rate is a metric that matters to the voting public. Inflation has become a focal point in political discourse and is politicized (p.129-163[2]. The next logical possibility for  Baptists would-be journalists. However their position on QE is “mixed”. Some outlets like to diagram the pros and cons, others are outright hostile, and some echo the positive sentiments acting as a mouthpiece for the Fed.

There is one faction in the QE advocacy coalition that unquestionably fits the definition of Bootleggers, the economists employed by the Federal Reserve. In the book Money and the Rule of Law (2021) Boettke, Salter, and Smith detail the numerous incentive problems facing Federal Reserve officials armed with “constrained digression” (CH 3; p.58-94). Pollical pressures asides; there are other reasons why favoring QE would be appealing (p.67-70), but also substantial internal pressures as well. The authors expound upon the impact of “bureaucratic inertia” on the central banks; like any other center of governance, there is a bias towards maintaining the status quo (p.64). After approximately fourteen years and four rounds of QE, the policy has become normalized. Initially, QE was an aberration in American monetary policy [3]. Favoring QE in 2022 is an example of institutional inertia, but not during QE1 (2008).

However, the obtuse and obstinate inflexibility of the sluggish nature of the Fed is far from the most troubling rationale for unwaveringly defending QE. That would manifest itself in the form of promotion opportunities. We need to consider that the Federal Reserve is one of the largest employers of economists in the United States (p.64), urging researchers to conform to internal norms of the Fed. (p.65). One paper that beautifully describes the incentives of the career concerns of Federal Reserve economists was Fifty Shades of QE: Comparing Findings of Central Bankers and Academics (2020; revised 2021). In their NBER paper, Fabo, Oková, Kempf, & Pástor found that central bankers are more likely to describe QE in sanguine terms in their research when compared to unaffiliated academics (p.15). Fabo et al. found that there was some evidence that:

“…One possible mechanism is career concerns. In principle, bank management could make promotion decisions in a way that encourages bank employees to assess the bank’s policies favorably… (p.18).

“… We find that the interaction between the effect on output and Seniority is positive and significant. A one standard deviation increase in Seniority raises the sensitivity of career outcomes to the estimated effect on output by about 50%… (p.21).

“..These could involve concerns about the bank’s reputation and, for very senior researchers, concerns about their reputation. Like career concerns, reputation concerns reflect researchers’ incentives because in both cases, a researcher derives a private benefit from reaching a particular research outcome. We have no evidence on the potential contribution of reputation concerns to our results…” (p.25).

We must not interpret this correlation between the promotion of senior economists and research validating the “positive” effects of QE as these actors intentionally manipulate the results. In the absence of sufficient evidence; making such an assessment is made in bad faith, but there is most likely a third variable connecting these outcomes. For example, Fabo et al. describe the potential of economics who end up working for the Fed having priors that make them more apt to favor interventionist monetary policy (p.4 & 25). They even explore the possibility of researchers inadvertently selecting modeling techniques that would make QE appear to be more effective (p.2 & 17).

Footnotes:

  1. The initial introduction of quantitative easing in the US in 2008 was dubbed QE1. In March 2020, the US Federal Reserve initiated its fourth round of QE (QE4).
  2. In Boom-and-Bust Banking (2012) (ed. David Beckworth), Scott Sumner argues for adjusting monetary policy to  NGDP targeting versus inflation targeting. A stance also advocated by David Beckworth. Sumner explains how inflation targeting is more politically appealing than a Nominal GDP target. After all, inflation is very salient, especially if you are old enough to remember stagflation. Side note, the author of this blog post was born in the late-1980s but is an avid fan of economic history.
  3. The policy of Quantitative easing developed in Japan in the early-2000’s and was subsequently implemented in the United States nearly a decade later.

Bootleggers & Baptists: XLIV- Russian Vodka Boycotts

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Protests often tend to be more figurative forms of political expression than effectual forms of collective action. The process of organizing a demonstration incurs a myriad of monetary and nonmonetary costs including, but not limited to: costs of communication, coordination, transportation, creation of signs, and other varieties of picketing paraphernalia. The one exception to this rule is boycotting goods. Sure, the costs of communication and finding substitute goods can be high; but on the margin are substantially lower than traveling across the country to participate in a protest. The other economic difference between boycotts and live demonstrations is the ability to measure the direct impact. The influence of live demonstrations on public opinion can easily be conflated with other factors to quantify. In contrast, with boycotts, the effect is easily measured by a company or section of business experiencing a slump in sales. Money frequently outweighs principles, making it a persuasive mechanism for facilitating change. In other words, boycotts would be a more rational and economically superior form of protest.

However, this is not to say that every boycott is rational. Boycotts are often subject to the same fallacies that impact other spheres of political behavior. It is easy to perceive an inefficient or mistargeted boycott as a symbolic message analogous to a demonstration, but it could be a misallocation of time and communication costs, as boycotts can exert their influence more quickly and definitively. The romanticism of protest may capture the more visceral and polemical aspects of political participation but yield no results. Certainly, a cost analysis, overlooked by the droves of wide-eyed and quixotic-minded college-aged activists. All too often, boycotts latch on to the most salient products rather than what would drive an economic agent to behave differently. If a salient luxury product is only a drop-in-the-buck compared to a country’s annual exports. Often boycotts are directed towards commodities that would bear no economic impact, being more of a symbolic gesture. Case and point the absurdity of the Russian Vodka boycott [1].

Vodka must be the most ubiquitous Russian export, but Vodka doesn’t even make the top-five commodities that Russia exports to the United States. Per the Office of the United States Trade Representative, the top Russian imports for the United States included:

“….The top import categories (2-digit HS) in 2019 were: mineral fuels ($13 billion), precious metal and stone (platinum) ($2.2billion), iron and steel ($1.4 billion), fertilizers ($963 million), and inorganic chemicals ($763 million)...”

Socially conscious activists should be calling for a boycott of Russian mineral fuels since it is the largest export to the US. Arguably, validating South Carolina Senator Lindsey Graham’s assertion that to crush Putin, you need to hit their “..oil and gas sector..”. Where does Russian Vodka rank in overall imports into the United States? It doesn’t even account for a sizeable amount of the Vodka consumed in the United States. As of 2017, Russian Vodka only accounted for 1.4% of all Vodka imported into the US. None of the top five vodkas sold in the United States were of Russian origin: Tito’s (produced in the US), Smirnoff (UK, US, Ireland, Italy, Brazil, and Latvia), New Amsterdam (US), Svedka (Sweden), and Absolute (Sweden).

https://www.statista.com/statistics/463960/us-leading-brands-of-vodka-volume-sales/

Even the perennial favorites among the “vodka snobs” are produced outside of Russia: Grey Goose (France, Cognac region), Ketel One (Netherlands), and Belvedere (Poland). Some brands ( Stolichnaya) are being mistaken for being Russian by ill-informed consumers. Overall, a symbolic gesture, the Vodka boycott is a hollow gesture as they are plenty of viable substitutes for Russian vodka. Arguably, Americans weren’t drinking much in the way of Russian Vodka, to begin with. It is safe to say that the financial sanctions placed on Russia be more effective than the feeble effort among the lay public banning Vodka. Mirroring the fallacy of voting; your vote has little probability of influencing election results. Likewise, opting to drink a Grey Goose martini versus a cocktail using a Russian brand will have no sizeable impact on Russia’s economy.

Regardless of the impact of the boycotts, it is still a form of collective political behavior that picks winners and losers. It is ultimately susceptible to the formation of Bootlegger and Baptist (1983) coalitions. After examining the Vodka boycott, the prima facie impression of most observers would be the protesters would be the Baptists, and non-Russian Vodka producers would be the Bootleggers. There is some truth to this interpretation of the boycott, but it does not capture the whole story.

Invariably, there will be Dual-Role Actors lurking within the Baptist faction of the coalition. Political activism has its incentives structure for rational actors hopping on the self-righteous bandwagon. Participants in a protest can forge careers, earn social currency, network, gain more business, earn the right to virtue signal, and even gain a sense of moral superiority. Despite their sincere belief in the moral justification for not economically supporting Russia, they still obtain personal benefits.

Foot Notes:

1. I was planning on writing this blog post on Saturday, February 22; however, due to a busy work schedule and other obligations, I am writing this essay a week later. Damn you, Forbes, you beat me to the punch!

Bootleggers & Baptists: XL- Joe Rogan: Team Spotify v. The Medical Establishment

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INTRODUCTION:

Veteran stand-up comedian, mixed-martial arts commentator, and podcaster; Joe Rogan has come under fire for promoting COVID-19 misinformation. Business Insider lists six examples of Rogan proliferating misinformation about COVID-19 within the past two years. Arguably the proverbial “straw-that-broke-the-camel’s-back” was last month (episode # 1757)when Rogan had a controversial virologist, Dr. Robert Malone, on as a guest. Prompting 270 medical experts to send an open letter to Spotify to address the inaccurate information disseminated through Rogan’s podcast. The letter expressed: “Spotify has a responsibility to mitigate the spread of misinformation on its platform, though the company presently has no misinformation policy..”.

However, is this statement even true? Do platforms have a responsibility (legally or morally) to moderate and suppress factually incorrect content? Even though Spotify is a Swedish-based company, this rhetoric parallels the talking points of the Section 230 debate in the United States. Section 230, in most instances, shields service providers from liability for the media generated by content producers. This amendment of the Communications Act of 1934 (230 falls under the Communications Decency Act of 1996). Section 230 states :

‘….‘(c) PROTECTION FOR ‘GOOD SAMARITAN’ BLOCKING AND SCREENING OF OFFENSIVE MATERIAL.— ‘‘(1) TREATMENT OF PUBLISHER OR SPEAKER.—No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider. ‘‘(2) CIVIL LIABILITY.—No provider or user of an interactive computer service shall be held liable on account of— ‘‘(A) any action voluntarily taken in good faith to restrict access to or availability of material that the provider or user considers to be obscene, lewd, lascivious, filthy, excessively violent, harassing, or otherwise objectionable, whether or not such material is constitutionally protected; or ‘‘(B) any action taken to enable or make available to information content providers or others the technical means to restrict access to material described in paragraph (1)….” (p.84).

This subsection of Section 230 could easily extend to streaming services. Spotify exercises no editorial discretion and merely provides the tools to content creators to distribute music and podcasts. ****Ethically, there are free speech concerns regarding social pressure to moderate and censor content. While the First Amendment only protects citizens from government censorship, it is evident that Spotify is not troubled by the content produced on Joe Rogan’s podcast. If Spotify takes any action, it would be due to public scrutiny.

BOOTLEGGERS AND BAPTISTS:

The outcry for Spotify to address the JRE podcast’s proliferation of misinformation may not have manifested in a formal policy proposal, but there are still individuals that stand to benefit. Making the JRE controversy a perfect scenario for a Bootleggers and Baptist (1983) coalition dynamic. One subset of the coalition acting as the public face presented the moral argument for Spotify acting against Joe Rogan. Quietly, lurking in the background, are the callous beneficiaries hoping their ulterior motives are not recognized. 

The Baptists in this scenario are the experts that drafted the open letter to Spotify and other notable public health professionals that have vocally expressed condemnation of Rogan’s commentary on the pandemic. One of these renowned crusaders is Dr. Katrine Wallace of the University of Illinois, who catastrophically describes Rogan as “a menace to public health,” particularly for espousing anti-vaccine rhetoric”. Whether or not you find this statement hyperbolic or false, it still conveys an ethical concern for the influence of Rogan’s podcast influence on public health. Therefore, making Wallace and like-minded professionals Baptists. Although, there is the potential that Wallace is a Dual-Role Actor, simultaneously being concerned about public health and seeing an opportunity to raise her public profile. After all, she is a blogger.

There are two categories of Bootleggers that operate as silent beneficiaries in this scenario. The first group is the other Podcasters that distribute their content through Spotify. If the JRE podcast becomes removed from Spotify or suffers other forms of sanctions, that would mean less competition for Tim Ferriss. The second category of Bootleggers would be the medical establishment. Not to treat this faction as an amorphous blob, considering it is a collective consortium of various people, organizations, and businesses, it would be nearly impossible to identify all the potential players in the subset of the anti-JRE coalition. The vast networks of the medical establishment are so pervasive it has even been referred to as the Medical-Industrial Complex, paralleling the concept of the Military-Industrial Complex.

There are a lot of individuals that stand to profit from keeping the status quo intact. Any professional possessing heterodox perspectives stand potentially disrupt the current public consensus resulting in fewer profits for pharmaceutical companies and other appurtenant facets of the industry. Over the past couple of years, there has been an ongoing assault on expert consensus. In a world of “alternative facts, the gap has continued to widen between popular opinion and professional consensus. Few things can be threatening as a credentialed professional who holds positions that go against the grain of the establishment. These individuals appeal to a public that is disillusioned and skeptical of expertise. The medical establishment aimed to reclaim its throne by targeting influential voices that have contrary views. In the hopes that people will stop patronizing herbalists and reading articles written by Robert Malone. When persuasion is ineffective, censorship becomes the preferred mechanism. 

POTENTIAL SOLUTION?:

The problem remains of how do we distinguish fact from fiction? Is it Dr. Malone or the medical establishment that is being dishonest? The average American citizen lacks the knowledge, time, and resources to effectively qualify the claims of either faction in the COVID debate. This situation parallels the phenomenon of rational ignorance examined in Public Choice Theory; deference to experts and public figures is cost-effective to the average layman. No need to read dozens of medical journals filled with opaque jargon. When there are have several sets of experts with competing opinions whom do you listen to? It is possible to find an expert in any field that can confirm our priors.

One brilliant suggestion comes from UCF professor and scholar Enrique Guerra-Pujol, who suggests we should utilize prediction markets to assess the veracity of conspiracy theories. In any decision-making process, we are grappling with the fact that no one can have all the information. As stated in the Hayekian Knowledge Problem; information is naturally dispersed, meaning effective top-down decision-making is impossible. If we could hypothetically remedy this by creating an incentive-based mechanism that can aggregate all perspectives on a given topic we will have a better (not perfect) outcome. By including the vaccine skeptics rather than excluding them, they become part of the validation process. When we look at range-voting in jury trials it becomes quite apparent that even including erroneous perspectives does not drastically impact the overall outcome.

Perhaps instead of capitulating to public pressure to remove all of Joe Rogan’s “COVID episodes, Spotify could run a user poll or a modified prediction market (to avoid the ire of SEC and CFTC) to get the listener feedback on the veracity of the content of these episodes. Instead of removing the episodes, if deemed to be inaccurate, Spotify should merely place disclaimers.

****Correction- The 230 immunity argument does not hold up for two reasons:

  1. Spotify does exercise editorial discretion.
  2. Spotify may satisfy the legal definition of a publisher.

Bootleggers & Baptists XXXIX- AB-5 and Uber

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The emergence of the Gig Economy has allowed millions of Americans to earn additional money without the constraints of rigid work schedules. However, the flexibility allotted to contractors through ride-sharing and food delivery services is under threat in California. Back in 2019, the California legislature passed Assembly Bill 5 (AB-5) that would classify many freelance workers as “… workers bona fide employees, with schedules and hours determined by the company rather than the worker..” (p.4). The California courts apply AB-5 under the three-prong test developed in Dynamex Operations v. Superior Court to distinguish contractors from full employees; after AB-2257 passed in 2020, “..109 categories of workers were exempted from AB-5..” (p.7). In response to AB-5, delivery and ride-sharing platforms collectively generated Proposition 22 to exempt these services from the law (p.7). Unfortunately, the law was ruled as unconstitutional 2021; per the Los Angeles Times:

That’s in part because the law, Roesch wrote, infringes on the power of the Legislature explicitly granted by the state Constitution to regulate compensation for workers’ injuries.

 Hector Castellanos, et al. v. State of California, et al.

Amid all the AB-5 turmoil, one question emerges, who benefits from labeling gig workers as full-employees? It certainly isn’t the Uber driver. Considering, 80% of surveyed independent contractors “…reported having done some sort of independent contracting gig in the last year said that it was a part-time occupation…” (p.6). Also, most gig workers have insurance benefits either from their primary job or spouse (p.5) and prefer the flexibility over fringe benefits that “…bear opportunity costs in the form of foregone income they could have received if not for the benefits.” (p.6).

When viewed through the lens of Bootleggers and Baptist (1983), it is clear that few economic agents are hiding within the smokescreen of the workers’ rights coalition. The irony is, the demographic that AB-5 is designed to “help’, vehemently opposed the legislation. It can be assumed that the California legislature is a Dual-Role Actor in this coalition. Why? State lawmakers most likely passed this law as a worker protection provision for gig economy employees. However, Judge Roesch’s admission that excluding gig workers interferes with the authority of the legislature. Lawmakers are also Bootleggers for having an invested interest in not relinquishing political power.

 One notable economic agent on the bootlegger side of the coalition would be labor unions. Some readers may wonder why labor unions would not be considered a Baptist or even a Dual-Role Actor. Unions are heavily involved in the political process (p.410), theoretically could be perceived more as political interest groups than employee protection organizations. Arguably, these organizations do little to advance the interests of workers. Labor unions within the state of California had angled to organize ride-share drivers, “…contributing to the pressure on legislators to make a change..”(p.7). Various labor unions throughout California have expressed that AB-5 would reduce the exploitation of contract employees. However, they benefit from this legislative victory because it reinforces their political currency as an interest group. One union that stands to gain the most from reclassifying Uber drivers are taxicab unions. It is well known that the taxicab industry has struggled to compete with the convenience and lower rates of ride-sharing apps. The state of Nevada has placed restrictions on platforms offering ride-sharing services. Uber has faced many regulatory barriers often supported by taxi drivers (p.191); most notably “medallion systems” where governments issue a limited number of licenses to operate as a driver (p.574). Classifying Uber drivers as full-employees would make employing contractors more costly and onerous, thereby disturbing Uber’s operations. All of this to shield taxi drivers from the Schumpeterian gales of creative destruction.

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).

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.  

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 and Baptists- XXX: USB-C Mandate in Europe

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USB (Universal Serial Bus) connections and ports have become a ubiquitous item in our daily lives. Whether it temporarily storing documents on USB flash drives and other peripherals (e.g. hardwired keyboards), we all use USB connections in some capacity. The matter of USB connections would hardly be a topic that could be conceivably politicized. However, the European Union has succeeded in turning the USB ports on electronic devices into a public policy debate. Next month the European Commission intends on presenting a “draft law” that would require all electronics producers to have a “common charging interface”. This would effectively prohibit the Lightning connections utilized by iPhones. If passed all other formats other than a USB-C connection would be banned in the European Union.

The question becomes what is a USB-C connection and why is the European Union so adamant about making it the compliance standard for the continent? USB connections and ports have been in existence since 1996. One of the latest innovations in USB connections came in the form of the USB-C (software version 3.1) in 2014. The USB-C connection boasts several technological advantages USB 2.0 and USN 3.0. Some of the benefits include thinner cables, greater capacity for transmitting data, and backward compatibility. Although these are most likely not the reasons why the EU is pushing for all electronics to have the USB-C standard for charging ports. The campaign for the USB-C mandate is arguably not directed towards consumer protection. Rather is more oriented towards environmentalism. One outstanding advantage of the USB-C format is that is more durable, meaning that it will not wear out as quickly as previous models of electronic port connections. The goal of mandating USB-C connections would be to reduce the amount of E-Waste a plank in the platform of the EU’s New Circular Economy Action Plan.

This initiative brought forth by the European Commission cannot escape the potential of a Bootleggers and Baptist (1983)  coalition from forming. The moralizing agent in this situation would be the European Union. Yes, there are some political gains for advocating for environmental causes. For instance, you look “progressive” and you earn the right to virtue signal. Above all, you win over the progressive vote, which is presumably sizable in Europe. The EU  may be a potential Dual-Role Actor, but for the sake of clarity, let’s assign the role of “Baptist” to the EU. Who are the Bootleggers in this scenario? It is highly unlikely that no one would benefit from the EU placing such compliance requirements on the charging ports for electronic devices. Regardless of whether the regulation is purported to target consumer safety or environmentalism disparate effects are inevitable. This was an observation implicit in Yandle’s theory since the nascent period of its development. Hence why in Yandle’s seminal paper he suggests there is a “demand” for regulation among corporations. The implementation of regulations operates as a backdoor way of reducing competition without violating antitrust laws. Granted, antitrust laws in the EU are different than those in the United States; however, this is still circuitous means of subverting the legal constraints of anti-competitive market behavior among firms.

Most electronics producers are on board and have already adopted all of the purposed EU requirements; except for Apple. While other Apple products have been reformed to include USB-C ports, the iPhone still uses a Lightning connection. Apple has even openly stated that such a requirement would hinder innovation. Yet, the other giants such as Samsung have remained silent on the matter; expressing tacit agreement with the purposed EU measure. It should be noted that Apple is a major competitor in the Smartphone market. The iPhone has approximately a 50% market share of the Smartphone market in the U.S. However, the global market share is primarily held by Samsung and other competitors. Nevertheless, Apple is still a serious competitor for companies such as Samsung in the global market. The silence of other producers most likely is due to rational business interests rather than the normative virtues of environmentalism. Therefore, Apple’s competitors in the Smartphone market are the “Bootleggers” of the EU’s USB-C mandate.

Bootleggers & Baptists: XVI: Terrorism and Prediction Markets

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The program was derided by Democrats and Republicans in Congress, some of whom called it “bizarre,” “unbelievably stupid” and “offensive.” Rumsfeld himself said he canceled the program “an hour after I read about it.” ( Wired ,July 2003)

Commonly, government programs engender partisanship and opportunism. Political actors are more successful to capitalize on such initiatives are controversial. This effect is only magnified when the program is headed by a polarizing figure. One prevalent example of this was DARPA (Defense Advanced Research Projects Agency) used Prediction Markets to gather intelligence on future geopolitical events. Once more contentious questions such as terrorist attacks and assassination attempts ended up being addressed, the program began to be publicly criticized.

 PAM (Policy Analysis Market) implemented by the Information Awareness Office, a counter-terrorism project ran by DARPA. PAM operated like a future exchanges market for predicting the likelihood of geopolitical events. Including but not limited to terrorist attacks. At various phases of the program, participants (consultation firms, colleges, think tanks) were provided a sum of money to “wager” on the likelihood of certain political events happening (p.77). Those with accurate answers were awarded a larger sum of money.

Figure 1

E.g.) Phase I: Participants were provided $100,000 by the IAO to wager and awarded $750,000 for accurate predictions (p.77).

Mirroring the model used in both past and future prediction markets. Dating back to Robin Hanson first pioneering prediction markets while consulting on project Xanadu in the late-1980s, these markets have always been an incentive-driven phenomenon. It is one thing to claim certainty, but it is another to be willing to die on that hill. Especially when money is on the line. Effectively aligning incentives towards accuracy and rigorous research versus armchair speculation. The objective being the firm, organization, or government department hosting the market with aggregate a large cache of quality information (p.76).In the field of counter-terrorism having averaging consensus from a variety of sources is crucial to avoid engaging the wrong target. Such mistakes will incur costs much greater than monetary losses.

As groundbreaking and innovative as PAM was invariably the program garnered some criticism that eventually devolved into outright censure. Academics and bureaucrats “betting” on the aptitude of terrorist activities and political revolts transpiring may be unsettling from a prima facie standpoint. Particularly if taken at face value with no further analysis. Arguably the criticism of PAM intensified due to the IAO’s controversial director, John Poindexter. Poindexter rose to infamy from his involvement in the Iran-Contra scandal of the Regan administration. Even though all of the insiders of the project acknowledged that Poindexter had little involvement in PAM (P. 6, footnote 7), most of the backlash was directed at him. The fury of pundits, media outlets, and the general public caused Poindexter to resign in the summer of 2003. Leaving the PAM project permanently defunct.

The advocacy and opposition to the implementation of PAM as a means of aggregating intelligence on sensitive matters is no doubt a complex maze of ethical and pragmatic arguments. The use of prediction markets for gathering information for defense planning is just like another government policy, the impact is not neutral. Meaning that keeping or eliminating the program will create disparate consequences. Typically favoring one subset of economic agents over another. Individuals will bear the “expected costs (p.38) imposed by the impact of the policy. For example, a government program may create jobs for individuals that are politically connected. However, this is generally at the expense of the taxpayer. Vice versa, abolishing a program will eliminate jobs for the clerks and managers operating the department. The impact of policy always affects some individuals positively and others negatively. All political policies involve the transfer of benefits from one party to another.

Considering the non-neutral nature of policy, it would be justifiable to apply Bruce Yandle’s concept of Bootleggers and Baptists to the political pressure to abandon the PAM program. Yes, there were some ethical concerns regarding the prospect of having people “wager” on terrorist attacks. It would be naïve to believe that all the opprobrium was motivated by morality. Much how skilled consultants can profit from participating in a Prediction Market, many actors can also do so by dismantling such a program. Beneficiaries ranging from media outlets to opportunistic politicians. The political opportunism was multilayered including enemies of the Bush administration, the Republican Party, and even direct adversaries of John Poindexter. Proving an opportunity for democrats to temporarily shed their anti-patriotic veneer, to admonish these “conservatives” for making light of national security threats. Yet, the credulous public seldomly questions this moral browbeating. On the surface, these criticisms sound valid. Since when have politicians previously disinterested in national security matters are suddenly deeply invested in the integrity of defense intelligence? As Machiavelli pointed out in The Prince appearances are more important than actual principles in politics (p.42).

The Baptists

It is exceedingly difficult to designate one side of the coalition as a pure Baptist in the public outrage campaign surrounding PAM. The self-interest of the media, politicians, resident experts within the government is glaringly obvious. The potential for Dual-Role Actors (economic agents that benefit materially, but simultaneously sincerely believe the moral argument) in this coalition dynamic exists. However, is muddied by the perverse incentives to use strawman, ad hominem, and other logical fallacies to denigrate the program. The adversaries of PAM had a lot to gain through defaming the program. Not a whole lot of utility to extract from testing the validity of the results. Since the average constituent is not going to care too much about the granular details of the program. Rather be fixated on their visceral reaction to the ethical considerations of “betting” terrorist attacks.

Regardless, of whether moral advocacy is misguided or ill-informed, nevertheless, it is still a normative position. The average citizen happens to be the proverbial Baptist in this coalition dynamic. Any expression of disgust or moral indignation was sincere with little to no observable benefit from ending the program (dispersed costs, concentrated benefits). Even if the public’s concern was stoked by the slanted framing of the program, it still does not lessen make their concerns any less earnest. In the absence of further context, a group of contractors and academics participating in a gambling pool predicting terrorist attacks does sound grotesque. Since gambling is considered a form of entertainment appears to trivialize the severity of contentious situations that could result in the loss of lives. For the honest concern for these moral considerations, the average voter is our Baptist.

One great irony was that one of the academics deeply involved in the project narrowed down the reasonable ethical concerns in a peer-reviewed paper years after PAM had been dismantled. It was none other than prediction markets pioneer Robin Hanson. Hanson citing the following as prevalent concerns of the program:

  • “…The first concern expressed—that of replacing professionals with amateurs..” (p.82)
  • “…The second fear expressed was that bad guys would be willing to make losing

trades to mislead us..” (p.82).

  • “..The third main fear expressed was that bad guys might be rewarded for doing bad things..” (p.83). E.g.) Al-Qaeda’s meddling with airline stocks in the 9/11 attacks.

Hanson tactfully addresses all these concerns explaining how much of these concerns are the result of misconception. Like how the media coverage of the program generated several misconceptions regarding the function and purpose of PAM.

The Bootleggers

Several various individuals and groups stand to benefit from a sensationalized portrayal of the PAM program. One of the more salient examples would be the media. Media outlets are a business much like another, the incentive is to maximize profits. Logically this premise is cogent to anyone with even a small amount of exposure to economics. This controversy emerged in the primordial era of social media (Myspace being founded in 2003). The internet did exist but did not present any true competition to televised and print news media. For media outlets to have a story as jarring as the government funding a macabre gambling bracket trivializing serious events, instant goldmine. That is the type of story that sells publications. It has all the elements of a good conspiratorial techno-thriller. One only needs to consider the success of Tom Clancy to know how stories of geopolitical/government intrigue are lucrative. It could be argued that the media is merely the messenger, if they happen to profit from the event, it is a natural consequence of the event. How the information is presented and sways public opinion. If news reports are worded in a manner that is hostile towards the program, this will influence public opinion. Creating a feedback loop, inciting the ire of the Baptists while concurrently profiting. This would be an excellent example of the Bootleggers tacitly inciting the indignation of the Baptists.

Another subset of Bootleggers would be the politicians who spoke out against PAM. A book could be written about the political motives guiding the strategy condemnation of the program by various politicians. As previously mentioned, the layers of political opposition operate on a continuum of scale. Varying from individual grudges, contention between political factions, and even opposition to the sitting president at the time (George W. Bush). Despite the complexities of various political considerations, speaking out publicly about a controversial government program fosters a positive public image. Especially for politicians who were affiliated with the Democratic party. During the Bush administration, Democrats were perceived as being soft on terrorism. At a time where terrorism was a hot-button issue, speaking out against counter-terrorism measures was tantamount to political suicide. The whole PAM debacle presented an opportunity for a clean slate. An opportunity to capitalize on a misstep made by the Bush administration and to feed into the fears of the public. Paralleling the Bootlegger –Baptist feedback mechanism generated by the media. See below for a shining example of such sanctimonious posturing:

For instance,” Mr. Wyden said, ”you may think early on that Prime Minister X is going to be assassinated. So you buy the futures contracts for 5 cents each. As more people begin to think the person’s going to be assassinated, the cost of the contract could go up, to 50 cents.

‘The payoff, if he’s assassinated, is $1 per future. So if it comes to pass, and those who bought at 5 cents make 95 cents. Those who bought at 50 cents make 50 cents.’ (Senator Ron Wyden (D), NYT July 2003).

Bootleggers & Baptists: XXIII- National Eviction Freeze

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Most regulations, laws, and government programs are not neutral in their impact on and the economy and society. Frequently picking winners and losers through which subset of the constituency benefits and the other group of voters and taxpayers that the policy discriminates against.  The idiom “regulation cuts both ways” encapsulates the notion that the consequences of regulation cannot be contained to the gains of the beneficiaries. Often the beneficiaries enjoy these perks at the expense of others. Because it is nearly impossible to secure complete unanimity among all citizens with the boundaries of a state never mind a nation; someone invariable will bear the external costs of the policy. Whether it be through higher taxes, revoked privileges, and rights, barriers to entry, or even legal sanctions; someone is bound to get the short end of the proverbial stick.

The advent of the pandemic has spurred a plethora of regulations, ordinances, laws,  and profligate monetary policy that operates to stifle the spread of the virus at the expense of other Americans. The actual effectiveness of these measures is debatable. Some of the oppressive examples of government fiat are flat-out spurious in the purported claims of impeding the transmission of COVID-19. One policy that has epitomized the welding of such questionable measures as means of maintaining public health has been the eviction moratorium. After being extended several times, last week U.S. district court judge Dabney L. Friedrich expressed that the eviction freeze was an overextension of the CDC’s authority. On many accounts, Judge Friedrich was justified in her assessment of the eviction ban. However, the polarizing nature of the policy inevitably makes a policy prescription in either direction discriminatory. Incentivizing both camps to form effective coalitions to combat their political opposition. Fostering ideal conditions for Bootleggers and Baptist’s coalition dynamics, like any other arrangement of political exchange, there needs to be an agent to provide the moral argument for the political activity. Naturally, lurking right around the corner is the beneficiary of that very same policy.

The Bootleggers and Baptists Favoring Overturning the Moratorium:

Coalition A:

Baptists:    Judge Dabney L. Friedrich and Proponents of Constitutional Conservatism.

Judge Friedrich and others voice concerns of the constitutionality of the orders direct by the CDC are quintessential Baptists. Why?  These individuals are arguing from the normative perspective of maintaining justice.  The very taproot of justice begins with making sure that the rules are fair and are being enforced properly. If the formal rules of our society are petty or capricious there is little hope for the nation being just. Hence, why highly esteemed critics such as Judge Dabney are crucial in assessing whether or not government agencies are stepping outside the boundaries of their legal limitations. Operating as a safeguard against overreach and other institutional abuses that need to be reigned in to avoid various conflicts of interest.

In her 20-page refutation of the moratorium order, Friedrich details how the specific actions of the CDC veer outside the permissibly established through legal restraint. The purposed extension of the eviction freeze through June would not justifiable as congress no longer supported this measure. Failing both prongs of the “Chevron Deference” test established in  Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 468 U.S. 837 (1984). Friedrich even expounds upon how the purported powers that congress initially conferred to the CDC fall outside of the scope of the Health and Service Act. Through expressing these concerns for a just administration of law, Judge Friedrich is a Baptist.

Bootleggers:  Landlords.

It would be a mistake to interpret assigning the role of “Bootleggers” to the landlords as an overt value judgment. Objectively, the landlords are the ones who stand to benefit the most from lifting the moratorium. There is nothing wrong with that from a moral perspective. Much like most economic agents, the landlords make an honest living by maintaining house units. Functioning as an odd hybrid between active and passive income. It was estimated that back in December 2020, that renters who were behind on their payments collectively owed $7.2 billion in rent.  Without any further analysis, it is quite clear that is a large sum of money. The moratorium on evictions has been economically detrimental to this sector of the economy.  Even engendering personal ruin for some of these individuals. Any individual in their position would be pleading to end the eviction moratorium. Otherwise, you are stuck having to provide maintenance and utilities for apartments where the resort is to pulling money out of your savings to continue providing housing services.

The Bootleggers and Baptists Favoring the Moratorium:

Coalition A:

Baptists:  The Biden Administration

On the opposite side of the fence, the Biden Administration is working to appeal Judge  Friedrich’s ruling.  While there is a potential of a dual-role actor dynamic lurking in the background, for simplicity’s sake we will assume the prima facie perception of this being a measure implement for the “public good”. The Biden Administration has defended maintaining the moratoriums on the normative basis of emphasizing the struggle of workers who have lost their jobs due to COVID-19. The  Whitehouse website has published statements detailing the statistics and numbers regarding renters impacted by the pandemic. Whether or not this concern for the economically disadvantaged is opportunistic or not is difficult to ascertain. However, regardless of the intentions, Biden’s Whitehouse assumes the role of the white knight, fighting on the behalf of the downtrodden. Please keep in mind, this assessment is based upon taking the statements made on the behalf of the president at face value.  Since all of the arguments have a moral dimension to them, we can only assign Biden and his Administration the role of Baptists. Acting as Judge Friedrich’s philosophical foil, defending positive rights while the Judge is actively defending negative rights.

Bootleggers:   The Renters.

Once again, assigning the role of “Bootleggers” to the renters impacted by the pandemic is not a value judgment. Much like the landlords, they are merely responding rationally to policy through attempting to preserve their self-interest. Naturally, much how no one would want to give their main source of revenue, no one would want to voluntarily surrender their shelter even if they lacked the means to pay their rent or mortgage.  However, the renters are “Bootleggers” in the narrow definition of the phrase, because they do stand to benefit from extending the duration of the eviction freeze.

Bootleggers and Baptists XV: Term Limits

Politicians often support policies that they indirectly benefit from. One example of this is supporting legislation or various forms of deregulation that has a populous bend to it. The kind of policies that set this individual apart from the political establishment. Typically, the politicians that support such policies tend to operate within the context of a Bootleggers and Baptist dynamic.

However,  these attempts to garner public support through supporting policies that attack the status quo are not the typical B&B dynamic. Much of the time these actors (the politicians)  economize the benefits on two fronts. Supporting their ideological agenda and securing firm endorsements from their constituency. Meaning that as economic agents in the marketplace of ideas, they operate as dual-role actors. Effectively they operate as the Bootlegger and the Baptists simultaneously. Through advocating for a specific policy position, the outspoken politician operates as a Baptist. They stress the moral and technical concerns of a specific stance on policy. Whether it is AOC advocating for the Green New Deal or Rand Paul arguing for term limits, both positions take on a moral dimension. For this very reason, both economic actors in the political sphere are Baptists.

But we would be remiss to assume that they also do not take on the role of Bootlegger concurrently. Why? I will give both Rand Paul and AOC the benefit of the doubt and assume the defense of their ideological pet projects is sincere. The economic agent’s sincere belief in the moral aspects of their advocacy is a crucial contingency for it being a true Dual-Role actor dynamic. All because some are sincere in their moral arguments for tax cuts (for example) doesn’t mean they do not stand to benefit.  Neither Dr. Paul nor AOC benefits monetarily from supporting policies that are popular among common people. The most conspicuous benefit is both political figures getting re-elected for another term. However, what they stand to gain through “pollical popularity” extends well beyond merely keeping their sear in the House or the Senate. In the age of social media, politicians now have a very different kind of relationship with their constituents. With platforms such as Twitter, there is a much higher degree of personal interaction. The days of listening to your public figure from afar as they pontific upon public policy at the podium (political pulpit) are over. The voter can now to a limited degree interact with their elected officials on social media. Many of them have amassed something of Fanclub on various social media platforms. Their social media presence has permanently shifted the dynamic between politicians and voters. Various political leaders are now being quoted, re-Twitted, and immortalized in internet memes at a mind-boggling magnitude. One only needs to remember the emergency of the Bernie Bros to see in current times the line between celebrity and political renown have been blurred. Formulating a subculture of political celebrity. That could have never existed without the on-ramp of cyberspace.

The cult of personality has morphed into a political bastardization of celebrity culture, politicians have quite a bit to gain through maintaining a positive image. These figures now carry social currency with people outside of their constituency. You have people in Hawaii following Rand Paul on Twitter and he is a senator for the state of Kentucky! Political forces such as Paul and AOC  carry enough populous clout they have mobilized political activism across the country. Their influence extends well beyond the jurisdiction of the state they represent. This is how they truly benefit! They reap the rewards of advocating for policies that concern the public. If James M. Buchanan was correct politics is a form of exchange. In most cases (except bribery, welfare programs, and subsidies) money is not being exchanged.  One of the most obvious examples of the non-monetary exchange in politics is log-rolling. Politicians trading votes in the House or Senate. However, the social currency earned through supporting policies popular among the public such as term limits is a different kind of exchange. The politician gives lips service to policies that benefit the average person. In exchange, you get the support of the people. The catallactics of this trade-off is quite salient once you give it some thought.   

Bootleggers and Baptists Part XII: Dual-Role Actors on Both Sides of Proposition 205 (Arizona, 2016)

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Back in 2016, election cycle Proposition 205 (Arizona) sought to establish a regulated market for recreational Marijuana. The measure failed to pass by a slim margin. Expounding upon the strategic flaws of the ballot question has already been thoroughly exhausted by local commentators.  What truly is interesting in retrospectively analyzing this failed legalization campaign was the coalition building. These strategic alliances were forged on both sides of the aisle.  Everyone from puritanical prohibitionists to cannabis aficionados teamed up with orthogonal allies to hedge their bets on achieving their desired policy outcome. Naturally the formulation of such coalitions invariable leads to Bootlegger and Baptists policy dynamics. By the very nature of regulations and policy decisions, someone stands to gain and someone stands to lose. Government action is never neutral. Even inadvertently a policy can provide a downstream benefit to an invested interest group. Sometimes these concentrated benefits are nontangible. Such as a positive public image or gaining notoriety. As the great moral philosopher, Adam Smith reminds social incentives to present us with powerful motives.

One of the more predictable opponents of legalization would be manufactures of prescription painkillers. Insys Therapeutic donated $500,000.00 to the 2016 opposition campaign in Arizona. Insys is a well-known producer of opioid-based medications. Their true motivations are somewhat puzzling.  Medical Marijuana was legalized back in 2010 which would have been a golden opportunity time for funding opposition. This could potentially be a strategic form of revenge. A thinly veiled attempt at settling a score with the Marijuana dispensaries that cost them business.  Why? Because the medical dispensaries would be among the first economic actors to enter the recreational market. It would take much in the way of resources to make a transition to selling both medical and recreational cannabis. In theory, this institutional form of retaliation would provide the benefit of instinct satisfaction to upper management within Insys. This theory assumes little to no economic benefit from this action.

An alternate theory could be Insys does finically benefit from keeping recreational Marijuana illegal. This move could signify a circuitous acknowledgment of the black-market for prescription painkillers. Whether big pharma wants to admit or not, recreational users do make up a portion of their profits. Their main customers need to operate as mid-level distribution. Either through an unscrupulous physician prescribing opioid narcotics to recreational users or through patients reselling the medications on the secondary market. Through going attacking recreational Marijuana they can protect their indirect profits made through the demand on the illicit secondary market.  Opioids are already in competition with alcohol, tobacco, kratom, Salvia Divinorum, and potentially marijuana. By eliminating a whole category of legal and accessible options they gain a slightly larger share of the quasi-legal American intoxicant market.

The question becomes whether this specific economic agent is a Bootlegger or a Baptist. They are unquestionably both. The company possesses some sort of murky incentive for keeping recreational marijuana illegal. Making them a Bootlegger. They assume the role Baptist when publicly justifying their generous donation to the counter-campaign. Citing the danger of marijuana to children. Also, expounding upon the dangers of ingesting substances that do not have FDA approval. All of these are arguments are laughable when you think about the pharmacological risks of the products Insys manufactures. Regardless, assuming good faith on the part of the firm, it is still a moral argument. Which may or may not be factually accurate. For this reason, they are a Dual-Role Actor.

In this scenario, there is another Dual-Role Actor that is on the other side of the fence. That would be the media. Numerous publications pick-up with this story and ran with it. Function as a Baptist through exposing the callous self-interest of pharmaceutical companies. This provides the appearance of a moral crusader who is attempting to reveal how big business attempts to manipulate the system. However, this public service is not done out of pure altruism. Media organizations are frequently willing to dispense with accuracy to be the first outlet to break a news story. Editors often do not focus on important stories but rather those that captivate their viewers/readers. Making news outlets more of a vehicle for entertainment than obtaining information. The best means of gaining and retaining viewership in an age where mainstream media is currently on life support is through sowing outrage.  Exploiting the public’s salient bias against corporations is a great means of generating click-bait worthy headlines.  Utilizing this tactic becomes much more imperative when your industry is presently clinging to life on a shoddy ventilator. The Schumpeterian gales are presently gusting. The creative destruction of alternative media is drawing many viewers away from FOX News and CNN.

Bootleggers & Baptists Part: XI: CVS and Tobacco

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Back when I was a broke college kid and was still a tobacco consumer, few tobacco products provided a better value than Parodi cigars. Yes, they were machine-made. However, they were mechanically bunched and wrapped with robust and Smokey fire-cured Kentucky/Tennessee broadleaf tobacco. These rugged little stogies wouldn’t get too far in a beauty contest, but they were solidly constructed. Mimicked the rustic Toscano cigars smoked in Spaghetti Westerns. There was only one brick-and-mortar locational locally that sold these drug-store treasures happen to be CVS. This all changed in 2014 when CVS elected to stop selling tobacco products altogether in the name of promoting health. Sure there was still the internet, with the complexities of shipping cigars across state lines (tax-wise and legally) it was far from an ideal option. I was far from the only one frustrated with this decision made by corporate. In 2015, CVS speculated a slight drop in sales was connected to the corporate ban on tobacco sales.

It is understandable for a firm to strive to convey a consistent message. There is a fair amount of hypocrisy in a healthcare store selling tobacco. Eliminating tobacco makes sense, only if you stop selling all the other unhealthy products sold at CVS locations. Examples ranging from soda, energy drinks, candy, and liquor. Also, one cannot forget powerful opioid narcotics. Granted, there is purportedly “safe” way to ingest such medications. Why not take a stand against the addiction crisis currently plaguing America if the company is so concerned about public health? Needless to say, there is certainly an asymmetry in CVS as a corporation’s advocacy for public health. Bringing the whole rhetoric of voluntarily choosing to stop selling tobacco into question. Even leading the incredulous skeptics among us to question the organization’s true intentions.

The murky intentions of CVS once again bring us back to the economist Bruce Yandle’s famous Bootleggers and Baptists hypothesis. In instances of this coalition-building dynamic, there are always the virtue signalers that provide us with the moral argument for a policy. The silent beneficiaries are known as the bootleggers. Individuals that purely advocate for the policy out of self-interest. Our Baptists in this scenario become apparent when you review the various organizations that provided praise to CVS for this move. Establishments such as the Massachusetts Medical Society and The Harvard School of Public Health. The Bootleggers benefiting from this shift in CVS’s business practices is clear as day, companies producing smoking cessation products. One of the most prevalent examples being Nicorette.

Where does CVS fall in the equation? Surely they either benefit from this change in-store policy or are expressing concern for public health?  I would argue CVS is an example of a dual-role actor. A dual-role actor in Bootleggers and Baptists coalitions are an economic agent or collective of economic agents that fill the role of Bootlegger and Baptist. They may have a genuine concern for the more implications of policy. However, they also simultaneously stand to gain from the purposed or implemented policy. For the sake of being charitable, let’s assume the initiative to improve “wellness” is sincere. Inconsistent, yet sincere. By exalting the virtues of not selling harmful products such as chewing tobacco, cigars, pipe tobacco, cigarettes, etc CVS claims the moral high ground, making them a Baptist. However, they also at the same time gain through accumulating social currency. From the standpoint of publicity, this is gold. The detrimental effects of tobacco use have been well documented and overall public perception of tobacco consumption is quite negative. These factors make tobacco low-hanging fruit in terms of formulating policy. Whether it is the internal policies of a private company or the stroke of a legislator’s pen, tobacco is an easy target. There is no quicker way to look like a hero than to stick it to Phillip Morris. However, why continue to sell soda and candy if you are concerned about fostering public health? Would the customer backlash be too strong? That said, it is difficult to quell my continued skepticism of CVS’s motives for this move. There is a high probability that CVS is operating as an advocate and a beneficiary.

Letter to Bruce Yandle: Dual Role Actor Dynamic: Bootleggers and Baptists

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Dear Dr. Yandle,

 

Throughout the pandemic, I have been reading more journal articles on Public Choice Theory.  I would have to say that now I am a convert. Previously being a layperson who was fond of the Austrian School. While there are many captivating concepts expressed in the Public Choice literature, the concept of Bootleggers and Baptists has so far been my favorite. In my opinion, the depth of your observations in this conceptualization extends beyond oddball coalitions and the transactional aspects of regulation. The Bootlegger and Baptists dynamic provides us with candid commentary on the nature of regulation.  Raising the important question of who stands to benefit from this law passing? Making the moral considerations for advocacy of specific law questionable. Does the benefit secured by implementing more safety regulations outweigh the decrease in market competition? As you have mentioned in previous interviews and podcasts, many of these costly measures end up acting as means for established producers to gain greater market share while circumventing anti-trust laws. The smaller businesses simply cannot afford to comply with the new and onerous requirements.

 

The insights into the self-serving quiddity of regulation aside, conceptually the Bootleggers and Baptists dynamic has been proven to be very versatile. It can be applied to just about any policy position and is applicable even outside the realm of political decision-making. I have seen countless examples of unlikely bedfellows teaming for a shared objective at work. The possibilities for application are seemingly endless and can even be applied to traditionally apolitical institutions.

 

It is the very versatility of the Bootleggers and Baptists concept that entices me to come up with novel applications of the theory. Leading me to the question why cannot the Bootlegger and Baptist be the same individual or group? An actor can possess multiple motives for the same action, the same could be true for advocacy of various regulations.  An individual actor or a group of actors could have a sincere moral concern but also simultaneously stand to gain from the regulation. This is not to say that the ratio of moral concern and self-interest is equal. For the individual actor or group self-interest or moral concern may take primacy over the other set of incentives and motives. If the individual or group provides a moral argument and is concurrently a silent beneficiary, they are both a Bootlegger and a Baptist. Regardless of the degree to which they qualify for either category.

 

I adorn this potentially novel observation with the title of a “Dual-Role Actor Dynamic”. Whether we examine the advocacy of a single economic agent or the collective action of a group there is the potential of Dual-Role dynamic. Even getting as granular as the level of an individual actor there is the potential for alignment of incentives and motives. In a sense, the individual is combining their self-interest and moral concerns into one action. Expressing an internal agreement between their moral convictions and self-interest. The best analogy that can be made is if the psychoanalytical stratifications of consciousness, the ID and Superego,  wherein complete unison. The proverbial devil and angel on our shoulders decided to shake hands signifying a truce. All because our selfish and moral motives are in agreement. In a group setting, the collective action is merely an aggregate of each group member’s own moralistic and selfish inclinations.

 

Recently, I believe to have found a real-life example of a “Dual-Role Actor Dynamic” in the domain of ballot access laws. After reviewing a few legal papers detailing the issue, I began to realize many of the moral arguments for stringent requirements also were silent beneficiaries. In theory, moral arguments such as shielding voters from frivolous candidacies, confusion, and political instability may be sincere. However, they are being made almost entirely by legislators, bureaucrats, and public officials affiliated with one of the major parties in the United States. Their moral concerns may be merely a thinly veiled-cloak to obscure blatant self-interest. Due to my inability to test the veracity of the sincerity of the invested interests advocating for stricter laws, I will have to take their claims at face value. While these invested interests purportedly feel a duty to protect the voter and maintain the integrity of democracy they still stand to gain. By imposing heavier burdens upon third-party candidates it redirects votes that would go to minor party candidates towards the two major parties. Effectively leaving the political duopoly in the United States intact. Making these advocates potentially Dual-Role Actors.

 

Dr. Yandle, I am aware you are very busy and most likely have a lot of other projects in the works. That being said, I appreciate you taking the time to read my letter. I understand that I am a far cry from a professional economist, however, any constructive feedback would be greatly appreciated. Even if my expansion of the Bootleggers and Baptists dynamic is conceptually flawed it was still an engaging intellectual exercise to grapple with this idea conceptually.

 

 

Thank you again, professor, for your innovative contribution to political economy,

 

Sincerely,

 

Peter C. Clark.

 

 

Bootleggers and Baptists IX: Ballot Access Laws- An Example of A Dual Role Actor

 

 

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Introduction:

 

Many Americans have expressed their displeasure with our current two-party political system. Back in 2016, opinion polls suggested that the majority of young voters were unhappy with the established political parties. Some experts even suggest that the days of the Republican-Democratic duopoly may be numbered. Such conjecture ignores the incentives of the self-interest legislators to maintain the status quo. Legislators are generally affiliated with one of the major parties that monopolize American politics. By any realistic estimate, the Republican-Democrat paradigm in the U.S. is here to stay.

 

The irony is that prior to the 1930s third-party candidacies were quite common.  The Republican party started as a minor party focused on the abolition movement of the 19th century. In the 1930’s the trepidation surrounding the potential growth of the Communist party in the United States laid down the substrate for stricter ballot access laws. Per the research of the political scientist, Richard Winger, the requisites to appear on the ballot have only increased over the years. Typically presenting an asymmetrical burden upon independents and third-party candidates. Unfortunately, previous case precedence has shown that the Supreme court seldom takes these insurmountable barriers to entry seriously. Presenting notable threats to the First and Fourteenth Amendment rights of minor party candidates in elections. The courts typically skirt over these considerations through loose technicalities making it impossible for the underdog to have a favorable ruling. This is particularly alarming when presented with the fact that ballot access laws are typically utilized to exert political control and maintaining dominance.

 

There are several core arguments for maintaining the status quo of the two-party system. One of the standard points is a state interest to look out for the best interests of the voters. By eliminating voter confusion, ballot overcrowding, and eliminating frivolous campaigns. While many proponents of stricter ballot access requirements provide lips service to the concern of ballot overcrowding it has never been a serious issue in American elections. The other category of concern expressed by ballot access law advocates is that of keeping political stability.  Although per attorney Oliver Hall of the Center for Competitive Democracy there is little evidence to suggest that the absence of stringent requirements would result in instability.

 

Bootleggers and Baptists:

 

Bruce Yandle’s examination of coalition-building in his conceptualization of Bootleggers and Baptists tends to have two acting parties. The Bootleggers that stand to benefit from the policy position, action, or regulation. On the other side of the alliance are the Baptists who provide the moral justification for the suggested course of action. The Baptists provide the moral smoke-screen that enables the Bootleggers to obscure their self-interested motives.

 

Ballot access laws like most policies have their moral proponents and silent beneficiaries. However, it can be argued that the instance of American ballot access laws the moral advocates, and the beneficiaries are the same. Presenting a scenario of a “dual-role” actor coalition advocating for these policies. Dual-role actor coalitions can be found in a wide array of social organizations the actions of a solitary economic agent to the aggregated motives of a group. The event of a dual-role actor coalition is more than just a coincidental alignment of motives within a single group or person. It is the unification of self-interest and moral goals. If an individual can hold multiple motives simultaneously, there is the possibility of an agent to be both a Bootlegger and a Baptist. Even if the moral element is being subverted and the self-interest is taking primacy in the individual’s advocacy. Moral concerns and the allure of potential benefits may not necessarily be equal in the decision-making process. If an actor or group provides a moral argument for policy and stands to benefit, then they are a dual-role actor.

 

Ballot access laws exemplify the previously described dynamic of coalition building.  Most legislators fall into either one of the dominant camps in the bipartisan divide. Making their self-interest quite salient. Placing a great burden on third-parties will help retain the power of Democrats and Republicans in American political life. Especially when the Supreme court has marginalized the Constitutional concerns of ballot access laws for third-party candidates. Reinforcing the institutional barriers imposed by the legislator. The same self-interested lawmakers also voice concern over political stability,  voter confusion, and weeding out frivolously campaigns. These objectives may or may not be laudable, but are moralistic in tone making them the rhetoric of a Baptist.

 

The legislator making itself the white knight that saves the common voter from confusion, joke candidates, ballot overcrowding, and political chaos is unnecessary.  Many of these issues can be remedied at the ballot box rather than through passing bills. Often pro-market economists will expound upon the concept of consumer sovereignty.  I would like to suggest that matters of voting are best resolved by voter sovereignty.  Meaning that voters and the electoral college will ultimately determine whether it is permissible for satirical political parties to be on the ballot.  There isn’t an ever-present moral duty to shield society from such issues.  Weak third-parties rise and fall on their own merits.

The notion of this creating instability is laughable at best. Third-parties have next to no electoral representation in the United States. The platitude of voting third-party squandering votes is so pervasive throughout American society, the oddball candidate doesn’t stand a chance. Political candidacies mirror advertising campaigns. There are voter demographics, candidate/party branding, and behind the scenes marketing. As with any consumer product, brand recognition is important. Most of the ideologies supported by minor parties tend to be conceptually foreign to the average voter. Making the probability that even in the absence of strict ballot access laws the two major parties would still be in power.