Re: Median voter thm. Elementary question
In a message dated 12/5/02 12:56:07 AM, [EMAIL PROTECTED] writes: Howdy, I've never really studied the Median Voter Theorem. Recently I read where someone claimed that the U.S. political system was designed to keep the two parties nearly identical by keeping other parties out. I assumed that the reason they Dems Reps seem so close may be because of the MVT--they want the middle guy's vote. So then I thought, suppose a third party were let into the race, does the MVT still hold w/ for 3 or more candidates? Does it weaken as more candidates are added, or do they all bunch toward the center for for any n2, where n is the number of candidates? Does anybody know of a good discussion of it online? -jsh Well look at the 1992 presidential race. You had Bob Dole, the tax-collector for the welfare state who never met a tax hike he didn't like and the architect of affirmative action, Bill second-biggest tax hike in history, and Ross let's fix what's broke by raising taxes Perot. You essentially had three mushy-moderate statist candidates running for office, and nobody openly advocating either mainstream conservatism or mainstream liberalism (if there is still such a thing). We needed Perot's brand of mushy-moderate statism like Al-Queda needs a new form of explosive. John Anderson in 1980 likewise offered fiscal conservatism and social moderation, in other words, warmed over Jimmy Carter, although since Reagan won, and would have won even had Carter gotten all of Anderson's votes (unlikely in the extreme based on exit-polling) it would seem we had two candidates rather far from the media voter. Still, most third party candidates in America (and perhaps in some of the parliamentary democracies) seem to offer platforms that are determinedly away from the median voter's squishy preferences. I think of candidates like Strom Thurmond, who probably captured the median white voter in the South, but fared poorly with most other voters. Green Party and Libertarian Party candidates, offering platforms well away from the median voter, fare even more poorly, at least in all but small local races. (I recall a bar owner in Denver, registered as a Libertarian, getting elected to the Denver Election Commission while I lived out there.) From the little I know about the MVT--and it's little indeed--it seems to assume that the candidates have no ability to influence the median voter, so as to move it more or less in one direction or the other. If so I'd have to say that it makes a more-than-heroic assumption. I think few people would have guessed that during what appeared to be the heyday of unabashed statist-liberalism and in the wake of Watergate that a strongly-conservative Republican candidate would win by a large majority in 1980. It's remarkable how quickly attitudes appeared to shift on a wide variety of issues from busing to taxes, to welfare programs to abortion to defense. While it's undoubtedly true that many people secretly agreed with Ronald Reagan's positions throughout the 1970s but feared to admit it to avoid social condemnation, it must also be true that Reagan and his supporters persuaded others who had not previously agreed, thus shifting the median voters toward the right across a spectrum of issues. By focusing on the median voter, the MVT seems to give credence to the mushy moderate's election creed--pander to me or lose when I vote for your opponent--but oftentimes, as we've seen in recent elections with Libertarians pulling votes from Republicans and Greens pulling votes from Democrats that not pandering to the extremes loses elections too. Indeed, it's not clear that the median voter theorem actually describes the process by which candidates typically win in highly-publicized elections. Presidents don't typically win by persuading all the mushy moderates, who tend to break both ways and can't generally be relied upon by a major party no matter what it does, but rather by building coalitions of voters highly-motivated by various issues. Put together a coalition of blacks, Jews, Northern WASP elites and labor union members and you can win even if you're too liberal (or too statist) for the median voter. Put together a coalition of defense hawks, right-to-bear-arms advocates, tax-cutters, budget-balancers, welfare-cutters, deregulators and pro-life advocates and again you can win without appealing too much to that mushy moderate in the middle. Voters tend to vote based on how they feel about candidates rather than what they think about candidates. The highly-ideological voter bases that feeling on the candidates' position on issues. But the mushy moderate median voter (that has a nice assonance to it, doesn't it?) based that feeling on things like how well-spoken the candidates seem, or whether the candidate came to the voter's house for the Iowa Caucus or has a funny accent made from a Texas accent overlaid on a Georgian
Fw: Median voter theorem
But perhaps third parties don't siphon off more votes because they're undercapitalized. It's hard for an upstart domestic auto company to challenge General Motors, or other established automakers. Remember DeLorean? He was a third party automaker. Democratic politics appear to be (inherently?) oligopolistic. (Funny, I just remembered that the Soviet political system was often described by western observers as an oligopoly--although they described themselves as a democracy. More support for my pet theory that differences between Communism and social democracy, while they do exist, are in many ways less striking than the parallels.) ~Alypius Skinner I've never really studied the Median Voter Theorem. Recently I read where someone claimed that the U.S. political system was designed to keep the two parties nearly identical by keeping other parties out. I assumed that the reason they Dems Reps seem so close may be because of the MVT--they want the middle guy's vote. So then I thought, suppose a third party were let into the race, does the MVT still hold w/ for 3 or more candidates? Does it weaken as more candidates are added, or do they all bunch toward the center for for any n2, where n is the number of candidates? Does anybody know of a good discussion of it online? Well look at the 1992 presidential race. You had Bob Dole, the tax-collector for the welfare state who never met a tax hike he didn't like and the architect of affirmative action, Bill second-biggest tax hike in history, and Ross let's fix what's broke by raising taxes Perot. You essentially had three mushy-moderate statist candidates running for office, and nobody openly advocating either mainstream conservatism or mainstream liberalism (if there is still such a thing). We needed Perot's brand of mushy-moderate statism like Al-Queda needs a new form of explosive. John Anderson in 1980 likewise offered fiscal conservatism and social moderation, in other words, warmed over Jimmy Carter, although since Reagan won, and would have won even had Carter gotten all of Anderson's votes (unlikely in the extreme based on exit-polling) it would seem we had two candidates rather far from the media voter. Still, most third party candidates in America (and perhaps in some of the parliamentary democracies) seem to offer platforms that are determinedly away from the median voter's squishy preferences. I think of candidates like Strom Thurmond, who probably captured the median white voter in the South, but fared poorly with most other voters. Green Party and Libertarian Party candidates, offering platforms well away from the median voter, fare even more poorly, at least in all but small local races. (I recall a bar owner in Denver, registered as a Libertarian, getting elected to the Denver Election Commission while I lived out there.) From the little I know about the MVT--and it's little indeed--it seems to assume that the candidates have no ability to influence the median voter, so as to move it more or less in one direction or the other. If so I'd have to say that it makes a more-than-heroic assumption. I think few people would have guessed that during what appeared to be the heyday of unabashed statist-liberalism and in the wake of Watergate that a strongly-conservative Republican candidate would win by a large majority in 1980. It's remarkable how quickly attitudes appeared to shift on a wide variety of issues from busing to taxes, to welfare programs to abortion to defense. While it's undoubtedly true that many people secretly agreed with Ronald Reagan's positions throughout the 1970s but feared to admit it to avoid social condemnation, it must also be true that Reagan and his supporters persuaded others who had not previously agreed, thus shifting the median voters toward the right across a spectrum of issues. By focusing on the median voter, the MVT seems to give credence to the mushy moderate's election creed--pander to me or lose when I vote for your opponent--but oftentimes, as we've seen in recent elections with Libertarians pulling votes from Republicans and Greens pulling votes from Democrats that not pandering to the extremes loses elections too. Indeed, it's not clear that the median voter theorem actually describes the process by which candidates typically win in highly-publicized elections. Presidents don't typically win by persuading all the mushy moderates, who tend to break both ways and can't generally be relied upon by a major party no matter what it does, but rather by building coalitions of voters highly-motivated by various issues. Put together a coalition of blacks, Jews, Northern WASP elites and labor union members and you can win even if you're too liberal (or too statist) for the median voter. Put together a coalition of defense hawks, right-to-bear-arms advocates, tax-cutters,
U of Cal scientists question efficient market hypothesis
http://www.newscientist.com/news/news.jsp?id=ns3124 Statistical physics predicts stock market gloom 11:5902December02 NewScientist.com news service A statistical physics model is predicting that the US stock market recovery suggested by recent rises will only last until spring next year, before tumbling yet further. Physicists Didier Sornette and Wei-Xing Zhou at the University of California in Los Angeles claim to have identified an "anti-bubble" in the Standard and Poor's 500 stock market index. Their model also describes a similar anti-bubble in the Japanese Nikkei index in the early 1990s, which preceded a decade of decline. However, Neil Shephard, an economist at the University of Oxford, UK, is sceptical. "Firstly, the track record of empirical prediction isn't very good and secondly, economic theory says it shouldn't work," he told New Scientist. This is because traders act on new information about the market by buying or selling shares, making it impossible to make a prediction without it affecting the outcome. But the physicists' predictions are in line with those of some others. Haydn Carrington, a dealer at spread betting firm City Index in London, also believes the US market is in a long decline, but that a short term rally is likely: "The Americans are optimistic about recovery, so that will probably happen." Herding behaviour Bubbles and anti-bubbles are traits of herding and imitative behaviour, Sornette says. Investors and traders constantly exchange opinions and information, generating a feedback loop that can drive the performance of the market. A bubble, or bull market, occurs when optimism spreads, pushing the market value artificially high. The bubble may then burst in a dramatic crash, but if not, a slow period of downwards adjustment will follow - a bear market, which Sornette calls the anti-bubble phase. An anti-bubble market has two key characteristics. The value slides inevitably downwards, but oscillates as it does so. The value of the SP 500 has been riding this rollercoaster since August 2000. Sornette says that the "up" seen now is just one of the oscillations, and that hopes of a recovery will be dashed by a "down" in mid 2003. And the trough that it sinks into may be deeper than this year's low, he says. Failure mechanisms Related Stories Pound and euro behave as if they are the same currency 5 December 2001 For more related stories search the print edition Archive Weblinks Didier Sornette, UCLA City Index Quantitative Finance SP 500 The model used to make this prediction describes "crowd" behaviour of the type Sornette expects from traders and investors. It consists of a set of three equations that describe feedback processes. He developed the equations when studying failure mechanisms in materials - the way that cracks develop and cause damage is similar to the way that information seeps through the market and changes opinion, he believes. The model requires the input of two constants: one quantifies the overall trend (down in an anti-bubble), the other the frequency of oscillation. He chose constants such that the model matched the SP data from the past few years - and then extended the model to 2004. Journal reference: Quantitative Finance (vol 2, p 468) Jenny Hogan This story is from NewScientist.com's news service - for more exclusive news and expert analysis every week subscribe to New Scientist print edition.
Re: reaganomics--elementary question
Did Reaganomics essentially hinge on the Laffer Curve (i.e. the elasticity of tax receipts w/ respect to tax rate [?]), and its implications regarding tax revenue? Or was there alot more to it than that? Paul Craig Roberts has a fascinating book about economic policy in the early years of the Reagan administration, titled Supply-Side Revolution (Harvard, 1984). A few years ago, Roberts and Blinder were involved in an acrimonious and rather nasty exchange about whether the Laffer curve was part of official policy. Essentially, as a I recall it, Blinder claimed administration policy was based on the Laffer curve, Roberts said it was not and dared Blinder to offer some evidence. Blinder's response was to say something like it was well known at the time but not offer any actual evidence, and the exchange went downhill from there. Bill Sjostrom + William Sjostrom Senior Lecturer Department of Economics National University of Ireland, Cork Cork, Ireland +353-21-490-2091 (work) +353-21-427-3920 (fax) +353-21-463-4056 (home) [EMAIL PROTECTED] [EMAIL PROTECTED] www.ucc.ie/~sjostrom/
Re: U of Cal scientists question efficient market hypothesis
--- Alypius Skinner [EMAIL PROTECTED] wrote: A statistical physics model is predicting that the US stock market recovery suggested by recent rises will only last until spring next year, before tumbling yet further. Why would this contradict efficient markets? The efficient-market proposition does not imply any absence of fluctuations, nor does it imply any limitation on the rise and fall of asset prices. It states that prices take into account public beliefs. If the expectation is that others will buy the assets at higher prices, then why would it be inefficient for the price to rise? It seems to me that efficient markets is a micro phenomenon on specific assets at some moment ex ante, not a proposition about the whole financial market over the long term ex post. Fred Foldvary = [EMAIL PROTECTED]
Re: Median voter thm. Elementary question
--- john hull [EMAIL PROTECTED] wrote: ... So then I thought, suppose a third party were let into the race, does the MVT still hold w/ for 3 or more candidates? MVT posits a bell-shaped distribution of political views, and the parties respond to that. Think of hot-dog vendors at a beach. Two vendors will position themselves at the middle, each getting half the business. Comes a third vendor. If he is in the center, each now gets 1/3 the sales. If one vendor moves just a bit away, he gets 1/2 while the others get 1/4. So a second vendor too moves a bit the other way. The middle vendor, left with little share, now moves a bit further towards one end than one of the other 2. The equilibrium will be that they will spread themselves so that each gets 1/3 of the sales, 1/6 on either side. So, for politic parties, expect a left, right, and middle party. The equilibrium might be unstable sometimes as the left or right party goes to the middle to get a greater share, but if political positions are flexible, the middle party will then move to the other side of that party, and if they learn that moving around does not gain anything in the long run, the equilibrium will hold. In reality, a political party may not be able to change its doctrine so easily, so we can see unequal shares for a while, but over the long run, except for ideologically driven parties, they will move towards equal shares, or more likely, two of the parties will merge, and they will return to a 50/50 split at the middle. The reason for the merger is that two parties are more stable than three parties, since once in a while there will be an ideologically driven candidate (e.g. Goldwater) who will move towards one end and reduce the party's share. That can happen with two parties (again, Goldwater) but less often, since the middle position is less ideology-driven. Fred Foldvary Fred Foldvary = [EMAIL PROTECTED]
RE: Median voter thm. Elementary question
Fred Foldvary wrote: MVT posits a bell-shaped distribution of political views. No, it doesn't. A uniform distribution works just as well. Comes a third vendor. If he is in the center, each now gets 1/3 the sales. If one vendor moves just a bit away, he gets 1/2 while the others get 1/4. So a second vendor too moves a bit the other way. The middle vendor, left with little share, now moves a bit further towards one end than one of the other 2. The equilibrium will be that they will spread themselves so that each gets 1/3 of the sales, 1/6 on either side. This is incorrect. There is no pure strategy equilibrium with three players. [See, for example, Gibbons A Course in Game Theory, or Mas-Colell, Whinston and Green Microeconomic Theory] There is, of course, a mixed strategy equilibrium. Alex Robson ANU
RE: Median voter thm
--- Robson, Alex [EMAIL PROTECTED] wrote: A uniform distribution works just as well. Of course MVT does not require a bell-shaped distribution of political views, but empirically that is what is found in most populations. There is, of course, a mixed strategy equilibrium. which is what I described. I did not say there would be a Nash equilibrium in pure non-cooperative strategies. The two players nearest the edges move towards the middle player, as I stated. The third player then moves around to get almost half the share. Another player can then jump over to be closest to the edge. The equilibrium for non-cooperative players is indeed a mixed probabilistic strategy. But players who play a cooperative game could agree that since they will over the long run get 1/3 shares, being equal in all characteristics, they may as well settle in one equilibrium. In that case, I don't see why this would not be at the 1/6, 3/6, 5/6 positions. I included the possibility of merging two of the parties into one party. When the Republican Party became a successful 3rd party in 1860, the US quickly reverted to two parties. I don't see why this would not be a pure strategy. If there is no ideological drive, the three parties are better off being two parties. One could then ask why the two parties do not merge into one party. The answer is that in reality, parties operate in more than one dimension. The hot-dog vender analogy works with proportional representation, where each party gets a share of the vote like hot-dog vendors getting a share of the sales, but of course does not apply to winner-take-all plurality voting. With two hot-dog vendors, consumers are best off if the vendors locate at the the 1/4 and 3/4 points, and the vendors are no worse off than if they are both at 1/2. So why could there not be a cooperative outcome where two political parties agree to be at 1/4, 3/4? That would also reduce the threat of minor-parties arising at the edges. That might account for the differences we do see between Republicans and Democrats. In the real world, rivalry does not exclude cooperation. Since empirically there does seem to be a bell-shaped political distribution in the USA, the 1/4 and 3/4 points refer to population, so the difference in ideology would not be large, but not tiny either. Fred Foldvary = [EMAIL PROTECTED]
Re: A Short Review of *Hard Heads, Soft Hearts*
--- john hull [EMAIL PROTECTED] wrote: Aren't payments in kind worth less than payments in cash, when the value is a significant portion of one's income, because they impose the consumption decision (for lack of a better term) on the individual? Yes, assuming no tax difference. Many payments are made in kind today because the employee does not have to pay an income tax on it, or because it is tax deductible for the employer but not for the employee. Note, however, that psychic income is paid in kind. If that is true, then maybe taxes in kind may be analogous? Just a guess. Yes, taxes in cash are in general preferred to taxes in kind, such as to be drafted into the military or serve on a jury. There is an economic difference, but no moral difference in terms of being coercive. The tax of restrictive regulations is paid in kind. Fred Foldvary = [EMAIL PROTECTED]
Re: U of Cal scientists question efficient market hypothesis
--- Alypius Skinner [EMAIL PROTECTED] wrote: A statistical physics model is predicting that the US stock market recovery suggested by recent rises will only last until spring next year, before tumbling yet further. Why would this contradict efficient markets? I originally called this message physicists discover anti-bubble; just in case that was one the two possible reasons the message did not appear on the list, I retitled it to be obviously pertinent to economics. (But I also cross-posted the first time, so maybe that was the problem.) Of course, that is not my complete answer to your question. The efficient-market proposition does not imply any absence of fluctuations, nor does it imply any limitation on the rise and fall of asset prices. It states that prices take into account public beliefs. If the expectation is that others will buy the assets at higher prices, then why would it be inefficient for the price to rise? It has always seemed to me that the greater fool theory is incompatible with market efficiency. If prices really are going up for a period of time solely on expectation that someone else will always be willing to pay prices even more unjustified by business fundamentals than the price the previous buyer paid, then it would be possible to predict that the overbid stocks will inevitably move downward by a large amount. That sort of extreme price distortion should not be possible in a highly efficient market. After all, all stock purchases are made in expectation that the price will go up in the future (which can only be because other buyers will be willing to pay more for them). If that is what you mean by an efficient market then to say that securities markets are efficient becomes a tautology rather than a theory. It seems to me that efficient markets is a micro phenomenon on specific assets at some moment ex ante, not a proposition about the whole financial market over the long term ex post. Fred Foldvary So are you saying that the market pricing of some stocks are efficient, but not the pricing of others? If the pricing of all (or nearly all) individual assets are efficient, then the market as a whole for these assets must be efficient. If a large number of securities are irrationally priced (based on business fundamentals) at any given time, then one can not speak of an efficient market, because the market average as a whole will become distorted by the large number of mispriced securities. Also, if the market (or the vast majority of its individual components, if one wishes to focus on the individual trees rather than the forest) are efficiently priced from, say, day to day, then the whole financial market over the long term must be efficient. The whole market cannot be inefficient over the long term if its individual component assets are efficiently valued at any given moment in time. Of course, an economist or historian may say, In the long run, markets will rise (or an astronmer or geologist may say, Over the long run, the markets will go to zero) for fundamental reasons without contradicting the efficient market hypothesis--but one should not be able to use a statistical analysis to correctly predict the ups and downs of market averages if the efficient market hypothesis is correct. The markets may or may not be efficient, but the term must be defined in some way that has enough objective meaning to be analyzed and tested. ~Alypius Skinner = [EMAIL PROTECTED]
Re: reaganomics--elementary question
In a message dated 12/5/02 10:04:34 PM, [EMAIL PROTECTED] writes: As a historical note abou the Laffer curve, it's interesting to see that the phenomenon was already described by Bastiat in his 1847-02-21 article Curieux phénomène économique (a peculiar economical phenomenon), itself inspired from actual experience gathered in Great Britain before that time. http://bastiat.org/fr/cpe.html The phenomenon is also discussed in his latter essay Paix et liberté ou le budget républicain (not yet digitized, but available as scanned photos of the original french text). Re-reading his Economic Harmonies (the whole of which are available in English from econlib.org), I can but marvel at how he was more than just a precursor of von Mises -- he did have a deeper and clearer understanding of economic mechanisms than is even possible nowadays, with so ma For that matter Alexander Hamilton makes a supply-side argument in The Federalist, some 60 years before Bastiat, when he talks about how exise taxes tend to be self-limiting: if you make the rate too high, you get less revenue. The man known as the greatest Secretary of the Treasury since Alexander Hamilton, Andrew Mellon, also used supply-side rational in arguing for his tax cut package, which resembled Reagan's initial proposals in a large number of ways. In the book Mellon wrote pushing his tax cut proposal, Mellon quoted Adam Smith, so I believe there's something in Wealth of Nations that uses supply-side rational. David Levenstam
