Game Theory in Democracy and Why Celebrity Apprentice is Fatally Flawed

1. I've been thinking about Danny's comment that "our pseudo democracy makes us think we have a voice and can make changes in government and the Chinese know they don't have one. Either way the people have the same pull." I don't think that's true. In an authoritarian regime, the majority can want something and not get it, unless they are willing to commit civil disobedience and revolt and possibly face physical punishment. Even then they might not get it what they want, and run a very big risk (e.g., Iran, which may or may not work out). That means most, even strong majorities are not going to get what they want, unless the government wants it too. In a democracy, the majority only has to want something so bad that they become single-issue voters on it, and they can usually get it. And the majority in a democracy doesn't risk serious retribution by government. Those are big differences. 
2. Unfortunately, while not strictly true, the statement certainly contains truthiness. That is Democracy gives you the feeling of control with very little actual control. Consider the following, which I think is kind of like game theory, but without the math (which I understand real game theory utilizes). We have persons A, B and C, who are students in a class trying to pick a class pet. They have three choices, a cat a dog and a fish. A prefers cat to dog, and dog to fish. B prefers dog to fish and fish to cat. C prefers fish to cat and cat to dog. If they all vote at once, they'll have one vote for each pet, and no decision. They'll have to vote in two rounds, between two pets, and the next round between the winner of the two, and the remaining pet. the outcome however, depends completely on the ordering. So, if the class picks between dog and cat, cat will win the first round (A and B for cat), and then in the second round between cat and fish, cat will win (A and C voting for cat). However, if the class picks between cat and fish first,  fish will win the first round ( B and C will vote for fish) and between dog and fish, dog will win the second round (A and B will vote for Dog).  In other words, voting only gives us the illusion that we are getting our preference. In reality it's random, or worse, can be manipulated.
3. If you want to get even more sad about it, you can listen to this excellent but depressing podcast by Russ Roberts and Don Boudreaux. First they point out that one vote basically never counts. Boudreaux doesn't even bother voting because he views it as a waste of time. Then they point out that, because you vote for candidates and not policy positions, you are taking the bad with the good, making the outcomes even more random and less representative of actual popular preferences. Picking a candid is like shopping, by choosing between several prepackaged shopping cart, where the voter just has to find the best fit for his preferences, and buy a few things you probably don't want or need. Then, what happens if only the policy positions you opposed but could live with are the ones that are enacted? I'm shooting from the hip here, but it seems possible to me that voters could pick one "cart" because of strong preferences about a few of the items that are in the cart, with none of the positions actually garnishing majority support. Like a cart that appeals to many various special interests.
4. I've long thought that people who don't want to vote shouldn't bother. If people don't care how they are governed, why not let the people who do care pick the leaders?  Now non-voters have another reason not to vote: one person can't make a difference.
5. I, by the way, have become an avid reader of Cafe Hayek, which is Boudreaux's and Roberts' blog. I almost get giddy about new blog posts. Today's post taking a journalist, to task for, well, acting like a journalist, would be funny if it weren't so sad and common. 
6. I want to say that I finished reading A Conflict of Visions. It was actually kind of a slog, and took me several months. First observation: Sowell is brilliant.
7. Second Observation: there is almost nothing about libertarianism in the book. I feel like libertarianism fits pretty well with a constrained vision, but Sowell describes it as a hybrid. I think it deserved more than the half-page treatment it got. (on to Frank Meyers?)
8. Third Observation and biggest lesson learned: liberals always seem to question conservatives' motives. I've always thought those accusations were in bad faith. Conservative and liberals generally want the same ends--help the poor, create wealth, increase freedom, etc.--we just have good-faith disagreements about how to reach those ends.  I can't find a good passage right now, but Sowell explains why liberals judge conservatives that way. Essentially, when you're liberal, and you think that people are "unconstrained", there is no reason to doubt that humans through government can correct social problems. The only think holding government back are the obstructionists. Anyone who does object to solving the problems is acting for some selfish motive and is evil. I need to find that passage because that's not quite right.
9. On to something a little lighter. Celebrity apprentice is fatally flawed. In normal apprentice you teams get a task, the project manager runs the task and people are held accountable for how they perform. Generally the project manager that loses gets fired. Now, some people on the show that become "celebrities" in the loosest sense of the word, like Omarosa, are going to hang around a bit longer. But everyone has about equal star power. Celebrity apprentice messes that balance up. Some celebrities have more star power, and ratings are everything for a show, so Donald's choice of who to fire is heavily affected by star power. Also, getting in a cat fight can only help your chances to succeed. Hence Joan Rivers and Annie Duke lasted to the end because they were in a huge cat fight (although I supposed normal apprentices can help themselves this way, too). Also, in celebrity apprentice, "succeeding" in the tasks is more related to who's in the celebrity's rolodex, and how well they can shake the money tree, instead of  how well they perform at the task. Fundraising, not performance is key. Either that, or every task is fundraising, so they should just call it celebrity fundraiser.
10. If you're a little nerdy, you'll probably find this funny.

Econ Talk Quiz

My commute is about 35 minutes. That gives me a lot of time to listen my iPod/iPhone. One of my favorite things to listen to is Russ Robert's podcast, Econ-Talk.

Here's a hypothetical question Russ asked one of the podcasts. How would taxing each cup of coffee 20 cents affect the size of the cup? I'll put my answer in the comments. The blog is also supposed to have an answer,and if I find it, I'll paste the URL in the comments, too.

The Pardox of Thrift

I'm trying to understand Keynesian business cycle theory. I think I get this much. There's a shock to the system that causes consumers to worry about the future. In order to smooth consumption, consumer spend less and save more. Spending less decreases the demand for goods and services. The resulting drop in demand for goods and services causes a drop in demand for people providing those goods and services, resulting lower GDP and unemployment.

Classical economics says that the creators of goods and services will respond to lower demand by lowering prices, and at the lower price they will be able to sell what they could have earlier. Similarly, workers will respond to lower demand by working for less.

Keynesians believe that prices and wages are sticky--that it takes time for people to understand that the labor that used to be worth more in nominal dollars, is actually worth less now in nominal terms. Thus, the necessary adjustment does not take place for some time, and that results in prolonged periods of unemployment and depressions.

Keynesians view the solution to this problem as increasing aggregate demand, or the total demand in the system for goods and services. If demand falls because of some shock to the system, it can be restored by government stepping in to supplement the demand, by spending money.

I'm having a hard time understanding the idea that saving reduces consumption, also called the paradox of thrift. Russ Robert and Steve Fazzari go a couple rounds on this point, here. I've now listened to this podcast twice, and I still don't quite get it. And I've been thinking about this occasionally since I first studied Keynes in college some years ago.

I do understand on one level that if a dollar comes to me, and I put 20 cents under my mattress, and spend 80 cents, and then someone else does the same thing (saving 20% and spending 80%) that will result in X number of dollars of economic activity. If you "save" less, and spend more, like say you save only 10%, and spend 90%, there will be more economic activity.

But "saving" in this instance is putting the money under your mattress. Saving, at least in common parlance, also means putting the money in the bank. The bank, however, is going to lend all but a small portion of that money out. So suppose you put a dollar in the bank instead of spending 90% of it, the bank will lend most of it out, and the person who get that loan will spend the money on consumption. It seems to me that, saving, then is actually mostly investing, which is also a specific type of consumption, which does not, in fact, reduce consumption, triggering the paradox of thrift.

So despite Fazzari's efforts, I don't understand the paradox of thrift.

UPDATE: ask and ye shall receive. Here is an article about Keynes by Richard Posner. Still not sure I understand the paradox, though.