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(I am trying to organize my thinking in this post.)

Three things to bear in mind (first two are facts and the third is an assumption):

  1. It is no longer possible for the Prime Minister to unilaterally call an election in the middle of a term without two-thirds of the House of Commons voting for it.
  2. The Leave vote is split between the Conservatives, the Brexit Party and Labour. The Remain vote in split between the Conservatives, the Liberal Democrats, the Greens, SNP and Labour.
  3. Boris Johnson is office-motivated not policy-motivated, i.e. he cares about being elected with a working majority and not about Brexit vs no-Brexit per se. He famously wrote two speeches, one pro-Brexit and one anti-Brexit and thought the former read better and went with it.

Johnson is giving every impression of hurtling towards “no deal”. He has shortened the term of Parliament, he is not negotiating with the EU and has come up with no new alternatives to no deal.

One way to understand this strategy is as the classic Schelling commitment tactic in a game of Chicken versus the EU. No deal would also hurt the EU so if they believe the UK’s threat to leave with no deal is credible, they will concede.

What if the EU does not concede? No deal would be terrible for Johnson’s re-election prospects. There would be an economic crisis, Scotland would start pushing for independence and there could be a similar push in Northern Ireland or even a return to violence.

So Johnson wants to be over-ruled by Parliament. To maximize the incentive of the Lib Dems, Labour and the Remain-backing Conservatives to organize, he needs to give them as little time as possible and give a credible sense he is going for no deal. Once, they overrule him, he can ask for an early election saying the country needs to vote to give Parliament direction. By having gone for no deal, he becomes the Leave candidate, unifies that portion of the electorate behind him while the Remain vote is still split. What happens after that? My guess would be that the UK ends up back in limbo forever stuck in negotiating stance but Johnson is fine with that as long as he gets to be PM.

This is the optimal path from Johnson’s perspective. It seems iteratively dominant to go for no deal. Either the EU blinks and no deal is better than the compromise-Theresa-May deal, or it does not, but no deal is replaced by kicking can down the road which is also better than the compromise deal.

But this relies on some backward induction argument where voters and competing political parties play along with Johnson’s forecast.

The most likely scenario is that Labour and the Lib Dems see through this strategy (though voters do not).

Their most dramatic countermove would be to accept the no deal status quo and leave it up to Johnson to deal with the EU till October 31. He would then cave and lose his brand as the Leave candidate. This would maximize electoral prospects of opposition parties. Some combination of morality, policy motivation, incentive to differentiate from the Conservatives and fear of actual no deal consequences will mean this option is not chosen.

A second move would be to pass no deal legislation and then refuse calls for an early election. This would be both responsible and then leave time for country to see Johnson’s incompetence for a while before an election occurs. But impatience on part of Corbyn for an election which he thinks he can win will undermine the patience required to implement this strategy.

So we are left with the third option which is to prevent no deal and then have an election in November or December once EU agrees to delay implementation of exit. And this is pretty much what Johnson wanted in the first place so his strategy is prescient after all.



There is a sender and two receivers, L and R. The sender has information, the state of the world, and can also make a decision. There is a socially optimal decision, the ethical decision, which depends on the true state of the world. The sender’s preferences depend on the gap between her decision and the ethical decision and on her “reputation” – more on reputation below.

If the sender only cared about making the ethical decision, her problem is simple – she implements the socially optimal policy for the privately observed state. But she also cares how much support her decision gets from the two receivers.The sender might care about her support because it affects the long run viability of the institution she belongs to. Or she might just want to be seen as being bipartisan. So the sender’s reputational concerns may arise for ethical reasons.

The receivers do not know the sender’s preferences – is the sender ethical or biased towards one receiver or the other? A receiver is more likely to support the sender the closer is the sender’s decision is to his own policy preference. The receivers’ preferences have a common value component. They might potentially update their preferences based on the information content of the sender’s decision.

Suppose the sender faces a decision where where the ethical decision favors L. If she makes that decision, she loses support from and that is bad for her reputation. So, she biases her decision rightward to maintain support. Perhaps she makes the same rightish decision for a set of information states from left to right in a pooling equilibrium. She loses support from the receiver but gets more support from the receiver. For ethical reasons, she makes  a decision which is not ethical from the one period perspective.

Hence, the press presents “both sides” even when it knows one side is right. The press has a super high standard of proof for calling someone out as a liar. Obama gave McConnell veto power over announcing Russian interference in the election. He could have gone ahead and announced the interference himself at the cost of being non-bipartisan but he did not. Comey broke FBI and DoJ policy by commenting when himself dismissing the case against Hillary Clinton. But he went with policy by not discussing the investigation of Russian interference and communication with members of the Trump campaign.

So, this framework helps to unify the strategic logic behind the way different institutions and decision-makers operate(d). But it also reveals a flaw in their decisions. This comes from the common value component of the receivers’ preferences. Receivers update on what the right decision is based on what they learn in equilibrium from the sender’s action. Some may switch their preference from left to right or vice-versa based on what they learn.  In fact, majority opinion may change. If there is some outcome that depends on majority opinion like an election, this switch can make dramatic consequences. If the cost of making an error is large,  the sender should condition on this event when they determine their message. Hence, if the reputational loss from changing majority opinion is large enough, the one period ethical decision and the long run ethical decision will be the same.

So, in this interpretation, the main Comey-NYT-Obama mistake was not to condition on the event they were pivotal but instead to focus on what was probable given the polls.

(HT: This is speculation based on Stephen Morris’s paper on Political Correctness and Ely-Valimaki on Bad Reputation. Here I am positing multiple principals rather than just one principal and there are is some common value component to principals’ preferences.)



Henry VIII (the right-wing of the Tory party) wanted to divorce his first wife (the EU) and marry Anne Boleyn (stop immigration and transfer payments to the EU ) but the Catholic Church (Angela Merkel) would not let him. So, he renounced Catholicism and became a Protestant, a new form of Christianity conceived by Martin Luther (Nigel Farage). But then Mary Queen of Scots (Nicola Sturgeon), a Catholic, married a French Prince when Elizabeth I (Boris Johnson) eventually came to the throne. Mary got beheaded and the Elizabeth’s reign turned out pretty well.

But here Boris’s and Elizabeth’s paths diverge. The Protestant Reformation was forward looking and emphasized the work ethic. Faragism – to the extent it is a philosophy – is backward-looking and is about denying globalization. Not clear then who gets beheaded, Boris or Nicola.

Trump is the Principal and a Republican Congress member is the Agent. Trump wants their support and wants to compel them to support him. There is no money to align incentives and all Trump can do is shower with praise (e.g. people who cave in to him are “brave” like Megyn Kelly who went to visit him in Trump Tower after their dustup) or rain down abuse (e.g. the Republican Governor Martinez of New Mexico who dared to text during one of his speeches).

From the Agent perspective, since there is no money, there is only re-election probability. This leads to two cases. In one case, the Agents reelection probability is increasing in being seen as pro-Trump. Then, Trump should allocate praise and abuse in the natural way. In the other case, the Agent’s re-election probability is decreasing in being seen as pro-Trump but Trump would still like Republican support to increases his election chances. Then, Trump should visit the Agent’s district if the Agent does not support Trump. He should say the Agent is brave and lie and say the Agent does support him. This threat maximizes compellence.


Marco Rubio provides the most interesting example. He has lumped in with Trump as he decides whether to run for re-election. If he throws his hat into the ring and Trump’s polls tank in Florida, Donald should threaten to campaign there heavily if Rubio shows signs of weakening in his support of Trump.

Forty-seven Republican Senators signed a letter to the Iranian leadership claiming that any nuclear non-proliferation treaty signed by President Obama could be vacated at the stroke of a pen by the next President. What is the impact of their tactic on the probability of the deal being signed?

There are many effects but here are four key ones:

1. The Iranians now get further confirmation that President Bush III will be tougher than President Obama. The deal on the table is the best they are going to get. This makes them more likely to sign.

2. Democrats who are skeptical of the deal with now rally round the President, as they did after the surprise Netanyahu speech. This makes a deal more likely.

3. The Iranians now get further confirmation that the deal may fall apart under next administration. This makes it easier for them to renege in the future if circumstances dictate – they can more credibly blame the U.S. for being untrustworthy. Their citizens will not blame them if they exit the agreement as the Iranian leadership can more credibly blame the U.S.

Russia and China can trade with Iran with less international condemnation as the U.S. can be more credibly faulted for the deal falling apart. This makes a deal more likely.

4. The “no deal” option just got better too for reasons outlined in 3. Iran can blame the U.S. for not agreeing to the treaty and try to persuade Russia etc to break sanctions. This makes “no deal” more attractive relative to “deal” and makes the deal less likely. It could also mean that the deal the Iranians now get is improved to reflect their better outside option. If the deal is already better than even the improved outside option, the improvement will have little effect on the chance of a deal.

So, unfortunately, the net effect of the letter on the probability of an agreement is ambiguous. But even if the letter makes a deal less likely, it makes it less likely by making Iran stronger.

You are trying to convince others that the product you are selling is high quality. Your target audience is concerned that the product is low quality. So your sales pitch should be credible – it should be convincing that the sales pitch would not be made by someone who is selling a low quality product.

Your target customers are also salesmen. They sell their own products and use a certain kind of lingo when they pitch. They use this lingo even when they are selling bad products.

Since you are pitching a product to them, you are tempted to use language they understand. But here is the problem: they know they use this language even when are makin’ stuff up. If you use that language, they suspect you are makin’ stuff up. So they do not believe you.

So, you have to come up with your own jargon, one your customers are unfamiliar with. Of course, back up your pitch with facts and logic. But if you pitch seems like BS, the evidence will have to be all the stronger to help you. If you have no facts and logic on your side, only a unfamilar pitch has any chance of succeeding.

Incredible piece by Dani Rodrik on a plot to discredit his father-in-law, a Turkish general:

On a drizzly winter day four-and-a-half years ago, my wife and I woke up at our home in Cambridge, Massachusetts, to sensational news from our native Turkey. Splashed on the first page of Taraf, a paper followed closely by the country’s intelligentsia and well-known for its anti-military stance, were plans for a military coup as detailed as they were gory, including the bombing of an Istanbul mosque, the false-flag downing of a Turkish military jet, and lists of politicians and journalists to be detained. The paper said it had obtained documents from 2003 which showed a group within the Turkish military had plotted to overthrow the then-newly elected Islamist government. The putative mastermind behind the coup plot was pictured prominently on the front page: General Çetin Doğan, my father-in-law

Begs the question: In a comparison between two types of pseudo-democracies – voting constrained by threat of military coups or voting manipulated by dirty tricks – which is the better system?


A division in a company, division A,  is trying to find talented people. They have a number of positions to fill and they can fill them now or wait to find better candidates. Once a position is filled, it is hard to terminate employment for a few periods at least. The profits of the division depend both on the quantity and quality of the people employed.

This system creates an option value to waiting. Given its payoff function, the division has a quality bar for hiring. The quality bar depends on the number of unfilled slots. It leaves some slots empty deliberately to capitalize on option value. There is another threshold for firing, also with an important option value component in its determination.

A CEO is hired to build value. He is focussed on the short term. For him, unused resources mean lower output – the quality is less important. So he starts allocating resources across divisions. If a division has unused resources or positions, the CEO gives them to another division if they can come up with a candidate that passes their bar.

Let’s assume the divisions have private values – they put zero value on the other division’s success. (Microsoft recently reorganized itself because different parts of the company were at war with each other.)

For each division, the option value of an empty slot declines – it can now be filled by someone from the other division. The incentives are obvious – both divisions lower their standards for hiring and firing. There is a race to the bottom.

Counterintuitive effects arise if there are common values – each division takes the other’s success into account. Suppose division A’s standards for hiring are originally higher than division B’s. Division A faces much the same incentives as in the case of private values – it will lower standards to pre-empt slot reallocation to division B. But division B, since it now wants to prevent the decline of division A, will raise standards so the principal will not give it division A slots. The fact that this seems so implausible argues in favor of private values.

In any case, even in the case of common values, the divisions’ equilibrium response to principal short termism will not achieve the first best. A better strategy is to reallocate slots between divisions ex ante. The reallocation should reflect the principal’s payoff function as well as those of the divisions. Then, let the divisions make their own decisions on hiring and firing.


Just went to a talk by Jesse Shapiro where he gave an overview his work on the media, much of it joint with Matt Gentzkow. One theme is that competing newspapers with different party affiliations generate more information for the electorate. How fitting to return to my office and find this Guardian discussion (by Howard Reed) on FT takedown  of Piketty (by Chris Giles).  Main issue is that FT did not account for differences in way wealth is measured across separate series which are then merged into one time series:

To summarise, Chris Giles’s investigation of Piketty’s data has uncovered some errors and inconsistencies which Piketty will hopefully address in future work. This shows the importance of quality assurance and third party checking of all results from statistical analysis – particularly when they involve spreadsheets, where it is very easy to make errors.

However, Giles then goes on to make a very serious error of his own in handling the UK data: he treats changes in the way wealth inequality is measured over the decades as if they were real changes in the underlying distribution of wealth. This error leads him to the misleading conclusion that wealth inequality fell in the UK between 1980 and 2010, whereas in fact it has increased (although not by quite as much as Piketty’s published results would suggest).

In some ways, the Guardian discussion is even clearer than Piketty’s own response today. This reflects the universal truth that (good) referees and discussants can often explain your paper better than you can yourself.

But this all leaves one question unanswered: When is Piketty going to respond to Debraj? He disputed Piketty’s theory not his data.

Your kid leaves her phone lying around. You find the scatterbrain never bothered to change her password as you guiltily break into her phone. You follow the trail of texts from last Saturday night. The slang is beyond you but Google translates. Shocked you find the supposed naïf and her friends were trying score some pot and booze from the cool crowd in school.

How should you respond?

You immediately want to go Putin-style hard on her ass. Confrontation, grounding, extra math classes. But any confrontation will likely reveal you accessed her phone. The stakes will only increase. Password changes, another phone purchased with the proceeds from the baby-sitting business..who knows where it will all end up?

You think through your strategy. Before this crisis, your threshold for the gateway drug was caffeine. So no Coca Cola has crossed the girl’s lips. But it seems she’s graduated from Izzes to Corona. Surely that worse than Coca Cola so you should come down like a ton of bricks? But one thing is certain – your access to her secret life is over because she’ll close off the information superhighway. How will you know if and when she’s “chasing the dragon” as people apparently said when you were young? You realize your threshold for intervention is coke (the drug) not Coca Cola. Just keep an eye on her messages till you see “yeyo” and then intervene.

You contemplate home schooling. You head over to the liquor cabinet and fix yourself a Scotch. Straight, no chaser.




Eric Posner makes a key point:

After the collapse of the Soviet Union, Ukraine inherited a huge nuclear arsenal, which it subsequently gave up. In return it received assurances from Russia,  the United States, and the United Kingdom that its territorial integrity would be respected. These assurances were embodied in the Budapest Memorandum of 1994. While the United States and the UK complied with that agreement by not invading Ukraine, Russia did not.

What if Ukraine had retained its nuclear arsenal? It seems more than likely that Russia would not have invaded Crimea. Putin might have calculated that Ukraine would not have used its nuclear weapons in defense because then Ukraine would itself have surely been obliterated by Russia. But the risk of nuclear war would have been too great; Putin would have stayed his hand. (However, it is possible that Ukraine would have been forced to give up its nuclear weapons one way or the other long before 2014.)

So between meaningless paper security assurances and nuclear weapons, the latter provides a  bit more security. One implication of the Crimea crisis may be the further unraveling of the nuclear nonproliferation efforts that President Obama has made the centerpiece of his foreign policy.

I would add that a similar implication follows from the lessons of Libya.

A rational player concedes to a known crazy type in a negotiation. If the crazy type is committed to a tough strategy, meeting that strategy with toughness leads to disaster. Hence, a rational opponent will concede. But this means a rational type has the incentive to pretend to be crazy. Then, a rational opponent will still concede as crazy and rational types pool.

This strategy might be effective in a two player game with one-sided incomplete information. But if one side is the Republicans in the Senate, it is not going to work because the McCain, Ayotte, Collins… part is too rational to send the country over the debt limit. So what to do?

One strategy is to compromise and try to win the Presidency. This is the establishment strategy with all its prescriptions of outreach to women and immigrants. But only a centrist appeals to the wishy-washy median voter. So if you are Ted Cruz, you cannot get the policies you want via a centrist Republican winning the Presidency.

The other strategy is to make commitment credible. This involves primarying those who do not vote crazy. Partisans turn out in droves in primaries and even a rational politician who wants re-election is forced to act/vote crazy to get into office. Then you have enough crazies or acting crazies to filibuster if your demands are not met. In essence, you give up on winning the Presidency and focus on ruling in opposition as a minority.



He has a blog (!):

Carl Reiner on Twitter last week, worried about the current Government shutdown, said this was cause for great concern in the world’s leading democracy.  And I thought, leading?  Who’s following?    The answer would appear to be no one.

After one of the recent school shootings a young mother said to me, “What must you think of us?   You must think we’re all mad.”     Mad certainly, but not all of you.

Half of America seems to be entirely enviable, movies, books, TV, arts, liberal democratic institutions, great centers of learning and research, gay marriage, social freedoms, etc. etc.

The other half does seem to be, well, nuts.

From the always interesting Erik Erickson at Red State:

So the question is do we want to stop Obamacare or do we want to stop the debt ceiling increase? My view is that we cannot do both at the same time. We might dare to dream, but the debt ceiling will be increased one way or the other.

Right now the GOP is holding up very well in the press and public opinion because it is clear they want negotiations. The GOP keeps passing legislation to fund departments of government. It has put the Democrats in an awkward position.

But the moment the GOP refuses to raise the debt ceiling, we are going to have problems. Remember, the last time you and I wanted the GOP to fight on the debt ceiling, the attacks from our own side were particularly vicious.

They’ve been vicious over the shutdown too, but now that we are here, the water ain’t so bad and only a few ankle biting yappers continue to take shots at conservatives from the GOP side.

It will not be so with the debt ceiling. And the GOP will no longer seem very reasonable. The debt ceiling fight will become an impediment to undermining Obamacare.

The main target is defunding Obamacare. Since the House will cave on the debt limit, not good to link defunding Obamacare to the debt ceiling. Link it to CR. Logic seems good if you like the objective. Also, it reveals that right believes debt limit will be raised. Hence, bondholders can relax.

From National Memo:

A day in the life of the emptiest suit in Washington:

7 a.m. You wake up, light a Camel. Read a pink Post-it left on the refrigerator by your wife: “John, don’t ever forget, YOU REALLY ARE THE SPEAKER OF THE HOUSE!!! Also, we’re out of bagels.”

7:30 a.m. You lie in your tanning bed meditating about the government shutdown, wondering if it was such a brilliant idea to let it happen. You put on some Pink Floyd, “Dark Side of the Moon,” but that doesn’t help.

8:00 a.m. On the ride to Capitol Hill, your driver remarks that there’s not much traffic in the city, no tourists lined up to see money being inked at the Bureau of Engraving and Printing. You smoke another Camel.

Hiaasen has a new book out.



From political scientist Gary Cox at the Monkey Blog:

The idea goes back to England’s Glorious Revolution, where MPs fought hard to put the Crown on a short financial leash, so that they could control Crown officials’ actions. Although they did not use the term, English arguments about what would give Parliament bargaining leverage vis-à-vis the Crown hinged on the budgetary reversion.  Because expenditure authority would lapse every year, forcing portions of the government to “shut down” in contemporary American parlance, parliamentarians were assured the Crown would seek a new budget every year — whereupon they could bargain for attainment of their various goals.

Eventually the power of the purse meant the monarch became a figurehead, the House of Lords a rubber stamp and power truly resides in the House of Commons. So, the analogy would be that the President becomes an (elected) figurehead, the House of Lords becomes an (elected) rubber stamp and the House of Representatives becomes the center of power. And the Tea Party Republicans want to turn us into Britain!

President Obama may or may not have the constitutional authority to raise the debt limit without Confressional approval. But he has not because:

[S]ome observers outside government in Washington and on Wall Street, citing a game theorylike approach, suggest that the president’s position is more tactical than fundamental, since raising the possibility of a way out for the White House like the constitutional gambit would take the heat off Republicans in Congress to act on its own before the Oct. 17 deadline.

This is Schelling 101 and of course is based on Sun Tzu:

When your army has crossed the border [into enemy territory], you should burn your boats and bridges, in order to make it clear to everybody that you have no hankering after home.

If the federal government shuts down on Oct 1, only essential staff get salaries. Congress is considered essential.

After the government shutdown, there will be a blame game to determine who gets held responsible for the closing of national parks etc. Either or both sides could in principle suffer the negative hit from the shutdown. Each party has to do something to get the upper hand in the argument. The first to renounce their salaries during the shutdown will get the upper hand.  They can say ” We share the pain of the shutdown with the American people and stand in solidarity with them. The other side is not suffering and is inflicting pain on all of us – they have nothing to lose and are advancing an extreme political agenda which is not in the interests of the American people.” The other side will soon capitulate and give up their salaries too. But the second-mover does not reap the rhetorical benefit. There is huge incentive to move first. So, there is a pre-emption game and everyone renounces their salaries.

There are two rationales for a limited strike on Syria: (1) Deter Assad from using chemical weapons again and (2) Send a signal to Iran that the US will enforce a red line against nuclearization.

The implicit threat of a tough response from the principal if an agent takes a Bad action must be coupled with the promise that there will a soft action if he takes the Good action. If the principal always takes the tough action as he is a hawkish type or always takes the soft action as he is a dovish type, the agent’s incentives are not responsive to the principal’s strategy. In the absence of incentives, the Bad action is optimal for the agent. The principal’s welfare is low because the agent takes the Bad action. The principal has to signal he is a coordination type to truly change the agent’s incentives.

Voters don’t like war just for the sake of it – they pay the costs and see little benefit (Kantian peace). But they can be convinced to go to war if there is a serious national security threat. There are coordination types. By going to Congress, the President imports the preferences of the median voter. The agent knows that the Good action is more likely to be met with a soft response and a Bad action with a tough response. The agent responds is more likely respond with a Good action. So the President’s payoff goes up whatever his true type. Hence, going to Congress is a great idea for the President whether he is hawkish, dovish or coordination type.

Our garbage cans sit on a back alley that is shared with a large apartment building. Last week, I found that our bins were full of trash left by a couple of people from the building. Their names and apartment number were on several Amazon boxes so I left them a note saying “Please do not dump your trash in our garbage cans. If you carry on doing it, I’ll call the City and complain.” Next morning, when I went out to the alley, I discovered several mattresses, a bed frame and other furniture.

I was attempting deterrence – “If you do x, then I will punish you with y” – but instead I caused escalation. I carried out my threat but it seems my erstwhile neighbors had moved out so my threat had no bite. This is an example of a generic problem in international relations – you take an action that is meant to deter but it backfires and causes escalation. We face a similar problem in Syria.

First, there is an international “norm” against the use of chemical weapons. Implicitly, it contains the threat that anyone who uses chemical weapons will face punishment of some form. The international community wants to make sure Assad does not use chemical weapons again, so someone has to step up and punish him. Or so the argument goes.

Second, there is the issue of “reputation”. The President threatened Assad with repercussions if he crossed  a “red line” on the use of chemical weapons. We also threatened Iran with repercussions if they cross their own red line with nuclear development. So, to maintain our credibility with Iran, we have to carry out our threat to punish Assad.

This akin to the reputation model of the chain store paradox as studied by Kreps and Wilson. A chain store faces entrants in many towns. If accommodation is cheaper than fighting in any one town and these payoffs are common knowledge, there is no predation via a backward induction argument. But if the chain store might be run by a “crazy” entrepreneur who loves to fight entry, a “rational” type will pretend to be crazy. Since both crazy and rational types fight entry, entrants should stay out.

Something like this argument lies beneath the “red line” argument for a limited strike against Assad.

First and foremost, we can attack Syria even if they do/did not use chemical weapons. In the chain store paradox this cannot happen – the chain store fights entry if it occurs but it can’t just fight for the hell of it if entry does not occur. In Syria, we can try for regime change and employ the use of chemical weapons as an excuse to intervene militarily. We can do this even if Assad backs down. This may seem farfetched to us but after the experience in Iraq and Libya as a pose to the survival of the regime in North Korea, this does not seem implausible to outsiders. So, if Assad thinks American will attack whatever he does, this does not increase his incentive to back down. Expecting attack, he might fight harder.

Plus Iran get the same signal – America wants regime change. So, they will redouble their efforts to go nuclear.

This is as plausible a forecast of future events as any other.

Israel uses it, Saddam used it, the US uses it w.r.t. Taiwan vs China policy and now Larry Summers is using it – strategic ambiguity.

[W]ith a high-profile appointment like for Fed chair or the Supreme Court, vagueness becomes a virtue. When Senate confirmation is the goal, a candidate wants to maintain wiggle room and let people project upon you whatever their preference is.

What Summers is trying to do is to create a situation in which conservative senators view him as a tough, no-nonsense central banker who will maintain the integrity of the dollar against those dirty hippies who want to debase the currency. Simultaneously, he wants liberals to view him as someone who will do whatever he can to try to strengthen job creation and find creative ways to improve growth.

Now we pretty much know Israel is nuclear but at its strategy’s inception things were not so clear. The US has not had to openly side with Taiwan or China in a significant conflict etc. This is important because it is hard to maintain ambiguity about your true preferences or nuclear status if you have been forced to reveal them in the past. Larry Summers has revealed lots about himself in the past either through policies he has embraced or comments he has made. Even if these opinions were not necessarily about monetary policy, they reveal the intellectual framework and biases that inform his economic worldview. So it is impossible to maintain strategic ambiguity as a stance.

The Democrats are threatening the change the filibuster rules in the Senate. The repercussion may be a significant response by the Republicans when they take control of the Senate. This may be quite soon if Nate Silver’s forecasts pan out. 

But perhaps the magnitude of the response can be quantified by examining history? Legislation has to be approved by the House, Senate, President and often the Supreme Court. How would a simple majority rule in the Senate have changed legislation?  Repealing Obamacare, civil rights, etc might be hard even with Senate majority rule. Cabinet and other appointments require Senate approval. How would a simple majority rule have changed personnel? John Bolton was a recess appointment at the U.N. – things would not have been different if he had been approved by Senate majority rule.  Etc , etc.

Probably someone has studied this already…


“Thibs is a guru,” Gibson said. “He understands the game plan.
“He had me guarding Ray Allen. That’s how much confidence he has in everybody’s ability to guard on defense. He really drew up and knew what the team was gonna do.
Every time they ran down and ran offense, it was exactly what Thibs showed us on paper.”

I was watching Fox News and they were discussing whether the law needed to be changed so US citizens could be interrogated at length without being told their Miranda rights. The rationale is that the suspect is willing to give information if he knows it will not be used against him in a court. Also, he will be more pliable with no lawyer present. And if the information is very valuable, this is a price worth paying. (At least I think this was the gist of the Five on Fox crowd.  I was a bit inebriated after a boozy conference meal at the Princeton Conference on Political Economy.)

The Five on Fox usually rail against rampant Leviathan – an uncontrolled government usurping the rights of honest, gun toting, red meat eating citizenry. That same Leviathan, if given the power to use domestic enemy combatant status, would apply it more and more broadly. A domestic enemy combatant is actually harder to define objectively than an assault weapon. A slippery slope would undoubtedly ensue and regular citizens would face being interrogated as enemy combatants. This is the risk of adopting the view of the illustrious Five.

But what about the benefits of greater Leviathan power, the power to interrogate true enemy combatants? We know Leviathan breaks the law at the risk of being held to account in court. There is no point running this risk in run of the mill cases. But there is a benefit in true enemy combatant cases. No jury will convict Leviathan in the latter case – the court of public opinion will replace the court of law. But egregious violations in run of the mill cases will surely lead to convictions by triggering the feeling “that could have been me” in jury members. So, roughly speaking, the law will be broken if and only if the case merits it.

Hence, there is no need for “domestic enemy combatant” status w.r.t. Miranda rights.

HT: I believe Becker and/or Posner made a similar argument years ago. If someone can tell me the reference I would be grateful.


James Surowiecki has a great article about why the Jets are sticking with struggling quarterback Mark Sanchez:

[T]he Jets have invested an enormous amount of energy and money in Sanchez, and, assuming that no one will trade for him, they are contracted to pay him $8.25 million next year, whether he plays or not….

In a purely rational world, Sanchez’s guaranteed salary would be irrelevant to the decision of whether or not to start him (since the Jets have to pay it either way). But in the real world sunk costs are hard to ignore. Hal Arkes, a psychologist at Ohio State University who has spent much of his career studying the subject, explains, “Abandoning a project that you’ve invested a lot in feels like you’ve wasted everything, and waste is something we’re told to avoid.” This means that we often end up sticking with something when we’d be better off cutting our losses—sitting through a bad movie, say, just because we’ve paid for the ticket. In business and government, the effect pushes people to throw good money after bad.

Jeff and I have a paper, Mnemonomics: The Sunk Cost Fallacy As A Memory Kludge, that offers a primitive theory of this “Concorde effect” as a response to limited memory. Mark Sanchez was hired years ago. At that time there was a rationale for why he would be a great QB for the Jets and hence he was paid a high salary. This rationale for his hiring has been lost in the mists of time but his salary is recalled perfectly. His salary encodes the rationale for his hiring – the higher the salary the better must have been the rationale for his hiring.  Even if we have forgotten the details, the rationale must have been good if Sanchez was paid a high salary. Therefore the higher the salary, the greater the chances of retention even when future events creates costs of retention.  This is the Concorde effect. As far as Mark Sanchez goes, mnemonomics does not do too bad a job.

But an obvious alternate theory rests on reputation:

“Taking the original decision-maker out of the picture and letting a fresh pair of eyes look at the pros and cons can help,” Arkes says. He points to a…study of a bank that found that loan officers were reluctant to acknowledge that loans they’d made had gone bad, whereas new executives were far more likely to take the loss and move on. Whoever becomes the Jets’ new general manager will have no personal or reputational investment in Sanchez, which should make it easier for him to be more objective, though he’ll still have to persuade the head coach and the owner.

There’s surely a lot of truth to this theory. But there is a countervailing effect too. Managerial turnover generates limited memory – who knows why the previous CEO made the decisions he did? If he was smart, it would be good to accord his decisions some respect and see them through before trying out new ideas. Perhaps the best CEOs understand this. From our paper:

For example, when John Akers stepped down and Lou Gerstner became C.E.O. of IBM in 1993, he was determined to “carry out a set of policies put in place by none other than the much-maligned Akers.” He was not “rushing to make significant changes in vision” but was “still following through on Akers’ two-year-old restructuring.” He believed that “IBM has yet to test fully many if the changes Akers put in place” and said, “I want to make sure the current system is implemented before we try any alternatives.” We interpret Gerstner’s decision-making as follows: Akers’ old plans were initiated using information known to him at the time. By the time Gerstner arrived, the direct information was lost but was manifested indirectly in the strategic plan he inherited. Hence, this generated a bias to implement the old plan.

From  Ian Millhiser at ThinkProgress:

As of this writing, every single state except Hawai’i has finalized its vote totals for the 2012 House elections, andDemocrats currently lead Republicans by 1,362,351 votesin the overall popular vote total. Democratic House candidates earned 49.15 percent of the popular vote, while Republicans earned only 48.03 percent — meaning that the American people preferred a unified Democratic Congress over the divided Congress it actually got by more than a full percentage point. Nevertheless, thanks largely to partisan gerrymandering, Republicans have a solid House majority in the incoming 113th Congress.

A deeper dive into the vote totals reveals just how firmly gerrymandering entrenched Republican control of the House. If all House members are ranked in order from the Republican members who won by the widest margin down to the Democratic members who won by the widest margins, the 218th member on this list is Congressman-elect Robert Pittenger (R-NC). Thus, Pittenger was the “turning point” member of the incoming House. If every Republican who performed as well or worse than Pittenger had lost their race, Democrats would hold a one vote majority in the incoming House.


Hence, the Democrats need a +7% swing to regain the House given the current structure of House districts.

From a Politico article about the fiscal cliff:

“For many Republicans, a cliff dive means blaming President Barack Obama for a big tax hike in the short term and then voting to cut taxes for most Americans next month. That’s an easier sell back home in Republican-heavy districts than a pre-cliff deal that raises taxes on folks making over $250,000 or $400,000, extends unemployment benefits and does little if anything to curb entitlement spending. If they back a bad deal now, they run the risk of facing primary challenges in two years.

For Democrats, the cliff is better than setting a rich man’s cutoff in the million-dollar range — or worse yet, extending the Bush tax cuts for all earners — and slashing Medicare and Social Security to appease Republicans. They, too, see an advantage in negotiating with Republicans who will feel freed from their promise not to vote to raise taxes once the rates have already gone up….

Another analogy: It’s a Nash equilibrium. John Nash, subject of “A Beautiful Mind,” the Oscar-winning film that revolved around game theory, explained how players act in a multiplayer game. Put simply, if each player understands his adversaries’ strategies, no one will alter their own course. Right now, Obama, Boehner and Reid are locked in on a course for the cliff, and there’s no obvious solution that would make any of them switch directions.”
In the next story, they will superimpose electoral incentives on the Nash demand game!

In a post-election move:

According to multiple Fox sources, Ailes has issued a new directive to his staff: He wants the faces associated with the election off the air — for now. For Karl Rove and Dick Morris — a pair of pundits perhaps most closely aligned with Fox’s anti-Obama campaign — Ailes’s orders mean new rules. Ailes’s deputy, Fox News programming chief Bill Shine, has sent out orders mandating that producers must get permission before booking  Rove or  Morris…Inside Fox News, Morris’s Romney boosterism and reality-denying predictions became a punch line. At a rehearsal on the Saturday before the election, according to a source, anchor Megyn Kelly chuckled when she relayed to colleagues what someone had told her: “I really like Dick Morris. He’s always wrong but he makes me feel good.”

Via Matt Yglesias:

Here is an email I got from the Romney campaign:

You’ve stepped up


This week, supporters from all over the country heeded our call to raise $7 million in 7 days to bring our message into new states. Because of you we have reached our goal in just 5 days and are now on air, sharing our plan to create 12 million new jobs.

Thank you for believing it’s time for real change, and that America can do better than the last four years.

Now, with 3 days left we are asking you to dig a little deeper to support our effort to raise $2 million by tonight.

Here is one from the Obama campaign:


Sandeep —

This is in your hands now.

Chip in $141, and let’s go win.

Turns out the Hey worked better in randomized trials and so they went with it.

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