Tag Archives: politics

The Republican Party is Like a Fast Food Chain that Lets its Restaurants Locally Source Meat

McDonald’s is a national brand, but most McDonald’s brand restaurants are locally owned and operated. One interesting fact about McDonald’s franchise arrangements is that each restaurant is required to purchase its meat from the company. Individual restaurants are not allowed to locally source their meat.

Why not? The answer is surely not because McDonald’s is the best at sourcing meat. It seems likely that from time to time, local operators would be able to find higher quality meat at lower prices than the company. And the answer is not that the sourcing of meat provides a profit to the company at the expense of the restaurants. Such a transfer would be capitalized via the other terms of the franchise agreement, so there is no incentive to adopt these terms unless they are efficient.

The real answer is that there is a brand externality. Let’s suppose that one local McDonald’s tries to increase its profit by purchasing extremely low-grade beef. If you stop at this McDonald’s on a road trip and get sick, you might punish all McDonald’s restaurants by refusing to eat at them in the future.

This problem does not plague standalone restaurants. We don’t worry about them locally sourcing their meat—and often, we prefer it. But this is because they have only their own reputation to harm. If they shirk on quality, they bear all of the reputational costs themselves.

The brand externality would also not be a problem if everyone only ever ate at their local McDonald’s. If your local McDonald’s used rotten beef, you wouldn’t go there, and neither would anyone else. Other McDonald’s restaurants would be unaffected. But the fact is, people travel and indeed, that is often when they go to McDonald’s, so the brand externality is an important issue, and the company deals with it by standardizing quality across all McDonald’s restaurants by contract. This contractual arrangement between the central company and the individual restaurants is called a “vertical restraint.”

When I think about why the Republicans lost ground in the 2012 election, I think about beef that is well past its sell-by date. Individual Republican politicians have an incentive to cater to the values of their local electorates, but this can come at the expense of the national Republican brand. Tip O’Neill famously said that all politics is local, but this is no longer true—the advent of cable news and the Internet means that some politics is national, as does the fact that more policy is now decided at the federal level. It’s like we have gone from a situation in which everyone eats only at their local McDonald’s to one where people travel and eat at restaurants around the country: a brand externality has emerged.

Given that national media is not going away, party leaders need to be able to impose vertical restraints on its candidates. They need to be able to ensure that local races boost the national Republican brand, even at the expense of losing local races from time to time. Local politicians may be able to get a local boost in turnout by playing to the prejudices of their bases, but if such activity harms the party on a national level, that is inefficient, and the central party needs to find a way to stop it if it wishes to succeed.

The admittedly oversimplified median voter theorem says that both parties should converge on the preferences of the median voter. To the extent that one party suffers more from brand externalities, the other party will be able to take advantage by converging more rapidly to that position, or by making more effective use of the slack generated by the ineffective party. Democrats are arguably more nationally-minded, and this means that in the age of political brand externalities, they have an advantage. If Republicans want to be an effective party in the 21st century, they need to find a way to impose vertical restraints on those who would abuse their brand.

How Not to Care About Politics

Adam Ozimek thinks I’m crazy. With respect to the presidential election in 2012, I wrote on Twitter that I’m “Pretty much indifferent between Palin / Bachmann / Obama / Romney / Huckabee / Gingrich / Trump. I won’t lose any sleep no matter what.”

I should be clear that I’m not indifferent to the outcome on any given policy matter. I am a pretty radical libertarian; I have clear policy views. Nevertheless, over the past few years I have cultivated a serene detachment from day-to-day politics. I don’t vote, and I don’t worry. Here are five reasons why.

The importance of politics is overrated

I was persuaded of this point by Steve Davies, who gives a fascinating lecture on non-political perspectives on history (one version of the lecture is on YouTube, highly recommended). Most of the history that you learn in high school is political history, a history of power: kings, presidents, wars, revolutions, and so on. But taking a commercial or economic perspective on history can show you how much politics has been oversold. Davies shows that, for instance, the invention of mass production, the shipping container, the birth control pill, and the Internet have been arguably more important over the last century than any presidential election.

This is not to say that individuals cannot do tremendous damage by political means. R.J. Rummel estimates that 262 million people were killed in the 20th century by their own governments, and of course governments have killed millions of foreigners as well. This is a good reason to be anti-government. But I’m not persuaded a priori that any of the candidates I named is likely to be significantly less destructive than the others. And I’m optimistic about our ability to flourish through commercial innovation no matter who you guys elect in 2012.

The Good vs. Evil story about politics is not true

As Tyler Cowen says, be suspicious of stories. It’s tempting to think about contemporary politics as a story of good guys versus bad guys. Whether the dichotomy is political parties or cosmopolitan versus provincial, people like the good versus evil story because we are biologically programmed to respond to it. Politicians have an obvious incentive to say that they are one of the good guys and their opponents are bad guys.

But who are the good guys in American politics? I look around and I see lots of people wanting to impose their values on others. Even many libertarians, who nominally say that they don’t want to impose their values on others, seem to want to impose libertarianism on the public through electoral victories. That is no way to treat unwilling minorities. It’s not that politicians are especially evil, either, though I do think that politics attracts a certain megalomania. Mostly, politicians of all stripes are ordinary, flawed, misguided people.

Recognize that a) stress kills and b) you can’t make a difference

It would be one thing to get worked up over politics if by doing so, you could affect political outcomes. But the odds of casting the decisive vote in any election of consequence are vanishingly small. It would be more probable to get struck by lightning on two consecutive days. And there are so many voices in political discourse that you’re nearly as unlikely to make a difference there, even if you are a respected blogger.

Even though few of us can make a political difference, many of us get worked up over politics. This is damaging to our physical and mental health. I worry that one particularly apoplectic econblogger, a talented economist, will literally die suddenly of a stroke. We’re much better off if we can recognize that for better or for worse, we have very little control over what happens politically, and there’s no reason to get stressed out about it.

Politicians often can’t act on their preferences

If there is any issue that motivated the 2008 presidential election, it was George Bush. Obama ran on a platform of “change,” and I believe that he was sincere. Nevertheless, we are still in Iraq and there is still a prison at Guantanamo, at which military tribunals will be held. Furthermore, Obama has opened up a new front in Libya. “I have decided to repeat George Bush’s mistakes,” mocks Ryan Young.

Events can be simultaneously absurd and inevitable. The fact is that Obama faces all kinds of political and institutional constraints in the execution of his role as president. There are not as many degrees of freedom as it may at first appear. Adam emphasizes the discretion that presidents have, and undoubtedly they do have some. But if Obama can’t even close Guantanamo, something that I believe he really wants to do, then the presidency probably matters less than people think.

The logic of reoptimization

One useful way of thinking about politicians is that they want to tinker with prices. They raise the price of some goods by taxes, regulation, or outright bans, and lower the relative price of other goods through subsidies, i.e., raising the price of everything else. Different politicians want to tinker with prices in different ways, and many of them want to undo many of the tinkerings of their predecessors.

If a politician wants to raise the price of something that I consume and lower the price of something I don’t consume, that makes me immediately worse off. But once I reoptimize for the new set of prices, I may be only slightly worse off, or perhaps even better off than before. I can consume more of the thing of which I used to consume less. For this reason, even bad politicians may be less harmful than they at first appear.

Worst case scenario, I’ll reoptimize to another country. Probably such a move would make me worse off (or else I would do it now), but it still places a real limit on how much the president is likely to harm me. I am probably more elastic in this respect than most Americans, but nevertheless if the worst possible outcome is that you move abroad, something that many people do voluntarily every year, it’s not that hard to relax about politics.

I invite you all to join me in serene detachment from politics. You will worry less and have more time to spend on other pursuits. What do you have to lose?