When one side of a transaction knows more than the other, the market — or the institution — tends to attract the wrong participants and repel the right ones. Akerlof’s lemons, Gresham’s law, the politics of scandal, the design of oversight mechanisms. Posts here are about the structural consequences of asymmetric information, particularly when institutions fail to account for it.
The Financial Times ran a piece last week reporting that Senegal — yes, that Senegal — had borrowed €650 million through instruments it had not disclosed to the IMF, to its existing bondholders, or apparently to anyone who might have objected. Which, it turns out, is everyone. I clicked on it because it was about … Read more
It’s been almost ten years since I’ve written here. The last time I posted, Donald Trump had just clinched the GOP nomination, his Banzhaf power index had hit 1.0, and I was calculating the proportion of his campaign contributions that were unitemized.1 That was June 2016. I stopped writing because the general election demanded a … Read more
Rick Perry’s campaign seems to be a little strapped for cash. But, his super PACs have plenty of money. What gives? Is this just bad management, or possibly a systemic regularity tied to the hot mess that is the race for the GOP presidential nomination? It’s no secret that super PACs have changed the nature of the (early) election … Read more
The recent events in Montana have sparked a broad debate about the ethics of field experiments (I’ve written once and twice about it, and other recent posts include this letter from Dan Carpenter, this Upshot post by Derek Willis, and this Monkey Cage post by Dan Drezner). I wanted to continue a point that I … Read more
Nothing gets political scientists as excited as elections. In this previous post, I discussed the Montana field experiment controversy. In that post, I pointed out that the ethics of field experiments in elections—e.g., in which some people are given additional information and others are not—are complicated. In the majority of the post, I was attempting to … Read more
Three political scientists have recently attracted a great deal of attention because they sent mailers to 100,000 Montana voters. The basics of the story are available elsewhere (see the link above), so I’ll move along to my points. The researchers’ study is being criticized on at least three grounds, and I’ll respond to two of these, setting the third … Read more
In this post on Mischiefs of Faction, Seth Masket discusses the recent debate about whether (super-)rich are overly influential in American politics. I’ve already said a bit about the recent Gilens and Page piece that provides evidence that rich interests might have more pull than those of the average American. In a nutshell, I don’t believe that … Read more
Thinking more about transparency (which I just wrote about), it occurred to me that I neglected two pieces (of many) that are relevant for the point about transparency of decision-making in bodies like the Federal Open Market Committee (FOMC) in which expertise plays an important role in justifying the body’s authority. David Stasavage and Ellen … Read more
Today’s post by Maria Popova and Vincent Post, “What is lustration and is it a good idea for Ukraine to adopt it?” made me think about the difference between what I will call policy and discretionary purges. It is not easy for a nation to fix itself after a period of authoritarian rule. There are many … Read more
Sarah Binder, as usual, provides excellent insights into a difficult political problem in this post discussing the potential political and economic pitfalls of imposing greater transparency on the Federal Open Market Committee (FOMC), which essentially directs the Federal Reserve’s active participation in the economy, thereby having the most direct control over short-term interest rates and, accordingly, day-to-day … Read more