Friday, January 4, 2013

Questions for My Co-blogger

I've been traveling and am short on posts, though on the road I mentally wrote several.  Rather than let the day go by without a post, I figure I'd bait my co-blogger with some things I've been thinking about.

Should we have a legal market for kidneys in the U.S.?

I've written a post about kidney markets and Wophugus has a post about not having a market for slavery (which is quite persuasive).  I think the argument for a market in kidney donation is very persuasive.  I certainly have blind spots, but as my recent Satz post emphasizes, I'm not very content with the arguments meant to convince me I'm wrong.  Should there be a market in kidneys?  If so, what regulations should we require for the market?

Is the debt ceiling constitutional?

I'm a (financial) economist, so it's my prerogative to say dumb things about the law.  It seems imminent that the House Republicans will hold the nation hostage each time the debt ceiling comes up and if I were this administration I'd be working on counters to that strategy.  One thing I do know a little bit about is game theory, and a lesson from game theory is often the outcome is decided by rounds of the game that will never be reached.  That is, if the administration can increase its position in the event of no debt ceiling deal, it can matter to the deal that is eventually reached, even if the chances of reaching a deal are 100%.

If the debt ceiling isn't passed, the treasury will have more outstanding obligations than money to pay them.  They are obligated to pay debt holders, they are obligated to pay federal employees, they are obligated to pay government contractors, and they are obligated to pay for any future spending that congress has enacted into law.  As far as I know, there is no contingency for who is to be paid what in the event that congress is not allowed to borrow money.  I can think of a lot of things for the administration too do, if they couldn't borrow more money.  Stop paying defense contractors (they could pay in IOUs).  Stop paying congressional salaries.  I think it would get us an agreement pretty quickly.  I can't imagine the administration could unilaterally decide who and who not to pay, but then again, they can't pay everyone, so in the end I think the debt ceiling is likely unconstitutional.

Right now, the Republicans are trying to pay the crazy dictator game.  The crazy dictator tries to convince the world that he will build or launch a nuclear bomb and then the world bribes him not to do that.  The crazier and more powerful the dictator appears the more he can extract.  On the other hand, if the world can weaken the dictator's bargaining position by threatening his base of power, he will extract less.  The administration should be thinking hard about increasing their bargaining position, even though I think the Republicans are all bluff and bluster.  Even if some deal will be reached and Armageddon avoided, the shape of that deal will depend to some extent on the position of the parties in Armageddon.

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