The Net Neutrality Repeal Relies on a $3 billion Assumption

The views expressed below are my own, and are in no way associated with the Federal Communications Commission.  I did not contribute any work to this proceeding. 

Tomorrow morning, the Federal Communications Commission will vote to roll back a commission rule that reclassified Broadband Providers under Title II of the Telecommunications Act to protect Net Neutrality.  Order

Aside from the argument that dubious argument that the Commission need not worry about Net Neutrality because there are few documented examples so far, the Order leans heavily on the argument that Title II reclassification reduced broadband investment in the industry.  

I’m not going to get into the merits of Net Neutrality or Title II classification here (short answer – I think it’s good), and as the rules will certainly pass tomorrow, it’s clear that I’m not trying to influence the proceeding. But I looked into the analyses cited by the order, and I noticed a common thread.

The $3 billion Assumption:

I noticed a common thread in almost every study cited by the Commission to justify the case that Title II reclassification had scared broadband providers into reducing their broadband investment – the seemed to rely almost entirely on one assumption (two of the studies cited, Kovacs and Ford, don’t rely on this assumption, I’ll discuss those at the bottom).

Aside from Ford and Kovacs, EVERY analysis mentioned in the order that alleges a decrease in wireline investment makes this assumption or cites to an analysis that makes this assumption.

On face, it might make sense. AT&T acquired DirecTV midway through 2015.  Their investment figures pre-2015 did not include DirecTV’s investment, and their investments post 2015 did include DirecTV’s investment, so sensibly that investment needs to be deducted from the later time periods. The problem is that all of these analyses assume that because DirecTV’s capital investment was roughly $3 billion in years prior to the merger, it must have necessarily continued at that level.

BUT WE DONT KNOW.  Most of the studies conclude that the industry drop in investment since 2014 was in the area of $3-$4 billion, so this assumption makes up a huge portion of the eventual findings. It’s entirely possible that after the acquisition, AT&T decided to scale back investment in DirecTV’s satellite operations, but we have no way of knowing.

Capital Investment is a Signal

For their part, AT&T was happy to announce to shareholders in their annual filings that they’ve increased their investment in infrastructure every year since 2014. By not disclosing their capital investments in their DirecTV operations, AT&T has found a way to simultaneously tell the FCC that the sky is falling while signaling to their shareholders that business is booming.

This is the issue when a few enormous companies dominate industry trends. We’re left to infer investment outlook for a multi-billion dollar industry based on strategic decisions of a few men in a couple boardrooms who are fully aware that their decisions will influence regulators. 

FWIW, AT&T themselves indicated in pre-Title II annual filings that they planned to reduce marginal broadband investment after they finished a huge broadband buildout. Still,  it’s entirely possible that AT&T and other industry players actually did reduce their broadband investment because they were afraid of regulatory burden. But that’s not certain, and in light of the outpouring of concern from content creators and edge providers across the web, as well as the unheard concerns of innovators who have yet to innovate, a decision this big shouldn’t hinge on an assumption.


Cited studies that didn’t rely on the DirecTV assumption:

Dr. Anna-Marie Kovacs’s analysis argues that wireless investment in broadband has dropped precipitously in response to the Title II regulation.  She doesn’t provide a detailed methodology or raw data, so its hard to audit what she did, but it seems above board. I would add however, that while these companies may not have been investing in hard infrastructure, they invested heavily in spectrum during this time period, and I can’t imagine why they would do that if their future revenue outlook was so poor.

Dr. George S. Ford’s analysis was very different from the others cited in the Order, as it uses post-2010 as the treatment period because he asserts that after the 2010 Order, the industry knew that Title II was in play. He uses a diff-in-diff model which mimics an experiment by creating an artificial control group. Basically, he argues that rather than comparing broadband investment year over year, we should compare it to an estimate of what it would have been if the rules hadn’t been implemented.  To do this, he constructed an artificial control group by choosing industries unrelated to telecom that closely followed broadband investment trends prior to 2010, and compares these industries post-2010 to actual broadband investment post-2010.

It’s a pretty cool experimental design, but it’s worth looking at the industries that he chose. His four “artificial control group” industries were:

  1. Machinery Manufacturing
  2. Computer and Electronic Product Manufacturing
  3. Plastic and Rubber Product Manufacturing
  4. Transportation and warehousing

Choices 2 and 4 jump out at me. I’m completely guessing here, and I don’t know how the BEA calculates their industry estimates for these so I may be completely off… but for #2 – this time period saw smartphones grow from niche high-end accessories to near ubiquity, as well as the explosion of electronic accessories surrounding them. For #4, this time-period also coincided with Amazon’s rise to prominence, which I’m sure has had a pretty significant impact on the transportation and warehousing industry.

Not surprisingly, controls 2 and 4 also happened to massively outperform controls 1 and 3, seem to be the driving factor behind his conclusions. His findings show that 2 and 4 both grew by more than 50%, meaning his conclusion that telecom investment decreased is just an argument that telecom didn’t experience the same gigantic surge in investment that 2 other specific industries did.

To Ford’s credit, his analysis showed that telecom underperformed all four of the control group industries, not just 2 and 4. Also, he includes several robustness checks that I have not yet reviewed closely (but plan to). But if I’m right about 2 and 4, his comparison to the remaining control groups, though still statistically significant, doesn’t seem to hold strong economic significance.


Democrats need to go all-in on term limits

The outlook for the Democratic Party looks bleak. They failed to take control of the senate in this year’s election, and with 25 Democratic caucus seats and only 8 Republican seats up for reelection in 2018, their odds of gaining any seats in the midterm are very low. Due to gerrymandering, the process of manipulating congressional district boundaries for one party’s advantage, the House is very likely to remain in Republican control in the midterms as well (note that gerrymandering is not a uniquely Republican thing, Maryland, for example, is heavily gerrymandered in favor of Democrats).


Given their current predicament, the Democrats need to act decisively to gain any sort of a foothold, and their best path forward may be to emphatically embrace a cornerstone of President-Elect Donald Trump’s successful presidential campaign.


Drain the Swamp


Trump’s anti-establishment campaign included a call to “drain the swamp” that he claims our government in Washington, D.C. has become. In his “first 100 day” promise, Trump has stated that he will propose a constitutional amendment to impose term limits on congress on his very first day in office. I believe that, strategically, the best move for the democrats would be to propose exactly such an amendment in the very first session of congress, and whip the votes in advance to make sure that every single democrat in both chambers comes out in favor of it.


On face, term limits may seem like a great idea. Institutional inertia is very real, and fresh faces in congress may make the legislature more receptive to new and bold ideas. There are drawbacks, however. Lawmaking requires a great deal of institutional knowledge, and if politicians are limited in their ability to take their time and build such knowledge, they may rely on unelected lobbyists and experts to bridge the gaps. This may be part of why Senate Majority leader Mitch McConnell has already shot down the possibility of backing such a proposal.


Putting aside the merits of term limits, lets ponder what would happen if the Democrats seized upon this proposal and forced the issue.


The Amendment Process


Trump has unambiguously stated his support for a term-limit amendment, and his election can presumably be read as popular support for the idea as well. The first major hurdle for putting it in place would be to secure a 2/3rds majority in favor of the amendment in both chambers. A Supreme Court ruling confirmed that an amendment is necessary to impose term limits, and a majority Republican House tried to pass one in 1995.  The amendment would have limited representatives to six two-year terms, and senators to two six-year terms (12 years in either body).  If such an amendment somehow did get through congress, 3/4ths of states would still need to ratify it, but lets focus on the congressional battle for now.

The Republican Options

For fun, lets assume that every Democrat in both the House and Senate came out in vociferous support for the amendment.  First, looking at the House, Democrats are projected to hold 192 of the House’s 435 seats (assuming the two Louisiana seats go red).  288 house votes would be required to move the amendment along, which means it would pass if 96 Republicans also voted for it.

Speaker Paul Ryan has stated in the past that he’s in favor of term limits, but a united Democratic front would put his words to the test. The Republicans would have two options here.  First, they could narrowly defeat the amendment.  To vote it down would put a lot of Representatives at risk, so Republican leadership would likely choose their 95 most vulnerable members to vote for the amendment, and the remaining 145 would risk appearing corrupt in the eyes of their constituents who just elected a man that wanted to drain the swamp.  It’s true that most congressional districts in general are safe, but as Former Majority Leader Eric Cantor’s surprise primary defeat shows, you’re never really safe from anti-establishment populist voters.

As a second option, the House could also come out in unanimous support of the amendment. By my rough estimate, if the next congress were to successfully pass a term-limit amendment, 84 Democratic and 116 Republican Representatives would be subject to term limits.  Beyond congressional district makeup, incumbency is a huge advantage, so such a shakeup could put enough seats in play to give Democrats a narrow path to control of the house.

Of course, even if the House unanimously passed the amendment, it could still be defeated in the Senate. If all 48 Democratic senators (again assuming the Louisiana senate seat goes red) came out in unwavering support for the Amendment, only 18 Republican senators could support it without it passing.  The remaining 34 would also risk the ire of populist voters who chose Trump out of mistrust of Washington.

Worth it?

It’s dangerous to speculate on why exactly Trump won without better data, but it seems a safe bet to say that many voters didn’t feel that the party was willing to hear their concerns and take them seriously. This gambit would send a message to those voters and signal willingness to work with the new President to improve the political system.  After ignoring the populist surges that occurred in both primaries, the Democratic party now needs to acknowledge them or risk perishing.  Day-one emphatic support of term limits could help the party shed the image of arrogant coastal elites who look down on the struggles of everyday Americans.

Even if a Republican congress successfully insulated its members themselves from the risk, this early action would drive a wedge between the traditional conservative and populist/anti-establishment wings of the party.  It would set the tone for future interactions between the President and Congress as one of animosity, and slightly undermine the blank-check that the GOP is currently playing with.  The battle itself (assuming the Democrats adequately promoted it in the media) may bring to light the inherent contradiction in either party, both of which rely on a deeply-entrenched establishment, waving the populist anti-corruption banner.  It may cause causal voters to think more deeply about the ramifications of procedural changes that sound good on face.

The risks are enormously high.  If the amendment made it through congress and passed the state legislatures, the entire leadership of both parties would be gone. Democratic whip Stenny Hoyer would be working to put himself out of a job.  But the Democrats are playing with their last few chips, and the poker player in me says this is the hand to go all-in.


Reflections on the 2016 Presidential Election

“When they go low, we go high.”


The next four years are going to be a massive test of character for the people who see the world as I do. After some reflection, I ask one thing of those on my side of the political spectrum: we must not treat President Trump the way they treated President Obama.


I should emphasize here that I speak from the perspective of a straight, cis-gendered male with a stable job in a supposedly recession-proof city and with a secure family structure to fall back on. My day-to-day life probably won’t change much as a result of last night’s election.


I had less riding on this election than the same-sex couple I met last night, half of which is waiting to naturalize. They are concerned changes to marriage laws may hold up her citizenship process and threaten their custody of their adopted child. I had far less riding on this election than low-wage workers hoping for an increased minimum wage, undocumented immigrants working to make a better life for their families, the millions who the ACA saved from medical bankruptcy, and the millions at risk in the middle east if an unhinged state department “rips up the Iran deal on day one” and destabilizes the region.


I’m pretty privileged to be safe, and I think that safety gives me the luxury to react with a little more measure than those directly in the firing line, and I definitely don’t begrudge those who are reacting with far more anger. So with that out of the way, I do believe we must follow Michelle Obama’s advice and “go high.”


Taking the high road means being gracious in defeat. I don’t want four years of pure obstructionism. I do not want to hear that Chuck Schumer’s “number-one priority” is to make Trump a one-term president. I don’t want senate democrats to bastardize bills in the hopes that they lead to poor results and can later be repealed.   I will not presume that President Trump’s every action is wrong just because he’s the one doing it.


Anti-Intellectualism got us into this position, and to treat Trump that way would only continue that. I recently watched some town-hall debates from previous elections, and now believe this was the most dumb-downed election at least in recent American history. Don’t get me wrong, I’m extremely disturbed by the deeply xenophobic and misogynistic views that the President Elect seems to hold, the alleged sexual assaults, and his shady business practices. But I think that the media’s fixation with those issues (and with constantly moving on to the next one) did him a favor.


The focus on scandals and shock-value statements was great for clicks and ratings, because people who already didn’t like Trump clicked on those articles (and people who did like him shared them as examples of media manipulation), but they served to marginalize the many people who are afraid of a changing world. A lot of people are terrified that the world today is viewed and discussed in very different terms than the world they grew up in, that careers that fed their families for generations are waning in the modern global economy, and Trump appeared as a safe-harbor for their concerns. Dismissing these people as racist, however apt the term may be when discussing some of their views, only pushed them further into the protest-vote camp.


At the same time, the obsession with shock-value statements and scandals crowded-out any real policy discussion. Baiting Trump into racism and sexism apparently didn’t expose him, and it looks like no one was really turned off by his unwillingness to make good on his debts. But maybe voters would have viewed him differently if he was pressed on specifics about how he would approach conflict in Yemen, or when it would be appropriate to raise interest rates, or when if ever the world needs to transition away from fossil fuels. Maybe voters would also have thought differently of Clinton if her answers to real policy questions came to mind instead of out-of-context banter in stolen emails. We grew numb to the scandals and ill-advised hyperboles, and in the end both candidates were so thoroughly covered in mud that we couldn’t see the huge gulf in policy-knowledge lying beneath.


So however abhorrent Trump’s general worldview and personality may appear to be, it’s time for us to accept that discussing it is completely unproductive. From now on, if I ever speak ill of the President Elect, it will be because I disagree with a specific policy proposal for objective reasons. If hateful words leave his mouth, I will denounce his words and stand up for those targeted, but I won’t waste time trying to use those words as ammunition against him. However appropriately an “-ism” word may describe his words or actions, I will withhold it and instead articulate exactly what I don’t like about them. If this means that we can no longer simply assume that racism is bad and must now explain why it is bad every time, so be it.


While I believe we should treat the President Elect with respect and fairness, I am not for a second suggesting total capitulation. Climate models are not up for referendum, and as the fate of the planet is at stake, we must continue to speak up in the name of basic science. I believe that regressive economic policies that will negatively affect minority communities will be unavoidable under 4 years of republican control, but we must refuse to accept any policies that directly compromise the basic civil rights that generations of Americans have fought for. If those rights are at stake, we must take to the streets alongside those affected.


So to the future President, even though you’ve implicitly questioned the right of millions of kind-hearted patriots to call themselves a part of “your America,” I will not question the goodness of your basic personhood any further. If you murder someone on 5th avenue, I will leave that to the courts and you won’t hear from me. But if you threaten the basic values of inclusiveness that define the “new America” that you’re so afraid of, know that we will fight you through every peaceful channel at our disposal.


Unemployment: Playing with Numbers

A little while back, I came across this article published by Mark Perry, a contributor to the American Enterprise Institute.  The headline reads:  “Texas, the ‘great American job machine,’ is largely responsible for the +1.2M net US job increase since 2007“. 

The article doesn’t make any direct ideological claims, but was posted just three days after President Obama proudly touted figures illustrating America’s recovery from the great recession in the 2015 State of the Union Address.  I can’t know Perry’s intentions for certain, but a quick scan of the comments on the site gave a clear indication of what people (specifically, the sort of people who read AEI blogs) took away from it: Obama was claiming credit for the job-creating accomplishments of the conservative bastion of freedom that is the state of Texas. Some comments (including the Facebook post that made me aware of this article) credit Texas’ low taxes and lax regulatory environment for their job creation.

Digging a little deeper, I came across this response piece by Barry Ritholz in the Houston Chronicle, which argues that Perry stacked the deck by starting his analysis in December 2007, before the effects of the financial crisis. According to Ritholz, Texas was not hit as hard by financial crisis of 2008 as other states, and thus managed to lose fewer jobs during the recession.  Ritholz argues that Perry wrongfully attributes Texas’ huge share of 2007-2014 job growth to the oil and natural gas boom, and instead credits regulations in Texas that insulated the state from lending practices that contributed to widespread mortgage collapse.

This piqued my curiosity, so I decided to take a look at the data for myself. A quick note: I told myself I would try not to make any overtly ideological posts here, and I’m going to make an effort to adhere to that while discussing the data.

What AEI Claims: 

“It’s a pretty impressive story of how job creation in just one state – Texas – has made such a significant contribution to the 1.169 million net increase in total US employment (+1,444,290 Texas jobs minus the 275,290 non-Texas job loss) in the seven year period between the start of the Great Recession in December 2007 and December 2014. The other 49 states and the District of Columbia together employ about 275,000 fewer Americans than at the start of the recession seven years ago, while the Lone Star State has added more than 1.25 million payroll jobs and more than 190,000 non-payroll jobs (primarily self-employed and farm workers).”

So According to Perry, from December 2007 to December 2014, Texas gained 1.169 million jobs, and the rest of the nation lost 275k.  Perry used overall employment data that includes farm employment, but I used non-farm data from the Bureau of Labor statistics because I couldn’t find overall employment data going back to 2007.  Because we’re using different measures of employment, my numbers will look a little different, but I don’t think it changes the overall point.  (You can find the API calls I used to obtain the data, and SQL code I used to clean it in this Github Repository.

The first order of business was to recreate Perry’s findings using BLS data. From December 2007 to December 2014:

Texas: 1.23 million jobs added (12% increase)

Rest of nation: 493k jobs added (0.4% increase)

So using different measure of employment, the conclusion is still essentially the same: when you look at the data with 2007 as a baseline, Texas appears to dominate any job growth that occurred across that period.

But as Ritholtz points out, starting from December 2007 combines two different events: the financial crisis and the subsequent recovery.  The trough of the Great Recession, by most metrics, occurred around September of 2008.  In order to avoid capturing any seasonal effects, I start my analysis at December of 2008.  From December 2008-2014:

Texas: 1.18 million jobs added (11% increase)

Rest of the nation: 3.70 million jobs added (3% increase)

That’s quite a difference.  Texas still outpaces the rest of the nation, but the rest of the country created over 3 times as many jobs as Texas did.

Part of the reason is that in the additional year that Perry included, from December 2007 to December 2008, Texas actually created 52k jobs, while the rest of the nation lost 3.2 million jobs.  So Texas has done well to create jobs, but the employment picture after this initial loss of 3 million+ jobs doesn’t support Perry’s claim that Texas was almost entirely responsible for recent American job creation.

To Perry’s credit, he never explicitly claims to be looking at recovery and never directly states that he means to contradict Obama’s claims about recovery.  Still, and especially given the proximity of Perry’s article to the State of the Union address, it seems disingenuous to lump a period of heavy losses and a period of heavy gains all into one category, and call the overall effect “job creation.”  

It’s worth briefly discussing Ritholtz’ claim that Texas was spared the wrath of financial crisis by their strict regulations on mortgage lending, and not by their lax corporate regulatory and taxation policy.

The reason – surprisingly for a state that likes to think of itself as a model of free-market economics – are regulations enshrined in the Texas Constitution and other legislation. Texas is the only state that limits home-equity borrowing, capping total mortgage debt at 80 percent of a home’s fair market value. That helps prevent using one’s own house as a piggyback for engaging in reckless speculation, as we saw in the rest of the country in the mid-2000s.

This post article from 2010 explains the phenomenon in more detail.  Beyond the restriction on home-equity loans, homeowners in Texas were unable to use “cash-out” refinancing – increasing the total balance of their mortgage in exchange for short term cash – because of the constitutional cap on mortgage debt.  These restrictions, the author argues, prevented sub-prime borrowers from taking out exorbitant debt against the value of their homes, leaving them less vulnerable during the nationwide economic downturn.

On face, it may appear that Texas owes its resilience during the recession to these borrowing restrictions, but Texas also benefited from the fact that it never developed a large housing bubble in the first place.

On average, the home-resale prices of the 20 metro areas in the Case-Shiller Home Price Index peaked in 2006 after more than doubling since 2000. In Dallas, one of the 20 areas, they rose just 25 percent, gradually, and have barely declined.

Texas’ unique lending restrictions only applied to loans on existing mortgages, so it’s doubtful that they alone were enough to prevent a bubble from forming.

So it seems Perry and Ritholz each tell part of the real story. Ritholz is probably right that Texas home-owners have less unmanageable debt thanks to the state’s unique lending restrictions, which helped them weather the recession, but these alone can’t explain the lack of housing bubble in the first place.  Perry’s claim that Texas has outperformed the nation seems to hold up even when we look at post-recession numbers, though the difference is far smaller than he claims.

Let’s take a step back.  This map, based on the same BLS non-farm employment data, shows the percentage change in employment for each state between December 2008 and December 2014 – it cuts out the first year that AEI used.  Screen Shot 2015-02-03 at 11.38.37 PM

You may not see the point I want to make with this map, and that’s because I’m not really making one.  This patchwork map is a reflection of raw numbers, stripped of the narratives we may be tempted to weave around them.  I could mention the strength of Texas and North Dakota to talk about the Shale boom, while ignoring the counter-example of Wyoming.  I can take a slice of the country and show how in that region, blue states outperform red states or vice versa. I could single out the home states of presidential hopefuls and allege mismanagement or gubernatorial incompetence.

But the numbers don’t do any of that themselves, numbers don’t do anything.  There are many ways to manipulate statistics to tell your story, and I don’t mean to disparage anyone for doing it as it’s considered essential for both politicians and pundits.  Maybe it was wrong for Obama to claim credit for the strong jobs numbers and maybe it was equally wrong for the GOP to use weak job numbers as a stick to beat him for so many years.

Fortunately, as I don’t have a defined ideological readership to please, I don’t have to take a stance and boil a complex issue down to one and only one brand of policy.

Statistics don’t reveal truths, they only simplify portions of the truth. I personally believe we would all be better served if we made the effort to question numbers and dig deeper, even if those numbers align with narratives that we like.  Wait, that last sentence sounds a bit like an ideology… oops.


Github Repository


Glenn Beck’s case for regulation

The views expressed below are my own, and in no way reflect the views of the Federal Communications Commission or any other entity – nor do they reflect my actions or motivations when working in a professional capacity for the FCC.

I want to make it doubly clear that I’m not advocating for or against the Comcast-Time Warner Cable merger, nor am I criticizing any of the parties that commented or filed related to this proceeding.

At the end of October, representatives of The Blaze, a cable channel owned by conservative pundit Glenn Beck spoke with the FCC in an ex parte meeting about the proposed merger between Comcast and Time Warner Cable  (an ex parte meeting where not all relevant parties are present, and it requires the speaking party to file a notice of what was said in the meeting).

You can find TheBlaze’s comments at the meeting here.  TheBlaze is a pretty new channel, they mainly function through subscriptions to their online video content. They’ve also been picked up by some TV providers like Dish.  However they haven’t been picked up by big cable TV players like Comcast and Time Warner, and they claim this is because the big boys don’t want to play ball and allow them to keep selling subscriptions to  In their ex parte, TheBlaze writes of their efforts get carried by the large cable TV providers:

However, the largest MVPDs, including the Applicants, have cited the availability of as an obstacle or adverse factor to gaining MVPD carriage and two of the applicants (Time Warner Cable and Charter Communications) have gone so far as to suggest TheBlaze discontinue nationwide in order to be considered for carriage.

Basically, they’re saying that Comcast and Time Warner are shutting down TheBlaze’s ability to reach their customers through other avenues (like the internet), using that as a condition of carrying their channel’s content.

TheBlaze continued on to claim that Comcast discriminates in favor of vertically-integrated channels – channels under the NBC umbrella that are tied to Comcast – against independent networks.  To solve this, TheBlaze recommends an “arbitration regime” to govern the way TV providers and content creators/channels negotiate programming agreements:

TheBlaze further explained that the Commission’s existing program carriage regime has been unsuccessful in eliminating discrimination from vertically integrated MVPDs. In response to questions asked by Commission staff, TheBlaze offered its suggestions about how the basic framework of an arbitration condition could be structured as a means to address carriage discrimination claims by unaffiliated independent networks. TheBlaze noted that arbitration would compel the Applicants to be transparent and even-handed in making programming decisions; and, with limited discovery, arbitration would showcase the less favorable treatment of independent networks compared to Comcast affiliated networks with respect to the ease with which they are permitted to rebrand, expectations with respect to program ratings, breadth and scope of MFNs and ADMs, and demands that Comcast must “make money” on the distribution of independent content.

So there’s lots of legalese in there, but essentially TheBlaze wants arbitrators – people hired by the government – to proceed over these negotiations and ensure that they’re fair. They want arbitration to make sure that MVPDs (TV providers) like Comcast treat independent networks the same way they treat the programmers that they own.

I’m not going to comment on whether or not arbitration is a good idea, but I do feel it worth noting that TheBlaze is owned by Glenn Beck.  That’s the same Glenn Beck of Fox News, the one who thinks pretty much all regulation including environmental, labor, and even telecommunications reform is wrong.  Yet here, Beck’s company puts forth what at least on face appears to be a very sensible case for why the government should intervene in the free market.

Generally, negotiations between networks and TV Providers are almost entirely unregulated – a nearly pure free-market.  That’s the kind of free market that pundits of Beck’s ilk tend to deify.  I don’t want to directly allege hypocrisy here, Beck has repeatedly argued that the Comcast – Time Warner Cable merger is a special case where the government should get involved, possibly because he feels things are just too out of hand.

Instead, I would ask Beck to consider if regulation is appropriate outside of this one narrow case.  Beck’s company does not feel it’s right for Comcast to strong-arm them into stopping their internet video subscription service, yet he has been an outspoken critic of net neutrality.  If it is wrong for Comcast to do that, wouldn’t it also be problematic if Comcast could just slow down traffic to TheBlaze for all of its subscribers?

We can venture beyond telecom too – so Beck claims the cozy financial relationship between the Obama Administration and proponents of the merger is a problem; how does he feel about the lobbying efforts of the oil, coal, gun, alcohol, tobacco, banking, and defense industries?

Again, without commenting on the specific arguments of TheBlaze, I at least can appreciate their general reasoning: that the government should step in when serious market failures occur.  Beck offers a nuanced approach, a stark departure from the “regulation=bad, private enterprise=good” formula that’s served as a blueprint for Beck and other conservative pundits.  I only wish I could see that sort of nuance in an area where Beck doesn’t hold financial interest.  And I would gladly buy a subscription to TheBlaze just to see how his viewers feel about it.




Game Night with Mitch and Barack

The day after last week’s election, Vox ran this article titled Mitch McConnell may be the greatest strategist in contemporary politics.  Their argument was straightforward: If Obama was able to get things done while in office, and especially if he was able to do so with Republican support, he would look good, and that was ultimately bad for the republicans.  McConnell’s response was to dig his heels in and resist, he made use of the congressional calendar to grind the gears to a halt, slowing down the legislative process and making the democrats who held the presidency look unproductive.

The article reminded me of a famous example discussed by Game Theorist Frank Zagare that I encountered back in college.  For those unfamiliar, Game Theory is just a way of modeling how people – or “players” – are going to behave in a situation.

Zagare discussed in Game Theory: Concepts and Applications the situation in 1981 back when Ronald Reagan was president, and democrats controlled the house but were the minority in the senate.  Sound familiar? It was the same situation as we had in the past two years – only the roles of the parties were switched.

Screen Shot 2014-11-12 at 9.38.47 PM

Zagare included in his discussion the above diagram printed in a newspaper in 1981 that laid out the possible “pay-offs” for Reagan and the Republicans, and for the Democrats.  The pay-off grid above is easier to read than it may seem. The Republicans have two choices:  support Reagan or compromise, and those are laid out across the top.  The Democrats can attack Reagan or compromise, those are laid out on the side of the grid.  The intersection of those two choices tells you which box you end up in, and that tells what “pay-off” or reward each side gets.  Obviously parties want the biggest reward, so this grid can help you guess what each player will do.

Since the situations were nearly identical (One party held the white house and senate, the other held the house of representatives), I updated the grid to reflect today’s situation:

2014 Election Grid


This game is similar to what we call a “Chicken Game.”  The Democrats get their best pay-off when they support Obama completely, and convince the Republicans to cave in (top right box), and the Republicans get their best pay-off when they relentlessly attack Obama, and convince the Democrats to compromise (bottom right).  If no one compromises, they end up in the bottom left, and everyone would be worse off than if they both just compromised (top right).

It’s not a true “chicken game” though, because the Democrats, like Reagan back in 1981, had a “dominant strategy”.  Notice that no matter what the Republicans choose, the Democrats get a higher pay-off if they support Obama Completely.  Knowing this, it would be wise for the Republicans to give in, and support Obama a little bit, to avoid that bottom square and their worst pay-off.


Is that how it played out? Well, sort of.  These game diagrams like the one above are useful but they’re obviously oversimplified, politicians don’t just make one choice, they make many.  The 2013 shutdown was definitely an example of both parties ending up in the bottom left box.  A CNN poll shortly after the shutdown found that 75% of Americans believed that the republicans should not be reelected, while 54% believed the Democrats should not be reelected. Those percentages break down very similarly to the pay-offs in the bottom left box: both sides lose, but the Republicans, in theory, lost a bit more.

Someone had to cave in to re-open the government.  By most objective standards, it was the Republicans, after most polls throughout the shut down showed that they were earning more of the blame.  The Democrats made few concessions in the bill, a clean CR that kept Sequestration cuts in place and extended the debt limit deadline. “We fought the good fight,” Boehner said, ” We just didn’t win.”

So, just as the Democrats were forced to cave in to the steadfast Reagan back in 1981, Obama stood strong and the Republicans were forced to give up their demands in 2013.  In the election of 1982 the Democrats deepened their majority in the House, just as Republicans did in 2014, and the result in both cases was widely attributed to dissatisfaction with the President.  Yet, back in 1982,  the President’s party held the Senate.  Zagare praised Reagan for being a brilliant game theorist, moreso than Reagan’s advisors who had urged him to compromise.  Hadn’t Obama made the same play? Post shutdown the jury was out.  The game was about the same, the players acted about the same, so why did we end up at a different result?


It’s tough to pinpoint why things played out differently when the world has changed so much since 1982.  The obvious culprit may just be that the game is so oversimplified that it’s meaningless, and that Obama and Reagan are so fundamentally different that the comparison is absurd.  That may be the case, but what fun would it be to give up now? Here are a couple contributing factors that may tell part of the story:

One possibility is that Obama simply had less political capital to begin with.  Unlike Obama, Reagan never had to devote significant time to proving he was born a US citizen and eligible to be President.  In the Cold War era, few were going to hurl words like “fascist” at Reagan the way Obama’s been termed a “socialist.”  The Vox article mentioned that McConnell was successful at both obstructing the productivity of the Senate, and getting Obama and the Democrats to take the blame for perceived inaction.  It’s possible that intangibles about how people see the President caused voters to assign blame differently in 2014 than they did in 1982.

Besides this, things happened between the government shutdown and the 2014 election.  The roll-out was badly botched, sign-ups didn’t go smoothly, sites crashed, private insurers cancelled grandfathered plans that would have otherwise remained eligible.  Economic recovery has been slow.  Numerous foreign policy crises have arisen, and Obama may been seen as too weak in his handling of Ukraine, Syria, and now Iraq.  Some may have wanted a stronger stance on Iran and Israel.  Also, Ebola is now, for some reason, apparently politically relevant.

The government shutdown was barely a year ago, but in light of all recent things that happened, it seems like a distant memory.  Literally, people have all but forgotten about that time when the US government completely stopped, because it was a bit over a year ago.

Cable News Network launched in October of 1980.  Back then there were no competitors until Financial News Network came about in 1981, and even then the two networks catered to different demographics.  There was no need to jazz up coverage to draw eye-balls away from competing news channels.  The internet did not exist. I was not alive back then, but feel I can safely assume that the role of news media in elections was quite different.

I think we can’t ignore the roll 24-hour news may play in increasing the importance of recency in voters’ minds.  Between cable news and internet news, it is easy to hit a point of saturation.The human capacity to prioritize information is limited, and daily saturation of information can easily push older things along the wayside.  I haven’t combed through the 2014 exit polls closely, but the biggest takeaway I’ve seen is that voters are generally dissatisfied at everything.

Obviously, turnout was a huge factor – it was low as it usually is in midterm elections and that generally favors Republicans.  Still, even amongst those who make it to the polls, I think it’s easily possible that after a year of being constantly told of things to be dissatisfied about, people simply forgot about the Government shutdown, it had to be pushed aside to make room for Ebola and missing airliners and resurgences of Cold War posturing.  In late 2013, people were very dissatisfied about the shutdown and they knew who they felt was to blame.  By late 2014, the effect had just faded.  People were still dissatisfied, but they were upset about different things and the old things didn’t matter.  The shutdown was a billion of tweets ago, and who has time to scroll back that far?