Wednesday, March 23, 2005

Lack of Cooperation Incentives

Andrew Samwick of Vox Baby, is a wicked smart guy and an excellent economist, especially when it comes to Social Security and the economics of demographics. However in a recent post, he makes an argument that immediately fails to include two of the first things you learn in undergrad Econ --- incentives/rewards matter as well as credibility. He was arguing that the Democrats should soon put forth a plan to save Social Security. He outlines three scenrios and the expected outcome in his mind is the expected value of engagement is higher than the EV of non-engagement.

The problem is that he ignores the cooperation incentive and the history of cooperation by the Democrats and the Bush administration. Early on, the Democrats cooperated on the 2001 tax cuts, and now the deficits it has contributed to has been used as a cudgel against domestic spending. The Democrats proposed Homeland Security as a Cabinet level department for several months which Bush opposed, and they saw it as a basepunishing (anti-union) weapon deftly wielded by Bush and Rove in the 2002 midterms (helloe Cleland=Saddam=Osama ads). The Democrats who normally would be willing to cooperate with the Republicans have been successfully targeted by the Texas re-redistricting and normal political action for electoral defeat. In the past four years, the Democrats have learned two things; first Bush is extraordinarily good at saying one thing, signing another and coming out smelling like a rose from the flip-flop... and secondly, there is no real reward for working with him to provide the minimal cover of bipartisanship that would allow for an extremely nasty conference bill to emerge.

The national political parties are realizing this equibilibrium will not change, for as Shamanic points out, the persuadables on the Democratic side are now politically unemployed, and the Republican ones are marginalized from the mainstream of the GOP leadership and base. It will not change as Georgia is in the process of a re-redistricting aimed against Democrats who otherwise may have had an incentive to occassionally cooperate.

Cooperation as a strategy only makes sense when both parties involved in the deal believe that they can advance their own interests most effectively by working and trusting the other side. The first term of the Bush administration has been an object lesson for Senate Democrats at the very least, that this trust and credibility that would lead to a cooperative environment does not exist in sufficient quantity to produce mutually beneficial outcomes. So why cooperate, when the opponent, who has a long history of violating tacit norms, only wants to harm you? That is the point that Andrew Samwick misses; the incentives have changed.

Links to this post:

Create a Link

<< Home

This page is powered by Blogger. Isn't yours?

Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 2.5 License.