Capture and Ideology, Debt Ceiling Edition

In my first published peer-reviewed articlePeter Navarro and I have argued that both special economic interests and candidate ideology alone can explain Congressional subsidies for farm voting (we have also applied this structure to car upkeep legislation), following Kalt and Zupan (AER 1984). In the ongoing discussions about how many members of the Republican Assembly would vote for the (yet-unpublished) debt ceiling bill, I wondered how individual effects could be tested.

In a 1984 article, we built a logit index of agricultural votes and related them to the importance of agricultural production (as a share of state personal income), food stamp dependency, PAC contributions, and the Ideological Orientation Index (Americans for Democratic Action Index).

One concern that may arise is that the ideology index is not orthogonal to economic interests (especially since it is based on votes on many issues). So what ideological proxy could be used for the upcoming debt ceiling vote? Here’s My Opinion: Bitcoin Stocks

My (completely unscientific) assumption is that bitcoins are owned by people who believe that the current financial system must or will be abolished by some disruptive event, given the generally poor risk/reward ratio associated with cryptocurrencies. In addition, the recent demonstration that cryptocurrencies are not insurance against risky events shows that for bitcoin holders, this is a triumph of ideology over rational interests (except for those who need cryptocurrencies to evade capital controls and / or financial regulation). Also, bitcoin holders tend to be anti-government or libertarian in their views (as suggested by polls).

The standard answer from econometrics is that ownership of bitcoin (or, say, gold) is not exogenous to perceived economic events. That is, some people may expect a crash associated with debt defaults and therefore stock up on bitcoin. So, ideally, we would use bitcoin holdings, say, a year before the vote.

I don’t know if we’ll be able to find out what is the share of individual bitcoins in total wealth, but it’s an interesting research project.