The Legislature And Game Theory

Larry Price
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Wednesday - April 29, 2009
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There is only one advantage to the effective use of management science: to help managers make better decisions. In modern management, “Game Theory” attempts to predict how rational people will behave in competitive situations. Game theorists may, for example, attempt to describe how competitors will response to a price increase, the introduction of a new product or a new advertising campaign. If a price reduction would quickly be matched by competitors, there would be little immediate advantage in lowering prices.

Unfortunately, a game theorist’s time alone often makes the techniques too expensive for many organizations or many types of problems. That is the only explanation I can think of that would leave the Legislature in the dire political they are in. Check a few of the rules to the political game going on between the administration, the legislature and the dominant political party. There is a law that says if any bill doesn’t pass the legislature by midnight on April 21, 2009, then they fall into a 45-day veto period, which means the governor would have until July to make decisions. Any bills that pass after April 21 gives the governor only 10 days to veto. The Legislature could then override them before the session ends on May 7. Leaders in both houses decided not to force the governor’s hand. The obvious question is, why? One possibility is they don’t have the votes and unity to override any of the vetoes.


 

A couple of these bills are back-breaking issues for the counties and small business owners in Hawaii. Example: Diverting the hotel room tax (HB 1744, HD1, SD1) would withhold the distribution of hotel room tax revenue to counties, but authorize the counties to add a surcharge to the hotel room tax not to exceed 5 percent. Big Island Mayor Billy Kenoi’s response: “Losing the $18 million Hawaii County gets annually for its share of the Transient Accommodations Tax would be devastating.”

Other mayors gave similar testimony. Members of the tourist industry testified that raising the TAT during tourism’s economic downturn would be devastating.

There are two other deadly ideas. One would authorize counties to establish a retail sales tax of no more than 1 percent on the sale of tangible personal property (HB 1605, DD1, SD1). The other (SB 1111, SD1, HD1) would increase hotel room taxes by an unspecified amount.


Those are only a few bills which the governor has promised to veto, but she can wait until July to do so. A game theorist would suggest something is probably going on behind the scenes that the taxpayers are not aware of. As the “game” is played, at some point legislators will have to override several gubernatorial vetoes. If they can’t, state government could run out of money, and mandated government furloughs could be the only way out, but only if the government labor unions agree to make generous concessions of something like 12 days of unpaid furloughs over the next year or two. One day of furlough for all government employees is estimated to be worth savings of about $12 million. There is also a possibility that they could refuse and strike, which would generate more funds for the budget deficit than the furloughs.

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