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Federal Food Stamps

The real world problem that I have choosen to translate into a collective action problem is that dealing with federal food stamps. Using the research process I will outline how this real world problem has become a collective action problem, predict the outcome of the situation and then after constructing a model to test the reactions of the actors involved, I present my hypothesis of the expected outcome.

Food Stamps are coupons sold to households having incomes and assets below the guidelines prescribed by the Department of Agriculture(Food Stamps 2). They can be used at retail stores to purchase food. People are elegible based on their income, resources and work registration. Foodstamps are provided to temporarily give aid to those falling under certain income levels. Over the past few years there have been increasing cases in food stamp related fraud. In many cases food stamps have been sold on the black market to those not qualifying. They have also been used as another form of currency to buy drugs(NYT March 18, 94). This fraud has been said to cost federal and state governments millions and many suggestions have been made in dealing with changing the system. In some states, such as New York and New Jersey, systems have been installed to check the fingerprints of the recipient therefore limiting fraudulant exchange or usage of foodsatmps(NYT March 30, 94). Many in Washington have called for an end to the allotment of foodstamps altogether. My hypothesis is that food stamps as a public good take cooperation to produce and because of one actor's motivation to abuse this good and not to cooperate the second actor will also choose not to cooperate. Therefore this pubulic good will cease to be produced.

The situation with federal foodstamps creates the collective action problem. It involves two and the money and systems necessary to provide them as the good. The theory I posit is that foodstamps as a temporary assistance mechanism can carry out its function only if there is coopertion between two actors. The actors are first those that are in Washington and those above a certain income level that provide the tax dollars necessary to run the federal food stamp program and second those qualifying and using federal food stamps. In order for cooperation to occur and this temporary safety net to remain, those producing the money for this good must be assured that they are being used accordingly. Conversely, those qualifying to use food stamps must cooperate by using them only when needed, not selling them or using them for drugs, and not transfering them to third parties.

Extending this real world problem to the theory of rational choice I predict that both actors are rational and will try to maximize their utilities. Those qualifying for food stamps will have an incentive to take a free ride, use them for other goods than food, and sell them for such things as drugs. Those providing the money for food stamps will sense that their money is being abused and being utility maximiazers will be unwilling to sacrifice their money for something that gives them no payoff.

It is possible to test this theory by formalizing it into a game theory model. Foodstamps have all of the characteristics of a public good. They are jointly supplied by public taxpayers and take cooperation to produce. Altough it is not entirely non-exclusionary, it is not feasible to exclude those meeting the criteria. Foodstamps also take cooperation in order to be produced. The foodstamp recipients and producers both have the choice of cooperating or not cooperating.

Game theory predicts that each player will look for a dominant strategy. The game also assumes that the actors will have transitive choice outcomes(Ostrom's Notes). Assuming that player one is rational, his best choice would be to not cooperate and exploit the full benfits of the food stamps. Player one's second best choice would be to cooperate and get the normal value of the good. Player one's third best outcome would be to not coopertate and get none of the good. Finally player one's worst alternative would be to cooperate and have the stamps revoked by a non-cooperting player two.

Players two's best alternative would be to not cooperate and get the full benifit of the dollars saved by not funding food stamps. Player two's second best alternative would be to cooperate along with player 1. Player two's third best choice would be not to cooperate simultaneously with player 1; therefore revoking funds. Player two's worst outcome would be to cooperate while player one was not. With this alternative player two would know that his or her tax dollers were being misused and thus provide more incentive not to cooperate. Translating this into a game matrix we see that following.

Cooperate Do Not Cooperate








This is what is called a prisoner's dilemma. The dominant strategy with these actors and preference orderings becomes non-cooperation. In this game both players are praticing a maximmax strategy. They both have an incentive to go for everything they can.

The outcome for this situation follows the predictions made in my hypothesis. The outcome is non-cooperation and therefore the good , foodstamps, will no longer be produced. This model predicts the outcome of the the debate over federal foodstamps by using the scientific research process. It takes a real world problem, abstracts it into a theory, formalizes it into a model, and then explains it and makes predictions through a theoretical and testable hypothesis. By using this process it was possible to make a prediction about the outcome of a real world problem. In this way this proccess was very useful. It would have been more useful though in preventive applications .

If a process such as this would have been applied to the problem before the formation of the foodstamp program, the current problem could have been avoided. Policy makers could have predicted the unsuccessful outcomes of their proposed policy therefore avoiding the trouble they face today. They could have possibly came up with a more successful solution to assisting those under certain income levels obtain food therefore using resources in a much more calculated and successful way.

It may not be necessary for policy makers to use the exact process that I have used in this example in order to predict the outcome of future polcies; but still this example shows the importance and usefulness in using some kind of scientific or formalized process in order to predict the results of policies before they are implemented.



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