Had an enjoyable trip to Stanford and INFORMS (in SF) meeting up with an IIT-Madras classmate, many colleagues and PhD students (and their students, and their students, yes, I met one of my Academic Great-Grand Daughters!), while staying at, no surprise here, at the Four Seasons.
Obviously the title of the post is a Maximally Inverse riff on
The Empire Strikes Back (also known as Star Wars: Episode V – The Empire Strikes Back) is a 1980 American epic space opera film and the sequel to Star Wars (1977). It has box office receipts of $550 million (on a budget of $30 million). It is now often regarded as the best film in the Star Wars series and among the greatest films ever made.
Tuesday’s American elections: What a sequel it was!
Two years ago, Donald Trump returned to the White House in a remarkable political comeback. Republicans controlled the presidency, the Senate, and the House of Representatives. The political narrative appeared settled.
Apparently, the American electorate had other ideas.
On Tuesday, Democrats won back both chambers of Congress, flipped Senate seats in some decidedly unexpected places, and captured governorships that Republicans had considered safely theirs.
Texas elected a Democratic governor. Kansas elected a Democratic senator. South Carolina, too, chose a Democrat for the Senate.
Even Hollywood might have rejected that screenplay as implausible.
But American voters have a habit of rewriting scripts.
The Force Awakens
There is a delicious irony in the way American democracy works.
We elect presidents with considerable enthusiasm. We give them a mandate, or at least they believe we have given them one. They proceed to govern, sometimes as though the mandate were unlimited.
And then, two years later, we get another opportunity to express ourselves.
Midterm elections are, of course, notoriously unkind to the party occupying the White House. But Tuesday was more than the usual midterm adjustment. It was a substantial rejection of the direction in which the country was heading.
Inflation, the cost of living, healthcare, war, and the conduct of government all played their parts.
Voters, it seems, are less interested in political theories than in what happens to their lives.
And they can be persuaded to change their minds.
And as I have mentioned before – Capitalism, Supply Chains and Democracy – this is why I believe in the interlacing of Political Economy with Operations Management (POEM) framing, and here is the abstract of our (with Nilsu Uzunlar and Alan Scheller-Wolf) working paper:
The Political Newsvendor: Swaying Votes, Stocking Up.
Firms do not merely adapt their operations to an uncertain policy environment; they can also invest in persuasion effort to shape it. Coordinating operations and persuasion is complex, owing to the interplay of uncertainty evolution and timing: Firms often commit to operational decisions, such as inventory orders, before the policy is set. In the Political Newsvendor, we use a probabilistic voting model to analyze a firm’s joint persuasion and inventory decisions when persuasion shifts voter support and thus the probability of each policy-dependent demand regime. We find that commitment feedback links two decisions: Because inventory is committed in advance, a more likely favorable policy leads the firm to order more, which in turn makes persuasion more valuable. Our analysis provides three key insights. First, unlike the conventional value of waiting under uncertainty, greater aggregate political uncertainty, due to shifts in voter sentiment, need not call for caution. When baseline support is weak, such uncertainty can lead the firm to engage less yet carry more inventory. Second, unlike a pure parity mechanism, which favors every firm starting behind as uncertainty increases, greater uncertainty can hurt a firm that starts below parity but persuades its way close to it. Third, when two firms with opposing interests compete, committed inventory increases the advantaged firm’s stakes, so competition amplifies an initial political advantage rather than offsetting it. Managerially, how a firm should respond to such uncertainty depends crucially on where it starts politically, in absolute terms or relative to competitors.
A New Hope?
I have long been fascinated by the relationship between capitalism, science, and democracy.
Capitalism depends on competition. Science depends on criticism. Democracy depends on the possibility of replacing those in power.
All three become less effective when incumbents believe they are indispensable.
In business, competition disciplines companies.
In science, evidence disciplines theories.
In democracy, voters discipline politicians.
And Tuesday provided a rather spectacular demonstration of the third.
And the best part?
There will be another episode!
No capitalist economy has competition, and the proof is the very little mobility between economic groups. There is no science, as the journal gatekeepers have their clubs. Two years ago, three economists were awarded after missing the entire human history. Regarding democracy, the right to vote still does not translate into social mobility.- Kalyan