Bastiat's Bastions

Was it Yogi Berra that said “I’m having deja-vu all over again”?

Back in October of 2006, I was rather peeved at listening to the morons on TV talk about how “clutch” Derek Jeter was. Later, they maligned Alex Rodriguez, and how “un-clutch” he was. I objected at the time, and wrote a post, which you you can read here. Take a look before you continue.

The point there is the same point here – it is difficult to make inferences based on small samples. A few post season games and a couple dozen at bats are indeed a small sample. If you flip a coin 12 times, sometimes it comes up 8 heads, even if the coin is “fair”. Sometimes heads comes up 4 times in a row.

Part of my motivation then (and now) is that I rather dislike Jeter — he gets a bit too much love from the media in my opinion. And part of my motivation then (and now) is that I think A-Rod gets too little love from the media. But so that you know that “fair is fair”, I’d like to revisit the issue again. After the recent “clutch” performance, I am equally peeved that the same morons are now calling Alex Rodriguez a “clutch” player!

The announcers on Fox clearly missed my original post. Might they suggest that whomever is “hot” now is “clutch” and forget that this same person was not “clutch” before? Is A-Rod a better player now in the post-season? Or is it simply random variation? I’ll go with the latter.

As I wrote before:

We could all disagree about exactly what is meant by “clutch”. Perhaps late in close games? Bottom of the ninth? Or simply in the playoffs? But even if we settle this disagreement, it is still very difficult to tell who is a clutch player, because by the nature of these situations, there are very few “clutch” situations during a season (or even a career).

…

Dr. Jahn Hakes and Dr. Skip Sauer (both economists at Clemson while I was in graduate school) have done some work on identifying clutch hitting in major league baseball. For an example of their work, click here. What do they find? They cannot find statistical evidence of persistently clutch hitters.

…

Why is that a couple of sports nuts economists, armed with PhDs from top schools, years of play by play data, and tons of computing power can’t find evidence of consistent clutch hitting, but the talking heads on Fox know it? Hmmmn.

I suggested in that old post, that if you like this type of stuff, read a book called Moneyball by Michael Lewis. It’s about how the GM of the Oakland A’s (Billy Beane) listened to scouts (announcers?) less and started doing more statistical analysis in drafting baseball players. The A’s have been quite successful despite their relatively low payroll. It’s an awesome book for someone interested in baseball, statistics, economics, or even business in general.

And for you amusement, I provide you two more tidbits.

Tidbit #1:

For those of you who don’t like baseball statistics, OPS is a measure that is pretty much the gold standard for measuring the productivity of hitters. OPS = On base % + Slugging %. The bigger the number, the better the player.

Jeter’s career regular season OPS = 0.847
Jeter’s career post-season OPS = 0.858

A Rod’s career regular season OPS = 0.965
A Rod’s career post-season OPS = 0.977

Uncanny, isn’t it? That difference (about 0.012 in both cases) is roughly one additional single per every 100 at bats! Quite a difference, eh?

Tidbit #2:

I have taken the worst 15 game stretch of Jeter’s post-season career and the worst 15 game stretch of A-Rod’s career and added up the stats. Can you tell which is which?

A: 15 games, 0.167 BA, 0.470 OPS, 0 SB, 5 R, 1 HR, 4 RBI
B: 15 games, 0.119 BA, 0.445 OPS, 1 SB, 3 R, 0 HR, 0 RBI

Neither one is pretty — which is the point! Prediction: A-Rod has a ho-hum World Series.

–CT

Player A is Jeter, Player B is A-Rod. But nobody ever told you about the ugly stretch for Jeter, eh? It started in the ALDS in 2001 and ends after game 7 of the 2001 World Series. Are they really so far apart?

Immigration is a contentious topic. Rather than add to the contention, I wish to clarify a poor economic argument that is frequently used in immigration policy debate. Many people support immigration because, “Americans aren’t willing to do the jobs that immigrants are willing to do.” This statement is potentially erroneous in that it confuses the notion of quantity of labor supplied with that of labor supply. Whereas quantity of labor supplied is the amount of labor a person or group provides at a given wage, labor supply is a schedule specifying a person or group’s quantity of labor provided at each possible wage level.

The statement quoted above stems from an observation—that some U.S. jobs are held almost exclusively by immigrant workers. From this observation, a fallacious conclusion—that domestic workers would not work in such jobs at any wage level—is drawn. To say that a group’s quantity of labor supplied is zero for a given job and wage is to say nothing about the group’s behavior at other wage levels. The graph below represents a possible depiction of a labor market with and without immigrant labor.

The graph features two supply curves, one showing quantity of labor supplied by citizens at each possible wage and another showing quantity of labor supplied by the combination of citizens and immigrants at each possible wage. In the absence of immigration, citizens would earn a wage of w_zero an hour and work q_zero hours in the featured labor market. However, if immigrants enter the country and work in the same market, the supply of labor shifts right (quantity of labor supplied increases at any given wage). In equilibrium, workers in this market now earn w_one per hour and work q_one hours. However, by looking along the labor supply curve of citizens, we find that citizens supply zero hours of labor to this market at a wage of w_one . Given their work and non-work alternatives, citizens opt out of the type of labor depicted in the presence of immigration (and its wage-depressing effect). However, citizens will rejoin this workforce if the wage rises above w_one .  Economist Chad Turner points out that this inducement of domestic labor at the higher wage will not obtain if the domestic labor supply curve is sufficiently leftward-shifted.   

Though immigrant laborers do benefit other members of our economy (e.g., consumers and producers), jobs would not go undone without them. Rather, in the absence of immigrant laborers, relevant market wages would move upward and induce the participation of citizens.

-SS

If you haven’t heard, the Cubbies have a pretty good team this year. They’ve clinched a birth to the playoffs, and are predicted to do some damage in the playoffs.

(Or wait – is that the fans that are predicted to do some damage? I’m getting ahead of myself.)

Read this article from the Chicago Sun-Times.

It seems some local political types are worried that, gasp, should the cubs win their first world series in 100 years (seriously, it would have been 100 years), that the numerous bars around Wrigley Field should stop serving beer after the 7th inning of any game in which they could clinch the series. They are worried about some unruly behavior.

The thought process is, that because the cubbies fan will stop drinking for an hour (beer will be served after the game ends), there will be less unruly behavior.

I find it a bit of a stretch…

We’ve talked about what happens to current demand when there is an increase in the expected future price of a product. Current demand increases when the price is expected to rise.

If the bar can’t sell you beers after the 7th inning, then you can think of the price becoming very very high after the 7th inning ends. As such, we’d expect a big spike in alcohol purchases just before the 7th inning.

But two more questions to consider. If people just buy an extra hour’s worth of beer before the 7th inning and drink at the normal pace, there is no effect of the regulation. A useless government intervention.

But could it be worse? Could people guzzle the last one, or guzzle the next one, or buy some Jaeger-bombs (they still taste ok warm), and become more unruly than they would have if there hadn’t been the ban? Could the rule induce substitution from beer to liquor?

Granted, there might be some people who just stop drinking for an hour.

However, the article says that policy is voluntary. How many bars do you think are going to volunteer to follow this policy?

Would you be in favor of this rule if you owned a bar near Wrigley? If you owned a bar just outisde of the covered area?

In the end, what does the rule accomplish?

Or does it really not matter at all because the cubs have no hope of clinching anything? Sadly, I worry about this option the most.

A hat tip to the folks over at sportseconomist.com for pointing out the article and writing a post similar in spirit.

–CT

Folks, I have been busy. I haven’t been posting to the old blog, but should pick up the pace down the home stretch of the semester.

If you’ve missed it, baseball season has begun. My beloved Cubbies haven’t won a world series in 100 years, so they are due.

And then I came across a story about Wrigley today.

For those of you who don’t know, Wrigley Field, home of the Chicago Cubs, is in the middle of a fairly residential neighborhood in Chicago. (To be sure, there are few bars in the neighborhood.)

There are several buildings that are just across the street from the outfield bleachers, and these buildings have excellent views of the ball parks. The owners of the buildings rent out the “roof tops” to groups, generating revenue in the process.

A while back, the Cubs and the building owners had a dispute. The Cubs claimed the owners should give them a portion of the revenue these owners generated. Naturally, the building owners would have preferred not to.

Surely this makes sense from the Cubs perspective. It is quite likely that watching from the stadium and watching from the stands are substitutes. The Cubs were not generating any revenue from the rooftop rentals, even though without the Cubs game, there would be no rental of the rooftops. In fact, the building owners and the Cubs got together and made an agreement – the Cubs would get a fraction of the revenue generated.

This discussion should ring a bell with our discussion of public goods, or more pointedly, of free-riders. The question is – are the views of the Cubs games from the rooftops non-excludable? Is it prohibitively costly for the Cubs to keep people who haven’t “paid” for the right from enjoying the view?

If so, the Cubs will have a hard time getting the building owners to “reveal their willingess to pay” for the right to watch cubs games (and charge people to rent their rooftops).

How might the cubs exclude non-payers from enjoying the game? Read this mini-article here. Do you think it will work?

Extra credit for the answer, but only for the first answer (not for the “I agree” posts).

–CT

An article in the Daily Comet about the Hornets.

The article reminds me of a line in the movie Major League. Major League, for the uninitiated, is a baseball comedy about a fictional Cleveland Indians team that begins the season with a group of misfits. They lose many games in the early part of the season before hitting their stride and becoming a playoff contender. Bob Uecker, playing announcer Harry Doyle, states “In case you haven’t noticed, and judging by the attendance you haven’t, the Indians have managed to win a few ball games, and are threatening to climb out of the cellar.”

The point of the current article is that same thing is going on with the New Orleans Hornets.

So why bring it up? When I started to read it, I started to tense up. Many times these articles end up touting subsidies for stadiums and mentioning the alleged jobs created by sports franchises. That is a post for another day. An additional post for another day is why newspapers seem to support these proposals.

I am glad I didn’t see that in the current article – but I suspect it won’t be long until you read that one. I do, however, have a quarrel with one point. Here’s the quote:

It appears that the only time fans attend Hornets games are to watch someone else play. Case in point, the top three attendance figures in that span was against the Cleveland Cavaliers, Los Angeles Lakers and Miami Heat. It seems like fans wanted to see LeBron James (Cavaliers), Kobe Bryant (Lakers) and Dwyane Wade and Shaquille O’Neal (Heat) play more than the Hornets.

Why should I be surprised that holding the price constant (?), more people wish to watch the Hornets play the Lakers than watching the Hornets play a lousy team like the Grizzlies?

It seems so obvious to me, but in both of those cases, the Hornets are playing, right? Isn’t it the case that we are leaning something about how much the New Orleans residents enjoy watching the Lakers compared to the Grizzlies?

We are not learning about how much fans enjoy watching the Hornets compared to Lakers as the article suggests.

As you know, when we discuss demand curves, we always use the phrase “ceteris paribus” which of course means holding other relevant factors constant. If we were to think of the demand curve for Hornets tickets, one of these ceteris paribus conditions would surely be the quality of the opposing team. Increasing the quality of the opponent will increase the demand curve for tickets.

Now assuming that the price does not change based on opponents (?), and assuming there are still unsold tickets, and assuming that nothing else changes (day of week, start time, Mardi Gras parades), we could interpret those increased sales as indications of fans perceptions of quality of the opponent.

Let me give you some suggestions for some extra credit.

1. Do you think the quality of the Hornets team is a ceteris paribus condition for the demand curve for Hornets tickets?

2. If in fact the demand for Hornets tickets is higher for better quality teams, what can the Hornets do to increase profits?

3. Do the Hornets engage in such a policy? Only if you provide me some evidence will I give you some extra credit on this item.

4. And back to this one later during the semester, but does the fact that the Hornets don’t sell out every seat indicate they are making a pricing mistake? I’d hold off on this one until we get to discussing elasticities.

–CT

For some years, I have been telling people in the Nicholls community about how markets are used to predict election results–and how they out-predict polls! Here is why markets, such as the Iowa Electronic Markets, work so well, compared to a single poll.   Just last year I wrote a blog post here on this subject, but now, the Iowa Electronic Markets are in the news (in my previous blog post I also discussed how markets could have been used to predict terrorist events, but this effort was squashed by our brilliant –not!–politicians in Washington).

Suppose you poll a very large group of potential voters about how they will vote in a few months (or days or weeks). You will get some results, but sometimes voters will not be very truthful. Some years ago, many voters who were supporting David Duke would not tell anyone, including pollsters, of their support for the former Klan leader.   Duke “under-polled” by a large margin.

The political markets are betting markets–good, old-fashioned wagers. Candidates’ “shares” get valued in the market between $0-$1, and the price reflects the market’s estimate of the candidate’s chances of success. If the bettor believes that candidate A has a better chance of winning than the candidate’s current price suggests, the bettor can buy up shares of candidate A, expecting to cash in after the votes are totaled.

A market makes forecasts much like the way the so-called “Delphi-technique” of forecasts(from Wikipedia) are made. The Delphi method takes the forecasts from experts and uses an average of middle value for the consensus.

There are several differences, though. Markets take middle values of forecasts, with each forecaster’s prediction weighted by the number of shares purchased. The more sure a forecaster gets, the more shares the forecaster buys. Forecasters select themselves instead of being picked by a researcher. Forecasters stand to gain if they make good predictions. and to lose if their predictions are lousy, and so, have a financial stake in the quality of their predictions. Traders who are especially good at forecasting, outpredicting the market, return to the market to play again. Those who lose, by being worse than the market at forecasting events, lose money and tend not to bet as much in the future, learning from their experience. The markets should just keep getting better at predicting as time goes by.

I should point out that sports betting lines and parimutuel betting odds are really determined in the same way and represent good forecasts of the outcomes of sporting events and horse races. By the same token, markets for oil and other depletable natural resources provide best forecasts of future scarcity of those resources.

While markets do better than polls, markets use information from polls, as the bettors incorporate poll information into their forecasts, and so, the polls end up being important in the process. Still, the markets pull more information together than what can be found in a single poll, and by using all information efficiently, weighing it for its reliability, markets provide the most accurate predictions of such future events.

-Morris Coats  

It’s hard to have missed all the talk about Mike Vick, dog fighting, and his plea agreement.

There are some other interesting angles to this whole affair. How much money did Mick Vick lose? Will he play in the NFL again? Should the NFL Players Association fight to ensure he is able to play? All interesting to me, but instead this post is about whether or not there should be a law against dog fighting.

I know some people love dogs – my aim is not to offend you. For the record, I like dogs – I am hoping to get one soon.

But I want to put that aside for a moment to think about the economics of this law, and other laws. Essentially this is a commentary on the law of property, or simply “property rights”. The last time I checked, dogs were indeed property.

What rights are typically associated with owning property? Suppose you purchase a car – that is, you obtain the property rights to car. This gives you certain rights – you can drive around the car, you can change the oil, you can paint you car red. You can even sell the property rights to your car – transfer your rights to another person. If someone violates your property rights by, say, stealing you car, you can call the government and they will help you out. Lastly, you can take a sledgehammer to your car and destroy it if you want. You may choose to destroy your own property – it is not illegal.

Of course, even with a car, your property rights are limited. You can drive your car down Main Street, but you can’t drive you car through a crowded shopping mall. You can drive on the right side of the road, but not on the left side of the road. You cannot run over people in your car. Why not? What is the economic justification for such restrictions?

I hope that is easy – each of the activities that are restricted above would have violated someone else’s rights, caused suffering, or made it more likely this would occur. People are not allowed to run over people in their cars because running over people clearly causes harm to the person that is run over. In all cases, the law is written to ensure that other people (people that are not the driver of the car) are not adversely affected by the decision of the driver. (Bonus question – can you think of something about driving that is entirely legal that nonetheless adversely affects other drivers?)

So, if dog fighting laws are in the same spirit of other property laws, it must be the case that there is someone who is harmed by the act of dog fighting, right? Who is the injured party? Is your answer the dog? Do dogs have rights?

I bet I know what you are thinking; a dog is a living thing. Grass is living? Cockroaches? I bet I know what you are thinking now; a dog is an animal. But there are no laws protecting roosters in the state of Louisiana, or goldfish. Why?

Explain to me where and why the line is drawn? Why not a law protecting me from smashing my car?

Two things I think I might see coming…

One issue might be whether or not the animal you are talking about is personal property. For example, a dog or a goldfish is personal property. A deer is not personal property.

Secondly, if the world “moral” shows up in your answer, should it be illegal to be immoral? Is it illegal to be immoral? Can you give me an example of another activity that is illegal because it is immoral (and doesn’t harm a person other than the decision maker?)

Again, personally I don’t condone dog fighting, and I am not posing this question to be a smart aleck – I want you to help me understand, and for you to think about the economics of property law.

–CT

Those of you who are baseball fans would have to be in a vacuum not to notice the festivities associated with celebrating the 60th anniversary of Jackie Robinson breaking the color barrier in baseball.

I do not in the least bit wish to marginalize the importance of Jackie Robinson, both for baseball and for race relations as a whole.

However, as long as we are remembering influential African American baseball players – I think we should remember Curt Flood. Curt Flood did an awful lot for improving the lives of baseball players, both African American and white.

If you haven’t read about Curt Flood – and the role he had in the toppling of the “Reserve Clause” in baseball, you should.

The reserve clause was a clause in a baseball player’s contract which essentially limited that player to negotiate only with the player’s current team. For instance, if you played for the Los Angeles Dodgers, the only team you were allowed to negotiate was the Los Angeles Dodgers. You could not negotiate with the Cubs or the Phillies. Essentially, before Curt Flood challenged the reserve clause, free agency did not exist. Baseball players operated in a very monopsonistic labor market.

Google Curt Flood and Reserve Clause, and you’ll have many to choose from. Here are just two:

http://en.wikipedia.org/wiki/Curt_Flood

http://www.baseballreliquary.org/flood.htm

Curt Flood can’t compare with Jackie Robinson’s groundbreaking social impact, nor the conditions Jackie Robinson endured. However, Flood’s contribution is also a great one.

If Robinson is number one on the list, Flood should be number two.

–CT

In case you haven’t heard, NASCAR’s Daytona 500 finished down in Florida this year amid not just flags, but also flames, flips, flats and flying flack. Here is some Youtube footage of the final lap.

What does this have to do with economics, though?

It’s a matter of a certain type of substitution, something that economists call “moral hazard.”

For a very long time, economists have noted that in the presence of insurance, say fire insurance, people reduce their pursuit of safety in other forms. For instance, people with fire insurance are less likely to do the same things to reduce fires that people without fire insurance would do. It’s a matter of substituting one form of danger reduction for another.

One of my own professors in graduate school, Gordon Tullock, told generations of economists about how seat belts endangered others. His story was that once auto drivers felt safer because of seat belts or other devices to protect the driver, they tend to increase their speeds and drive a little less cautiously. While this increased danger from fast driving gets mitigated for others in cars because they would also be wearing seat belts, the increased danger is not mitigated for pedestrians. Pedestrians would be in more danger from cars than before.

Tullock offered, as the ultimate safety device for the protection of pedestrians, a simple dagger mounted in the steering wheel column facing the chest of the driver. With such a device, you can be sure that few accidents would occur. Of course, there would be very few cars on the road as well.

Russ Sobel (WVU) and Todd Nesbit (Penn State at Erie) are authors of “Automobile Safety Regulation and the Incentive to Drive Recklessly: Evidence from NASCAR,” forthcoming in the Southern Economic Journal. We were lucky to have Dr. Nesbit present this paper in a seminar here two years ago. What Sobel and Nesbit show is that after Dale Earnhardt died in a NASCAR crash and NASCAR responded by increasing the safety devices required to protect drivers, the number of NASCAR accidents went up by more than what could be accounted for by mere chance. In other words, as is expected from the theory of moral hazard, the tough rules NASCAR adopted to increase driver safety was met by offsetting risky driving behavior resulting in more accidents.

Is the recent wreck in that final lap at Daytona just because of Moral Hazard and the extra safety equipment required after the Earnhardt tragedy? That really can’t be determined. All we can say is that the recent NASCAR wreck is part of a lot of wrecks in NASCAR and this higher rate of accidents can be attributed to the increase in the safety of drivers from the new regulations.

Some other places in sports where we might see this type of offsetting behavior is in contact sports such as football after pads and helmets were worn routinely. Imagine how different football would be played if there were no pads or helmets used. I doubt the hitting would be nearly as hard. I would bet that there are certain types of injuries that have increased along with the degree of protective equipment.

I thought I would end this on the lighter side by sharing with you a joke that was sent to me by an excellent commenter on this blog, a real critical thinker. Remember when reading this that seat belt laws have increased our sense of safety when driving. So, here is the joke Steve W. sent:

The National Transportation Safety Board recently divulged they had covertly funded a project with the US auto makers for the past five years, whereby the auto makers were installing black box voice recorders in four-wheel drive pickup trucks in an effort to determine, in fatal accidents, the circumstances in the last 15 seconds before the crash. They were surprised to find in 49 of the 50 states the recorded last words of drivers in 61.2 percent of fatal crashes were,

“Oh, SH*T!”

Only the state of Louisiana was different. There, 89.3 percent of the final words were:

“Hold my beer and watch this.”

MC

An article from cnn.com about drug testing.

It seems a few football players at a Division III school were arrested with a variety of drugs, including marijuana, cocaine, and steroids. The local DA threatened to extend the investigation to all football players, with a stated focus on steroids.

Naturally, the school suggests some self-policing, announcing that all 100 football players will be tested for street drugs (marijuana and cocaine), but will only randomly test 25 football players for steroids.

Any thoughts on why, with the DA worried about steroids, the school will only be randomly testing 25 football players for steroids, while testing them all for street drugs?

Any guess as to which test is more expensive?

–CT