Saturday, February 28, 2004

Becoming Costanza 

Why did Jason Alexander win the part of George Costanza on Seinfeld? The recent strife over Seinfeld re-run royalties makes it clear that Mr. Alexander did not have to try very hard to get into his role.

Jason Alexander in The Globe and Mail:

"I'm not ashamed to talk numbers. I would say in the years that we've been in syndication, Julia, Michael and I have probably individually seen about a quarter of a million dollars out of residuals, whereas our brethren have seen hundreds of millions of dollars. Seinfeld has a profit of over a billion dollars."

George Costanza on Seinfeld:

Thirteen thousand?...a piece?...That's insulting! Ted Danson makes eight hundred thousand dollars an episode... I'm sorry. I can't live knowing Ted Danson makes that much more than me.

See more on MR.

Hey Jason, The Jerk Store called...


Friday, February 27, 2004

The Vanishing Charley Pride 

As a serious student and fan of country music, I believe that Ray Charles and Charley Pride are two of the greatest hillbilly singers ever. This month, to celebrate Black History, CMT has a new documentary called “Waiting in the Wings: African Americans in Country Music”. The show is an hour and a half, and does a good, if brief, job of profiling both Charles and Pride.

Ray Charles experienced commercial success in the early sixties with his covers of great country songs. His versions of “Born to Lose”, “You Don’t Know Me” and “You Win Again” are true country classics, and belong on any list of the top 50 country performances of all time. Charley Pride debuted in the late 60s and was a major star throughout the 70s. He is still the second biggest selling artist in the history of RCA records, behind only Elvis. His recordings of “All I Have to Offer You is Me” and “Kiss An Angel Good Morning” would also easily make any list of the top 50 country recordings of all time. Both artists were black and both were huge successes during the 60s and 70s among country fans, even though those fans lived primarily in the southern states that during this period gleefully elected racists like Lester Maddux and George Wallace. You would think that the success of black artists in country music during a time when racism was widespread would speak to the colorblind power of music and the tolerance of country music fans, if not the overwhelming influence that the profit motive has on music companies. The CMT special glosses of this observation, and is done with Pride and Charles, who vanish and are fogotton after the first half hour.

The final hour of the show could be summarized with the question “Are country music fans racists?” The answer, from CMT, seems to be “Yes!” This hypothesis is supported by the fact that has been no major black country music artists break through since Charley Pride. Much of the last hour profiles black artists who have tried to break into country music in the last decade and failed. The various music critics, African-American Studies professors, and for some reason, well known country music expert Arsenio Hall all agree that the reason is ultimately because white country music fans are too intolerant to listen to music made by non-whites. To really put this point home, the documentary concludes by unfavorably comparing country music fans to rap fans, arguing that fans of rap music are much more tolerant because they have embraced the deplorable Eminem.

I think I have a better explanation for the failure of black country artists in the last 12 years: the singers who have made records and those featured on the show are terrible. Trinni Triggs has been around for a while and sings like a poor mans Clay Walker, and Clay Walker has no discernable talent. Rissi Palmer appeared on Star Search (were she lost) and was promoted as “sounding like Faith Hill” which was true enough, but if you want to be a country singer, that’s not exactly a compliment.

Does CMT really believe that country music fans are more racists today than 30 years ago? I personally would be willing trade 20 Toby Keiths for 1 new Charley Pride and at least 1,000 Kenny Chesneys and 1,000 Martina McBrides for one new Ray Charles. Maybe next year instead of insulting their viewers CMT could just present a Charley Pride concert.

Thursday, February 26, 2004

Envy the Poor? 

After reading article by Virginia Postrel, recommended below by JC, I think I might finally understand why Democrats and liberals are so passionately against free trade. I think it springs from their single-minded focus on relative incomes and standards of living.

Liberals constantly argue against free markets and freedom generally because it results in a distribution of wealth that they deem unfair. They do this in spite of the fact that free markets and unequal income distribution result in faster economic growth, with raises everybody’s standard of living. To me the question is not “How much more does the top one percent of income earners make relative to the bottom 20%?” but “What sort of standard of living can someone in the bottom 20% obtain and how does that compare to what the bottom 20% made 20 years ago?” All the statistics show that the poorest Americans live lives not of severe desperation, but typically enjoy air conditioning, cars, and cable TVs. Maybe they don’t have the best jobs, best cars or best television sets, but in what other societies presently or ever on this planet have the poorest had it so good? Nonetheless, liberals focus on relative income and standard of living, and ignore the amazing progress made across the board in absolute standard of living.

When you accept that liberals are only focused on relative standards of living, you can see why the oppose free trade. Free trade will make the U.S. economy grow faster and therefore increase the absolute standard of living across the board. This is clearly good if you care about the absolute standard of living. If you only care about relative standard of living, free trade is a bad policy. Trade with other nations will cause other, poorer nations to grow faster than the United States, allowing the poor nations to catch up and achieve comparable absolute standards of living. But, from the perspective of a liberal who cares only about relative standards of living, Americans will be worse off, because relatively speaking, American will be poorer compared to the rest of the world than it is now. Liberals apparently resent and therefore oppose free trade because it will allow poor nations to become rich, erasing the huge current U.S. relative income advantage.

Sound crazy? How else do you explain Charles Schumer’s fear of having millions of Indians become educated? Or the fear of technology, like DSL, that makes trading cheaper? How else to you explain John Kerry’s promise to “keep jobs in America” and the fear that all jobs will leave American and go somewhere else? Apparently, liberals like the world as it now exists, where American’s have the best standard of living by far. If we allow free trade, American incomes will continue to grow, but other nations will catch up, and relatively speaking, this will make liberal minded Americans unhappy.


Postrel on Trade 

I am a bit busy so I will just point you to this article by Virginia Postrel on free trade and economic growth in US states. See The Sports Economist for analysis.

Tuesday, February 24, 2004

What Does a PhD in Economics Get You? 

Tyler Cowen cites some research on the subject, and the news is good.

-- Only four percent of finishing Ph.d. students received no financial aid whatsoever.

-- The unemployment rate for graduating Ph.d. students is projected at 2.1 percent.

-- Only six percent of Ph.d. graduates in economics say they do not like their jobs. The median salary is $74,000, again noting that not everyone responded to the questionnaire.

Join the club!


Levitt on Beaneball 

The Sports Economist links to an article in the Financial Times about University of Chicago economist Steven Levitt. Levitt, the most recent winner of the prestigious John Bates Clark Medal, is a very interesting fellow. If you had me for senior seminar, you know how much I admire Dr. Levitt's work. But this quote at the end of the article surprised me.

There has been much hype recently about baseball clubs finding statistics to identify good players. Levitt read Michael Lewis's book Moneyball about the supposed innovators, the Oakland As, and is unimpressed. "If you look at all the stats they say are so important, the As are totally average! There's very little evidence Billy Beane [the club's general manager] is doing something right."

Really? So I looked at the numbers, and he is right (at least on offense). The table below (oh you know I'm going to overuse this little tool) lists the Mean OBP, SLG, and OPS for the Oakland A's and the American League (AL) from 2000-2003. I also include the SD of the variables for the AL.

Oak 0.337 0.429 0.766
AL 0.332 0.426 0.759
AL(SD) 0.015 0.026 0.039

Note to self, never doubt Steven Levitt. Wow! So what does this mean? Maybe Billy is not so innovative after all. I think I'll submit the article over as a Clutch Hit to Baseball Primer to see what the Primates have to say about it.

Update: I sent David Pinto of Baseball Musings an e-mail about this. He kindly responds to me that while the A's offense may not be all that impressive, the pitching probably is. You have to look at both sides. I don't have the pitching statistics handy, but I would suspect he is right. Also, David points out that Beane is getting his average talent for less than the average price. Thanks David!

Another Update: Baseball Primer has started a discussion thread on this article. There's nothing like getting that Primer pointer glory.

Even More: I could not resist. I had to check out a sabermetric-approved pitching statistic to examine the claim that the A's might be winning with excellent pitching and average hitting. Luckily, Futility Infielder calculates the DIPS-corrected ERA (dERA) for all pitchers in 2003. The site has all of the relevant information about the DIPS correction. The average dERA for the AL in 2003 was 4.97 with standard deviation of 1.95. The average dERA for the 2003 A's was 4.43. It is lower, but not by much. I think Levitt is onto something. Even if the A's are paying fewer dollars per OBP-point (for example), that should only make the A's an average team with a below average payroll. This means that the Moneyball-approved statistics may not fully explain what has caused the A's to succeed in the past few years. I am beginning to see why Beane may have been so loose-lipped in the company of Michael Lewis.

And Finally (I think): I want to say that I disagree with Levitt's statement that there is no evidence that the A's are doing anything right. Clearly, Bean & Co. have done a very good job of winning over several seasons. I am concentrating on Levitt's statement that "If you look at all the stats they say are so important, the As are totally average!" I take this to mean that the stats hyped in Moneyball are not explaining much of Oakland's recent success. A more sabermetrically-inclined friend tells me that this is old news. I think much of what Bean didn't say -- valuing defense and developing new tools for measuring process instead of outcomes -- has helped the A's win. Levitt is pointing out that the main metrics do not tell us much about the success of the A's, which is something I did not realize. Sabermetrics is as much about a philosophical approach to analyzing the game as it is about using data analysis. There is no doubt the A's are winning and performing well in some less sophisticated measures of performance (e.g., the A's pitching led the league in regular old ERA), and I think the Beane model is contributing to that success. I am not sure if Levitt would agree with me on this, because he does clearly state that "There's very little evidence Billy Beane [the club's general manager] is doing something right."


Monday, February 23, 2004

Will the Alger Hiss Stamp Be Next? 

I had the misfortune of visiting the Post Office last week. In honor of black history month, they are heavily promoting a new stamp featuring Paul Robeson. The post office describes him as a “performer, athlete, and activist”, which is true, but leaves something out. Robeson was a communist, and not the fuzzy sort who are merely for wealth redistribution. He was an admirer of Joseph Stalin, and for his support, Stalin presented him with the 1952 “Stalin Peace Prize”, which Robeson proudly accepted. If you think I am a right-wing kook for pointing this out, consider and enjoy the reaction of the Young Communist League to Robeson getting a stamp.

During the anti-Communist witch-hunts spearheaded by Sen. Joseph McCarthy, Paul Robeson became a target for repression. He went from being arguably the most famous person in the world, to being erased from the history books. Now, after a six-year grassroots campaign, the United States Post Office is issuing a commemorative stamp in his honor. The stamp is the twenty-seventh to be issued in the Black Heritage series, which has also included Harriet Tubman, W.E.B. DuBois, Thurgood Marshall, and Dr. Martin Luther King, Jr. The stamp will be issued in 2004, in time for Black History Month. Robeson is perhaps the first U.S. communist to be so honored.

How dare that villian McCarthy make the communist Robeson testify! I really empathize with the Young Communists, as there is nothing sadder than the injustice that results when a witch hunt for communists actually catches one.

David Horowitz tells a story in Radical Son about Robeson. Itzhak Feffer was a Jewish poet who lived in the Soviet Union. He was a friend of Robeson and in the early fifties rumors where flying that Feffer and other Jews were being systematically killed by Stalin. Robeson, on one of his many trips to Moscow asked to see his friend Feffer, but was told he was on vacation. He had actually been in prison for 3 years. Stalin had him located, given needed medical attention and fed so as to appear healthy, and in three weeks set up a meeting with Robeson. At that meeting, which was monitored by the Soviets, Feffer told Robeson “They’re going to kill us. When you return to America, you must speak out and save us.” When Robeson returned and was asked about Feffer and other Soviet Jews, he responded that such charges were slander against Stalin. This story was not created by Horowitz, but was told by Robeson himself.

Robeson clearly does not belong on a stamp. A good nominee for next year addition to the “Black Heritage” series by the Post Office would be the boxer Sugar Ray Robinson. In the 30s Robeson said that black Americans would fight on the side of the Soviets against their American oppressors. When Sugar Ray Robinson heard this, he promised to punch Robeson in the nose if they ever met.


Quantifying Big Market Advantage II 

As promised from this post, here is average number of wins per season (1995-2002) adjusted for the number of wins attributable to population size. I simply subtracted out the number of wins attributable to population size -- calculated from the marginal impact of population on wins in a regression -- from the actual wins for each team. I find it interesting that the NY Yankees fall only from second in total wins to fifth in population-adjusted wins. Also interesting is the fact that the top-7 teams in total wins and population-adjusted wins are the same, and the bottom four teams in population-adjusted wins and total wins are the same.

Team Pop Pop-Adj Actual-Wins P-S P-S
------ Rank Wins Rank ------ Rank Apps. Rank
Atl 16 95.34 1 97.5 1 8 1
Cle 22 89.2 2 90.75 3 6 3
Sea 18 86.76 3 88.63 4 4 4
Ari 20 86.29 4 88 5 2 11
NYY 1 84.35 5 95.5 2 8 1
Bos 11 83.81 6 86.88 6 3 7
Hou 15 83.79 7 86.25 7 4 4
StL 24 81.88 8 83.25 11 4 4
SF 8 81.55 9 85.25 8 3 7
Oak 8 79.67 10 83.38 10 3 7
Cin 28 79.46 11 80.5 14 1 16
SD 23 77.27 12 78.75 17 2 11
Tex 13 77.25 13 80 16 3 7
LA 3 76.39 14 85 9 2 11
Col 25 76.14 15 77.5 18 1 16
ChiA 5 76.06 16 80.88 13 1 16
Tor 14 74.91 17 77.38 19 0 23
Bal 7 73.25 18 77.25 20 2 11
NYM 1 71.85 19 83 12 2 11
Fla 17 71.84 20 73.88 22 1 16
Ana 3 71.76 21 80.38 15 1 16
Min 21 71.31 22 72.88 24 1 16
Mon 19 71.13 23 72.88 25 0 23
Phi 10 70.12 24 73.38 23 0 23
Mil 30 70.11 25 71 26 0 23
ChiN 5 69.43 26 74.25 21 1 16
Pit 27 68.76 27 70 27 0 23
KC 29 68.07 28 69 28 0 23
Det 12 62.88 29 65.75 29 0 23
TB 26 62.34 30 63.6 30 0 23

Mean 76 80 2
Median 76 80 2
SD 7.75 8.27 2.22
Max 95 98 8
Min 62 64 0

So Bud, is it really market size that causes the Yankees win and the Brewers lose?

Thanks to an anonymous reader for helping me figure out the table.

Free Market Sports Manifesto 

I just ran into an interesting website by Eric McErlain. Naturally, being a market-friendly economist who likes sports I had to follow the link to the author's Free Market Sports Manifesto. This post is about a year-and-a-half old, but it is still relevant. Here are the top-5 points:

1. Athletes are not overpaid, they are simply paid a salary that owners can afford. If you believe that athletes are overpaid then stop: attending sporting events; purchasing lisenced merchandise; buying products advertised at sporting events, or on broadcasts of sporting events; and listening and watching sports on television and radio. Otherwise, quit your whining.

2. Division I college athletics are just a device to extract labor from young adults at below market value.

3. Thou shalt oppose the spending of public monies on sports stadia, unless your local owner chips in to pay for a significant amount of the expenditures on his/her own.

4. Thou shalt not propose to your girlfriend/boyfriend/potential domestic partner at the game for broadcast on the jumbotron. This is an important moment, so show some class.

5. Sports is an entertainment business like any other, and its success or failure is gauged in the same sort of fashion.

This is great stuff, and there are 15 additional points on his site. And the points I list above all have hyperlinks to relevant stories that I did not include. So, if you are interested, go visit the site.


Friday, February 20, 2004

Is Beaneball Finished? 

Aaron Schatz of the New Republic Online (and Football Outsiders) argues that the Bill James revolution brought forth by Billy Beane is dead. With the dispersion of Beane disciples Ricardi and DePodesta to Toronto and LA, as well as the acceptance of sabermetric philosophy in NY (both teams) and Boston, there are no more market inefficiencies for small-market teams to exploit.

Unfortunately, thanks to the mainstreaming of sabermetric techniques that DePodesta's hiring signifies, the future of Major League Baseball probably looks a lot more like today's AL East than the league Michael Lewis brings to life in Moneyball. In the end, the revolution pioneered by Billy Beane and the Oakland A's may make the market for baseball players a lot more efficient. But it won't make the game any more competitive.

I will be blunt: bullshit! It is tempting to view Beaneball as a one-shot technological innovation that will diffuse across teams until there are no more inefficiencies. Now that OBP will be valued properly by the market what will the "small market" A's do? Well, the sabermetric revolution is not a revolution of static discoveries -- such as using DIPS, OPS, and win shares -- but a new way of thinking. Read Moneyball again. It is a discovery that there is always room for improvement in baseball strategy. Abandoning the old scout mentality is not just about putting radar guns away. It is about no longer relying on what my father's father thought about baseball. Sabermetrics is a way of thinking about the game, looking for new innovations, and improving the old. In my view, if the Mets and Yankees think they have countered Beane by hiring statisticians to "do what Billy does," they are in for a shock. I am sure that Beane and his offspring have much more to come.

Also, I want to make it very clear that I am not attempting to trash Schatz's article. On the contrary I think it is excellent, and I would love to sit down and chat with him on the subject. I am just a little more optimistic about the role of sabermetrics in affecting baseball. PS -- I saw this on Baseball Musings.

Quantifying Big Market Advantage 

How much of an advantage is a bigger population to baseball teams? I was curious so I regressed the effect of Metropolitan Statistical Area (MSA) population on average wins from 1995-2002.* Here is a scatter-plot of the data with a regression line.

Basically, every 1.9 million people translates into an additional win per season. I have used this number to calculate the population adjusted wins for each team, but I do not know how to post tables using Blogger. If anyone knows how, please e-mail me. But the general analysis reveals the difference between the biggest (NY) and smallest (KC) markets is about 11 wins per season. During the sample the Yankees (I'll ignore the Mets for now) won an average of 30 games more than the Royals. This means about 1/3 of the difference between these two extremes is determined by inherent population differences; hence, the other 2/3 is due to other things, like the ineptitude of KC (e.g., running Bill James out of town) and the excellence of Yankee management (e.g., having the Rangers subsidize A-rod). Also, the R-square on this estimate is about .12, so population does not explain much of the variance in wins across teams in the post-strike era.

*The label on the Y-axis has the incorrect time period.


Thursday, February 19, 2004

Chicago Cubs Learn from the Chicago School 

Doug Pappas points to this Chicago Sun-Times article on how the new rooftop bleacher arrangement allowed the Cubs to sign Greg Maddux.

General manager Jim Hendry acknowledged Wednesday that if not for the profits gleaned by Tribune Co. sharing in those rooftop proceeds, if not for the extra cash from 200 premium seats being installed behind home plate and the financial lift from four extra night games after a landmark agreement with the city, he might not have been able to afford Maddux's potential three-year, $24 million deal, with the final year contingent on Maddux's innings pitched in 2005.

See what happens when you assign property rights. I wonder if Ronald Coase is a Cubs fan.

Occupational Hazards 

Earlier today I met with a student to review for an upcoming exam. As I looked at her notes, I was very impressed. They were a virtual transcript of my lectures, neatly typed, with all of the various graphs I use recreated with software. When I complemented her on the notes, she told me she got them from my website, which surprised me, because I never created such a fancy set of notes. On further study, I discovered that they were produced by this website, which pays students to take notes and then sells the notes. I don’t have any problem with giving students notes, and on my website here, I give them access to old exams and review sheets to help them study.

I do have two problems. First, I created the lectures, and therefore they belong to me and should not be sold without my consent. Secondly, upon closer review, the notes contain a great deal of incorrect information and will alomost certainly cause more confusion than good.

I sent the website an email stating these two complaints. Today I got a call from their lawyer in Washington D.C. He explained to me that, in fact, multiple courts have held that it is legal to sell other people’s lectures online. I would still really like to sue them, but I will just probably put some lecture notes up on my site for free to at least keep them from making any more money.

Am I right to be upset about this? Can I do anything?


Thanks Canada! 

From today's Chronicle of Higher Education:

Canada's mandatory-retirement law has ended up as a boon for the University of Texas at Austin, where the government department has hired a pre-eminent political philosopher from the University of Toronto.

Thomas L. Pangle, who will turn 60 this year and is known as one of North America's leading historians of political thought, has agreed to move to Austin, although "we haven't red-inked the offer yet," says John Higley, chairman of Austin's government department.

The hire is a coup for Texas, which beat out Harvard University and a counteroffer from Toronto. Mr. Pangle has won several teaching awards and written seven books on political philosophy, including Political Philosophy and the God of Abraham, published last year by the Johns Hopkins University Press. He said he had been concerned about a Canadian law that requires workers to retire at 65. He has been at the University of Toronto since 1979. "While I might want to retire," says Mr. Pangle, "I would rather make the choice myself."

File under "Incentives Matter."

Wednesday, February 18, 2004

Saber-Thinking and Education 

After my rant yesterday on why academia needs a Paul Depodesta, it seems that I am not alone in my thoughts. Matt Welch points to this article on the NRO on the need for a Bill James and Billy Beane for the entire US education system.

While the academy needs more than a tweak, I think the US education system as a whole (or is it hole) needs a sledgehammer. If Bill James couldn't help the Kansas City Royals, the education system is way out of his league.


Easterbrook's Paternalism 

Gregg Easterbrook is one of my favorite writers. I believe he really cares about poor people. If you also care about poor people, but disagree in the slightest with Easterbrook about how to help them, you are a bad person. If you are a Christian and disagree with him, than you are a hypocrite. He explains:

No, I won't blame the greedy rich and the hypocritical politicians for the continuation of poverty amidst plenty, because this shifts attention away from the group that is most to blame: typical Americans. It is the country's middle-class, middle-income majority that endlessly demands new government benefits for itself, locking up public funds that could otherwise help the impoverished. It is the country's middle-class, middle-income majority that does not pressure politicians for higher minimum wages or similar reforms, because the country's middle-class, middle-income majority--much of which boasts of being Christian--doesn't care what happens to the forgotten poor at the bottom, or even likes the poor kept that way, as this ensures a cohort of lawn workers and burger-flippers who will accept low wages.

Most important, it is the country's middle-class, middle-income majority that endlessly demands the lowest possible price for everything, and instantly shifts its loyalties to Wal-Mart or whatever firm offers the lowest possible price. The lowest-possible-price sellers that increasingly dominate the United States economy get their low prices by paying less than a living wage, by cheating minimum-wage workers on overtime, by cutting health care benefits--to use the current California supermarket example--and otherwise ensuring that families of four remain mired at $18,850 annual income even when both parents work.

Easterbrook here and in his superb book The Progress Paradox proposes a living wage as the solution to poverty in America. He gives lip service to such a policy having costs (slightly higher prices), but for such a smart man, clearly believes in free lunches. Doubling or tripling the minimum wage would benefit some workers, but would necessarily cause many to lose their jobs, depriving the very lowest skilled workers of any chance at developing job skills and moving up the economic latter. Certainly rich people can afford to pay more for cheeseburgers or motor oil, but corporations like Walmart don’t exist for the rich. Rich people can afford more of everything, that’s what is nice about being rich. Poor people can’t, and are naturally the biggest beneficiary of the low prices that Walmart offers.

It is disappointing for such a smart man and great writer to take the position that those who disagree with him are morally inferior. It is even more disappointing for him to argue that Christians have a moral obligation to help the poor via the coercion of government. That is a big leap from Christian philosophy, which I understand to encourage voluntary acts of charity and compassion. If anything is morally repugnant, it is Easterbrook’s interpretation of Christianity, under which Gregg Easterbrook determines what is compassionate, and then forces everyone, at gunpoint if necessary, to pay whatever he determines to be “fair” wages and taxes.


The Free Trade Hall of Shame 

Tech Central Station has a list of current anti-trade zealots. It is nice to have a record of these things for future reference. The list is not exhaustive, and certainly maybe even George Bush (or at least Karl Rove) deserves a spot for his support of steel tariffs. But speaking of Bush, I wonder what his position on trade will be. Will he move protectionist to counter Kerry or Edwards and try to win on foreign policy? I sure hope not. In my view I think Michael Dukakis must be happy right now, because I think there is a chance that his loosing legacy may be surpassed by either of the likely nominees. The guys are on the record supporting higher taxes and opposing the war (the Democrats can thank Dean for this), both issues are general election vote poison.

Tuesday, February 17, 2004

DePodesta and Academia 

Rob Neyer has an excellent article on the Dodger's new GM Paul DePodesta. He cites this speech and says it has been pulled off the web, but thanks to the Google cache it is still freely available for a limited time. Now I know DePodesta as a character in Moneyball. A shrewd personality-lacking stats geek with a knack for finding hidden baseball stars in his laptop database. Read this article; DePodesta is about much more, plus he seems like a nice guy who would be fun guy to meet. What strikes me about this guy is his management philosophy of questioning all the cogs in the process. Why did MLB teams give its scouts radar guns? They were useless if guys who could throw much slower could win Cy Young awards. The Dodgers are getting way more than a number cruncher. The more I read the more I got to thinking how much the academy needs a Paul DePodesta. How many things do we do every day that we do just because...well that is the way it has always been done? Why am I on the bookstore committee? Why do we have a bookstore committee? No American institution is in more need of a shake-up than academia. We are full of complacent old geeks who never had to respond to anyone after our dissertation committees gave us the "you're done" nod. My mind is spinning, I need to think some more on this. Paul DePodesta, please save us!

Monday, February 16, 2004

Charles Schumer’s Theory of Absolute Disadvantage 

Another Sunday without the NFL, but instead of going outside and getting a life, I watched the Sunday morning talk shows. On ABC This Week, Charles Schumer (D-NY) presented the following case against free trade. He argued that Ricardo's theory no longer applies because of three major changes which all made trade harmful for America.

Increased Capital Flows - Now Americans can easily invest anywhere in the world, and since other countries are improving their financial markets, many Americans are choosing to do so. This bad because it means less investment and less jobs in America

Broadband - Because of broadband, American business can now shop around the world for services that were traditionally impossible to trade. This is bad because high skilled workers will now face competition, and some will lose their current jobs or have to take pay cuts.

Improved World Education - Citizens in other countries, he singles out India, are now increasingly as educated as Americans. This means American consumers will be able to purchased high technology products designed and built in other countries. American business will also now be able to take advantage of the increasing number of high skill workers around the world, meaning that high skill American works will have to compete, possibly losing their jobs or having to take pay cuts.

According to Schumer, America is at the tipping point of being at an absolute disadvantage to the rest of the world. This means that Americans will no longer be the best at anything, and sooner or later we will produce nothing, and apparently all die or have to depend on UN chairity. If we allow free trade, according to Schumer, we are doomed.

To someone who does not understand trade (and some who do, like Paul Craig Roberts) these three changes seem like problems. As far as I can tell, all three changes are absolutely good for American producers and consumers, as well as producers and consumers around the world. These changes should be celebrated.

If Schumer really believes these three changes are bad, he should have the courage to suggest what policy changes could stop them. We could make it illegal to invest in other countries, destroy American technology that makes broadband possible, and try to prevent the education of people in the other parts of the world. Seeing Schumer make such proposals would convince almost anyone of the stupidity and economic illiteracy of his critique of free trade, and hopefully convince people of the stupidity of men like Charles Schumer.


Cheap Coats and Free Trade 

As Bill pointed out recently, John Edwards's 10 year-old girl story seems a bit far fetched. Alex Tabarrok agrees citing this article in the NY Times, which also brings Mr. Edwards's protectionist views into conflict with his poverty position.

Yet, as John Tierney points out, "clothing has become so cheap and plentiful (partly because of textile imports, which Mr. Edwards has proposed to limit) that there is a glut of second-hand clothing, and consequently most clothing donated to charity is shipped abroad. The second-hand children's coats that remain in America typically sell for about $5 in thrift shops." (emphasis added)

More on Outsourcing 

Chip Taylor links to three good stories on the benefits of outsourcing.

Sunday, February 15, 2004

So Long Lawrence Ritter 

I was saddened to hear of the death of Lawrence Ritter, who passed away today at the age of 81. Ritter is most known for his book The Glory of Their Times: The Story of the Early Days of Baseball -- Told By the Men Who Played It. My grandfather gave me this book for my birthday when I was about 11, I promptly put in on a shelf where it sat for a decade. One summer in college I finally got around to reading it, and I kicked myself for waiting so long. I gained a new appreciation for the game of baseball, and I learned about the guys who called Babe Ruth "the kid." Ritter's book was based on personal interviews with the old timers. This was an important book for baseball because it brought a new understanding of the early days of the game to modern fans, and it earned several forgotten stars entry into the Hall of Fame. In reading his obituary I was surprised to learn that Ritter was an economist who taught in the Finance Department at NYU. If you ever get the chance, I highly recommend picking up a copy of The Glory of Their Times. I think I may re-read it again soon. Read some more nice thoughts about Dr. Ritter on Primer.


Breaking Down the A-Rod/Soriano Deal 

So baseball fans everywhere are screaming again. “The big-market free-spending Yankees have made the 2004 baseball season virtually irrelevant a week before spring training starts,” or so they claim. As the deal is being reported by ESPN, the Yankees send second baseman Alfonso Soriano to Texas for last year’s AL MVP, Alex Rodriguez. However, I am not so sure that this is a case of the Yankee’s screwing over the little guys of the league. Let’s take a look.

A-Rod and Soriano are scheduled to make $22 and $5.4 million a piece for next season. However, this is not an even swap of salaries. The Rangers must pay $40 million to the Yankees over the next seven years (there is also some deferred money involved that I will ignore). This translates to the Rangers paying $11.11 million a year and the Yankees paying A-Rod about $16.3 million. Compare their numbers over the last three years straight up (not adjusted for park effects).

Player: OBP/SLG
A-Rod: .396/.615
Soriano: .325/.501

A-Rod is clearly the better player, but how much better? In terms of runs produced, I ran a regression on the returns to OBP and SLG on runs per game by team over the past 6 season in the AL. I pick this time-period to go back to the most recent expansion. The results are:

Runs per Game = -6.07 + 22.54*(OBP) + 7.99 (SLG)

This fits almost perfect with Paul DePodesta’s 3OPS model, meaning each OBP point is 3-times more valuable than a point of SLG. When I plug in the individual player numbers the model tells me how many runs a team comprised entirely of these players would produce. The A-Rod team would beat the Soriano team 7.76 to 5.25. Dividing these numbers by 9, A-Rod is worth .86 runs/game and Soriano is worth .66 runs/game. Over 162 game season A-rod and Soriano will generate 139.7 runs and 94.6 runs respectively for their teams. Now we have usable numbers to compare these players’ worth per dollar.

A-Rod: 139.7/$16.3 = 8.57 runs per million
Soriano: 94.6/$11.1 = 8.51 runs per million

It seems that this is a pretty even swap, and that the Yankees didn’t use their financial muscle to “overpay” to get A-Rod at all. The Rangers appeared willing to cover A-Rod’s salary to make the trade work with any team willing to deal. The big difference in the deal is the marginal difference in payroll and runs to the Yankees. A-Rod is expected to produce 33 more runs than Soriano for the Yankees while taking on an additional $11 million in salary, or $3 million a run. Is it worth it? I cannot say, but this looks like a very shrewd move on the part of the Yankees front office, and I suspect some other GMs out there are now realizing A-Rod was available at a rate equal to his performance. Yes, this deal was out of reach for some teams, but several other teams in the league are clearly capable of paying the salary to receive such a large boost in performance. I just find that it is interesting that the trade ended up looking so equal.

Addendum: The NY Times agrees that this is a great financial coup for the Yankees.

The expected payouts to Henson, Soriano and Boone total roughly $14.2 million. The $942,623 in termination pay the Yankees would owe Boone, in addition to the $14 million they will pay Rodriguez this season, would raise the Yankees' payroll by less than $750,000.

"We traded an All-Star to get a Hall of Famer at a gain of very little for this year," a Yankees official said.


Friday, February 13, 2004

Hornets Suffering in New Orleans 

I grew in Charlotte. I waited patiently for soon-to-be Hornets owner George Shinn to bring a professional sports team to town. He went after the USFL, MLB, the NFL, but he only succeeded in landing the Hornets. The town was so grateful the Hornets led the league in attendance for a decade. I went to at least one game every season during this franchise's first 10 years. Only moving away from Charlotte kept me from attending more games. But, things soured. Jerry Richardson succeeded where Shinn had failed in bringing the NFL to Charlotte with the Panthers. Shinn was a yellow with jealousy equal to the color of his lemon-dyed hair-wig. Deep down Shinn is just a jackass. He demanded a new arena, called the fans pathetic, he told NC basketball legend Michael Jordan that he was not wanted, and he rivaled Carolina Panthers players in appearing in court.

To deflect the public's disgust of himself, Shinn recruited a more objectionable character to co-own the team, Ray Woolridge. George and Ray demanded a new area and a wad of bills as if they were talking through ski masks to bank tellers. Charlotte is a banking town, and Charlotteans don't take that kind of crap. We told Shinn we would be happy to build a new arena for anyone else but him. George packed up and took a crooked deal in New Orleans, which screwed its taxpayers with a huge public arena designed to generate income to the already wealthy owners and generate losses for the city. Shinn promptly fired one of the best coaches in the NBA, Paul Silas, and hired one of the worst, Tim Floyd.

How has New Orleans responded? Well, according to this story my father sent me the team is not doing well. Average attendance is below 15,000 for a team that is winning games and has two All-Stars. Contrast this with Charlotte that used to regularly fill a 23,000 seat arena all 41 games. This is a great example of why localities should never publicly finance sports stadiums. And how has Charlotte fared? Well, the new Bobcats start play next season in a new arena with all the amenities George demanded. The owner, Robert Johnson, is likeable and the first minority NBA owner. He plans to put the team on BET and his team will play in the most basketball-crazy city in the country (this is not an exaggeration).

So why am I writing this. I just want to send a special message to George Shinn. Up yours! I predict that the Hornets will be contracted within the next three years.


Thursday, February 12, 2004

Book Review - An End to Evil by David Frum and Richard Perle 

Apparently, being a “compassionate conservative” does not mean governing like Barry Goldwater with a smile, but free spending to buy votes. That being said, I believed Bush has been surprisingly aggressive and rational when it comes to dealing with terrorism. According Perle and Frum in their book An End to Evil, Bush has done OK, but if we really want to win the war against terrorism, the United States must become much more aggressive.

On the home front, they call for a total reworking of the FBI, CIA, Defense Department and State Department. They want immigration laws strengthened, and call for the creation of a national ID to aid in identifying illegal aliens. Once identified, they want illegal aliens deported. They like the Patriot Act, and support increased judge approved monitoring of religious, charitable and educational organizations. Ultimately, they argue that America has to some extent scrap its fuzzy multiculturists view of Islam, and accept that radical Islam is an evil doctrine utterly inconsistent with western values of respect for life and liberty.

Internationally, we have to deal a lot of work to do with terrorist supporting regimes. In North Korea we are faced with an unpleasant choice of allowing the regime to spread nuclear weapons or fighting a bloody war. Iran is less of a problem, and can probably be dealt with by active American moral support and financial assistance to the overwhelming pro-western majority. Syria is now surrounded by U.S. allies and could probably be bullied into changing regimes. Saudi Arabia is a bigger problem because it is the main financial, moral and spiritual supporter of worldwide radial Islam, all while somehow maintaining the status of an U.S. ally. Frum and Perle suggest its time to play hardball with the Saudis by calling a spade a spade, and holding them accountable for their support of terrorism. If the current Saudi leaders will not go along, they suggest allowing the entire oil rich eastern region of the country to secede and form a pro-western democratic state.

As for diplomacy, the authors encourage the President to live up to his promise that every nation is either with the terrorist or us. In addition to opposing us diplomatically countries like France, Germany and Russia lack the serious military capacity to truly help us, and should therefore be ignored when possible, and punished with a downgrading of NATO status or trade sanctions if necessary. The UN has also shown itself to be unhelpful, primarily because its charter does not give countries the automatic right to retaliate against terrorism or those nations that support terrorism.

What to make of all this? I thought reading this book and seeing a serious plan to fight terrorism would cheer me up, but the sheer magnitude of what must still be done is depressing. Though at first look Frum and Perle seem ready to fight almost everybody, given what we face, there seems to be little choice. The terrorists hate us enough to kill us by the millions and they have the spiritual and financial support of many regimes. Nuclear, biological, and chemical weapons are cheaper and easier to obtain than at any time in history. It seems we face a choice of dealing with terrorist all over the world with our military or having to deal with them and their plans with civilians here in the United States.

Pearl Harbor was enough to sell the American people and both political parties on a four year world war that cost 295,000 lives in order to restore America security. Just over two years after 9/11 and with less than 1,000 military casualties, American seem ready to quit and declare victory, and the Democrats are essentially promising to declare “peace in our time” if elected. Unfortunately the terrorists are not tired of fighting, and are unlikely to turn their swords into plowshares in response to an America that won’t fight. How many more 9/11s before we get serious and realize that we face not the false choice of war verses peace, but an unpleasant choice of war on the terrorist’s terms or the terms proposed by Frum and Perle?


The End of Civilization is Near 

From CMT:

Clark Declines Playboy Cover
"It Seems Sex Is a Fast Track to Media Attention," Singer Says

Terri Clark has turned down the chance to pose for the cover of Playboy magazine. After coming in second place (behind Shania Twain) in a poll on Playboy's Web site last year, Clark was offered the cover of May's music issue.

Hopefully they will not work their way down the list until they get to Wynonna, who probably really needs money. Just think how close an entire generation of young men came to being permanently traumatized.

Why Are Pitchers Hitting More Batters?  

I have studied the issue of hit batsmen in the Major Leagues quite a bit, yet I still cannot explain this pattern in the rate that pitchers have been hitting batters over time.

It is as if the data are trying to ask "W[hy]?".

Outsourcing = Free Trade = A Good Thing 

James Glassman at TechCentral has a nice article bashing some prominent critics of outsourcing. If you are in my 101 class, I encourage you to read it twice.

Another word for outsourcing is "trade" -- an endeavor, as economists learned early on, that benefits both parties to the exchange. Nothing has changed since Adam Smith wrote in 1776: "It is the maxim of every prudent master of a family never to make at home what it will cost him more to make than to buy." Still, writes Julian Sanchez of Reason magazine, "Free traders are trapped in a public policy version of 'Groundhog Day,' forced to refute the same fallacious arguments over and over again, decade after decade."

The outsourcing uproar is occurring as the U.S. unemployment rate last week dropped to 5.6 percent, lower than the average during the 1990s. Growth is a robust 4 percent, inflation is low (partly because trade depresses prices), and the Institute for Supply Management's closely watched Manufacturing Index is at its highest level since 1983.

But this is my favorite part.

Unfortunately, Dobbs and xenophobic politicians are out to kill the goose that lays our golden eggs. Sen. John Kerry, in his stump speech inveighs against the "Benedict Arnold CEOs [who] send American jobs overseas." By the way, the Kerry family business, H.J. Heinz Co. of Pittsburgh, operates 22 factories in the United States and 57 in foreign countries. I don't think that Kerry should shut down The Heinz 57, but he might drop the rhetoric and talk about trade responsibly. He should support, not trade's contraction, but its expansion, like George W. Bush, Bill Clinton and every president since Herbert Hoover.


John Stuart Mill Hates Conservatives! 

Fox News’s Brit Hume reported Tuesday on this story from Duke University. Students there surveyed the party affiliation of campus faculty and found that Democrats outnumber Republicans 142 to 8. Not so surprising, but consider the explanation given by Dr. Robert Brandon, chairman of the department of Philosophy as two why “liberals” so outnumber “conservatives” at Duke:

"We try to hire the best, smartest people available," Brandon said of his philosophy hires. "If, as John Stuart Mill said, stupid people are generally conservative, then there are lots of conservatives we will never hire.
"Mill's analysis may go some way towards explaining the power of the Republican party in our society and the relative scarcity of Republicans in academia. Players in the NBA tend to be taller than average. There is a good reason for this. Members of academia tend to be a bit smarter than average. There is a good reason for this too."

The Mill quote that Brandon is referring to is legit, and comes from a letter to a liberal member of parliament written in 1866, where he stated:

I never meant to say that the Conservatives are generally stupid. I meant to say that stupid people are generally Conservative. I believe that is so obviously and universally admitted a principle that I hardly think any gentleman will deny it.

That Brandon hates conservatives is fine, but to attempt to bolster his argument by hiding behind the great John Stuart Mill is both shameful and embarrassing. Certainly, Brandon as the chair of a prestigious department at an important college knows the difference between 20th and 19th century liberals? Yes, Mill was a liberal, and yes he thought conservatives were stupid. The 19th century England, the Liberals were a party whose:

. . . distinguishing policies included free trade, low budgets, and religious liberty. Their anti-imperialism reflected confidence in Britain's economic supremacy. Most Liberals believed in the economic doctrines of laissez-faire and thought labor unions, factory acts, and substantial poor relief a threat to rapid industrialization.

In 19th Century England, the Conservatives were a party:

. . .were defenders of the established Church of England. They supported aristocratic government and a narrow franchise. They attempted, by passing factory acts and moderating the poor law of 1834, to ease hardships stemming from the Industrial Revolution, but they had no comprehensive plan to cope with its widespread dislocations. They were stronger in rural than in urban areas and were defenders of agricultural interests.

So what Mill is saying is that “conservatives” who favor protectionism and meddling with the economy are stupid, and “liberals”, like him, who favor free trade and free markets are smart. If Mill could come back and be introduced to a modern liberal and modern conservative, say Hillary Clinton and Barry Goldwater, who would he call stupid, other than, of course Dr. Brandon?

Another Reason to Major In Economics 

From ESPN:

Oakland assistant general manager Paul DePodesta is expected to be named the new GM of the Dodgers this weekend, ESPN's Peter Gammons reports. DePodesta has been a top assistant to GM Billy Beane since joining the A's in November 1998, and this would be his sixth season with the club. He earned an economics degree from Harvard.

Of course, I guess an alternate title to this post could be "Another Reason to Go to Harvard."

Wednesday, February 11, 2004

When All Else Fails... 

I really enjoy Rob Neyer's articles on ESPN.com. His stuff is great for anyone with a budding interest in sabermetrics like me. I happened to be reading Neyer's latest -- in which he debunks an article predicting standings for the next five baseball seasons -- when I ran across this great line.

So you run the numbers, and you discover that your output is completely meaningless. Drivel. What do you do?

A) Start over.
B) Realize the exercise is pointless.
C) Publish what you've got, and hope nobody notices.

I happen to think the exercise is pointless, but I wouldn't blame a guy for thinking that maybe you really can figure out the 2008 standings. What I don't understand is how anyone would choose C.

Hey Rob, there is a lot of C in academia, too. Read more on Primer.


Measuring the Quality of Competition in Baseball 

How good is the competition in Major League Baseball today? In the early days of baseball, baseball players represented a much larger fraction of the country's total population. Therefore, the players today may be less dispersed along the spectrum from bad to good players. In other words, teams ought to be more equal in terms of talent that compose the team. However, since professional baseball came into existence other professional sports have arisen to compete amongst the pool of athletes.

I decided to test this by calculating the coefficient of variation (SD/Mean) of offense and defense across all baseball players by year. (Thanks to the Lahman database, my data-wizard friend Doug, and Microsoft Access). I used OPS to measure offense and a "quasi"- measure of OBP (the data does not include sacrifice hits) given up by pitchers. There is a bit more to it, but I have simplified my estimates by decade in this table. (Note: higher bars mean more dispersion, lower bars mean more equal talent)

The result. The talent dispersion today is most similar to the 1900-1910 years of baseball, and it is as high as it has been since the 1930s. It is interesting to note that the expansions of the 1960s and 1970s did not increase dispersion, but the 1990s expansion seems to have further dispersed talent.

Caveat: I just whipped this up. I may discover errors and make changes. I also welcome your thoughts on the subject. If you're reading this Bud Selig, I haven't made the case for contraction. In my opinion, this is the golden age of baseball. I don't want to go back to the tighter competitiveness of the 1940s-1980s.

Baseball Problems that Economists Should Solve 

Baseball Primer pointed me to this article over on Baseball Prospectus. It is a list of 23 important problems that sabermetricians ought to solve. The list includes these problems relevant to the economics of baseball.

15) Clarifying the win/dollar trade-off preferences for major league decision-makers.

Winning has never been the only thing in baseball. The fact that baseball is a business is not news to anyone reading this book--in fact, it hasn't been news for the last 125 years. As the ultimate decision-maker for a franchise, the owner of a team values two types of outcomes: on-field success and profitability. The relationship of one to the other isn't objectively knowable, as it comes from the personal--or professional--preferences of the owner. It's perfectly rational for an owner to refuse to risk an $80 million payroll for a 10% chance at a World Series, while another would spend $90 million for a 7% chance. The second owner has a higher win-per-dollar trade-off preference than the former, or you could say he's more willing to take risks. For baseball analysis to move to the next level of relevancy for baseball teams, it must be ready to deal with varying preferences and tolerances and account for them rationally in assessing desirable trades, transactions and contracts. (Ed. note: Doug Pappas breaks down teams by marginal wins/dollar in BP 2004, and will further expand on the topic at baseballprospectus.com in the coming weeks.)

16) Creating a framework for evaluating trades.

Whether a trade is a good or bad decision is something that should be assessed based on the information known (or that should have been known) at the time of the trade. Analyzing trades with any consistency is difficult, as there are always several reasons and factors that go into every trade. Salary dumps, stretch-drive pickups, overcoming key injuries, getting rid of a troublemaker or somebody the manager just can't stand, exchanging excess talent at one position to fill some other hole on the team--these have all motivated transactions of various kinds over the years. To be successful, a framework for evaluating trades must be ready to consider financial factors (including the overall health of the club), current and future expected production from the players involved, the team's current and future competitive situation, and the premium ownership places on winning.

17) Determining the value of draft picks, Rule 5 picks, player-to-be-named-later arrangements, and other non-specific forms of compensation in transactions.

The more esoteric forms of compensation in trades are usually ignored, but they must have some real value if teams continue to exchange talent for them. What does a team give up when it signs a Type A free agent? How much is that draft pick worth? Is a typical Rule 5 pick worth the $50,000 and the roster spot? Are teams taking full advantage of the Rule 5 draft? What kinds of PTBNL deals make sense for both teams?

18) Evaluating the effect of short- and long-term competitiveness on attendance and demand elasticity.

Scholars like Andrew Zimbalist and Gerald Scully have done pioneering work in measuring the relationship between on-field success and attendance. Building on that work, we should study second-order effects in more detail, such as the impact of five or more losing seasons on long-term attendance trends. How long does it take attendance to recover from a bunch of lousy seasons in a row? How quickly will fickle fans abandon a former champion? Does fan apathy catch up with a team that consistently contends year after year, but never quite wins the pennant? Is it worth overspending in the short term to build long-term fan loyalty, thus ensuring greater financial resources to devote to the team in the future?

19) Optimizing the competitive ecology of the game.

Some issues are bigger than any single team's problems. The long-term survivability of "small-market" clubs has made headlines in the past couple of years. One theory is that "small-market" teams can't hold onto their own farm-developed talent, which supposedly departs through free agency for major media markets like New York and Los Angeles. The current argument is that the Minnesotas of the world can never retain the players produced by their farm system long enough to contend. However, if we went back to making it easier for teams to retain their own players, you risk creating long-term dynasties like the Yankees of the 1950s, which diminishes interest in baseball in the cities without the dynasty. So what's the best way to achieve league-wide competitiveness?

Have at it! These are all very good questions that economists ought to be able to solve.

Tuesday, February 10, 2004

Book Review - God's Bestseller by Brian Moynahan 

Someone should make a movie about Thomas Moore. The classic film “A Man for All Seasons” is supposedly about him, but it belongs with "Your Cheatin’ Heart” (about Hank Williams) among the most inaccurate biographical films ever made. An accurate portrayal of Moore would have to include his overwhelming passion for burning people alive. Moore cheered when his superiors burned heretics, and wrote voluminously and joyously about those whom he believed needed to feel the saving powers of the flame. When he finally achieved real power, as Henry VIII Lord Chancellor, he could fully engage is his life dream of torture and man-burning. On many occasion he had his agents capture suspected heretics, bring them to his estate, where he would personally interrogate and torture them, before turning them over to be burned.

The heretics that More so hated and enjoyed burning were primarily Englishmen who owned copies of William Tyndale’s translation of the Bible. God’s Bestseller is primarily about Tyndale and his struggle to translate the Bible into English, and More’s stuggle to burn both the translations and the translator. Tyndale believed that the Catholic Church used its monopoly over the bible to the detriment of Christianity, and based its monopoly of faith on inappropriate interpretations of scripture. His life’s work was to translate the entire New Testament, and much of the Old Testament into English. His work survives and makes up over 90% of the prose in the King James New Testament, and about half of the Old. Unfortunately, Tyndale was captured and burned before he could complete his entire translation.

God’s bestseller is an excellent biography of both More and Tyndale, and is a pretty good page turner for a book about the English reformation. William Tyndale deserves to be remembered among the greatest of English writers and as a true friend of liberty. More is a true villain, and represents all of the worst qualities of the middle age Church. You would think that the modern Catholic Church would want to dissociate from More, the way it backed away from its persecution of Galileo. Apparently, some things never change, as the Church made More a Saint in 1935 and the “Patron Saint of Politicians” in 2000. Perhaps it is fitting that such a despicable man would become the Saint of such a despicable profession.


Putting the Living Wage in Perspective 

Tyler on Haiti:

Haiti remains mired in possible civil war, but this was not the most depressing Haitian news story of the day. The Washington Post reports on water supplies in Haiti:

...three times a day, she [a mother] fills a five-gallon tub, balances it on her head and walks steadily and gracefully back up to her one-room house, careful not to spill a drop. The water may not be safe to drink, but it is precious.
She said she has no alternative to drinking tainted water, which kills thousands of people in Haiti every year. This is her test for the daily water: "If it is clean, nothing will happen. When the water is not clean, my children get diarrhea."

"When we see the doctor, the doctor will say, 'Take precautions for the water. Put Clorox so you can drink it,' " she said. But when there is no bleach, she said her children sometimes become sick with fever. That is when she boils the water if she can. Boiling water is a luxury for the rich. "I don't always have money to buy charcoal or gas to boil the water," she said. "I know it is a risk but I have no choice."
(emphasis added)

A living wage "to meet the basic needs of workers and their dependents" is equal to $15/hour in Grundy County according to one estimate. The hourly minimum wage in the US is equivalent to the daily Haitian wage (GDP per capita/220 "work days"). Next time I see my Grundy neighbors at a local grocery store, restaurant, or above-ground swimming pool outlet, I'll try to remember how poor they truly are.


Monday, February 09, 2004

The Living Wage In Grundy County, TN 

This morning I received this information in an e-mail to the Sewanee community.

A living wage is a wage sufficient to meet the basic needs of workers and their dependents. This includes necessities such as shelter, food, clothing, health care, and transportation. The living wage for Grundy County is $15.23/hour while the national minimum wage is only $5.15/hour.

Grundy County is right next door to Franklin County, where Sewanee is located. And, yes Bill, it is the host of the Grundy County Auction mentioned in your favorite John Michael Montgomery song. Anyway, I am strongly opposed to minimum wages of any sort (as are more than 90% of all economists), because I understand that markets set wages, not altruistic employers. But, instead of responding to the argument as most economists would, I think looking closer at this statement captures the absurdity of such an argument.

Assume an individual earns $15.23/ hour, 40 hours/week, 50 weeks/year. This means an individual would need to earn $30,460/ year "to meet the basic needs of workers and their dependents." That is interesting, because were Grundy County a nation with the per capita income of $30,460/year it would be the SEVENTH richest country in the world, just behind Denmark and just ahead of Iceland (see here). Heck, the per capita income of the entire US is about $35,000.

Reductio ad adsurdum!

Sunday, February 08, 2004

Coase in Action 

Chip Taylor points to an interesting example of Coasean bargaining featured in the NY Times.

It was the blue that doomed Cheshire, Ohio. That was the signature tint of sulfur trioxide and sulfuric acid, emissions from the massive coal-burning power plant whose smokestacks and cooling towers loomed over the town. On days when the smoke was blue, locals complained of sore throats, burning eyes and strange blisters. Sometimes the smog was so thick that cars drove through the streets at noon with their headlights on.

As for the rest of the story, it's easy to imagine how Hollywood would script it. One or two plucky souls stand up at a town meeting and vow to fight. The plant's owner, a ruthless multibillion-dollar corporation, strikes back with everything its high-priced attorneys can devise, or worse. Someone has to die. And finally, good (or just possibly evil) prevails.

But that's not what happened. Instead, it was something quite undramatic, or at least uncinematic: in a series of town meetings in the spring of 2002, lawyers presented an offer from American Electric Power to buy all of Cheshire for $20 million. The 200-odd residents would have to move, their houses would be razed and their community would cease to exist -- and in exchange they would each receive about three times the assessed value of their property. Though a few dissenters stood up and said they would rather fight than leave, they couldn't sway their neighbors. Nothing rallied the townspeople to resist, to tap the stubborn courage of the American heartland, to show the company that their hometown couldn't be bought. They deliberated for a short while and told American Electric Power that, yes, they would accept the offer. They would waive their right to sue. They would take the money, and they would lose Cheshire.

You read it correctly, the power company bought the whole town! But Chip asks the following question: So why did AEP pay off the town residents?

I'm assuming that the plant was in compliance with pollution regs. Which meant that they had the right to emit pollution -- if not in any amount -- then at least the amount that they were, in fact, emitting. And with emissions trading, an individual plant has a good bit of leeway in how much it emits -- assuming that it can by the additional emissions credits it needs. So it seems to me that the legal "right to pollute" resided with the power plant owners.

Chip suggests that avoiding bad publicity may have been the motivation, and I agree. But getting a write-up about your polluting ways in the NY Times is the last thing they must have wanted. So this unique plan may have backfired. Even though this is a great example of a problem solved, I can almost guarantee the environmental protest buses are packed and on their way to Cheshire.


More on Clarett in the NFL 

Tyler Cowen weighs in on young players jumping to the NFL. If you missed it, we have had a lively discussion on this issue here, here, and here.

[B]anning high school players helps keep the league in competitive balance. Consider the NBA. There was once a time when the prime draft picks had played four years of college ball. The worst team picked first and was virtually guaranteed to pick a future star, usually a player with immediate positive impact (exception: LaRue Martin). Today the team that picks first takes a gamble on an unknown, with no guarantee of getting good value. So the bad teams are more likely to stay bad for a long time. When the losing Milwaukee Bucks picked Kareem Abdul-Jabbar in the 1970s, they were an immediate championship contender. The losing Washington Wizards picked Kwame Brown, a high school player, two years ago and they have gone nowhere.

I'm not sure I buy this argument either. Have high schoolers really been less predictable in the NBA that college players? Kobe Bryant, Kevin Garnett, Jermaine O'Neill, LeBron James...I am certain that I am leaving out some busts, but I am not sure the college kids are any more variable busts. What about Harold Minor, Randolf Childress, and Bobby Hurley, all fantastic college players who were immediate NBA busts? And then you have the Clippers who have traditionally held one of the top picks in the draft for...err, as long as I can remember. Having a talent pool devoted to college players -- the de facto norm 10 years ago -- certainly didn't help them make better selections. Obviously, my memory is a bit selective here, but this story on Hoopsanalyst (a sabermetric-type site for basketball) contains a more complete history of early entrants into the NBA. Even if high school players are higher risks, cannot bad teams shy away from these player to go with the less variable college talent?

But back to the NFL. I think rookies are much more valuable in the NFL where the game relies more on teamwork than individual effort than in basketball. So, given that the NBA's experience with young players has not been all that bad, I would suspect the effect on the NFL will be even less. Again, I am not saying that the NFL ought not to be allowed to set an age limit on new players, just that I don't believe the arguments that this will adversely affect the game on the field. I think there is a good answer to why the NFL has this rule, but I am not sure we have stumbled onto it yet.

Saturday, February 07, 2004

Field of Dreams 

As a sports fan I’m depressed. The Super Bowl just ended and opening day in baseball is two months away. I might be able to stomach some college basketball, but I really can’t see much reason to start watching that until the ACC tournament. But, Tim Kurkjian of ESPN filled me with hope for seasons to come.

It could happen. Major League Baseball and other entities, are attempting to organize a baseball World Cup, much like soccer's World Cup. The hope is to have 12 to 16 teams in a tournament that ideally would be played during spring training 2005.

What a great idea. I have always liked the idea of the All-Star game, but in practice it stinks. Somehow attaching home-field advantage to the game this past year didn’t make it matter any more for me. I think baseball is the only other sport in the world that could put together a World Cup like soccer. While the teams would obviously come from the Americas and Asia, I think the games would be quite competitive. But, most of all, I relish the opportunity to see the best players in the world play against the best. A contest where everyday MLB starters might not even make the team, an infield composed of heavy hitting shortstops, an outfield of center fielders, and number-one starters in the bullpen. Observing a sport at a higher level of competition is always a good thing. I can watch World Cup soccer. These guys are all good. But just try and make me watch a European league match or even an MLS game and I get bored with the comparatively sloppy play. Just think how great this would be for baseball.

A real world series for baseball, I like it.


Friday, February 06, 2004

More on the NFL 

I don't want my rant on the NCAA to be taken as an indication of support for the application of antitrust laws in the professional sports world. I am a firm believer that the past application of antitrust laws to this peculiar industry have been only harmful. The judge's decision, on its face, makes no sense to me. I'll give her the benefit of the doubt that she is following a bizarre yet regularly applied precedent. For example, the courts have routinely commented that baseball's antitrust exemption based on the Landis decision -- declaring baseball to be intrastate commerce -- is wrong, but the precedent is too strong to overturn. If anyone is going to suffer from the NFL's rule, it is the NFL. As a realist, the best I can hope for is that this decision will destroy the NCAA cartel on minor league football, which is what college football is. But I digress...

I do not buy the argument that adding younger players will degrade the quality of players in the NFL. In fact, I think there is a good argument that the quality will improve as we ship some aging veterans off to pasture. Unlike the NBA and MLB, rookies play a lot in their first year in the NFL. Check out this amazing list of 2003 rookie stars at NFL Draft World. Also, see Doug Drinen's study on performance and age in the NFL, where he shows that at some positions players peak rather early in their careers, especially running backs. If these young players are so bad, why does the NFL need a rule to keep teams from drafting them? If the younger players are not as good as the older players, their draft status will suffer.

So why does the NFL have this rule? I will have to think more on this, but I have a few thoughts. 1) The NFL players union wants it to protect veterans 2) NFL attendance is improved by fans following the college game 3) It lowers scouting costs. I would appreciate any reader suggestions, because I cannot figure out why the NFL has such prohibitions, but the other sports do not.

Don't forget Bill's post, and Shonk has some good thoughts on this over at Selling Waves.


In Defense of the NFL 

In answer to JC earlier post. I have no affection for the NCAA as a cartel. I do however have great affection for the NFL. I have a great fear that removing the “three years out of high school” rule will spell the same doom for the NFL that it has spelled for the NBA. Gregg Easterbrook, in a post on this subject, suggests:

Why has the National Basketball Association, the hot rising sport in the 1980s through early 1990s, been in free-fall for a decade--plummeting ratings, declining attendance, last year's finals the least-watched ever in prime-time? Because about a decade ago, the NBA began admitting teenagers en masse. Since then quality of play has fallen sharply. Today most NBA games are simply crummy games, and some are so poorly played they make you want to cover your eyes. Players who go directly from high school to the pros, as is suddenly common in the NBA, lack training in fundamentals. They won't listen to coaches, having been handed multi-million-dollar guaranteed no-cut contracts when much too young to appreciate their responsibility to keep the business successful and the revenue flowing. They launch crazy off-balance shots, refuse to do anything but go one-on-one, and endlessly try to mega-dunk like in the shoe commercials--but they miss ten shots for every one mega-dunk that succeeds. When the NBA began tapping high school, league management thought fans would be too stupid to notice the decline in quality of play. But everybody has noticed, which is why the NBA's popularity is falling.

As far as I am concerned, you can scrap the NCAA, but let the NFL set its own eligibility rules to maintain the quality of its product. The only legal action against the NFL that I encourage is for Congress to condemn John Kasey for humiliating all NFC fans, and of course, for all law enforcement organization to continue to keep a very close watch on Ray Lewis off the field.


The Grade Trade 

Tyler cites and interesting grading system used by one Chinese school for loaning grades to students. A student who does poorly on a test can borrow points from a future test with 100% interest. This means every one-point loan results in two fewer points from the next test.

I am all for markets, but I think this system really violates what grades represent. The one aspect of being a professor that I hate most is grading, and it is not the time component that I dislike most. I like my students and it crushes me to see a student do poorly on a test. In my class, the grades provide information to students about their knowledge of the subject. I think it is my duty to inform students of the difference between what they know and what they think they know. And I think that is why I am paid. If it were up to me, I would never assign grades. I have no care in the world about what students choose to learn or not learn. I think I grade because students demand those grades, either for signaling to employers or for their own satisfaction. So this is why I think the grade-loan market is a bit silly. If you know 70% of the material, you know 70%. If you want to tack on an arbitrary 10% from your future 90% for an average of 80%, well that's great but irrelevant to the learning process. I understand the supposed incentive effects, but I think it confuses the goals of education as a quest for grades rather than knowledge. I wish people would spend more time learning the material they teach rather than wasting time investigating new "pedagogies" for the classrooms.

Music Recommendation: Patty Loveless 

It has taken me a while but I have to second Bill's recommendation of Patty Loveless's latest, On Your Way Home. I got a copy for Christmas, but I really didn't get a chance to devote more than a casual listening. Last night, I devoted serious attention to it, and I was blown away. Bill's description as "depressingly fantastic" is dead on. Patty's voice is just haunting. Songs that might sound sappy or silly if performed by another artist become genuine when Patty sings. Even if you don't like country music I think you will like this album.

I Hate the NCAA 

I was happy to hear that Maurice Clarett has been declared eligible for the NFL draft. Although the judge used antitrust law (of which I am not all that fond) to do this, I am happy to see the NCAA suffer. The NCAA is disappointed.

Wally Renfro, senior advisor to the president of the NCAA, says allowing students to jump into the NFL at an earlier age will result in more college athletes failing to complete their degrees. "If you're there three years, you have a degree in sight," Mr. Renfro says. "From an educational standpoint, we're disappointed in the court's decision." [Insert sarcastic violin music here.]

Oh how you weep for the children...you jackass! Many of these poor kids with immense athletic talent are forced to sit through classes they don't want or need. If a player wants a college degree, there is nothing stopping him from getting it after his short NFL career is over. There is nothing inherently valuable about a college degree. Just ask Bill Gates, who realized his skills were more valued in the real world than in the academy. Colleges earn huge sums of money for putting these kids on the football field, yet the college kids see nothing but a scholarship that they never wanted in the first place. The reason these kids play is the expected value of NFL wages that may or may not come in the future. The NFL gets a cheap training ground, the NCAA gets a low cost fundraiser. Don't put that "for the good of the children" crap in my face! If we want antitrust law to do something good, we should hope the courts would tear down the college sports monopsony of the NCAA, which is propped up by heavy state subsidies.

Rah-Rah Op-Eds 

I am starting to wonder what the purpose of the Op-Ed page of the paper is. I know it is an outlet for political opinion, but now I see many writers about as informative as "viewer feedback." I really don't care what a random selection of people think about a particular political issue. What does that person have to add to the policy debate? Normally, nothing. To me TV producers add these segments to feed the viewership of people who just want to have the chance to get on TV. These people are only slightly less pathetic than the outside morning crowd to see Al Roker on the Today Show. But back to my main complaint. See this article by Bob Herbert, in which has this little nugget to offer.

Maybe it's too much to hope for. But I wonder if we aren't watching the beginning of a decline in the effectiveness of the Republican Party's divide-and-conquer strategy. For nearly half a century the G.O.P. has displayed an unparalleled mastery of the ugly art of devising campaigns that appeal to the very worst in us. It's always the whites against the blacks, the middle class against the poor, the conservatives against the hated liberals, with the word "liberal" spat out with the kind of disgust that's usually reserved for child molesters.

How is this "strategy" any different than what the Democrats do? Has he been paying attention to politics at all?... Ever! My point is not that Bob Herbert is an idiot, I have known this for a long time. But, why does Herbert get paid any sum of money to appear in a prominent national newspaper to offer his opinion? I don't mind when people advocate political positions along any part of the ideological spectrum, but at least give me some additional information to add to the debate. Simple opinion is not helpful. If he wants to trade irrelevant personal opinions he might appreciate a letter on how much I dislike ketchup. Sure, there are a few facts dropped in there, straight off any Democratic candidate's talking points. I really don't care if he as a hunch that the Republicans will do poorly in November if the "facts" he presents are correct. Who the heck is he, and why should I care? The NY Times could save a lot of money by cutting Herbert lose and replacing him with reader mail without losing any of its quality content.


Wednesday, February 04, 2004


In teaching intermediate microeconomics, I been thinking about indifference, and have come up with several personal examples of bundles, that when combined, leave me indifferent. I reveal them here, although they almost certainly show that I am not a very good or serious person.

When CMT Crossroads featured Ray Charles (+) and Travis Tritt (-).
Ashley Judd and Wynonna Judd
Mike Martz as Offensive Coordinator and Mike Martz as Head Coach
Any Skit on SNL that combined Will Ferrell and Cheri O’Teri
When Sara Evans sings a song written by Bruce Hornsby
CBS NFL broadcasting team of Dick Enberg (+) combined with Dan Dierdorf (-)
The day last fall when Johnny Cash died on the same day as John Ritter.


John Edwards's America 

From his Tuesday night South Carolina victory speech:

Now I want to take just a moment on this night of extraordinary celebration of a great political victory to talk just for a moment about the millions of Americans who will not go home, go to bed and celebrate tonight, the millions of Americans who struggle every single day just to provide for their own families.

Tonight -- tonight -- somewhere in America a 10-year- old little girl will go to bed hungry, hoping and praying that tomorrow will not be as cold as today because she doesn't have the coat to keep her warm; hoping and praying that she doesn't get sick as she did last year, because it means 24 hours waiting in an emergency room to try to get medical care; hoping that her father, who lost his job when the factory closed and has not been able to find steady work, will actually get a job that allows him to provide for his family.

The U.S. department of labor published its most recent study on the working poor in June 2003. Over 9 million or 6.1% of all participants in the labor force earn incomes that place them below the poverty level, which is about $18,000 for a family of four. These low-income workers are the source of the 35 million people in poverty that Edwards constantly complains about.

There are two problems with talking about poverty the way Edwards does. One is that “poverty” in America is a standard of living that most everyone around the world and anyone living 50 years ago would gladly accept as a major improvement. To complain about poverty because the poor have not kept up with the rich in income growth is ridiculous, as what matters is not relative quality of life, but whether or not the absolute quality of life for a poor person is getting better or worse? Relative measures of wealth and campaigns based on envy may win votes, but they badly overlook the fact the quality of life for poor people has constantly and radically improved in America.

The other problem I have with Edwards is that he likes to characterize the poor in America as typical Americans, who play by the rules, but get the shaft. One might ask the question to Edwards, what are the rules that one should play by avoid poverty in America?

I would argue that the rules for a fair society would be that anyone who completes high school, has children only while married, and works full time should not be poor. How do Americans who play by these rules do?

- Of workers who work at full time jobs, at least fifty weeks a year, only 3.3% live below the poverty line.
- Of all workers who have only completed high school, only 5.8% of them earn income below the poverty line.
- Of all children, 5.6% of those living with married parents are poor compared to 26.4% of those living with single mothers.
- For families where the parents are married, and both work, only 1.4% or 374,000 live below the poverty line.

In other words, poverty is a very rare circumstance for someone “works hard and plays by the rules”. Though in a country of 292 million people anything is possible, I challenge John Edwards to produce actual examples of his unfortunate “10 year old girl”. Such examples should not be children suffering because of negligent or lazy parents, but because of poverty that persists even though a caring mother and father work full time and can not earn enough wages to buy sufficient nutrition or a warm coat. Also remember that as much as 1/3 of the worlds population survives on $1 a day.


Why Bill James May Have Missed Early Success 

Economists are baffled at Billy Beane's discovery of Bill James. James publishes his first book in 1977 but few in MLB take him seriously until the mid-to-late 1990s in Oakland. As I discuss in a previous post, maybe James's ideas got pushed aside due to some bad luck. Mainly, maybe some of his good ideas looked bad due to anomalies in baseball that occurred at the time he came on the scene. So I decided to look at one of James's first discoveries, Runs Created (RC), which was published in 1979.

RC = [(H + BB)*TB]/(AB + BB)

In the 3 seasons that followed RC's introduction (1980-1982) the R-squared of the linear regression estimate of RC on Runs per game (RG) was .44. For the effect of BA on RG the R-squared is .64. If I'm a GM, who do I listen to? The guy from the pork and beans factory or my baseball scouts? In hindsight, it is easy to see what a truly great man James is. But such an observation may not have been so easy 20 years ago.

P.S: James tested the RC model on the 1975 season (according to Moneyball), for which the model predicts with an R-squared of .85. Today RC has been modified to where it is an excellent predictor of offense.


Predicting Runs in Baseball 

David Pinto at Baseball Musings cites an excellent article by Dominic Rivers on estimating the effects of on-base-percentage (OBP) and slugging (SLG) on producing runs. Dominic starts off trying to replicate the results of Moneyball stat-hound Paul DePodesta. Though he does not find the Moneyball OBP:SLG ratio to be 3:1 as is claimed in the book, he does find SLG to be more important than OBP greater than the conventional wisdom (1.6:1 ratio). However, there are five years in the data set that seem to deviate from the norm of OBP being more important than SLG. For the 1981, 1982, and 1989-1991 periods, SLG is more important for producing runs. This got me thinking...Why? To the Stata mobile!

When I separate out the average offense for the odd years 81,82, 89, 90, and 91, there seems to be much lower numbers relative to other years. RG, BA, SLG, and OBP are almost 1 standard deviation below the average for the post- 1980 average, excluding the 5 anomaly years. Most of the decline in OBP is due to BA as the walk-rate is lower, but not much in relation to its normal variance. SLG is down due to both BA and Iso-Power (SLG-BA) falling. So what does this mean? When offense is low, getting on base is less important, because no one can knock you in. Getting further around the bases with each hit is more important, since there is less of a chance that you will get moved around by other batters.

Another thought on this as well. I am not sure how these dips in offense affect other sabermetric predictors of performance. But, these anomalies occur at times crucial to the growth of sabermetrics within baseball. Bill James begins publishing in the late 70s. If some executive decided to test his stuff in the early 80s and it might not look so hot. Pete Palmer introduces OBP in the mid-80s, but in the years that follow the anomaly occurs again leading to the same result. Serendipity has always been a friend of scientific progress, but unfortunate mistakes have to play an offsetting role as well. So at least this might explain why some front office types largely ignored sabermetrics until Beane came along. I will have to investigate this further.

Also, see a discussion of this on TG and Baseball Musings.


High-Tech Hypocrites 

So now it seems that the Democratic race to see who can become the most anti-trade candidate has hit a new low. Now candidates are upset that sending jobs overseas "destroys" American computer jobs.

Hmmm...didn't these same computer jobs once "destroy" jobs in now defunct sectors of the economy? So why is the computer industry so morally superior that we are happy when computers "destroy" jobs, but we are upset when computer jobs are "destroyed?" I am still concerned about all the professional ground-draggers put out to pasture by the wheel.
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