This fan favorite, featured on June 26th, wraps up our Best of 2011 series. With beer the subject on tap, it seems to be a particularly apropos way to end the year. Be sure to stop by soon for new content, as we are certain that law, economics, politics and culture will continue to intersect in 2012. Happy New Year!
Ownership, whether of a car, a home or a business, is thought by many to be one of the key ingredients in that tough-to-define and oft-evolving concept known as The American Dream. However, earlier this month an innovative plan utilizing social media that would have given Americans a chance to own their own little piece of a well-known national brand was nixed by the Securities Exchange Commission (SEC). Why? The SEC determined that a social network-driven initiative to buy brewer Pabst failed to meet the statutory standards for a public offering. According to The Wall St. Journal's legal blog:
"Two advertising executives on (June 8) reached a settlement with securities regulators over a Web site that purported to raise $300 million via ”crowdsourcing” on Facebook and Twitter to buy Pabst Brewing Co., the maker of Pabst Blue Ribbon, Lone Star, Colt 45 and other beers.
The Securities and Exchange Commission said Michael Migliozzi II and Brian William Flatow agreed to a cease-and-desist order after they allegedly failed to register their offering before seeking to sell shares to the public. They did so without admitting or denying wrongdoing."
For those unfamiliar with the details of the Pabst sale, crowdsourcing or the role of the SEC, allow us to elaborate. Migliozzi and Flatow noted that the brewer, Pabst, had been put on sale by the private charitable trust which currently owns it. The two ad execs saw an opportunity to buy a well-known brand (or conduct a social media experiment, or both depending on who is describing the facts) and created a website which advertised their intent to buy PBR. They also used social media, including Twitter and Facebook, to attract co-travelers, who they called 'pledgees' and 'investors' to their potential venture.
12.31.2011
12.30.2011
The Best of 2011: NYC Bag Ban and the Shifting Rationale for Trademark Law
This popular post, the second by contributor Jeremiah Newhall to appear on our Best of 2011 list, originally featured on May 24th. I can't be sure this is for its legal analysis or rather due to people looking for cheap merchandise, but I can say that it was a favorite of mine in either case.
By contributor Jeremiah Newhall
The recent BlawgConomics post on NYC’s proposed bag ban prompted me to wonder: what, or whose, interest is the ban protecting? Trademark law should prevent unfair competition and consumer confusion, but this law punishes consumers, not competitors. What’s going on here?
The ban is aimed at the putative world capital of designer knock-offs, the Canal Street area. The previous post focused upon the efficiency (or, as Josh concluded, lack thereof) of enacting and enforcing such a measure, but I’m drawn to other questions. The proposal represents a seismic shift in the way we think about trademark law.
As a preliminary matter, I’d like to dispense with two basic points: first, the bags in question are protected by trademark, not copyright. For reasons best explained elsewhere, designer bags are not, in most cases, copyrightable. As a result, designers from Donna Karan to Calvin Klein have relied instead upon trademark protection to prevent others from creating copy-cat designs.
By contributor Jeremiah Newhall
The recent BlawgConomics post on NYC’s proposed bag ban prompted me to wonder: what, or whose, interest is the ban protecting? Trademark law should prevent unfair competition and consumer confusion, but this law punishes consumers, not competitors. What’s going on here?
New York City's biggest law enforcement problem?
The ban is aimed at the putative world capital of designer knock-offs, the Canal Street area. The previous post focused upon the efficiency (or, as Josh concluded, lack thereof) of enacting and enforcing such a measure, but I’m drawn to other questions. The proposal represents a seismic shift in the way we think about trademark law.
As a preliminary matter, I’d like to dispense with two basic points: first, the bags in question are protected by trademark, not copyright. For reasons best explained elsewhere, designer bags are not, in most cases, copyrightable. As a result, designers from Donna Karan to Calvin Klein have relied instead upon trademark protection to prevent others from creating copy-cat designs.
12.29.2011
The Best of 2011: The NBA: Where an Overpaid Middle Class Happens
This post by Mike Azmera, which originally featured on November 10th, kicked off a number of NBA-related posts on our site during and directly after the league's labor dispute. While basketball has returned this week, it was still far from certain that there would be a season when we first dove into the topic.
By Michael Azmera
I would like to quickly thank my friend Josh for letting me talk to you about one of my favorite things, basketball, and about one of my least favorite things, the current NBA lockout.
The last time that we saw an NBA game, we watched Dirk Nowitzki join the ranks of the great players who have won an NBA championship. He joined Jordan, Kobe, Magic, Bird, Duncan, Garnett, Olajuwon, Moses Malone, Isiah Thomas, and Shaq, all players who are either in the Basketball Hall of Fame or well on their way there. All of these players were—and some still are—among the very best players in the NBA during their careers.
Excluding the 2004 Detroit Pistons as the lone exception, every NBA champion since the 1980 Lakers had at least one of these players on its roster. All of them have been able to boast at least one of the 10 best players in that season’s NBA. The rule is pretty simple: Teams with elite players can contend for NBA championships. Teams without these players just fill out the rest of the league. Micky Arison, owner of the Miami Heat, looked back on 31 years of recent NBA history, noted this rule, and built a team around a pair of superstars. The Heat narrowly lost in the 2011 NBA Finals, essentially proving this rule along their way.
However they did not win it in the end; the Dallas Mavericks did. And in comparing the champion Mavericks with the runner-up Heat, the difference is obvious. The Mavericks surrounded their superstar with a good team of complimentary players; the Heat splurged on superstars and filled out their roster with an affordable group of supporting players.
Now give me a moment to explain why this is relevant to the current labor dispute. As fans, we like to think of winning championships as the ultimate goal of team owners. But owners also want to turn a profit. As such, they need to generate enough team revenue to exceed team expenses. NBA teams generate revenue, among other things, through ticket sales, through TV contracts, and through merchandise sales. Put simply, NBA teams generate revenue when people watch games. So one goal is to win the games; another is to get people to watch the games.
By Michael Azmera
I would like to quickly thank my friend Josh for letting me talk to you about one of my favorite things, basketball, and about one of my least favorite things, the current NBA lockout.
The last time that we saw an NBA game, we watched Dirk Nowitzki join the ranks of the great players who have won an NBA championship. He joined Jordan, Kobe, Magic, Bird, Duncan, Garnett, Olajuwon, Moses Malone, Isiah Thomas, and Shaq, all players who are either in the Basketball Hall of Fame or well on their way there. All of these players were—and some still are—among the very best players in the NBA during their careers.
Excluding the 2004 Detroit Pistons as the lone exception, every NBA champion since the 1980 Lakers had at least one of these players on its roster. All of them have been able to boast at least one of the 10 best players in that season’s NBA. The rule is pretty simple: Teams with elite players can contend for NBA championships. Teams without these players just fill out the rest of the league. Micky Arison, owner of the Miami Heat, looked back on 31 years of recent NBA history, noted this rule, and built a team around a pair of superstars. The Heat narrowly lost in the 2011 NBA Finals, essentially proving this rule along their way.
However they did not win it in the end; the Dallas Mavericks did. And in comparing the champion Mavericks with the runner-up Heat, the difference is obvious. The Mavericks surrounded their superstar with a good team of complimentary players; the Heat splurged on superstars and filled out their roster with an affordable group of supporting players.
Now give me a moment to explain why this is relevant to the current labor dispute. As fans, we like to think of winning championships as the ultimate goal of team owners. But owners also want to turn a profit. As such, they need to generate enough team revenue to exceed team expenses. NBA teams generate revenue, among other things, through ticket sales, through TV contracts, and through merchandise sales. Put simply, NBA teams generate revenue when people watch games. So one goal is to win the games; another is to get people to watch the games.
12.28.2011
The Best of 2011: The Centers for Disease Control vs. The Zombies
This post, the first of two by contributor Jeremiah Newhall to appear on our Best of 2011 list, allowed us to have a little fun with the CDC, well, having fun. It originally appeared on December 4th.
By contributor Jeremiah Newhall
The Centers for Disease Control (CDC) recently posted an excellent article on what to do in case of zombie attack on its Public Health Matters blog. Of course, CDC is not really worried about zombies, but it is worried about emergency preparedness, and the “zombie attack” premise is a cheeky attention grabber which addresses this concern. Kudos to CDC (in particular to the author of the piece, Rear Admiral Khan) for tricking us into reading something educational, and perhaps even making us all better prepared for real life emergencies.
But while reading the post, I was struck by CDC's assertion that it would be in charge of fighting the zombie apocalypse:
If zombies did start roaming the streets, CDC would conduct an investigation much like any other disease outbreak. CDC would provide technical assistance to cities, states, or international partners dealing with a zombie infestation.
...Not only would scientists be working to identify the cause and cure of the zombie outbreak, but CDC and other federal agencies would send medical teams and first responders to help those in affected areas (I will be volunteering the young nameless disease detectives for the field work).
This got me to thinking: in case of a zombie apocalypse, who would be in charge? It’s a cop-out to say the President, or whomever the President delegates. After all, the President may be a zombie himself before the government can react. A zombie President (and Vice President) would not be technically dead (they’re undead), so succession would be hazy. Who would be the natural cabinet official, based on their responsibilities, to step up?
By contributor Jeremiah Newhall
The Centers for Disease Control (CDC) recently posted an excellent article on what to do in case of zombie attack on its Public Health Matters blog. Of course, CDC is not really worried about zombies, but it is worried about emergency preparedness, and the “zombie attack” premise is a cheeky attention grabber which addresses this concern. Kudos to CDC (in particular to the author of the piece, Rear Admiral Khan) for tricking us into reading something educational, and perhaps even making us all better prepared for real life emergencies.
But while reading the post, I was struck by CDC's assertion that it would be in charge of fighting the zombie apocalypse:
If zombies did start roaming the streets, CDC would conduct an investigation much like any other disease outbreak. CDC would provide technical assistance to cities, states, or international partners dealing with a zombie infestation.
...Not only would scientists be working to identify the cause and cure of the zombie outbreak, but CDC and other federal agencies would send medical teams and first responders to help those in affected areas (I will be volunteering the young nameless disease detectives for the field work).
The CDC is getting ready. The only question is whether the zombies or the red tape will beat them first.
This got me to thinking: in case of a zombie apocalypse, who would be in charge? It’s a cop-out to say the President, or whomever the President delegates. After all, the President may be a zombie himself before the government can react. A zombie President (and Vice President) would not be technically dead (they’re undead), so succession would be hazy. Who would be the natural cabinet official, based on their responsibilities, to step up?
12.27.2011
The Best of 2011: The War on Drugs, In the Style of Satire
This post originally featured on November 30th, and is notable for generating some very interesting reader feedback. We followed up this post with a few others focused on the e-satire of Morris on December 5th and December 12th.
One of the great pleasures of running BlawgConomics is the ability it affords me to showcase thought-provoking and interesting content by some colleagues and friends of various political and ideological persuasions. I often find myself wishing that there were more fora for thought and discussion on the internet and elsewhere that provided similar opportunities; media where discussion on topics of the day didn't degenerate instantaneously into name-calling and partisan sniping. Until then, there is BlawgConomics.
Today we are carrying on our proud tradition of featuring the best and the brightest by introducing our readers to Mr. Robert Morris, a recent law school graduate who also goes under the tag of MoFreedomFoundation. Mr. Morris' MoFreedomFoundation avatar is an attempt to explore the facts behind The War on Drugs.
Students of both legal and economic theory will be familiar with various arguments for and against The War on Drugs. Though generalities are tough to make on a topic which is so socially, ideologically, and politically charged, it can nonetheless be argued that economists (and proponents of a law and economics approach) are more likely to be against The War on Drugs than those coming from a straight legal tradition. The former camp looks at the numbers behind what has, in their view, been a disastrous effort while the latter is more likely to cite notions of retribution and deterrence in support of drug regulation.
One of the great pleasures of running BlawgConomics is the ability it affords me to showcase thought-provoking and interesting content by some colleagues and friends of various political and ideological persuasions. I often find myself wishing that there were more fora for thought and discussion on the internet and elsewhere that provided similar opportunities; media where discussion on topics of the day didn't degenerate instantaneously into name-calling and partisan sniping. Until then, there is BlawgConomics.
Today we are carrying on our proud tradition of featuring the best and the brightest by introducing our readers to Mr. Robert Morris, a recent law school graduate who also goes under the tag of MoFreedomFoundation. Mr. Morris' MoFreedomFoundation avatar is an attempt to explore the facts behind The War on Drugs.
Students of both legal and economic theory will be familiar with various arguments for and against The War on Drugs. Though generalities are tough to make on a topic which is so socially, ideologically, and politically charged, it can nonetheless be argued that economists (and proponents of a law and economics approach) are more likely to be against The War on Drugs than those coming from a straight legal tradition. The former camp looks at the numbers behind what has, in their view, been a disastrous effort while the latter is more likely to cite notions of retribution and deterrence in support of drug regulation.
12.26.2011
Best of 2011: Wolfer on Loan Forgiveness = Analytical Fail
This article was originally posted on September 19th in response to a post by Professor Justin Wolfers' on the Freakonomics blog. While we happen to think that it is one of the better posts we have written this year, it stands out even more for two other reasons. First off, Wolfers showed off an impressive sense of fairness when he posted a link to the article on his Twitter page. Even more rewarding for us was the genuine and passionate commentary by readers that it inspired.
Let us start off this post by saying that Justin Wolfers is a very intelligent person. Not that it is 100% dispositive, but the professor has his own page on the Wharton website chock full of fancy titles and publications. And if being a professor at Penn wasn't enough, those perusing his vitals will also note associations with institutions like Stanford, Princeton, Brookings and the Federal Reserve. In short, he is not the sort of individual that we have any business going toe to toe with on economic analysis. However, there is something in his recent Freakonomics post 'Forgive Student Loan? Worst Idea Ever.' that just isn't sitting right from our perspective.
The issue of student loan forgiveness is a touchy one with passionate advocates on either side. Unlike other debts, student loans cannot be discharged in bankruptcy. Sometimes even death doesn't erase the burden. The individuals signing the papers for debts which can exceed six figures are often young, uninformed and naive/overly optimistic about post-graduation employment possibilities. And those who take the debts on are often forced to start paying them back when they are just starting out in entry-level positions and are therefore most financially insecure. There is also a significant percentage of the population which ascribes to the idea that forgiveness is morally acceptable because the loans were made by predatory corporations in the first place.
On the other hand, college is statistically a good gamble over the long-term as lifetime earning potential will largely overshadow the downside of loan repayment. And those taking the loans, while young, are no younger than those we ask to die for our country. Loanees have the tools at their disposal to understand the burdens they are taking on. Finally, countering the 'corporations are just out to get us' argument would be the contrasting moral obligation line of reasoning; essentially that paying back debts is a responsibility, and shirking that responsibility is not fair to society.
Most of the arguments above can be fitted loosely into two different political philosophies. To erase any ambiguity most of those who advocate for loan forgiveness tend to support Democrats while those with Republican leanings tend to be against the idea. Of course, this is not hard and fast. Many people I know with liberal leanings of course feel responsible for their debts. And, some I know who consider themselves to be conservatives would probably be happy to have their debts erased. However, it tends to be organizations like Moveon.org and legislators with a D after their names who typically support forgiveness plans with Republican legislators poo-pooing such notions.
Let us start off this post by saying that Justin Wolfers is a very intelligent person. Not that it is 100% dispositive, but the professor has his own page on the Wharton website chock full of fancy titles and publications. And if being a professor at Penn wasn't enough, those perusing his vitals will also note associations with institutions like Stanford, Princeton, Brookings and the Federal Reserve. In short, he is not the sort of individual that we have any business going toe to toe with on economic analysis. However, there is something in his recent Freakonomics post 'Forgive Student Loan? Worst Idea Ever.' that just isn't sitting right from our perspective.
The issue of student loan forgiveness is a touchy one with passionate advocates on either side. Unlike other debts, student loans cannot be discharged in bankruptcy. Sometimes even death doesn't erase the burden. The individuals signing the papers for debts which can exceed six figures are often young, uninformed and naive/overly optimistic about post-graduation employment possibilities. And those who take the debts on are often forced to start paying them back when they are just starting out in entry-level positions and are therefore most financially insecure. There is also a significant percentage of the population which ascribes to the idea that forgiveness is morally acceptable because the loans were made by predatory corporations in the first place.
On the other hand, college is statistically a good gamble over the long-term as lifetime earning potential will largely overshadow the downside of loan repayment. And those taking the loans, while young, are no younger than those we ask to die for our country. Loanees have the tools at their disposal to understand the burdens they are taking on. Finally, countering the 'corporations are just out to get us' argument would be the contrasting moral obligation line of reasoning; essentially that paying back debts is a responsibility, and shirking that responsibility is not fair to society.
Most of the arguments above can be fitted loosely into two different political philosophies. To erase any ambiguity most of those who advocate for loan forgiveness tend to support Democrats while those with Republican leanings tend to be against the idea. Of course, this is not hard and fast. Many people I know with liberal leanings of course feel responsible for their debts. And, some I know who consider themselves to be conservatives would probably be happy to have their debts erased. However, it tends to be organizations like Moveon.org and legislators with a D after their names who typically support forgiveness plans with Republican legislators poo-pooing such notions.
12.25.2011
Best of 2011: Should Ponzi Schemes Be Legal?
This story originally ran on January 12th, and was one of the most Googled topics we wrote about all year. We are unsure of what this says about our readership and the greater American public, but we are pretty sure that this is a bad sign for suckers nationwide...
I recently heard someone, when asked to define 'Ponzi scheme,' offer an answer that though technically correct also sounded considerably more benign than such a definition would be expected to sound in a post Bernie Madoff world. After all, everyone knows that Ponzi schemes are awful pyramids which cheat people out of money. However, 'An illegal plan where early investors put money into a pot which the organizer takes money from. The early investors are then paid back by the contributions of later investors.' sounds an awful lot like a pension plan, at least once you get past the 'an illegal' part. Indeed, it doesn't really take a lot of verbal olympics to get that statement to read something like 'A fund workers pay into which a manager takes a fee to run. The workers then get paid by the contributions of workers with a later retirement date.'
Parallels can also be drawn to the stock market. IPO investors are more likely to get their money, plus a nice bonus, for their troubles than the later investors whose buying pushes up the price. To people who see little difference between Ponzi schemes and the equity markets anyway, perhaps this similarity is not that striking. Indeed, extreme proponents of such theories might suggest that, like illegal pyramid schemes, stock markets should be shut down. We are certainly not suggesting that however. Indeed, on the contrary, what if we took the other side altogether. What if to be provocative, we suggested that Ponzi schemes, like pension plans and stock markets, should be legal?
I recently heard someone, when asked to define 'Ponzi scheme,' offer an answer that though technically correct also sounded considerably more benign than such a definition would be expected to sound in a post Bernie Madoff world. After all, everyone knows that Ponzi schemes are awful pyramids which cheat people out of money. However, 'An illegal plan where early investors put money into a pot which the organizer takes money from. The early investors are then paid back by the contributions of later investors.' sounds an awful lot like a pension plan, at least once you get past the 'an illegal' part. Indeed, it doesn't really take a lot of verbal olympics to get that statement to read something like 'A fund workers pay into which a manager takes a fee to run. The workers then get paid by the contributions of workers with a later retirement date.'
Parallels can also be drawn to the stock market. IPO investors are more likely to get their money, plus a nice bonus, for their troubles than the later investors whose buying pushes up the price. To people who see little difference between Ponzi schemes and the equity markets anyway, perhaps this similarity is not that striking. Indeed, extreme proponents of such theories might suggest that, like illegal pyramid schemes, stock markets should be shut down. We are certainly not suggesting that however. Indeed, on the contrary, what if we took the other side altogether. What if to be provocative, we suggested that Ponzi schemes, like pension plans and stock markets, should be legal?
Page 14 of the prospectus might look something like this...
(Sort of) Live from Bretton Woods: The Best of 2011
In their wisdom, the organizers of the World Economic Forum chose, once again, to not extend an invitation to Blawgconomics for their annual event in January. However, fear not dear friends! This week I am getting over the sadness precipitated by this snub by visiting the site of what might have been the first world economic forum in substance, if not name; Bretton Woods, New Hampshire.
In 1944, delegates from the 44 Allied nations of World War II convened on this small mountain community in the shadow of Mt. Washington to determine the fate of the global economic system. Why would some of the most powerful men in the world gather at such an off-the-beaten path location? Well, some of the delegates, including John Maynard Keynes, couldn't stand the heat of the summer in New York or Washington, DC and air conditioning was not yet widely in use. The mountain air of a resort in New Hampshire was a worthy alternative in which to peg exchange rates and create the IMF, and the rest, as they say, is history.
While I enjoy a few days of skiing, zip lining and cocoa, faithful readers will still have some content to look forward to as we will be reposting some of the most popular articles of 2011. Among the scheduled reposts are an article about zombies, a video explaining why we should end the drug war and a piece on why it might make sense to legalize Ponzi schemes. If that doesn't get everyone in the holiday spirit, I am just not sure what will...
In 1944, delegates from the 44 Allied nations of World War II convened on this small mountain community in the shadow of Mt. Washington to determine the fate of the global economic system. Why would some of the most powerful men in the world gather at such an off-the-beaten path location? Well, some of the delegates, including John Maynard Keynes, couldn't stand the heat of the summer in New York or Washington, DC and air conditioning was not yet widely in use. The mountain air of a resort in New Hampshire was a worthy alternative in which to peg exchange rates and create the IMF, and the rest, as they say, is history.
While I enjoy a few days of skiing, zip lining and cocoa, faithful readers will still have some content to look forward to as we will be reposting some of the most popular articles of 2011. Among the scheduled reposts are an article about zombies, a video explaining why we should end the drug war and a piece on why it might make sense to legalize Ponzi schemes. If that doesn't get everyone in the holiday spirit, I am just not sure what will...
12.23.2011
Is Albert Pujols Worth $254 Million? Part I
We return to the sports world today to talk about the economic concept of value. Albert Pujols was one of the greatest baseball players of the 2000's (if not the best), is currently on track to break a number of records which are sacred in the eyes of baseball fans, and, barring any Bonds-ian or Clemens-esque controversies, is a lock for the Hall of Fame. Heading into the most recent off-season, he was also a free agent, and, at the age of 31, was very clearly was on track for one last big payday.
So what was he worth? This was the question being asked by the management of the only team he had, to that point, suited up for, The St. Louis Cardinals, as well as other baseball executives and fans. He seemed almost certain to be baseball's second $200 million dollar man (after Alex Rodriguez who has twice signed contracts giving him that distinction). But how much more than $200 million?
At least according to one team, the Los Angeles Angels, the final answer was $254 million over the next 10 years. This left many pundits, happy fans in California, stunned fans in St. Louis and dozens of baseball executives wondering whether the deal was 'worth it'. In other words, was this the correct value to put on Pujols?
Of course value is a term with many different meanings to different people. Many people will subjectively look at the contract and think that there is no way someone should be paid that much money to play a game. Of course $254 million is a lot of money. Of course America is in a recession. Of course Mr. Pujols is getting paid to play a child's game. Of course numbers like this don't seem to make a lot of sense to people who are digging ditches every day or fighting for our country on the front lines.
However, subjective analysis is, well, subjective, and it isn't the best way to analyze this (or really any) contract. After all, many executives make more money that Pujols will under his contract just for the honor of destroying shareholder value (though that might be a post for another day).
One way to get baseball discussions to shift a little closer to the realm of objectivity is to use statistics. For those who don't follow the sport, or might only be passingly familiar with statistics like RBIs and home runs, there are baseball-specific ways to measure value called sabermetrics. These are most often measures of how much a player's specific statistics more generally benefit a team. Jamesian terms like win-share and wins over replacement, once the realm of uber-stat geeks, have become more familiar to common baseball fans.
In addition to being fan favorites, these types of measurements are helpful for executives as they allow for direct comparisons between players. They also help to set the market for free agents as a player statistically worth a relatively high number of wins can usually expect a nicer payday in comparison to lesser players. Many teams have gone so far as to base their scouting programs on such advanced metrics. Even non-fans might be familiar with this approach, or at least its name, as the 'moneyball' concept recently featured in a Hollywood movie of the same name.
While a subjective statement that someone is paid 'too much' and the use of sabermetrics are certainly ways to explain value, they also don't get right to the heart of the concept we are talking about today. Why is this? Well, the parties to the contract were thinking in economic terms when they signed it. And, in economic terms, the subjective concept of value we noted above is really inconsequential. Addtionally, the baseball measures of value explain how someone impacts a game, but not how they impact the bottom line at company they work for. Yes, that is correct, not the team they play for, but the company they work for. Let's not forget that it is the owners, and not the fans, who sign the checks.
Some owners care more about on-field results than others, but hardly any take too kindly to losing money. Therefore, in the analysis of 'is he worth it,' the owners really adhere to the economic definition of value. Of course most owners care what the fans think to some extent (subjective value), and of course, all things equal, most owners would prefer to win (sabermetrics analysis). However what they care about more is creating profits, and economic analysis is uniquely suited to determine whether they will be successful in that endeavor.
Players, of course care about economics as well. Quite simply, the equation is usually the more money the better.
However, what type of economic analysis is appropriate in this situation is something we struggled with a bit. Regular readers might be a bit surprised to hear that we first turned to Karl Marx for the answer, as we mulled over the idea that the labor theory of value is the best way to analyze whether Pujols is 'worth' his contract. At some point, however, this didn't hold up as we couldn't figure out any way to fit what Pujols 'produces' nicely into labor theory. In other words, since Pujols 'makes' hits, not, say, balls, bats or gloves, there is nothing to base his worth on in traditional Marxian analysis (of course to the extent that there are any neo-Marxists who are also baseball fans out there who think they can refute this there is always the comment section).
We also took a look at some other theories of value, but long story short, (and like we often do on the site) we finally settled on a simple supply and demand type of analysis. At the base of this analysis is the idea that Pujols is 'worth' the price someone assigns to his services that he accepts. As Pujols was offered $254 million, and he signed the contract, $254 is what he (or rather his services) are 'worth' (On a side note, while services can of course be valued under Marxian analysis, we still couldn't get around to understanding what is 'produced' by Pujols' labor...so supply and demand it is!)
We couldn't merely end the analysis there, however. Supply and demand should be thought of as an ethereal concept rather than a static one, so it is helpful to look ahead a bit as well. Therefore, we took the analysis a step further. However, our readers will have to wait for Part II for that...
So what was he worth? This was the question being asked by the management of the only team he had, to that point, suited up for, The St. Louis Cardinals, as well as other baseball executives and fans. He seemed almost certain to be baseball's second $200 million dollar man (after Alex Rodriguez who has twice signed contracts giving him that distinction). But how much more than $200 million?
At least according to one team, the Los Angeles Angels, the final answer was $254 million over the next 10 years. This left many pundits, happy fans in California, stunned fans in St. Louis and dozens of baseball executives wondering whether the deal was 'worth it'. In other words, was this the correct value to put on Pujols?
Of course value is a term with many different meanings to different people. Many people will subjectively look at the contract and think that there is no way someone should be paid that much money to play a game. Of course $254 million is a lot of money. Of course America is in a recession. Of course Mr. Pujols is getting paid to play a child's game. Of course numbers like this don't seem to make a lot of sense to people who are digging ditches every day or fighting for our country on the front lines.
However, subjective analysis is, well, subjective, and it isn't the best way to analyze this (or really any) contract. After all, many executives make more money that Pujols will under his contract just for the honor of destroying shareholder value (though that might be a post for another day).
One way to get baseball discussions to shift a little closer to the realm of objectivity is to use statistics. For those who don't follow the sport, or might only be passingly familiar with statistics like RBIs and home runs, there are baseball-specific ways to measure value called sabermetrics. These are most often measures of how much a player's specific statistics more generally benefit a team. Jamesian terms like win-share and wins over replacement, once the realm of uber-stat geeks, have become more familiar to common baseball fans.
In addition to being fan favorites, these types of measurements are helpful for executives as they allow for direct comparisons between players. They also help to set the market for free agents as a player statistically worth a relatively high number of wins can usually expect a nicer payday in comparison to lesser players. Many teams have gone so far as to base their scouting programs on such advanced metrics. Even non-fans might be familiar with this approach, or at least its name, as the 'moneyball' concept recently featured in a Hollywood movie of the same name.
While a subjective statement that someone is paid 'too much' and the use of sabermetrics are certainly ways to explain value, they also don't get right to the heart of the concept we are talking about today. Why is this? Well, the parties to the contract were thinking in economic terms when they signed it. And, in economic terms, the subjective concept of value we noted above is really inconsequential. Addtionally, the baseball measures of value explain how someone impacts a game, but not how they impact the bottom line at company they work for. Yes, that is correct, not the team they play for, but the company they work for. Let's not forget that it is the owners, and not the fans, who sign the checks.
Some owners care more about on-field results than others, but hardly any take too kindly to losing money. Therefore, in the analysis of 'is he worth it,' the owners really adhere to the economic definition of value. Of course most owners care what the fans think to some extent (subjective value), and of course, all things equal, most owners would prefer to win (sabermetrics analysis). However what they care about more is creating profits, and economic analysis is uniquely suited to determine whether they will be successful in that endeavor.
Players, of course care about economics as well. Quite simply, the equation is usually the more money the better.
However, what type of economic analysis is appropriate in this situation is something we struggled with a bit. Regular readers might be a bit surprised to hear that we first turned to Karl Marx for the answer, as we mulled over the idea that the labor theory of value is the best way to analyze whether Pujols is 'worth' his contract. At some point, however, this didn't hold up as we couldn't figure out any way to fit what Pujols 'produces' nicely into labor theory. In other words, since Pujols 'makes' hits, not, say, balls, bats or gloves, there is nothing to base his worth on in traditional Marxian analysis (of course to the extent that there are any neo-Marxists who are also baseball fans out there who think they can refute this there is always the comment section).
We also took a look at some other theories of value, but long story short, (and like we often do on the site) we finally settled on a simple supply and demand type of analysis. At the base of this analysis is the idea that Pujols is 'worth' the price someone assigns to his services that he accepts. As Pujols was offered $254 million, and he signed the contract, $254 is what he (or rather his services) are 'worth' (On a side note, while services can of course be valued under Marxian analysis, we still couldn't get around to understanding what is 'produced' by Pujols' labor...so supply and demand it is!)
We couldn't merely end the analysis there, however. Supply and demand should be thought of as an ethereal concept rather than a static one, so it is helpful to look ahead a bit as well. Therefore, we took the analysis a step further. However, our readers will have to wait for Part II for that...
Team Obama's Latest Stop on the E-Campaign Trail
It is increasingly common for political rhetoric and partisan bickering to overshadow actual attempts to find solutions to the problems facing America. This pervasive problem reared its ugly head again recently in the form of the payroll tax issue. However, while it was covered ad nauseum in the press, we believe that many in the media missed an interesting angle on the story with implications that could reach far beyond a few weeks of tax cuts.
Interspersed with all of the political wrangling, spliced among all of the media rantings, mixed-up in all of the admonishment of politicians by the citizenry was one of the best political uses of social media yet, the #40dollars campaign. For the less-social media savvy among our readers, this campaign was an effort by The White House to encourage people to Tweet about what an extra $40 means to them. The White House believed that this would help to drive its message and spur action by House Republicans. In addition, and showing a solid understanding of not just the medium, but its capabilities, the White House re-Tweeted some of the more compelling 140 character stories proponents of extending benefits shared.
The strategy wasn't entirely successful as Republicans hijacked the hashtag at times to make their own points (albeit somewhat clumsily...see Speaker Boehner's feed for examples). However despite taking a risk that it couldn't control its message entirely, this seemed to be an overwhelmingly successful campaign by The White House as many people chimed in showing support for its position.
We have written extensively about e-campaigning in the past. Though the use of social media has seemingly derailed as many political careers as it has jump-started (see Weiner, Anthony and Larsen-Gate) sometimes pols are successful when employing e-strategies. While the #40dollars campaign was an end in and of itself, it also strikes us that it was an important step in the campaign development strategy for Team Obama. If this is true, Republican candidates should make sure they have excellent teams of social media experts at the ready. It is becoming clearer that social media will be as crucial a stop on the campaign trail as Iowa or New Hampshire as Campaign 2012 picks up steam.
Interspersed with all of the political wrangling, spliced among all of the media rantings, mixed-up in all of the admonishment of politicians by the citizenry was one of the best political uses of social media yet, the #40dollars campaign. For the less-social media savvy among our readers, this campaign was an effort by The White House to encourage people to Tweet about what an extra $40 means to them. The White House believed that this would help to drive its message and spur action by House Republicans. In addition, and showing a solid understanding of not just the medium, but its capabilities, the White House re-Tweeted some of the more compelling 140 character stories proponents of extending benefits shared.
The strategy wasn't entirely successful as Republicans hijacked the hashtag at times to make their own points (albeit somewhat clumsily...see Speaker Boehner's feed for examples). However despite taking a risk that it couldn't control its message entirely, this seemed to be an overwhelmingly successful campaign by The White House as many people chimed in showing support for its position.
The e-campaign trail doesn't result in as many awkward photos as the real campaign trail. Luckily for us, e-campaigning didn't factor as heavily during the two previous election cycles...
We have written extensively about e-campaigning in the past. Though the use of social media has seemingly derailed as many political careers as it has jump-started (see Weiner, Anthony and Larsen-Gate) sometimes pols are successful when employing e-strategies. While the #40dollars campaign was an end in and of itself, it also strikes us that it was an important step in the campaign development strategy for Team Obama. If this is true, Republican candidates should make sure they have excellent teams of social media experts at the ready. It is becoming clearer that social media will be as crucial a stop on the campaign trail as Iowa or New Hampshire as Campaign 2012 picks up steam.
12.22.2011
Payments to Doctors: Problems and a Solution
Let's play a quick game of what if. If you had an injury that required surgery to replace, say, a knee, wouldn't you want the best replacement knee possible to be used? If you had the option, wouldn't you want the actual doctor who created that knee to do the procedure? Even assuming that you answered yes to those questions, you might wonder if there was a hook. Would you mind if that doctor was paid over a million dollars a year in royalties because he helped create the knee? Would it matter if that doctor was working at a teaching hospital linked to a state university system? Or that some other options, including non-surgical options, might be available?
These are just some of the conflicting interests inherent in the way the medical system is currently structured in the US. Two quotes from a recent Wisconsin State Journal article on the issue sum up the main points of the two sides succinctly and accurately:
"Since doctors write the prescriptions, it's crucial for drug companies to win their hearts and minds — to bribe them, seduce them, flatter them, whatever it takes," Dr. Marcia Angell, former editor of the New England Journal of Medicine, said at a forum last month in New York. "The companies wouldn't do this unless it worked."
"We have an obligation to leverage the resources of the people of Wisconsin in partnership with industry, as long as it's done in a transparent and ethical way," said Dr. Robert Golden, dean of the UW School of Medicine and Public Health.
We typically strive for some basic level of objectivity here at Blawgconomics, and will tag issues where we feel we are being a bit more subjective as Op-eds. Therefore, it is common for us to present both sides of a story. However, objectivity aside, this issue is striking in that both sides have equally valid and strong arguments. Of course having doctors who work with products consult on their creation is beneficial to recipients. Of course we should allow people who create innovative devices to be financially rewarded. And of course these two facts lead to potential conflicts of interest.
While some point to disclosure as the cure for such conflicts, it is also true that the average consumer of medical services and products, to the extent that they even read disclosures, is unlikely to understand such conflicts. However, the solution to this isn't to eliminate the practices (and thus conflicts) in question. It is to give consumers more, and importantly better, options for understanding the conflicts that could impact their care.
One of the most innovative solutions we have heard of is a program where patients have the option to receive independent counseling on procedures and products which are being contemplated for their treatment. In such a program, a trained professional (though not necessarily a doctor) works with the patient to explore everything from conflicts of interest to alternative treatment strategies, removing many of the concerns that exist when doctors who work closely with device makers and pharmaceutical companies act as the only consultant. Some hospitals have such systems in place currently, and we would anticipate that it is a trend that will continue to move in a positive direction as these relationships face increased scrutiny.
These are just some of the conflicting interests inherent in the way the medical system is currently structured in the US. Two quotes from a recent Wisconsin State Journal article on the issue sum up the main points of the two sides succinctly and accurately:
"Since doctors write the prescriptions, it's crucial for drug companies to win their hearts and minds — to bribe them, seduce them, flatter them, whatever it takes," Dr. Marcia Angell, former editor of the New England Journal of Medicine, said at a forum last month in New York. "The companies wouldn't do this unless it worked."
"We have an obligation to leverage the resources of the people of Wisconsin in partnership with industry, as long as it's done in a transparent and ethical way," said Dr. Robert Golden, dean of the UW School of Medicine and Public Health.
We typically strive for some basic level of objectivity here at Blawgconomics, and will tag issues where we feel we are being a bit more subjective as Op-eds. Therefore, it is common for us to present both sides of a story. However, objectivity aside, this issue is striking in that both sides have equally valid and strong arguments. Of course having doctors who work with products consult on their creation is beneficial to recipients. Of course we should allow people who create innovative devices to be financially rewarded. And of course these two facts lead to potential conflicts of interest.
While some point to disclosure as the cure for such conflicts, it is also true that the average consumer of medical services and products, to the extent that they even read disclosures, is unlikely to understand such conflicts. However, the solution to this isn't to eliminate the practices (and thus conflicts) in question. It is to give consumers more, and importantly better, options for understanding the conflicts that could impact their care.
One of the most innovative solutions we have heard of is a program where patients have the option to receive independent counseling on procedures and products which are being contemplated for their treatment. In such a program, a trained professional (though not necessarily a doctor) works with the patient to explore everything from conflicts of interest to alternative treatment strategies, removing many of the concerns that exist when doctors who work closely with device makers and pharmaceutical companies act as the only consultant. Some hospitals have such systems in place currently, and we would anticipate that it is a trend that will continue to move in a positive direction as these relationships face increased scrutiny.
Internet Freedom Update
The internet has been a hot topic in the news recently, often in the context of how the freedoms enjoyed via this growing medium are being threatened by governmental actions. In addition to recent posts on this very page, a few other stories in this vein, with both national and global implications, have been making the rounds recently:
- While it is unlikely that any of our readers sympathize with the Somali militant/terrorist group Shabab, there are at least some among you who might be concerned with government efforts to shut down the group's Twitter account. Apparently the US military complex hasn't taken too kindly to Shabab's mocking of the Kenyan military via Tweets and is seeking out legal avenues to shut down its means of communication. Twitter representatives declined to comment on the story.
- In what is merely the latest attempt at legislation to 'enhance cyber security', the House Homeland Security Committee recently introduced a bill which would establish an entity to oversee information-sharing. The mostly-Republican supported bill would require private firms to share information on cyber threats. The legislation has some similarities to other recent proposals, but it is unclear what actual enforcement mechanisms it might create to accompany the mandate to share information.
- And, in a slight change of direction from stories we normally discuss in this realm, someone in the government is warning that greater regulation of the internet could be a threat to freedom. Of course, this one is a little different because it deals with the UN, and not the US government, creating the regulatory system, so maybe the reticence around the idea can be chalked up more to concerns about sovereignty than internet freedom. However, in either case there is quite a bit of material for domestic internet freedom advocates sprinkled throughout FCC Commissioner Robert McDowell's comments to The Washington Times recently.
Those interested in additional stories related to this topic can visit our November post Freedom v. Security, Tech-Style here.
- While it is unlikely that any of our readers sympathize with the Somali militant/terrorist group Shabab, there are at least some among you who might be concerned with government efforts to shut down the group's Twitter account. Apparently the US military complex hasn't taken too kindly to Shabab's mocking of the Kenyan military via Tweets and is seeking out legal avenues to shut down its means of communication. Twitter representatives declined to comment on the story.
- In what is merely the latest attempt at legislation to 'enhance cyber security', the House Homeland Security Committee recently introduced a bill which would establish an entity to oversee information-sharing. The mostly-Republican supported bill would require private firms to share information on cyber threats. The legislation has some similarities to other recent proposals, but it is unclear what actual enforcement mechanisms it might create to accompany the mandate to share information.
- And, in a slight change of direction from stories we normally discuss in this realm, someone in the government is warning that greater regulation of the internet could be a threat to freedom. Of course, this one is a little different because it deals with the UN, and not the US government, creating the regulatory system, so maybe the reticence around the idea can be chalked up more to concerns about sovereignty than internet freedom. However, in either case there is quite a bit of material for domestic internet freedom advocates sprinkled throughout FCC Commissioner Robert McDowell's comments to The Washington Times recently.
Those interested in additional stories related to this topic can visit our November post Freedom v. Security, Tech-Style here.
12.21.2011
Page Lebanon
One of our main self-criticisms at Blawgconomics is that we lack the requisite local knowledge needed to fully and carefully explore many of the topics we post about. Though that apparently doesn't stop us from recklessly forming and sharing opinions and conclusions about situations, we are nonetheless self-aware that it typically takes boots on the ground to understand the nuances of regional social, political and economic issues.
Someone with less of a problem in that area (at least when it comes to the Middle East), is friend of the site Anthony Elghossain. Though Anthony resides in the US most of the time, he has lived and traveled extensively in the Middle East and is therefore able to bring a unique perspective on the region to his blog. From Page Lebanon:
Page Lebanon, as the name implies, is a blog on all things Lebanon. The blog generally deals with politics, but also touches on cultural, economic, and social developments in that small country on the shores of the Eastern Mediterranean. Of course, events elsewhere – particularly in the broader Levant - have a funny way of affecting things in Lebanon so Page Lebanon focuses on those issues too.
Anthony has been writing a bit more actively recently after posting sporadically for a while, and his new material is excellent. For anyone interested in a witty insider's perspective on the goings on in the Middle East, the following three posts are worth a read. All descriptions have been provided by the author:
Someone with less of a problem in that area (at least when it comes to the Middle East), is friend of the site Anthony Elghossain. Though Anthony resides in the US most of the time, he has lived and traveled extensively in the Middle East and is therefore able to bring a unique perspective on the region to his blog. From Page Lebanon:
Page Lebanon, as the name implies, is a blog on all things Lebanon. The blog generally deals with politics, but also touches on cultural, economic, and social developments in that small country on the shores of the Eastern Mediterranean. Of course, events elsewhere – particularly in the broader Levant - have a funny way of affecting things in Lebanon so Page Lebanon focuses on those issues too.
Anthony has been writing a bit more actively recently after posting sporadically for a while, and his new material is excellent. For anyone interested in a witty insider's perspective on the goings on in the Middle East, the following three posts are worth a read. All descriptions have been provided by the author:
- An Oasis of Steel and Glass: a first impression of Abu Dhabi and the UAE from a Levantine perspective
- The Big Cat's Out of Bag: a (slightly) polemical look at the Assad regime's duplicitous essence
- The Botox Revolution: a tongue-in-cheek piece about socialites in Lebanon's reform movements
12.17.2011
Op-ed: Persuasion v. Coercion in Goverment Actions
We recently posted an article describing Senator Joe Lieberman's attempt, as head of the Committee on Homeland Security and Governmental Affairs, to get Blogger to stop allowing what he calls terrorist speech on the blogs it hosts. Blogger (the platform we use for the site) is owned by Google. Google also owns YouTube, and previous attempts by the Committee to have terrorist content removed from that medium have proven successful. Presumably, Lieberman would have Blogger monitor its blogs and/or respond to requests and remove the offenders whenever content therein could be deemed 'terrorist' in nature.
While I noted some first amendment constitutional concerns in the post itself, a friend of the site wisely pointed out in the comments that Lieberman, or anyone else in the government, has as much of a right to express free speech as anyone else, so long as they are not, in fact, violating the rights of others. While this is undoubtedly true, it did lead me to consider a broader concern: When does the power of persuasion become the power of coercion? When does government speech attempting to convince a company like Google to stifle speech slide over into the government forcing Google to stifle speech?
For purposes of this post, I am not so concerned with the jurisprudence on the matter; particularly in the realm of e-issues, this is somewhat ethereal. Even if I did not so casually eschew the opinions of our nation's jurists, there is a very practical problem which exists in the realm of internet cases. That is that the Supreme Court has itself chosen to leave some of the more important questions concerning with the internet tangled in a complicated maze of Circuit splits. This makes it difficult to determine just what legal precedent might be in this situation.
Therefore I will instead think about the reasoning behind the matter, taking a more 'natural rights' viewpoint. In other words, as the baseline for this discussion, I am hoping that our readers can take some time to think about what it means to have freedom of speech as a right. Then I want them to think about what it means to have restrictions on it.
While I noted some first amendment constitutional concerns in the post itself, a friend of the site wisely pointed out in the comments that Lieberman, or anyone else in the government, has as much of a right to express free speech as anyone else, so long as they are not, in fact, violating the rights of others. While this is undoubtedly true, it did lead me to consider a broader concern: When does the power of persuasion become the power of coercion? When does government speech attempting to convince a company like Google to stifle speech slide over into the government forcing Google to stifle speech?
For purposes of this post, I am not so concerned with the jurisprudence on the matter; particularly in the realm of e-issues, this is somewhat ethereal. Even if I did not so casually eschew the opinions of our nation's jurists, there is a very practical problem which exists in the realm of internet cases. That is that the Supreme Court has itself chosen to leave some of the more important questions concerning with the internet tangled in a complicated maze of Circuit splits. This makes it difficult to determine just what legal precedent might be in this situation.
Therefore I will instead think about the reasoning behind the matter, taking a more 'natural rights' viewpoint. In other words, as the baseline for this discussion, I am hoping that our readers can take some time to think about what it means to have freedom of speech as a right. Then I want them to think about what it means to have restrictions on it.
12.14.2011
Article Review: Derivatives: A Twenty-First Century Understanding
Derivatives are an oft-maligned and dangerous yet misunderstood and critical part of the modern financial system. While many Americans rightfully place some of the blame for the housing bubble on a system which could enable and even facilitate the creation of highly-rated credit default swaps on blocks of almost worthless debt, it is also true that derivatives allow companies and investors to manage risk and protect value. Like so many things from the financial markets to everyday life, derivatives can be very useful when properly utilized and exceptionally destructive when they aren't.
Unfortunately most of the policy-makers who have oversight over these instruments have little idea how they work, leading to disruptive under-regulation. Or at least that is the theory of one individual, Professor Timothy E. Lynch. In a recent article which appears in the latest Loyola University Law Journal, Lynch outlines some of the problems with derivatives and explains what he describes as a modern framework for derivatives. Under this framework, derivatives, which Lynch argues are defined both over- and under-inclusively currently, would be more appropriately redefined. In Lynch's estimation, this would ensure that policy can properly match the challenges presented by the myriad structures which exist. From the abstract:
"Derivatives are commonly defined as some variation of the following: a financial instrument whose value is derived from the performance of a secondary source such as an underlying bond, commodity or index. But this definition is both over-inclusive and under-inclusive. Thus, not surprisingly, derivatives are largely misunderstood, including by many policy makers, regulators and legal analysts. It is important for interested parties such as policy makers to understand derivatives, because the types and uses of derivatives have exploded in the last few decades, and because these financial instruments can provide both social benefits and cause social harms. This Article presents a framework for understanding modern derivatives by identifying the characteristics all derivatives share.
Unfortunately most of the policy-makers who have oversight over these instruments have little idea how they work, leading to disruptive under-regulation. Or at least that is the theory of one individual, Professor Timothy E. Lynch. In a recent article which appears in the latest Loyola University Law Journal, Lynch outlines some of the problems with derivatives and explains what he describes as a modern framework for derivatives. Under this framework, derivatives, which Lynch argues are defined both over- and under-inclusively currently, would be more appropriately redefined. In Lynch's estimation, this would ensure that policy can properly match the challenges presented by the myriad structures which exist. From the abstract:
"Derivatives are commonly defined as some variation of the following: a financial instrument whose value is derived from the performance of a secondary source such as an underlying bond, commodity or index. But this definition is both over-inclusive and under-inclusive. Thus, not surprisingly, derivatives are largely misunderstood, including by many policy makers, regulators and legal analysts. It is important for interested parties such as policy makers to understand derivatives, because the types and uses of derivatives have exploded in the last few decades, and because these financial instruments can provide both social benefits and cause social harms. This Article presents a framework for understanding modern derivatives by identifying the characteristics all derivatives share.
12.13.2011
Schmidt on SOPA
Google Chairman Eric Schmidt made some interesting comments on the Stop Online Piracy Act (SOPA) during and after a recent visit to the Economic Club of Washington. In discussing SOPA, Schmidt had the following to say, as relayed by Gautham Nagesh at TheHill.com:
An online piracy bill in the House would "criminalize linking and the fundamental structure of the Internet itself," according to Google Executive Chairman Eric Schmidt. Schmidt said the controversial Stop Online Piracy Act (SOPA) would punish Web firms, including search engines, that link to foreign websites dedicated to online piracy. He said implementing the bill as written would effectively break the Internet.
"By criminalizing links, what these bills do is they force you to take content off the Internet," Schmidt said, calling it a form of censorship. "If Congress writes a bad law, we all suffer," Schmidt said. He compared the proposal to the Web censorship practiced by repressive foreign governments like China.
"It's not a good thing. I understand the goal of what SOPA and PIPA are trying to do," Schmidt said of the Senate counterpart bill, the Protect IP Act. "Their goal is reasonable, their mechanism is terrible. They should not criminalize the intermediaries. They should go after the people that are violating the law."
An online piracy bill in the House would "criminalize linking and the fundamental structure of the Internet itself," according to Google Executive Chairman Eric Schmidt. Schmidt said the controversial Stop Online Piracy Act (SOPA) would punish Web firms, including search engines, that link to foreign websites dedicated to online piracy. He said implementing the bill as written would effectively break the Internet.
"By criminalizing links, what these bills do is they force you to take content off the Internet," Schmidt said, calling it a form of censorship. "If Congress writes a bad law, we all suffer," Schmidt said. He compared the proposal to the Web censorship practiced by repressive foreign governments like China.
"It's not a good thing. I understand the goal of what SOPA and PIPA are trying to do," Schmidt said of the Senate counterpart bill, the Protect IP Act. "Their goal is reasonable, their mechanism is terrible. They should not criminalize the intermediaries. They should go after the people that are violating the law."
12.12.2011
Dreaming of a White Christmas?
The idea of a white Christmas is as much a part of the mythological fabric of the holiday season as reindeer and decorated trees. However, the reality is that most Americans are only slightly more likely to see snow than the former, and are far less likely to see snow than the latter.
Nonetheless, the possibility of snow on Christmas has enough implications for travel, vacation-planning and even sales numbers (though which way the correlation works is not necessarily clear...) that we thought it might be of interest to our readers. The below probability map comes courtesy of The Weather Channel.
Nonetheless, the possibility of snow on Christmas has enough implications for travel, vacation-planning and even sales numbers (though which way the correlation works is not necessarily clear...) that we thought it might be of interest to our readers. The below probability map comes courtesy of The Weather Channel.
Nobel Prize Lectures
A few weeks back we told you why Messrs. Sargent and Sims won the latest Nobel Prize for economics (and also explained why 'Nobel Prize' is a slight misnomer). Today, we bring you their Prize Lectures:
Challenging Mainstream Economics
I found the video below posted on Harvard Professor Greg Mankiw's blog. The lecture captured in the video is a teach-in, and is an extension of the "Occupy Harvard" protest which started a few weeks back.
For purposes of this post, the most notable facet of that ongoing protest was the walk-out of the aforementioned Professor Mankiw's Principles of Economics class. The walk-out was staged to protest the class's mainstream economics curriculum, which some say verges on fundamentalist. In reaction to this concern, Steve Marglin was brought in to challenge the orthodox approach taken by Mankiw as well as many others around the world.
While I can agree that mainstream economics and economists leave something to be desired, I would argue that the best way to debunk or counter orthodoxies is to understand them (a point Mankiw makes as well). Therefore, I believe that the walk-out was a bit pointless and inefficient, but I am sure its participants would disagree with my definitions and/or use of both adjectives.
In any case, the lecture below is reminiscent of some I have attended in the past, and I can say that, though none of them have influenced me too heavily, they did provide an opportunity for me to look at things from different perspectives. And that is never a bad thing in my book.
For purposes of this post, the most notable facet of that ongoing protest was the walk-out of the aforementioned Professor Mankiw's Principles of Economics class. The walk-out was staged to protest the class's mainstream economics curriculum, which some say verges on fundamentalist. In reaction to this concern, Steve Marglin was brought in to challenge the orthodox approach taken by Mankiw as well as many others around the world.
While I can agree that mainstream economics and economists leave something to be desired, I would argue that the best way to debunk or counter orthodoxies is to understand them (a point Mankiw makes as well). Therefore, I believe that the walk-out was a bit pointless and inefficient, but I am sure its participants would disagree with my definitions and/or use of both adjectives.
In any case, the lecture below is reminiscent of some I have attended in the past, and I can say that, though none of them have influenced me too heavily, they did provide an opportunity for me to look at things from different perspectives. And that is never a bad thing in my book.
The Drug War is Awesome, Part III
It has been our great pleasure to work with e-satirist Rob Morris to provide a second home for his video series on the War on Drugs. His videos have been provocative (in the best sense of the word), and have clearly brought out the best in our commentariat. Today, we are happy to be able to post the final video in the War on The War on Drugs Trilogy, and I think this one just might be the most compelling of the three. That said, it would probably be best to let it speak for itself...
12.07.2011
Remembering Pearl Harbor
Some very nice words from President Obama commemorating the attack on Pearl Harbor:
Seventy years ago today, a bright Sunday morning was darkened by the unprovoked attack on Pearl Harbor. Today, Michelle and I join the American people in honoring the memory of the more than 2,400 American patriots—military and civilian, men, women and children—who gave their lives in our first battle of the Second World War. Our thoughts and prayers are with the families for whom this day is deeply personal—the spouses, brothers and sisters, and sons and daughters who have known seven decades without a loved one but who have kept their legacy alive for future generations.
We salute the veterans and survivors of Pearl Harbor who inspire us still. Despite overwhelming odds, they fought back heroically, inspiring our nation and putting us on the path to victory. They are members of that Greatest Generation who overcame the Depression, crossed oceans and stormed the beaches to defeat fascism, and turned adversaries into our closest allies. When the guns fell silent, they came home, went to school on the G.I. Bill, and built the largest middle class in history and the strongest economy in the world. They remind us that no challenge is too great when Americans stand as one. All of us owe these men and women a profound debt of gratitude for the freedoms and standard of living we enjoy today.
On this National Pearl Harbor Remembrance Day, we also reaffirm our commitment to carrying on their work—to keeping the country we love strong, free and prosperous. And as today’s wars in Iraq and Afghanistan come to an end and we welcome home our 9/11 Generation, we resolve to always take care of our troops, veterans and military families as well as they’ve taken care of us. On this solemn anniversary, there can be no higher tribute to the Americans who served and sacrificed seventy years ago today.
Seventy years ago today, a bright Sunday morning was darkened by the unprovoked attack on Pearl Harbor. Today, Michelle and I join the American people in honoring the memory of the more than 2,400 American patriots—military and civilian, men, women and children—who gave their lives in our first battle of the Second World War. Our thoughts and prayers are with the families for whom this day is deeply personal—the spouses, brothers and sisters, and sons and daughters who have known seven decades without a loved one but who have kept their legacy alive for future generations.
We salute the veterans and survivors of Pearl Harbor who inspire us still. Despite overwhelming odds, they fought back heroically, inspiring our nation and putting us on the path to victory. They are members of that Greatest Generation who overcame the Depression, crossed oceans and stormed the beaches to defeat fascism, and turned adversaries into our closest allies. When the guns fell silent, they came home, went to school on the G.I. Bill, and built the largest middle class in history and the strongest economy in the world. They remind us that no challenge is too great when Americans stand as one. All of us owe these men and women a profound debt of gratitude for the freedoms and standard of living we enjoy today.
On this National Pearl Harbor Remembrance Day, we also reaffirm our commitment to carrying on their work—to keeping the country we love strong, free and prosperous. And as today’s wars in Iraq and Afghanistan come to an end and we welcome home our 9/11 Generation, we resolve to always take care of our troops, veterans and military families as well as they’ve taken care of us. On this solemn anniversary, there can be no higher tribute to the Americans who served and sacrificed seventy years ago today.
12.06.2011
From the Desk of the Commissioner
We received an email blast from 'the desk' of NBA Commissioner David Stern earlier this evening. We thought that posting it might be a nice way to bring some closure to our coverage of the league's labor dispute. It follows in its entirety:
In the days and weeks ahead, all of us hope you will enjoy the run-up to the start of the season: free agency, training camp, and preseason games. Each NBA team will be hosting special events for fans, so be sure to check your favorite team's website, Facebook page, or Twitter feed for details. This season we look forward to bringing you more of everything you love about NBA basketball: incredible competition, tremendous excitement, and unending hard work and dedication by the world's best athletes.
Thank you for being an NBA fan. I hope you enjoy the season, which promises to be a most exciting one.
Dear Fans,
On behalf of the entire NBA family, I want to thank you for your patience and support over the past several months. The new collective bargaining agreement is designed to provide more competitive balance for our league, reward strong performances by our players, and strengthen our game by improving its economics. We believe this agreement will benefit our teams, players, and most importantly, fans by making the NBA stronger.In the days and weeks ahead, all of us hope you will enjoy the run-up to the start of the season: free agency, training camp, and preseason games. Each NBA team will be hosting special events for fans, so be sure to check your favorite team's website, Facebook page, or Twitter feed for details. This season we look forward to bringing you more of everything you love about NBA basketball: incredible competition, tremendous excitement, and unending hard work and dedication by the world's best athletes.
Thank you for being an NBA fan. I hope you enjoy the season, which promises to be a most exciting one.
12.05.2011
Does America Imprison Too Many People?
Considering the amount of time we have been spending discussing the causes and effects of the War on Drugs recently, not mentioning Judge Richard Posner's recent post on the incarceration rate in America would be almost negligent. From the article:
Another troubled American system is that of criminal justice, with particular emphasis on the astrounding (sic) growth and level of imprisonment. Some statistics: the incarceration rate had been 118 per 100,000 in 1950, and actually fell in 1972 to 93 per 100,00. By 2000 it had reached 469 and only since the advent of the economic crisis has it begun to decline as states try to reduce expenditures. Between 1950 and 2000 the white imprisonment rate increased by 184 percent and the black imprisonment rate by 355 percent; today 40 percent of prison and jail inmates are black, although blacks are only 13 percent of the overall population. Even though the U.S. crime rate fell by a third in the 1990s (and by two-thirds in many large cities)— the murder rate by more than 40 percent—the inmate population continued growing during this period, an increase that cannot be explained by population growth, since the population grew by much less than a third in the 1990s.
For more on these alarming statistics, check out the complete post here. Fans of Judge Posner will know that he has addressed the War on Drugs in the past, and his views on marijuana in particular are not entirely dissimilar from those of recent contributor Rob Morris. Meanwhile, Judge Posner's partner-in-blogging Gary Becker has also posted on the topic. From his piece:
Imprisonment is the right policy for anyone committing heinous crimes like rape, assaults, robbery at gunpoint, and many other crimes where victims are badly harmed both physically and mentally. Imprisonment is the wrong punishment for crimes without victims, or where other punishments are more effective. The sale of drugs is the prime example of a “victimless” crime for understanding the data on imprisonment. Buyers of drugs for the most part enter into voluntary transactions with sellers. Yet almost one quarter of all persons in US prisons are there on drug-related charges. In addition, studies indicate that many others are there because they committed crimes to finance their expensive drug habits since drug prices are kept artificially high by US drug policy.
Interestingly, both articles contain discussions on deterrence, a concept that factored heavily in our readers' comments on the original War on Drugs article we posted.
Another troubled American system is that of criminal justice, with particular emphasis on the astrounding (sic) growth and level of imprisonment. Some statistics: the incarceration rate had been 118 per 100,000 in 1950, and actually fell in 1972 to 93 per 100,00. By 2000 it had reached 469 and only since the advent of the economic crisis has it begun to decline as states try to reduce expenditures. Between 1950 and 2000 the white imprisonment rate increased by 184 percent and the black imprisonment rate by 355 percent; today 40 percent of prison and jail inmates are black, although blacks are only 13 percent of the overall population. Even though the U.S. crime rate fell by a third in the 1990s (and by two-thirds in many large cities)— the murder rate by more than 40 percent—the inmate population continued growing during this period, an increase that cannot be explained by population growth, since the population grew by much less than a third in the 1990s.
For more on these alarming statistics, check out the complete post here. Fans of Judge Posner will know that he has addressed the War on Drugs in the past, and his views on marijuana in particular are not entirely dissimilar from those of recent contributor Rob Morris. Meanwhile, Judge Posner's partner-in-blogging Gary Becker has also posted on the topic. From his piece:
Imprisonment is the right policy for anyone committing heinous crimes like rape, assaults, robbery at gunpoint, and many other crimes where victims are badly harmed both physically and mentally. Imprisonment is the wrong punishment for crimes without victims, or where other punishments are more effective. The sale of drugs is the prime example of a “victimless” crime for understanding the data on imprisonment. Buyers of drugs for the most part enter into voluntary transactions with sellers. Yet almost one quarter of all persons in US prisons are there on drug-related charges. In addition, studies indicate that many others are there because they committed crimes to finance their expensive drug habits since drug prices are kept artificially high by US drug policy.
Interestingly, both articles contain discussions on deterrence, a concept that factored heavily in our readers' comments on the original War on Drugs article we posted.
What Makes a Trader Go Rogue?
Rogue trading, or the act of independently making, and often obfuscating, reckless losses in a firm's accounts, has become so common that the uncovering of these situations has lost the shock factor it had in the days of Leeson. This is despite the fact that the dollar figures involved in such scandals have become increasingly mind-blowing.
However, despite the rising frequency with which rogue traders make the headlines in the financial press, the fundamental question of why they have done what they have done often goes asked and unanswered. This is no simple question of greed; traders would usually have very little chance of personal financial gain even if their trades were to go right. And, even if the potential for a big bonus is the lure, it is clear that the downside of jail time and public humiliation far outweighs the upside of pecuniary gains in the minds of most rational observers.
Over the weekend, John Gapper of The Financial Times outlined an interesting theory that might do a better job of explaining rogue behavior than simple financial incentives; biology. In his article What makes a rogue trader, Gapper identifies research suggesting that many species will take bigger chances when they are already in a hole (whether the deficit is made up of seeds or dollars) than they would otherwise. And, since this risky type of behavior often leads to survival in the case of, say, food shortages or droughts, risk genes are more likely to be passed down through the generations. In other words, we might be genetically predisposed to go double or nothing.
Who knew that sparrows and bumblebees could provide such insights into market behavior? If what Gapper suggests it true, it would seem that we are less Homo economicus and more Bombus pennsylvanicus, not necessarily a happy thought for all the neoclassical microecononomics holdouts in the audience...
However, despite the rising frequency with which rogue traders make the headlines in the financial press, the fundamental question of why they have done what they have done often goes asked and unanswered. This is no simple question of greed; traders would usually have very little chance of personal financial gain even if their trades were to go right. And, even if the potential for a big bonus is the lure, it is clear that the downside of jail time and public humiliation far outweighs the upside of pecuniary gains in the minds of most rational observers.
Over the weekend, John Gapper of The Financial Times outlined an interesting theory that might do a better job of explaining rogue behavior than simple financial incentives; biology. In his article What makes a rogue trader, Gapper identifies research suggesting that many species will take bigger chances when they are already in a hole (whether the deficit is made up of seeds or dollars) than they would otherwise. And, since this risky type of behavior often leads to survival in the case of, say, food shortages or droughts, risk genes are more likely to be passed down through the generations. In other words, we might be genetically predisposed to go double or nothing.
Who knew that sparrows and bumblebees could provide such insights into market behavior? If what Gapper suggests it true, it would seem that we are less Homo economicus and more Bombus pennsylvanicus, not necessarily a happy thought for all the neoclassical microecononomics holdouts in the audience...
The War on The War on Drugs
If the comments on our recent posting of Rob Morris' YouTube video are any indication, the War on Drugs is a divisive topic among our viewers. This is not surprising as it is a political, economic, social and racial issue that is complicated and has few clear alternatives that a majority of Americans would agree on, even if they agree that it isn't working (which itself doesn't appear to be a consensus). Given the power of the status quo, particularly with regards to government initiatives, this lack of clear alternatives suggests that the War on Drugs is here to stay, regardless of the government's nomenclature du jour.
However, despite that fact that changing the nation's policy on drugs is an uphill battle, people have not stopped trying to do so. With that thought in mind, we are happy to be able to bring part II of Rob's video series The Drug War Is Awesome! to our readers below. In addition, for anyone who is interested, Rob is now on Twitter, and can provocatively be found at TheFederalGovt.
However, despite that fact that changing the nation's policy on drugs is an uphill battle, people have not stopped trying to do so. With that thought in mind, we are happy to be able to bring part II of Rob's video series The Drug War Is Awesome! to our readers below. In addition, for anyone who is interested, Rob is now on Twitter, and can provocatively be found at TheFederalGovt.
12.04.2011
The Centers for Disease Control vs. the Zombies
By contributor Jeremiah Newhall
The Centers for Disease Control (CDC) recently posted an excellent article on what to do in case of zombie attack on its Public Health Matters blog. Of course, CDC is not really worried about zombies, but it is worried about emergency preparedness, and the “zombie attack” premise is a cheeky attention grabber which addresses this concern. Kudos to CDC (in particular to the author of the piece, Rear Admiral Khan) for tricking us into reading something educational, and perhaps even making us all better prepared for real life emergencies.
But while reading the post, I was struck by CDC's assertion that it would be in charge of fighting the zombie apocalypse:
...Not only would scientists be working to identify the cause and cure of the zombie outbreak, but CDC and other federal agencies would send medical teams and first responders to help those in affected areas (I will be volunteering the young nameless disease detectives for the field work).
If zombies did start roaming the streets, CDC would conduct an investigation much like any other disease outbreak. CDC would provide technical assistance to cities, states, or international partners dealing with a zombie infestation.
The Centers for Disease Control (CDC) recently posted an excellent article on what to do in case of zombie attack on its Public Health Matters blog. Of course, CDC is not really worried about zombies, but it is worried about emergency preparedness, and the “zombie attack” premise is a cheeky attention grabber which addresses this concern. Kudos to CDC (in particular to the author of the piece, Rear Admiral Khan) for tricking us into reading something educational, and perhaps even making us all better prepared for real life emergencies.
But while reading the post, I was struck by CDC's assertion that it would be in charge of fighting the zombie apocalypse:
...Not only would scientists be working to identify the cause and cure of the zombie outbreak, but CDC and other federal agencies would send medical teams and first responders to help those in affected areas (I will be volunteering the young nameless disease detectives for the field work).
If zombies did start roaming the streets, CDC would conduct an investigation much like any other disease outbreak. CDC would provide technical assistance to cities, states, or international partners dealing with a zombie infestation.
The CDC is getting ready. The only question is whether the zombies or the red tape will beat them first.
This got me to thinking: in case of a zombie apocalypse, who would be in charge? It’s a cop-out to say the President, or whomever the President delegates. After all, the President may be a zombie himself before the government can react. A zombie President (and Vice President) would not be technically dead (they’re undead), so succession would be hazy. Who would be the natural cabinet official, based on their responsibilities, to step up?
Especially in a pre-election year, there is another way to look at the question: if the President runs for reelection and needs to blame someone for his failure to stop the zombie apocalypse (can’t you just hear the partisan rhetoric?), which cabinet official is the natural to take the fall?
CDC would be a good-sense option to step up and lead the response; it’s an agency filled with brilliant doctors who love doing research on pandemics and epidemics and how to stop them. But when we have brain-craving zombies roving around, I think the Department of Defense might leap to the minds of most Americans: priority one, protect us from zombies. Priority two, cure zombies. I think doctors lose this one.
The question is thorny because all cabinet officers are equal; they report directly to the President, not to one another (here’s a nice overview). But a decent proxy for rank is order of succession, set by 3 U.S.C. § 19 (and in a more digestible form on The White House website). Of course, this isn’t absolute: no one expects Tim Geithner to be telling Leon Panetta whether to have the Marines target the zombies’ heads or hearts. (Always go for the head shot!) So we’ll look first for agencies that should have expertise in controlling zombie plagues, then use succession as a kind of tie-breaker.
At first blush, controlling a zombie uprising/plague seems like it should fall squarely in the bailiwick of the newly formed Department of Homeland Security. DHS does not include CDC; that falls under the purview of the Secretary for Health and Human Services (see the HHS org chart here). But DHS does include the Federal Emergency Management Agency (FEMA), the folks who step in after hurricanes, floods, and earthquakes (see the DHS org chart here).
On the other hand, Janet Napolitano of DHS is actually last in line for the Presidency. Of course, HHS Secretary Kathleen Sebelius doesn’t fare that much better; she’s seventh in line of the Cabinet officials (ninth overall, after the Vice President and Speaker of the House). Still, between FEMA and CDC, it makes more sense to hold CDC responsible for controlling a zombie epidemic. FEMA does best at picking up the pieces; quarantine laws are more likely to be enforced by the military and National Guard at the direction of the President on the advice of CDC (See, e.g., 42 U.S.C. § 264 and 42 C.F.R. § 70.6).
So in all likelihood, CDC would be in charge of guiding the President’s response to a zombie apocalypse. And thank goodness Rear Admiral Khan is already planning ahead, just in case.
Now, about the legal repercussions of shooting all those citizen zombies without due process ...
Jeremiah Newhall is a graduate of The George Washington University Law School and currently serves as a law clerk in Chicago. He can be reached via the miracle of email.
12.02.2011
Following up on the NBA Labor Dispute
Before the resolution of the NBA labor dispute, we dedicated quite a few column inches to insight and analysis on the situation. Now that it is done, many fans will be content to go back to a BRI-free world, completely satisfied in the knowledge that they will get to see Kobe Bryant smiling down on them from their new Black Friday-enabled big screen during Christmas dinner after all.
However, some people are probably still interested in the business aspects of the deal. For those fans, the best analysis I have seen so far graced the pages of Grantland recently. The curious can find Vishnu Parasuraman's article here, while everyone else can enjoy most of the big guns in action in between wrapping paper fights.
However, some people are probably still interested in the business aspects of the deal. For those fans, the best analysis I have seen so far graced the pages of Grantland recently. The curious can find Vishnu Parasuraman's article here, while everyone else can enjoy most of the big guns in action in between wrapping paper fights.
The Race to the Moon: Two Approaches Light Years Apart
The Isle of Man and China almost couldn't be more different. According the CIA World Factbook, one is a parliamentary democracy in Europe measuring 572 km sq whose biggest business is low tax-driven offshore banking and gambling. The other is a nearly 10 million km sq rising superpower with a market-oriented communist government and seemingly whatever business it wants.
However, despite these stark contrasts, these two nations have something in common; they are both considered to be front runners in the race to space. They can also be considered to be the contrasting sides in a referendum on funding space exploration, with approaches differing almost as much as their CIA profiles.
The Isle of Man has stimulated its space program by providing an accommodating business environment where innovators have been able to headquarter and work on development. Despite a lack of government spending, the favorable tax regime has allowed private companies to flourish. Meanwhile, the Chinese program is backed by the wealth of the state, and is seen by the government as a prestige piece in the nation's development plans, not unlike the NASA program was for the US during the Cold War.
Ah, the US. Some may be wondering where this pioneering nation of space travel fits into the picture. Well, the US has been making moves as well. In the absence of a solid plan to the return to the moon, NASA is rather in the process of developing rules for moon tourism that it will have no legal or practical ability to enforce. And people say America is a superpower in decline...
However, despite these stark contrasts, these two nations have something in common; they are both considered to be front runners in the race to space. They can also be considered to be the contrasting sides in a referendum on funding space exploration, with approaches differing almost as much as their CIA profiles.
The Isle of Man has stimulated its space program by providing an accommodating business environment where innovators have been able to headquarter and work on development. Despite a lack of government spending, the favorable tax regime has allowed private companies to flourish. Meanwhile, the Chinese program is backed by the wealth of the state, and is seen by the government as a prestige piece in the nation's development plans, not unlike the NASA program was for the US during the Cold War.
Ah, the US. Some may be wondering where this pioneering nation of space travel fits into the picture. Well, the US has been making moves as well. In the absence of a solid plan to the return to the moon, NASA is rather in the process of developing rules for moon tourism that it will have no legal or practical ability to enforce. And people say America is a superpower in decline...
BCS Proven to be as Skewed as We All Knew it Was
After our earlier post on what 'percent' correlates to certain income levels, we found another story on the Real Time Economics blog that might be of interest to our readers. The conclusion is that the BCS is every bit as skewed and open to manipulation as college football fans have intuitively known it to be since its inception. To find out how the authors of the study highlighted in the post came to that conclusion, click here.
What Percent are You?
With all of the ongoing talk about 'The 99%' 'The 1%' and who is representing who, it might be helpful for readers to know just what category they fall into. Although it doesn't account for things like regional costs of living or the fact that not every tax filing unit is the same (not an insignificant problem in my opinion), this calculator at the Wall St. Journal's Real Time Economics blog does nonetheless does provide some food for thought.
If nothing else, Friday afternoon time sucks on economics blogs somehow feel less wrong than playing solitaire or Farmville...at least in this humble blogger's opinion.
Tip of the cap to J.N.
If nothing else, Friday afternoon time sucks on economics blogs somehow feel less wrong than playing solitaire or Farmville...at least in this humble blogger's opinion.
Tip of the cap to J.N.
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