Marginal Revolution

Markets in everything

Restaurants for dogs with Hall of Fame baseball players as waiters edition.

I thank John de Palma for the pointer (and the name of the edition).

Against team players

When one team wins, another loses.  If the Celtics win the championship, the Lakers cannot.  Sports at the team level, within the context of a single season, is more or less a zero-sum game.  But ranking the quality and fame of players is more multi-dimensional and thus it is more positive-sum.  Maybe the advent of LeBron James diminishes the luster of Tim Duncan (or maybe it doesn't), but the total amount of fame produced still goes up because of LeBron and his efforts.

Players who maximize team wins are investing more resources into the zero-sum game.  (In fact team players in small markets with few fans are especially destructive of human welfare and it is those players who should be most encouraged to become ball hogs.)  Players who pursue individual glory -- even if at the expense of the team -- are investing more resources into the positive-sum game and thus they are doing more to benefit society.

So why is it again that we glorify the team players?

Sentences of persuasion

Are you picking Philly to make the Eastern finals?  Think again:

In a league in which you need a proven crunch-time guy to battle the other proven crunch-time guys in the last three minutes of close games, they don't have a proven crunch-time guy. (And don't tell me it's [Elton] Brand. I watched him for four years on the Clippers; he's not that type of player.) Fundamentally, this can't work for anything beyond 45-47 wins and maybe a second-round appearance … and that's before you factor in the skewed level of expectations already in place, or the fact that, again, they just spent $83 million to reunite the best two guys on a 27-win Clippers team from 2003. I just don't see it.

I'm picking the Wizards to tank and making no other predictions.  The interesting question is whether Cleveland will deal for Allen Iverson.  Here is much more.  You'll also find this excellent sentence:

Jamaal Tinsley is a sunk cost.

The best criticism of me I read today

The fallacies of Cowen and Krugman are of the most basic sort -- errors only made possible by men captured by a deeply false conception of "science", and hence a pseudo-scientific capital-free, causally impossible, aggregate "modeling" approach to the macroeconomy, rather than a causally real relative price / heterogeneous capital ordering process approach, just as Hayek explained in his Nobel Prize lecture.

Here is the full article.  I thank Bryan Caplan for the pointer. 

Addendum: Angus comments.

Markets in everything

Kiwi song videos about chess boxing.  The interviews produce several remarks of interest plus some nice accents.

Over the last year a few of you sent me links about chess boxing.  I thank you all but I rejected your mainstream taste to hold out for something quirky.

What do the Republicans want?

Under the alternative Republican plan, the government would set up an expanded insurance system, financed by the banks, that would rescue individual home mortgages. The government would not have to buy up the toxic mortgage-backed assets that are weighing down financial institutions.

Here is the story.  Is this the Jeffrey Ely plan (you heard it here first!)?  Do any of you have more information?  Does the Paulson-Bernanke rejection of this plan count as a very bad signal about the immediate solvency of major banks?

Questions that are rarely asked

Was September 2008 the month of greatest increase in United States Wealth in History?

Doesn't the long term economic impact of 5-10 trillion dollars of offshore oil overwhelm the trillion dollars from the bailout?

That's from Andrew, a loyal MR reader.  He sends along this link.  I have not myself done any calculations of the fiscal benefits from such oil (which are distinct from the price effect, which is likely small).  Does anyone know a number?

At first I thought he was going to mention the recent decline in the price of oil, which on average you can expect to be permanent.  The real lesson, I would say, is how much coordination (or lack thereof) matters and how badly representative agent models perform in explaining the most important economic changes.

The benefits of a winning sports team?

The consistently interesting Drake Bennett writes:

...a few scholars have started to suggest that there may indeed be another kind of benefit from big-time sports. There's a catch, though: the team has to be good. In a forthcoming paper, economist Michael Davis and the psychologist Christian End say that having a winning NFL football team increases the incomes of the people who live and work in its hometown by as much as $120 a year. And while the study doesn't identify exactly what causes the boost, the authors point to psychological literature suggesting that winning fans are at once harder workers and bigger spenders. In short, buoyed by the team's success, we work longer hours, take bigger risks, and shop more avidly, all of which helps the local economy.

I have a simple hypothesis.  Winning sports team cause local fans to feel better and thus to spend more money.  Most importantly, consumption tends to be local and thus the spending shows up in the city of the winning sports team.  Saved funds, in contrast, are invested but banks and securitization make these funds mobile.  Savings will help the national or international economy but not the local economy so much.

Since more savings would be desirable, the best outcome is if no team wins, if a small city team wins, or if the victory is uninspiring.  Detroit vs. San Antonio, anybody?  That's what the American economy needs.

Alternatively, you might think that the economic boost comes from greater confidence, higher labor supply, and other supply-side effects.  Then you should root for the teams from the largest cities (Los Angeles, New York, Philadelphia) and most of all you should root against the Washington Wizards.

Sports figures favor Republicans

Or so it seems (original source here):

• “Professional athletes and executives have given $445,334 to the two nominees — 55.8 percent to McCain and 44.2 percent to Obama, according to ESPN analysis of figures from the Center for Responsive Politics, a nonpartisan research group.”
• “The difference this election is that pro sports donors are more divided. In the past two presidential elections, the Democratic nominee has struggled to muster at most 16 percent of pro sports donations.”...
• “McCain has lots of friends in the dugout, but his biggest fans are in football. Six of McCain’s top 10 pro sports donors are with NFL teams, led by the San Diego Chargers, Dallas Cowboys and Houston Texans.”
• “NBA staff topped Obama’s list of pro sports donors at $24,360.”

I can think of a few hypotheses to explain these results:

1. Sports figures don't want high marginal tax rates for the upper income brackets.

2. Currently the disproportionate representation of African-Americans in sports is throwing more support to Obama than a Democratic candidate normally would receive.

3. Perhaps athletes are less likely to come from coastal elites, who are becoming increasingly Democratic.

4. Republicans have historically shown less interest in regulating professional sports than have Democrats.

5. The sport of football most embodies the ethic of martial virtue and so football players and executives are especially drawn to McCain.

Is there more?

My IM chat with Ross Douthat

It is here and it was produced yesterday afternoon.  The point about fertility was borrowed from Steve Sailer.

Another example of randomized Nash equilibrium

From an interview with Vladimir Kramnik.  Note that Kramnik is playing in a regular chess tournament, shortly before with world championship match with Anand:

Is it difficult for you, because of course you cannot show your preparations, your openings for the match, so you have to choose, let us say, not your real openings...

Yes, sometimes. But it is nor really about this, it is about that fact that sometimes it would be too simple if you don't show anything. That also gives a lot of information to your opponent. Then he knows that what you played you will for sure not play in the match. That is why you need to mix. Some things. I have to show, some things I don't show. So I am trying to confuse as much as possible my opponent. And this is a bit difficult. Before each game I start to think if he plays this should I play this or should I play that, or even during the game I start to think maybe I should play this or maybe I shouldn't play it. It is a little bit confusing I would say. It is easier to play when you don't have such an event in front of you.

Kramnik has been playing indifferently lately, yet when times demand he can be the world's strongest match player.  Anand is the current world champion, noting that he won the title through a tournament structure.  Match chess is all about adjustments and stamina and defense and preparation and strength of will.  Winning tournaments requires that you beat the weaker players consistently and that has never been Kramnik's strength.

Anand, by the way, can play speed chess almost as well as he plays classical slow chess.  He is an amazing tactician and a brilliant defender.  But does he have a deep enough strategic style to prevail in a longer and tougher setting?  I'll let you know how the match goes.

U.S. fact of the day

High school cheerleading accounted for 65.1 percent of all catastrophic sports injuries among high school females over the past 25 years.

Here is the link, with a photo.  Loyal MR readers will know that I am a strong and genuine non-paternalist.  But if you are a paternalist, and you are looking for one place to start, well...it's not just the injuries that should point your attention in this direction.  We have to raise tax revenue from somewhere, right?  Currently we are subsidizing cheerleading and, along the lines of Robert Frank's column, that makes no more sense than subsidizing fuel. 

Good sentences

The marriage between sport and broadcasters, though long and successful, has been changing in a number of ways. First, the fragmentation of audiences among hundreds of channels has given the most popular sports enormous bargaining power. As the number of channels has multiplied, large audiences have become much harder to find, but sport has retained its ability to supply them.

Here is more.  Here are related articles on globalization and sports.

Why does India win so few Olympic medals?

A loyal MR reader writes to me:

Here’s an interesting fact: despite a population of more than 1 billion, India has won a grand total of 18 Olympic medals (mostly in field hockey):

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

there are many obvious hypotheses, all of which may be partially right, yet one would think these apply to zillions of other countries that nevertheless have non-trivial Olympic presences.

So what is it?

My guess would be lack of government subsidies, combined with the possibility that non-democratic, authoritarian governments feel greater need to prove themselves on the international stage and to their people at home.  The subsidies matter for the infrastructure as much as for the athletes.  Throw in low social mobility, nutrition problems, and the relative lack of TV to inspire the young 'uns and you've got my answer.  Bad roads don't help any either.  Does this query have any other takers?

Here are some different yahoo attempts at an answer.  Here is a Guardian article.  Anirudh Krishna and Eric Haglund have a whole paper on the topic of social mobility.

China fact of the day

After three games, the U.S. has the worst three-point shooting percentage of any team -- men's or women's -- in Beijing.

Here is more.  Can you build a simple model showing that this is in fact likely the case for the best team?

China fact of the day

"Business is worse than at this time last year," said a receptionist at a 22-room hotel in Beijing's Chongwen district, where rooms cost $28 a night. "It's the season for traveling and last year the hotel was full. The Olympics should have brought business to Beijing, but the reality is too far from the expectation."

Many of the events are not very crowded, so:

To remedy the problem, officials are busing in teams of state-trained "cheer squads" identifiable by their bright yellow T-shirts to help fill the empty seats and improve the atmosphere.

Here is the story.

Silly questions to bug people with

You devote two hours a week to sports fandom, you say?  How much would you have to be paid to give those two hours up?  You'll be paid in terms of extra time.  So if you give up your two hours of sports fandom, the benevolent genie gives you three hours for something else, whatever is your next best activity or activities.  That means a net gain of an hour a week and a time rate of return of 50 percent.  You won't do that?  How about four hours back and a time rate of return of 100 percent?  Nope.  Really?

Sports must be fun.  Well...why aren't you watching more sports?

OK, go draw your marginal utility curves and show your MU for sports first way above your MRS and then dropping off a cliff.  What's the hard-to-substitute-for "Lancastrian Z good" that makes sports so imperative for two hours but so inessential for three?

Prediction markets in everything, Brazilian soccer player edition

It could be a fantasy football draft in any office in America — only these trades are real. This is the office of Traffic, a Brazilian company leading a new, and controversial, wave of investment in Brazilian soccer.

Armed with 20 million reals of their own money (about $12 million) and another 20 million reals they hope to get from investors, Traffic is buying up contracts of young soccer players all over Brazil. They then lend the players to teams, who pay the players a salary and also allow them to showcase their talents. If they are recruited by a big European team, Traffic and its partners reap the largest share of the transfer fee. (The player, as usual, gets any signing bonus, and an often hefty salary.)

“Instead of investing in the stock market or real estate,” Julio Mariz, Traffic’s president, said, “these people are investing in buying the economic rights to football players."

Here is the full story and thanks to Hunter Amor Williams for the pointer; here is Hunter's beer blog.

NFL Player IQ by Position Played

"The closer you are to the ball, the higher your score."

Details here and here.  Hat tip to Kottke.

There are now 29 chess players rated over 2700

Here is the story and list.  Achieving a chess rating of over 2700 is very hard to do.  This is a reflection of either: a) just how much talent and sponsorship the modern world has, or b) just how narrowly restricted some people's talents are.  In an age where a socially non-adept person still can earn good money in hi-tech, I lean more toward a) than b).  The boom in womens' chess -- not generally foreseen twenty years ago -- I find especially puzzling and it's not all driven by the Chinese government wanting to win medals.

The law and economics of surfing

When oh when will this be a Journal of Law and Economics piece?  Here is one excerpt:

The norms (for visitors) of mild localism include:

1) Don’t arrive in a large group[156]

2) Ease into the lineup (don’t compete aggressively too early)[157]

3) Let locals surf most of the best set waves[158]

4) Take extra caution to avoid violating any ordinary surf norms (i.e. don’t get in a local’s way!)

Together, these concrete norms can implement the abstract norm of ‘respect the locals’. Observing these norms demonstrates deference to the locals and helps mitigate the effects of crowding for the locals.

Here is the full treatment, the piece is interesting throughout though it starts off a bit slow with the familiar.  Thanks to Hugh for the pointer.

Kevin Hassett on whether NBA refs are crooked

In case you don't know, Kevin is an economist at AEI.  Here is where things stand:

Hassett found no smoking gun.

But he did find some weird stuff in elimination games, when calls seemed to favor extending the series more than in other games.

He also found that home court advantage was much more important in the playoffs than in the regular season, which is a bit odd.

Both findings are consistent with what you'd find if you wanted to have as many money-making playoff games as possible. Basically, if every series ended in a sweep, there'd by very little opportunity to make money. However, if every series gets to Game 7 -- which happens when home teams win every game -- the teams and the League have not only three more chances to make money, but the three most exciting games of the series.

Here is further explanation.  Here is the Hassett piece.  Note that fouls called on a team are often a measure of how tired that team is or how sloppy it is on defense.  So if teams play better with their back to the wall, at home, or if stamina matters more toward the end of the year, these correlations could potentially arise through natural means.

Is the NBA fixed?

Tim Donaghy, the ref who was caught gambling, says it is.  Here's a good deal of evidence that it isn't.  Small market teams do well in the draft and reach the Finals at a high rate. 

Yet I haven't seen any MSM source, at least not in the context of these allegations, which admits the obvious: star players get favored treatment from the refs.  And this equilibrium is self-sustaining without any direct instructions from the Commissioner.  As a ref, you know you are expected to allow offensive fouls from LeBron James, the crowd expects it, other refs act that way, and you are never reprimanded for the non-calls.  So in at least this one way the NBA is clearly fixed and by the demand of the fans, even if they do not prefer to think of it as such.

But now imagine a nervous ref who wonders -- if only with p = 0.2 -- whether the NBA wouldn't prefer to see the Los Angeles Lakers beat Sacramento and move on in the playoffs.  That same ref knows about the convention to favor star players.  And hey, the Sacramento team in those days didn't in fact have any real stars.  What inference should you draw and how should you behave in your calls?

If the NBA has been tolerating at least one (and surely more) crooked ref, it is unlikely that other ref pathologies have been absent as well.  Toss in the $50 billion or so a year bet on NBA games and maybe you have some real action.

So it's hard to avoid the conclusion that the NBA is at least partially fixed, although not necessarily in the conspiratorial sense that many people might be expecting.

Here is what a professional gambler thinks.

The point taken from economics is that there are many ways of enforcing implicit collusion, not to mention that at some margin gains from trade do kick in.  If wealthy CEOs will cheat, why won't NBA refs?

The incentives for violence in hockey

Here is my source.  Here is the paper.  Here is the abstract:

The level of violence in the National Hockey League (NHL) reached its highest point in 1987 and has reduced somewhat since then, although to levels much larger than before the first team expansions in 1967. Using publicly available information from several databases 1996–2007, the incentives for violence in North American ice hockey are analyzed. We examine the role of penalty minutes and more specifically, fighting, during the regular season in determining wages for professional hockey players and team-level success indicators. There are substantial returns paid not only to goal scoring skills but also to fighting ability, helping teams move higher in the playoffs and showing up as positive wage premia for otherwise observed low-skill wing players. These estimated per-fight premia, depending on fight success ($10,000 to $18,000), are even higher than those for an additional point made. By introducing a “fight fine” of twice the maximum potential gain ($36,000) and adding this amount to salaries paid for the team salary cap (fines would be 6.7% of the team salary cap or the average wage of 2 players), then all involved would have either little or no incentives to allow fighting to continue.

In other words, there are substantial incentives for violence in hockey.

A Cowen-Caplan dialogue

Bryan cites one from years ago, but in reality we reprise it in many different forms, about every three days or so:

Tyler: People like to think they're special, but we're all pretty much the same.

Me: No we're not.  Some people are really great; others are simply awful.

Tyler: That's just the kind of thing people say to make themselves feel special.

Me: You don't really believe that.

Tyler: Do too.

Me: What if we use the metric of your willingness-to-pay to spend an hour with a person? There are a few awesome people you would pay thousands of dollars to meet. But you'd pay hundreds of dollars to avoid an hour with most people.

Tyler: [3-second hesitation.]  Well, it's not clear why that should be the relevant metric.

Me: But it's your metric!

Tyler: What's so special about my metric?

Me: What's so special about it? By definition, that metric captures everything that you think matters. And by that very metric, people are not "pretty much the same." They're incredibly different.

It's funny how Bryan thinks he can cite my actions as evidence against the correct belief.  That's absurd; for instance I also don't act as if determinism is true, but citing that doesn't settle the matter.  I sometimes describe Bryan's most basic world view as the belief that what is good is very very good and what is bad is very bad indeed.   I am more likely to see endowment effects at work.

Home court advantage in basketball

We all feel the Celtic ouch and perhaps some of us delight in it.  Matt writes:

Kevin Drum notes two smart responses to the question of why home court advantage is so big, with one hypothesis pointing to the refs and another pointing to the idea that there are actually lots of differences from arena-to-arena.

Of course if the arena is the difference you would expect shooting guards, who need a good feel for the lights and angles of the basket, to have a bigger relative advantage at home than do the dunking big men.  That should be easy enough to test.  And maybe a look at Lakers-Clippers or Nets-Knicks history can clear up the importance of arena by holding geographic area constant. 

I wonder if a third component of home court advantage has to do with sleep.  People sleep better at home, if only because they don't have to go to such great lengths to get sex.  I recall reading that Larry Bird became a truly great player only once he...um...calmed down a bit.

Division of labor is limited by the extent of the market

His specialty is static apnea: holding your breath while remaining immobile in a swimming pool. It requires some of same skills as being buried alive for a week, Mr. Blaine said: “It’s all in your mind. You’ve got to stay calm and slow everything down.”

The guy can hold his breath for sixteen minutes; here is the article, interesting throughout.  He is also versatile:

As a self-described endurance artist, he’d spent 35 hours atop a 105-foot pole and survived a week buried in a coffin. He’d fasted for 44 days in a box suspended over the Thames, a nutritional experiment that was written up in The New England Journal of Medicine (with Mr. Blaine listed as a co-author).

Nor had I known this:

Immersing the face in water produces a protective action in humans similar to that in dolphins, seals, otters and whales. Called the mammalian diving reflex, it quickly lowers the heart rate and then constricts blood vessels in the limbs so that blood is reserved for the heart and the brain.

Why did the Houston Rockets draft Yao Ming?

Yao Ming is (was?) a very good player and of course he looked great on paper.  He's now injured for the third season in a row and out for the year.  He has never been past the first round of the playoffs and it is not clear he will ever be healthy.  It is clear that players over 7'4" almost always have persistent injury problems; human beings with that frame were not meant to play professional sports, least of all contact basketball.  There are plenty of people that tall, but who has had the most successful basketball career?  I believe the answer has to be the not totally impressive Rik Smits. 

So why did the Houston Rockets draft Yao Ming?  They couldn't not draft him.  The lessons for financial markets are obvious.  Drafting Yao Ming is like writing the disguised naked put.  You see the money in front of you, you see the return in front of you, you see the potential in front of you, none of the alternatives are so glamorous, and so you can't not do it. Besides, other players get injured too.

Yao Ming, the naked put.  Think about it.

21 accents

Of the lot I enjoyed the Kiwi imitation most, but they're all good.  I was least convinced by Texas.

Betting markets in everything, Super Bowl edition

I have found odds on how long Jordin Sparks will take to sing "The Star Spangled Banner'' (wager under or over one minute and 42 seconds) and which advertisement shown during Super Bowl will top USA Today's Ad Meter popularity contest.  Budweiser is the -200 favorite (bet $200 to make $100 profit), followed by Go Daddy at +300 and Pepsi at +600.           

Looking through betting Web sites I have found more than 2,000 different "proposition bets,'' the name bookmakers give to markets that are about what happens around the game rather than on the result.      

Here is the full story, and thanks to John De Palma for the pointer.  But in baseball, regulators are shutting down one nascent market.          

Bargaining theory

Bryan Caplan says:

When the bachelor gets married, he almost certainly starts doing more housework than he did when he was single.  How can you call that shirking?

Megan McArdle says:

I'm no neatnik, but this is . . . daft...Does Mr Caplan think that "person with the lowest standards wins" should be a general rule for marriage? Can women unilaterally quit their jobs because they're content with a lower standard of living, or spend the retirement fund on shoes because they don't mind spending their golden years in penury?

I believe there is no simple Coasian answer to this problem.  Even if bargaining were possible the final deal would depend on the initial allocation of the property right.  That's a sign that an apparently "small thing" (after all, how much do you spend on a maid, relative to family wealth?) is treated as having large symbolic importance.  And what does economics tell us about symbolic goods?  Symbolic goods usually have marginal values higher than their marginal costs of production; Americans for instance love the idea of their flags but the cloth is pretty cheap, especially if it comes from China. 

Going back to marriage, the theory of symbolic goods means the man should take the woman's most irrational requests (flowers?  the placement of the toilet seat?) and go to the greatest lengths to satisfy them.  Expand output where marginal cost is low, which in this case refers us back to the gestures not the real efforts.  That's part of the Nash bargaining solution, namely to make concessions where it costs the conceding party the least.  If there is a case for the man not cleaning more, it's that greater net gains may be had from satisfying other, less rational demands of the complaining party, in this case the wife.

In other words, it is OK not to clean more, provided you insist on the contrary on your blog.

Oops.  Time to go clean up.

Football games make us angry

Some people at least.  Daniel Rees writes to me:

...we find that college football games are associated with sharp increases in crime.  For instance, assaults increase by about 9% when a community hosts a college football game, vandalism increases by about 18%, and DUIs increase by about 13%.  We also find evidence that upsets result in larger increases in crime than games that do not produce an upset.  For instance, an upset loss at home is associated with a 112% increase in assaults and a 61% increase in vandalism.  We discuss these results in the context of psychological theories of fan aggression.

Here is the paper.  I guess those people should have gone to see a violent movie instead!

Addendum: Here is some outside coverage, see also Justin Wolfers at Freakonomics blog as well.

Another way to limit draws in chess

A compromise is that a draw offer should remain valid for some fixed period,   say ten moves. This will allow the person who has been offered a draw to test   whether the offer was truly justified, e.g. by trying a daring line which may   or may not be refuted by the opponent. If it is he can claim the draw on his tenth move, even if his position is losing. The limitation to ten moves avoids the potential problem of people playing on interminably after a draw offer, waiting for their opponents to blunder or overstep the time.

That is John Nunn, here is more.  A draw, of course, is a form of trade, albeit one with some negative social externalities (a quick draw makes chess more boring for the spectators).  If you want to limit trades in some markets, a similar rule could be contemplated.  If you offer to buy a currency at a particular price, you have to keep a similar offer open for one week to some number of other market participants.  Solve for the resulting equilibrium, and see how it matters.

The age-performance profile in baseball

[Economist Ray Fair] asked... Which players have exhibited the most unusual age-performance profiles? Specifically, are there any players who got better with age?

Over the entire period between 1921-’04, Fair found only 18 hitters who appear to have defied Mother Nature, logging four or more seasons after the age of 28 in which their OPS (on-base plus slugging average) exceeded their age-specific expected level by more than one standard error.

And you know what?  Except for good ol' Charlie Gehringer (1939), they all come 1987 or later.  Goodness gracious!  Who would have thought?  Check here for the list and further discussion, and thanks to John de Palma for the pointer.

Thoughts on steroids, redux

I don't usually recycle posts but this one is from the early days of MR, and my view on steroids hasn't changed much.  Excerpt:

Note that the Olympics probably prosper more from competitive balance than from a single dominant country. Was it really so much fun for the rest of the world to watch the Soviets win all those medals? This would predict that the Olympics should take special care to ban performance-enhancing drugs, which is indeed the case.

Baseball is again thrown under a cloud, and one obvious question is how much we have close substitutes for our increasingly damaged pride in the sport.  The likely eventual outcome is a long-run equilibrium where all performance enhancements are allowed, thereby placing an inefficient tax on amateurs and performers who don't need to be the very best.  Unless you think real enforcement is possible, the publicness of today's not-even-surprising revelations means the game has no other way to go.  Common knowledge does matter.  So even if some of you think it might be more efficient to simply allow steroid use and then look the other way, that is not obviously an attainable equilibrium.

Prudie meets Trudie

In Discover Your Inner Economist the economist and blogger Tyler Cowen provides quirky and insightful advice for life based on his signature urbane style of economic reasoning.  On his blog, MarginalRevolution.com, Cowen offers economic advice in his periodic "Dear Trudie" posts.  Presumably Cowen offers good economics.  But dare one take an economist's advice?  Emily Yoffe, author of Slate's popular "Dear Prudence" advice column, will advise.  Please join us for an advice-off, as Trudie meets Prudie to discuss the practical benefits of economic reasoning (or lack thereof) in everyday life.

That's this Thursday, noon, at Cato, also webcast live at www.cato.org.  To register, visit www.cato.org, e-mail events@cato.org.

Here are my previous Trudie posts.

Can super-agents raise player salaries?

Robert, a loyal MR reader, asks:

I was recently reading about ARod's decision to leave the Yankees. The article mentioned "superagent Scott Boras." It's widely believed in the sports community that Boras has the ability to increase the salaries beyond what they would get with a regular agent. Considering that there are only 30-odd teams that might want a player, I find it hard to believe that an agent could make such a big difference.

I know more about Mark Alarie than ARod, but super-agents may matter through the following mechanisms:

1. The super-agent manages an otherwise incompetent or unruly player.  The agent is about improving the quality of the player as much as extracting surplus from the team.

2. A super-agent, especially if he has repeat business with teams, may credibly certify the unobservable qualities of players, even star players.

3. Boras may be very good at marketing his players to management and getting owners to open up their pocketbooks.

4. If Boras represents multiple stars, clubs will be reluctant to cross him.  The equilibrium here is tricky.  But if the agent has discretionary power to steer a player to one equal offer or the other, and the club reaps surplus from each player, a club may overbid for one player to stay on the agent's good side and receive favorable discretionary treatment later on.  Repeat dealings with the agent also mean that the club is more likely to follow through on its implicit commitments to both the player and the agent.

5. Robert suggests that some (non-super) agents may in fact be in league with the owners, not the players.

Can you think of other possible mechanisms?

Addendum: Here is J.C. Bradbury on Boras.  And here is a New Yorker story on Boras, courtesy of John de Palma.

Fun debates

The Economist will import its highly regarded debate series into America.  The first debate is November 10, in New York City.

The debators?  Will Wilkinson and myself against Jeffrey Sachs and Betsey Stevenson.  Here are the details.  The proposition is: "America is failing at the pursuit of happiness."

I hope to see some of you there.  Can you guess which side I am on?

Behind-the-Scenes Power Brokers in Sports

ESPN Magazine lists their list of the Nine Behind-the-Scenes Power Brokers in Sports.  Reprinted in Business Week here.  Includes one rather unexpected name.

Thinking about Sports and Economics

I spent last Saturday at a very interesting conference on Sports Statistics, run by the Sports Stats section of the American Statistical Association.  It was a fun day, involving academics, sports journalists, and those Moneyball-inspired quants working for various sports teams.

But at some point I asked myself: Why do economists work on sports?

1. Sports provide unique opportunities to test economic theories.  Cribbing from a New York Times article, this is the Thaler defense:
   

   "'My justification for doing this is that it's the one really high-stakes activity where you get to watch all of the decisions,'' Thaler said. ''If Bill Gates invited me to watch all of his decisions, I'd talk more about that.''

2. Sports shapes broader national debates.  Sports is a microcosm of our broader society and our national narrative on the important issues, from drugs, to race, to cheating, to sexual harrassment often play out on our sports pages.  In honor of a particularly compelling example, let's call this the Jackie Robinson defense.
3. Professional sports are an important part of the economy.  I call this the Dog defense, not as a dyslexo-religious statement, but simply because dogs raise an important question: aren't pets a bigger part of the economy than professional athletics?  If so, why are there so many papers on professional sports and so few on the economics of dogs?
4. Sports participation is an important activity.  It seems important to learn whether sports make us happier, healthier or more productive.  For instance, it is important to learn, say, what the broader effects of Title IX were.  Under this view, research on sports is part of the human capital agenda, leading me to call this the Gary Becker defense.
5. Sports provides a useful teaching metaphor.  Many of those teaching Sabermetrics-inspired courses argue that sports provides a useful vehicle for teaching something far more important - basic quantitative reasoning.  When I teach my class on behavioral economics, I do so by analyzing anomalies in sports betting markets.
6. Doing research on sports is fun.  It was no mistake that the conference I attended was on a Saturday.  Many of the academics in attendance were giving up leisure, not more important work. But for some, sports provides a chance to mix work with leisure; of course, if non of the above arguments holds, then it is just a chance to mix leisure with leisure.

Let me now translate this into advice, because I often hear from students wanting to write a thesis on sports.   My first response is always: Don't.  Too often, we find our sporting heroes more interesting than other people do.  (Yes, I have been guilty of breaking this rule.)

But if you must work on sports, make sure you have a defense to this charge. I find the Thaler and Becker defenses most compelling, because they speak to the broader economic issues or yield policy implications.  The Jackie Robinson defense is also important, but not applicable often enough.  The Dog defense is often raised, but rarely compelling; neither pets, nor professional sports, are really a big part of the economy (estimates to the contrary usually turn out to be more applicable to the Becker defense).

How to sound smart around the water cooler

The baseball playoffs begin today. (Go Red Sox!)  But if you haven't been following the 162-game season, you may risk sounding foolish around the water cooler.

Here's how to sound like an expert: Research tells us that prediction markets yield accurate forecasts.  Indeed, a prediction market forecast is likely smarter than any expert.  Simply point your browser to your favorite prediction market, and make the following observations confidently around the water cooler:

1. Note that the American League looks much stronger than the National League.  (HT: Mike Giberson at Midas Oracle.)
2. Sigh, while you say that "Once again the American League race looks like being the Red Sox or the Yankees."
3. State emphatically that "the National League is anyone's race.  Heck, even the come-from-behind Phillies are a chance."  (Say this as though you didn't already know they were the betting favorites)

That's it.  You are now an expert.  (How else do you think an Aussie can keep up a conversation about U.S. sports? I've been faking it for years... but shhh, don't tell David Stern.)

King's Gambit

Former British champion Bill Hartston once observed, "Chess doesn't drive people mad.  It keeps mad people sane."  Morphy and Fischer's behavior became truly bizarre only after they retired from the game.

That is from Paul Hoffman's King's Gambit: A Son, A Father, and the World's Most Dangerous Game.  I loved this one, it's one of the few great chess books.  It's also a tale of how Manhattan has changed, how sons become independent, the nature of psychological warfare, and why obsession never really dies.  Note that author Hoffman is also editor of Discover magazine, which I enjoy as well. 

Claims my Russian wife's husband laughs at

"My only weirdness is you."

Here are previous installments in the series.

Justin Wolfers speaks

Legalizing wagering on which team wins or loses a particular game, while banning all bets on immaterial outcomes like point spreads, would destroy the market for illegal bookmakers and make sporting events less corruptible by gamblers.

And:

Point shaving may be widespread enough to have occurred in around 1 percent of N.C.A.A. basketball games.

Here is the full argument, and thanks to Chris F. Masse for the pointer; Chris also points me to this new and possibly very important study (a senior thesis by Jonathan Gibbs, at times the link isn't working) of point shaving in the NBA.

Female tennis players and wages -- politically incorrect paper of the day

Female tennis players play more conservatively and commit more unforced errors when playing critical points.  Does this explain the upper-echelons wage gap?

Here is the fact in more detail:

Women are significantly more likely to hit unforced errors at the most crucial stages of the match, while men exhibit no significant variation in performance.  Specifically, about 30% of men’s points end in unforced errors, regardless of their placement in the distribution of the importance variable.  For women, about 36% of points in the bottom quartile of the importance distribution end in unforced errors, but unforced errors rise to nearly 40% for points in the top quartile of the importance distribution.  What is remarkable is not the difference in the levels (men are more powerful and therefore more likely to hit winners at any stage).  The interest lies in the differences in the way men and women respond to increases in competitive pressure.

Here is the full article.

When you forget someone's name

Sadly this problem plagues me more than it used to, though I never forget the location of a restaurant.  Gretchen, at The Happiness Project, has a few suggestions:

1. The “I know your name, but I’m blocked” dodge:
“I keep wanting to call you "David," but I know that’s not right.”

2. The “Of course I know you -- in fact, I want all your information” dodge:
“Hey, I’d love to get your card.”

3. The “The tip of my tongue” dodge:
“I know I know your name, but I’m blanking right now.”

4. The “You’re brilliant!” dodge:
“Wow, you have a terrific memory. I can’t believe you remember my name from that meeting six months ago. I can’t remember the names of people I met yesterday! So of course I have to ask you your name.”

5. The “Sure, I remember you” dodge:
“Remind me – what’s your last name?” If you ask a person for his last name, he’s likely to repeat both names. “Doe, John Doe.”

6. The “One-sided introduction” dodge:
“Hey,” you say to the person whose name you can’t remember, “let me introduce you to Pat Smith.” You introduce the two and say the name of the person whose name you remember. Almost always, the nameless person will volunteer his or her name.

I have tried asking the person how his or her name should be spelled (if the name is too simple that one can backfire), or "when you publish articles, how much of your full name do you give?" 

Do you all have better ideas? 

Steve Levitt at the World Series of Poker

Here is one account, here is Levitt's account of another round.  In the latest he did very well indeed.  Out of 900 or so contestants, I am hearing reports that he finished about #25, some sources are saying as high as #10.  The pointer is from Scott Cunningham, tell us more if you know more.

So how many dimensions does intelligence have?  Some top chess players, such as Etienne Bacrot, are switching into poker for the higher pay, though I suspect Levitt's move is temporary rather than permanent.

Addendum: Here is Levitt's account.

LeBron vs. San Antonio: the numbers

The series isn't over yet:

First of all, the Cavaliers won both games [against San Antonio].  It was 88-81 back in November, and 82-78 in January.

But that's only the beginning of the story.  The main point is that when LeBron James got the ball against San Antonio's defense, the Cavaliers managed to get a good shot an alarming percentage of the time.  There were a smattering of offensive fouls, certainly. And a couple of times James forced a pass that was picked off.

I watched 50 possessions, between the two games.  Eight times (nine if you count a pretty amazing Tim Duncan block of Anderson Varejao) the Spurs forced the Cavaliers into a turnover, an offensive foul, or a truly difficult shot.  Trusting my observations, that means the Cavaliers had good looks 84% of the time.  Seems like a high number against any team, but especially San Antonio.   

Of course the Lucas critique is relevant; the numbers don't mean that Cleveland can replicate those shots at will.  The betting markets are giving Cleveland about twenty percent.  Matt Yglesias offers numbers on offensive and defensive efficiency, and writes of the coming blowout.  I'm picking San Antonio in six.

Magnus Carlsen

In the prestigious Linares chess tournament Carlsen met the following top-rated players: Veselin Topalov, Viswanathan Anand, Peter Svidler, Alexander Morozevich, Levon Aronian, Peter Leko, and Vassily Ivanchuk (replacing Teimour Radjabov). With the significantly lowest ELO rating, he achieved a 2nd place (on tiebreaks) with 7.5 points after 4 wins, 7 draws and 3 losses, and an ELO performance of 2778.

Magnus, born in Norway November 30, 1990, may be the greatest chess prodigy of all time.  He is arguably ahead of the pace of either Fischer or Kasparov.

How to save the NBA

Back when I was Tyler's colleague (and Alex's professor), Tyler and I shared a pair of season tickets to the then Washington Bullets. We'd sit in the stands and discuss how we would run things if we were the general manager. Now older and wiser, I'd like to offer suggestions for how to improve the league.

1. Re-seed after each round of the playoffs. I'm pretty sure the majority of other pro sports  do this and it makes sense. Keep the best teams in the longest, save the best match-ups for last. I know it might cause some extra days off and lengthen the already long playoffs but......

2. Shorten the regular season. Modern NBA basketball is a brutal sport. 82 games is a grind and a half. What shall we say? 60? 70 at the most. This leaves room for the extra time re-seeding might take, makes the games that are played more important, and reduces the potential for injury.

3. Make the draft lottery a true lottery. The tanking in the Greg Oden derby was hideous. Let every team that misses the playoffs (or better yet, every team in the league) have an equal shot in the lottery. Eliminate the lottery-created incentives to lose. And regarding the possibility that the rich would just get richer, that would actually be a plus.

4. Make the finals 2-2-1-1-1 not 2-3-2. Again, the shorter season gives us more time for travel days and the current 2-3-2 is just unfair. Stat boy can check me but I am pretty sure no home team has ever won all three of those middle games.

Am I missing anything?

The NBA study of referee bias

As a response to Justin Wolfers and Joseph Price, the NBA financed a study supposedly showing there is no racial bias in refereeing.  Here is a WSJ analysis of that study.  Here is part of what they found:

Columbia University statistician Andrew Gelman, who has blogged about the Wolfers-Price study and participated in a conference call with Segal and me, said, “What the statistics tell you is that there’s a pattern in the data that’s not explainable by chance.” University of California-Irvine statistician Hal Stern told me the NBA’s study “can’t be said to disprove the Price-Wolfers analysis.”

Meanwhile, the NBA’s study didn’t include players who weren’t called for any fouls, making Segal’s results “suspect,” according to Mr. Gelman. Mr. Fluhr responded, “I’m not sure if you’re looking at non-calls, it would affect the data.” He added that Segal had the data necessary to incorporate such players, but didn’t consider the data relevant, instead only focusing on foul calls. Messrs. Wolfers and Price included all players who appeared in the games they examined.

The NBA does promise to examine non-calls and redo some of the results.  I do not think we have yet gotten to the bottom of this, but my "haven't read anything but the initial study" intuition (and Steve Levitt's comments; see also Voxbaby) is that the result of bias will hold up.

Thanks to Chris Masse for the pointer.

Addendum: Wolfers claims the NBA study supports his results.

Are NBA referees racist?

I wouldn't have thought so, but Justin Wolfers, writing with Joseph Price, says maybe yes:

...during the 13 seasons from 1991 through 2004, white referees called fouls at a greater rate against black players than against white players...[the authors] found a corresponding bias in which black officials called fouls more frequently against white players, though that tendency was not as strong.

Here is the paper.  The effect is big enough that an all-white team would, all other things equal, win two extra games over the course of an 82-game season.  A panel of three independent experts has judged that the Wolfers-Price analysis is more convincing than a David Stern-sanctioned rebuttal that no bias is present.

The NYT web site is slow this morning, try back later if the first link is giving you trouble.

Markets in everything

Wall Street is about to launch a new way to trade professional athletes the way you trade stocks.  A piece of Tiger, anyone?

Here is further information.

Shaq attack

In 1993 71-year-old Tom Amberry shot and made 2,750 free throws in a row.  Yes that is documented.  Here is the truly excellent article and photo, for non-sports fans as well; it is via Jason Kottke.

More fun than chess

Let's consider a power supplier with market power and zero marginal cost.  Capacity suffices for ten units but five units are sold at p = 10; selling more would lower profits.  Now, using carbon offsets, bribe the fifth buyer to stay out of the market, say by walking to work rather than flying his jetpack.  Even better, just shoot him. 

The company has two options.  It can stick with selling four units and raise price.  Or it could drop price a bit and pick up a fifth buyer again.  Hard to say what will happen.  Alternatively, if buyers stand along a continuum, is there a general proof one way or the other? 

Rather than bribing the fifth buyer to walk, invest the "carbon offsets" money in building a nice comfy sidewalk.  In principle all buyers could walk on this new path.

It is then easy to see how the power company might lower price and expand to six units or more.  Otherwise they might lose all their customers.

A key question is the cost structure of the alternative clean technology.  Non-scalable technologies, with little potential for expansion, are the least likely to backfire and least likely to lead to more dirty power.  Scalable technologies, such as the sidewalk, are most likely to backfire and make the world dirtier.  They require a bigger competitive response on the part of the dirty power supplier.  (At least in the short run this is true, in the longer run the scalable technology might eliminate dirty power altogether.)

This counterintuitive conclusion is one reason why we have economic models.

The World Cup

The head of the largest birth clinic in the [German] city of Kassel, Rolf Kliche, estimates that births at his hospital will be up by 10 to 15 percent, which he described as a "minor sensation" given the usually stable birth statistics.

Here is the story, via Jason Kottke.

The best John Amaechi bit I read yesterday

He [Amaechi] writes that the pros play the game for a lot of reasons—money, fame, groupies, self-esteem—but that very few NBA players love basketball.  "The fan sitting at home … wants us to love the game like he does," he writes.  "If he knew why we really play the game, for the most part, he might not love the game.  He might not even watch it."  The average fan, gay or straight, will probably find that contention more troubling than a former player's homosexuality.

Here is more.

The Baseball Economist: The Real Game Exposed

The Baseball Economist: The Real Game Exposed, by J.C. Bradbury, a former student of mine.  My blurb: "...the next step after Bill James - and it is about time!  It will change how you think about the game of baseball."

Here is J.C.'s blog, Sabernomics.

Further thoughts on The Gay NBA

I never knew you all had such a pent-up demand to discuss matters gay.  Having read through 110 plus comments, I am now more inclined to see genetic correlations -- rooted in the human mind rather than the body -- with athletic achievement (NB: I don't agree with all the "genetic" claims in the thread, by any means).

Most of all, I am struck by how few former male athletes have come out of the closet.  That would seem to adjust for "the locker room effect" and "the endorsement effect," as explained in my original post.  Once an athlete is retired, those factors shouldn't matter much.

I also noticed that Amaechi signed a book contract about being gay in the NBA.  He was a pretty feeble player, and quite nerdy, more here.  How large was his book advance?  50K or 100K is not a bad guess.  I've known plenty of gay guys who would self-identify for much less; the fact that so few former male athletes have done so is striking.

The marginal product of Super Bowl events, reflected in betting markets

Fascinating, excerpt:

The Bears winning the coin toss made them 0.5% more likely to win...

When the Bears took an 8 point lead, the market still viewed the Colts as the favorite to win.

The gay NBA?

The not-so-famous John Amaechi, former NBA player, has come out and admitted publicly he is gay.  I am struck that he is (only) "the sixth professional male athlete from one of the four major U.S. sports -- basketball, baseball, football, hockey -- to openly discuss his homosexuality."

Those are scant numbers, why?  I see a few hypotheses:

1. There aren't so many gay professional athletes, maybe because guys play college ball to get women.

2. Even the not-so-famous earn endorsement income, at some level or another, or at least hope to, and that implies a mainstream image.

3. Fans don't want to see gay players, or at least they do not want to know too explicitly about sexuality in that manner.  Major league sports are about numbers of fans, not the possibly intense minority loyalties that could be generated if a major star came out of the closet.

4. Other team members don't like the idea, perhaps because they fear an eroticized locker room or whatever.

I put most of the weight on #2.  When it comes to #4, my sense is that the teammates often know or suspect who is gay, even if it is not publicly admitted.

Keep in mind it is relatively easy to measure performance in sports.  The real lesson is that employer-driven discrimination is no longer the dominant model. 

Mental models of me

Kieran Healy has many mental models.  My mental models have mental models of various people having mental models of me, but fortunately a fixed point theorem applies, at least on alternate Tuesdays.

Why are men better chess players than women?

There is now a comprehensive study.  Two results struck me:

They found no greater variance in men than women.  It had been suggested that since science selects for individuals at the upper tail of the distribution, a higher variance in men than women might explain their greater representation.  However, the researchers found that -- with respect to chess -- if anything in most age groups women had a higher variance then men.  Upper tail effects do not explain the differences in the numbers of grandmasters...

And:

If you look at the participation rate of women and relate that to performance, you find that in cases where the participation rate of women and men is equal the disparity in ability vanishes.  Basically, this means that in zip codes where there are equal numbers of men and women players there is no great disparity between male and female ability -- and certainly not a disparity in ability large enough to explain the difference in the numbers of grandmasters.

Chess players, of course, have clearly defined numerical performance ratings, which measure quality quite accurately.  The bottom line seems to be that men simply care more about doing well at chess, I might add that this speaks well for women.  Of course this preference-based explanation can be tested further; it implies that women should have greater relative chess strength in poorer countries, where they are more likely to play for a living and not just for fun.  I believe this to be true, most of all in China.

The pointer is from Daniel Strauss Vasques.  On related issues, here is my earlier paper, "Why Women Succeed, and Fail, in the Arts."

Why do colleges run football teams?

Over at Free Exchange Isaac Bickerstaff poses a good question:

...why are America's institutions of higher learning also operating semi-professional sports franchises?  Especially since overall, the athletics department is a money-losing proposition for most schools.  They also bring down the value of the university's core "product", as schools offer places and often lavish scholarships to academically unqualified student athletes.

The evidence is mixed, but some papers find a connection between athletic achievement and student quality, or athletic achievement and alumni donations.  I suspect the donor connection is the key, but we also must ask what exactly colleges and universities seek to maximize. 

Under one view, there is some local market power, a surplus from tuition and endowments, fairly passive boards, and a faculty-driven governance structure which gives Presidents considerable discretion over non-instructional projects.  If I were a University President, I would spend money on the library, a very good music school, a concert hall, and -- if they would abolish the NCAA and the zone defense -- a basketball team.  Basketball is The Queen of Sports, and what better way to entertain local bigwigs and receive favors in return?

Do the Denver Nuggets refute the theory of comparative advantage?

Out here in BlogLand, a boy can ask any silly ol' question he wants...

I'm referring to the trade for Allen Iverson, of course, not the brawl.  For background Matt Yglesias is of course the go-to guy (it also turns out he is right about *The Wire*).  Some of us, like me, feel that Denver will be a worse team for the trade.  Not because of what they are giving up, but because of what they are getting.  The sports logic is straightforward, namely two shooting guys and only one ball, resulting in a discombobulated offense.  (You don't have to agree in this particular case, the point is that this could be true.)  But how exactly, in the language of microeconomics, does this make Denver worse off?  Aren't there gains from trade in all cases and thus also between AI and Carmelo Anthony? 

There are two partially unpriced resources, first the basketball and second the attention of the public (which produces endorsement income in the longer run).  Both induce excess and premature exhaustion of shooting opportunities.  (One correspondent tells me the two are each averaging about 24 shots a game, an NBA team averages maybe 80 shots a game, note that AI connects on 41 percent, below the league average, and plays no defense.)  The trade between the two players brings some benefits but also makes these "tragedy of the commons" problems worse.

The lesson for international trade?  The more impressively talented countries you have trading with each other, the greater the need for well-defined property rights in common pool resources such as clean air and ocean use.

Allen Iverson needs to join the Pigou Club.  The presence of Yao Ming in the league -- as a force whose time has come -- makes this all the more imperative.

The Hobgoblin

Did Ralph Nader really send a letter to NBA commi