I’ve just learned that Gordon Tullock died yesterday. Even at Mason, where there are many great economists and thinkers generally, Tullock was one of my favorites. His contributions to public choice and law & economics were enormous, and we are all in his debt.
It’s been noted in a million outlets that association football is truly the world sport. The rules are easy to learn, the play is straightforward (not that there isn’t a lot of strategy in how high-level games are played), and it can be played just about everywhere. On the other hand, the most popular US sports, gridiron football and baseball, have much more limited audiences and—coincidentally or not—many, many more rules. I like both of these sports and still couldn’t give an exhaustive summary of the rules.
What’s interesting is that the only US sport to really catch on globally is basketball, which is a lot more like association football than gridiron football and baseball. There are more (and more complicated) rules in basketball than in association football, but less than in the other big US sports, especially in the early years of the sport.
This may not be remarkable except that I’ve heard from more than one non-US person that we Americans seem to them to be fixated on rules. Do we like our professional sports to be more structured because we just think about rules more in general?
One of the many famous passages in The Wealth of Nations is the description of how the division of labor makes a pin factory far more productive than it would have been had all the workers performed all of the steps themselves.
One man draws out the wire, another straights it, a third cuts it, a fourth points it, a fifth grinds it at the top for receiving the head; to make the head requires two or three distinct operations; to put it on, is a peculiar business, to whiten the pins is another; it is even a trade by itself to put them into the paper; and the important business of making a pin is, in this manner, divided into about eighteen distinct operations… Those ten persons, therefore, could make among them upwards of forty-eight thousand pins in a day. Each person, therefore, making a tenth part of forty-eight thousand pins, might be considered as making four thousand eight hundred pins in a day. But if they had all wrought separately and independently, and without any of them having been educated to this peculiar business, they certainly could not each of them have made twenty, perhaps not one pin in a day; that is, certainly, not the two hundred and fortieth, perhaps not the four thousand eight hundredth part of what they are at present capable of performing, in consequence of a proper division and combination of their different operations.
My recent bedtime reading has been the Mabinogion, a late medieval collection of older Welsh stories. Though its purpose is not economic education, the Third Branch has a reference to greater productivity through the division of labor. It describes the character Manawydan’s attempt to earn a living in a new town as a shoemaker, assisted by his friend Pryderi:
As long as it could be obtained from him, no shoe nor boot nor anything could be sold by a shoemaker in the whole of the township. As for the [other] shoemakers, they realised their profits were failing: for just as Manawydan crafted his work, so Pryderi stitched.
The extent of the market and technology were both very limited in the period when those stories were told (relative to today). The division of labor was therefore far less advanced. But it did happen, and judging by the stories that endured, people noticed even if they didn’t yet have the economic theory to appreciate it.
This is from the introduction to Pete Leeson’s Anarchy Unbound: Why Self-Governance Works Better Than You Think:
Anarchy can also be said to work better than you think when (assuming you didn’t believe as much already) a society whose governance is based on such mechanisms produces higher welfare than it could enjoy under its feasible government alternative. The essays in Part IV consider self-governance in this vein.
The key to finding such a self-governance “unicorn” is to compare a society with a recent experience under anarchy to the same society under the government it actually had before or after moving to anarchy – or, somewhat more difficultly, if that society hasn’t had a recent experience under anarchy, to compare that society’s likely experience under anarchy to its experience under the government it’s currently under. This kind of comparison forces one to restrict his attention to relevant governance alternatives – to the kind of anarchy and government actually available to some society – and precludes the comparison of irrelevant governance alternatives, such as poorly functioning anarchy and exceptionally high-functioning government, which is the kind of comparison most people are prone to make. The self-governing society that outperforms the state-governed one is only impossible to find if one is simultaneously pessimistic about anarchy in some society and optimistic about government in that same society, which, ordinarily, he probably shouldn’t be given that the same historical constraints that limit the potential effectiveness of one kind of governance arrangement are likely to limit the potential effectiveness of other kinds.
Anarchy working better than you think does not mean that the mechanisms of self-governance I discuss always, or even often, work better at solving the problems they address than some kind of government could – especially if that government is the rare, extremely well-functioning kind most people pretend is the rule instead of the exception. I will argue that in some cases those mechanisms can work better than government – especially if one compares their performance to the comparatively common, extremely poorly functioning kind most people pretend is the exception instead of the rule. By my argument doesn’t imply that any anarchy is superior to any government one could conceive of. Nor does anarchy’s superiority in a particular case necessarily generalize.
I’ve taken a class with Leeson and read a good deal of his work, including some on which this book is based, so this does not surprise me, but it seems like it would be surprising to almost everybody who hasn’t. At least in the Western world, the usual mental comparison is between government and anarchy/self-governance is typically something like the thinker’s relatively high-functioning government vs. Somalia’s anarchy. Given a choice between any modern Western nation and Somalia, it seems like a no-brainer to prefer to live in the Western nation. But this is not the relevant comparison. As Leeson said in the book panel a couple weeks back, 1st best government obviously beats nth best anarchy, but nth best government doesn’t always.
This seems like such an obvious point to me—now, in my fourth year in GMU’s economics graduate program—but most people don’t think that way. It’s really an extension of the public choice perspective that government failure needs to be taken seriously by people who take market failure seriously. The flawless government solution to a market failure is better than the market failure condition by definition. But why in any particular instance would anybody expect the government solution to go off without a hitch?
The reason I could justify reading this book in my dissertation proposal semester is that I’m also teaching an undergraduate class, International Economic Policy, in which many of this book’s lessons will be relevant. Even if you’re not in my class, I suggest you look into it.
One of the beautiful things about the world that economically-minded people enjoy more than others is seeing how people are connected, again and again through time and space, by trade. Leonard Read’s “I, Pencil” is a great example. There are many motives to go out and see who and what else is there in the world, but trade is one of the most reliable. Despite the multitude of different cultures, languages, religions, etc., people are and have long been connected in important ways that we don’t often think about.
While not quite as optimistic an example, I thought the following passage demonstrates that connectedness from another angle. For context, the chapter begins with a discussion about the evidence for the theory that syphilis was a disease of New World origin.
Even if no direct statements on the newness of syphilis to the inhabitants of the Old World existed, there is enough linguistic evidence to support that contention. The variety of names given it and the fact that they almost always indicate that it was thought of as a foreign import are strong evidence for its newness. Italians called in the French disease, which proved to be the most popular title; the French called it the disease of Naples; the English called it the French disease, the Bordeaux disease, or the Spanish disease; Poles called it the German disease; Russians called it the Polish disease; and so on. Middle Easterners called it the European pustules; Indians called it the disease of the Franks (western Europeans). Chinese called it the ulcer of Canton, that port being their chief point of contact with the west. The Japanese called it Tang sore, Tang referring to China; or, more to the point, the disease of the Portuguese. A full list of the early names for syphilis covers several pages, and it was not until the nineteenth century that Girolamo Fracastoro’s word, “syphilis,” minted in the 1520s, became standard throughout the world. – from Alfred W. Crosby, Jr., The Columbian Exchange, 1973, pp. 124-125
In society, virtue is supposed to be crowned with success. Hard work should produce accomplishments and accomplishments should bring recognition and respect. It does not always work out that way. A sport is a circumscribed area of controlled striving and, in a limited sense, is a model of a good society, where rules are respected and excellence is rewarded. Part of the pleasure of sport is in savoring this sense of a small, well-ordered universe. Of course, sport includes some young men and some not-so-young men who have never grown up, who are self-absorbed, willful, vain and arrogant, as headlong in satisfying their appetites as in their athletic competition. But precisely because competition at the pinnacle of American sport offers many temptations, and because physical abilities can carry an athlete far without a commensurate portion of good character, the achievements of the genuine grown-ups, of whom Gwynn is one, are all the more to be admired. – George Will, Men at Work, pp. 225-226
When the Lance Armstrong doping scandal broke, a lot of people in my circles and some higher-profile writers suggesting that the cycling authorities (and the authorities in other sports) should just legalize doping. If it is so common and so hard to detect, why not just put it out in the open? It has an appeal to it, sure, especially perhaps to economists. But I don’t like it.
My first criticism of this attitude, which is the shorter one so I’ll get it out of the way, is that if an offense is difficult (but not impossible) to detect, you can still get the desired deterrent effect by raising the penalty. If you have a 1% chance of getting caught using PEDs a $100 fine is laughable, but a lifetime ban may still deter you.
But why make actions like these offenses in the first place? I noticed that the people who offered this solution were not usually fans of the sports in question. I didn’t have an eloquent response, as I only read Will’s book after the whole scandal went public. Allowing doping, especially with products like EPO that really are game-changers in cycling, changes the nature of the product being offered. People have a willingness to pay to see “a small, well-ordered universe” of “controlled striving” where “virtue…is crowned with success”. Not everybody has a willingness to pay for the various flavors of this product—cycling, football, baseball, etc.—but the ones who do want a certain thing that doping fundamentally alters. They want to see hard work and attention to detail lead to success. True, some fans just want to see big splashy achievements, the kind doping produces, but I don’t think they’re in the majority and they, too, seem to feel cheated when they find out the cause. Nobody in the baseball world feels the same kind of admiration for Barry Bonds’ home run record as they feel for Hank Aaron, Babe Ruth, and Willie Mays.
The Virginia DMV currently has a survey available asking for feedback on for-profit ridesharing services like Uber, Lyft, etc. I doubt it will do much good, but it only takes a few minutes. I’m posting the questions (in bold) and my answers here.
1. Insurance requirements protect injured customers and third parties. Current insurance requirements are based on the nature of the transportation service and the number of passengers in the vehicle. Insurance companies generally distinguish commercial and personal insurance policies—all passenger carriers licensed in Virginia must have a commercial policy.
What are your views on TNCs and other for-hire passenger transportation companies being required to maintain certain levels of insurance?
There is no reason why this will not emerge as a standard absent state direction, and at more market-appropriate rates than those set by diktat. It’s hard for me to believe that VA DMV thinks riders are not concerned about safety and responsibility enough to make the companies respond to market pressure. The first lawsuit would fix this overnight, and knowing this in advance, the services will get in shape without having to learn the hard way.
2. Under current law, DMV reviews company owners applying for authority to operate a for-hire transportation service in Virginia. Local governments have authority to conduct background checks for companies and drivers within their jurisdiction. These checks serve two goals. First, they insure that company owners have a record of providing honest and reliable service. Second, it ensures that taxi drivers have not been convicted of certain crimes or driving offenses.
What are your views on companies and/or drivers being subject to criminal history and background checks? Do you believe this is something best performed by a government entity or by the individual companies?
I think it’s a good thing, but it’s best performed by individual companies. An equilibrium will emerge privately, as dangerous drivers are bad for business unless enabled by a government-supported cartel system. On top of this, there are plenty of offenses one could have committed in the past that have no bearing on present capacity to drive safely, quickly, and conveniently that would almost certainly be a bar to employment if DMV is running the show.
This model makes little economic sense in an age when smartphones can let riders provide instant feedback both to the services and to other potential riders.
3. Local governments can set standards for vehicles used for hire in their jurisdictions. Some localities have age and mileage restrictions for taxis, which further limit the vehicles that can be used. Together, these requirements are designed to ensure that all vehicles, including those carrying passengers for-hire, are in sound working order and do not pose a risk to public safety.
What are your views on for-hire vehicles being subject to higher standards than other vehicles registered in Virginia; what should those standards be?
As if poorly-working vehicles were not bad for business in a very immediate way? Not only would the riders themselves be angry, but it would be bad advertising. If anything, standards could very feasibly be lower for these vehicles than for ordinary vehicles, as regular Joes like me do not see their business reputations suffer if their vehicles break down in traffic. For me and the people around me in traffic it’s an inconvenience; for Uber et al. it’s a huge business problem.
As far as what the standards should be, the more minimally-specified, the better. Consumers face quality vs. price tradeoffs every day, and there’s not one answer that satisfies everybody. If all cars were held to the standards of brand new Cadillacs, quality would be very high but few could afford it. Fortunately, there is a large enough market for consumer automobiles that lets some people drive brand new Cadillacs but doesn’t ban me from driving an old but affordable Kia.
4. State laws require that certain carriers publish their fares. Localities have authority to regulate fares within their jurisdiction.
What are your views on governments setting requirements relating to fares; what should those requirements be, if any?
Though I’ve met a great many very smart people working in government positions, they have no more wisdom or appreciation for the vast array of consumer preferences in this area of the economy than they do in any other area of the economy. By what logic does not make sense to regulate fares for carriers but not for restaurants or clothing stores? If fares are too high, potential riders will find other means of transportation, pushing fares back down. Fare regulation makes perfect sense in the context of enforcing cartels, but it does not make sense in a competitive market the likes of which we’re going to see eventually, regulations or not, due to technological progress.
5. Certain passenger carriers must show that the service is necessary in the community in which they seek to operate and localities have authority to control the number of taxis in the community. This local authority stems from the community’s interest in controlling traffic and pollution that may result from roaming or idling taxis.
What are your views on standards relating to public necessity for transportation services and on potential limits to the number of operators allowed in an area?
As these services are substitutes for traditional taxi services, more of them on the road means fewer taxis on the road, and indeed a vehicle that is only in operation when asked for seems like it should cause less traffic and pollution than a taxi driving around in circles. If regulatory agencies had to pick winners and losers, it seems that they would do better to mandate the newer style of organization than to allow idling taxis in high-traffic areas. Of course, there is probably room for both models of organization, as not everybody has or uses smartphones for the transportation purposes. It’s simply not credible to think that allowing more vehicles from Uber et al. will simply add to the current total. Traffic is already nightmarish in Northern Virginia, but it should in the long run get better instead of worse by allowing ride-sharing services.
The “necessary in the community” clause is the most transparently cartel-serving requirement there is. If it were obvious that a service is necessary in the community, why wouldn’t the regulatory agencies have issued more permits in the first place? Nobody knows in advance what services the community demands; they have to try and see. Services are organized and offered on a guess that there is an unfulfilled demand out there. Most of the time they are wrong, which is why most businesses fail. But the successes of ride-sharing services in the places where they have been offered is a demonstration that sufficient demand exists.
6. Licenses and permits show the traveling public that the companies, drivers, and vehicles meet minimum standards. Customers and the public can contact the licensing authorities with complaints and concerns; and the authority can follow up by investigating and, if needed, suspending the passenger carrier.
What verification methods would you design to confirm that standards are being met?
The standard mandated vehicle inspections that all Virginia drivers must pass are probably sufficient as a legal minimum. Firms with reputations to uphold and no cartel protections have incentives to have internal controls to make sure their vehicles exceed the standards.
I don’t know how seriously anybody will take these comments—not very seriously is my guess—but it works for a post.
I came to intellectual maturity during the Clinton presidency, so while I may not remember all of the details or interpret them how I would if I were living through them right now, I feel like I got a pretty good sense of the climate back then, at least of his second term. (I was unusually interested in the topic for a teenager.) And I recall that he got very little criticism from the left, who tended to find other targets.
I recall very well during the George W. Bush years when his critics from the broad American left* were fairly focused on him. Of course there were other things people worried about, there always are, but Bush seemed to take a plurality of the anger. [For many good reasons.] Fast forward to a Democratic administration. Ever since the 2008 election the American left no longer has such an identifiable, personal target for its outrage; Barack Obama is insignificantly different from Bush on a wide array of policies, but that’s how politics works. “He may be a bastard, but he’s our bastard.” All the public outrage has to go somewhere.
What made me think of this was yet another article about outrage over something somebody wrote, or more correctly something somebody didn’t write, but was reputed to have written by sloppy, careless, uninformed, or intentionally misleading critics. And I’ve seen this movie before; this time next week hardly anybody will be talking about it. As it’s mainly folks on the left who are behind this phenomenon of mass ephemeral outrage, this got me wondering. I don’t recall this kind of mass ephemeral outrage targeted at a constantly changing cast of characters and situations that stand in for abstractions like reproductive rights, economic inequality, rape culture, or privilege. Back in the Bush years there was a constant and personal target for the ire, so there wasn’t as much need to have a new target every week.
Part of the reason, no doubt, is that so many people use Twitter now and read so many websites that are more immediate, interactive, and specialized than Time or the local newspaper were back in the Clinton years. Letters to the editor don’t really get the momentum going, and the state of internet media has matured enough that an industry of writers, editors, and websites can supply very focused content to specific, identifiable audiences. But since the left—with notable and honorable exceptions—isn’t taking out its anger on a steady target during this administration, it’s lurching around railing against one thing today, another thing Friday, another next week. It’s the combination of immediate technology and the lack of another reliable target that lead to mass ephemeral outrage; the technology enables the pre-existed impulses. And one of these impulses is the urge to both feel and be seen as part of a team, so there’s hardly any need to dig down into each issue as it comes up and see what the real facts, arguments, and implications are or to use good discussion technique and try to construct the best version of the opposing argument when the interpretation is not clear. The next episode will be up soon anyway. It’s not like the Bush years when the same sonofabitch would still be around next week and the week after and you could reliably earn team points by badmouthing him. [Which he thoroughly deserved.]
I don’t mean to suggest that people don’t really care about the abstractions I mentioned above—I can’t read minds—or that those abstractions aren’t worth concern. Of course, as somebody writing about mass ephemeral outrage I haven’t done myself any favors by focusing only on a narrow part of a broader phenomenon and putting this disclaimer so far down in the post. But it’s noteworthy that these episodes of outrage have such a short shelf life before the next one comes up.
It’s hard to quantify this, I know. I’ll also have to wait until the next Republican administration takes office to see if the left can coalesce around hating that sonofabitch and ease up on mass ephemeral outrage, and who knows how many things will have changed in the meantime in terms of how and what we communicate with each other, especially over the internet? But now I’m on the record so I’ll remember to keep an eye on it and others can judge if I was onto something or not.
* I have to put a note here explaining that I mean the left in its common political sense. Not the “true” left or the pure left or whatever definition nitpickers might prefer. Just how the average person understands the part of our society and culture that “the left” refers to. I don’t mean to implicitly smear any parts of the left that take issue with the characterization given in this post. Trust me, as a libertarian I know all about how other people who get grouped in with me are doing it wrong.
Vox has a great piece entitled “Why you shouldn’t drive slowly in the left lane”. I won’t quote it at length, as one quotation pretty well sums it up: “It impedes traffic and probably makes everyone less safe”. I’ve written on this topic before [here and here] and think it’s fairly important so I was very glad to see it in a big outlet like this.
There are people who are expert in the study of traffic patterns, so I’m sure it was known to the authorities already. Why isn’t a penalty against it enforced more? If it was a phenomenon intelligible even to a guy like me who is not a traffic expert, not knowing is not an excuse.
I can think of two reasons. First, the responsible authorities can’t be seen to promote speeding, even safe speeding, because rationally ignorant people are likely to throw fits. The harms of unsafe speeding are very vivid and memorable, while the harms of unsafe slow driving are almost invisible except for the inconvenience it causes other drivers, and in my experience people tend to pin the blame on other drivers in traffic more or less uniformly, not on specific bad (slow) drivers. That the authorities tend to focus on speeding rather than slow driving is not surprising.
Second, it’s hard to enforce. If you’re a police officer on a four-lane Northern Virginia state highway, you’re more likely to be stuck far behind an offending driver where you can’t feasibly get to him than to notice him when you’re in a position to do something about it. You could radio ahead and have another patrol car pull him over, but that kind of coordination is difficult and unlikely. So it’s also not surprising that the rule is lightly enforced.
Of course, the next question is what can be done about it. For starters, driver education could emphasize the harms done by driving out of sync with other drivers. The safest driving conditions are predictable driving conditions that people can prepare for. Driving too slowly and changing lanes poorly throw off the pattern and thereby throw off drivers’ concentration. This is a recipe for trouble. Second, it means better enforcement of the rules against unsafe slow driving. I know I just said this was hard to do, but even a little more emphasis on it by the authorities would have a positive impact. I’ve definitely seen plenty of times on the interstate where it was feasible to pull somebody over who was slowly hogging the left lane; instead of focusing so much on people going safely over the speed limit, shift that energy to the slow left-lane drivers.
Third, let’s try to get creative with enforcement, as there are limits to what the police in their traditional operating modes can do. I have a suggestion linked above, though it relies on technology we don’t really have yet. Surely there are other ways to do this. Something like current E-Z Pass technology could also be used for this purpose. (Concerns about the surveillance state are very relevant, so that may not be ideal.) This post is pretty much off-the-cuff, so I don’t have a lot of other suggestions, but I’m sure people could dream up something given how fast the pace of technological development is going. Can you think of anything, dear readers?
It goes without saying that I think private management of roads would incentivize solutions more than the current system, but I’m not against baby steps.
FiveThirtyEightSports has a great piece about how much college quarterbacks are really worth in terms of market value. I’m neutral-but-leaning-against on the issue of paying college athletes, but the piece begins with University of Iowa Athletic Director Gary Barta giving a very bad reason to oppose it: it’s too complicated to figure out how much they should be paid. He’s right given how he’s conceiving the issue, he’s just not conceiving the issue in the right way.
Wages are not determined by a person or group of people independently evaluating what a job is “really” worth. That’s what markets do, i.e. that’s what innumerable decisions over time by innumerable anonymous consumers operating within the price system do. The failure to understand how the price system works in allocating resources by preferences is not unique to Barta. Very few people understand it, and lamentably even people who do understand it often forget what they know when they think about how it applies to wages. I don’t mean to pick on Barta. Within the bounds of how people ordinarily think about prices and wages he’s right. It would be unfair to expect him to be an expert in economic topics on top of being an athletic director. In fact, not even all the economists in the world put together can really tell you what a particular position is worth. Nobody can. It’s a discovery process. It takes trial-and-error in endless iterations to find out what the social value of a job is, and it’s always changing.
FiveThirtyEight does an admirable job attempting to estimate the added value of particular quarterbacks in their prime seasons. But let’s not get too comfortable. This kind of estimate is only the first pass. I assume if universities had to pay student athletes they would start with something like this, as they clearly have to start somewhere. But the feedback they get from the bottom line would lead to adjustments at the first opportunity, and these new numbers would also be adjusted ad infinitum with continuing feedback. Would it be perfect? No, probably never. It’s not always easy to parse out the relative contributions of the various members of a team effort, not even with the discovery process. But it would certainly be closer to the mark than any wage-setting entity could come up with.
Also, on a side note, student athlete pay would lead to a change in transfer rules. If a player feels underpaid at one school and sees bigger dollar signs at another—maybe his skills fit in better there or he’s currently a good player warming the bench behind a great player—he would naturally want to transfer. As nobody knows going into college how well players will fit on a team two years later, and as the pay would give them better estimates, I imagine this would lead to a whole lot of players wanting to move around a lot more. At some point this amount of pressure would almost have to lead to a rule change. I’m sure there are other rules that would change as well. This doesn’t mean they shouldn’t institute athlete pay, it just means the issue has a lot of ramifications that they should consider.
I can’t imagine the NCAA would actually institute a pay system that mirrors that of the professional leagues. For one thing, where would this leave the sports that fewer people pay to see? Many less popular programs operate at a loss, and surely they don’t want to charge those student athletes to play them. Simply upping the stipends and benefits the players currently receive still leaves many athletes, especially the stars, getting paid far less than they contribute, which wouldn’t satisfy the critics, and upping them so much that it averages out may be beyond the means of most institutions. (If the standards are not universal, there will be other problems.) But saying that they can’t do it because they don’t know how much they should pay is not the appropriate response. New entrants to established industries have some decent ideas about the starting point by reference to their incumbent competitors. Starting to pay student athletes on the scale of the NCAA, well, they’d just have to find out. No doubt it would be chaotic for the first few years, but it wouldn’t be chaotic forever. If an outsider website like FiveThirtyEight can come up with these numbers, I’m sure that college sports programs that have access to financial information and data on all their players can find a starting point. The rest is out of their hands, as it always will be.