Government Shouldn't Run Healthcare, Etc. -- Round Basketball Court Edition

Driving by watching this park develop years ago it surprised me as I noticed this circular pavement being built not knowing what it was going to be.



When basketball goals went up I became irritated and was reminded of this irritation again every day as a drove by. Anyone who plays or watches basketball knows this is not what a basketball court looks like or how it is played. In fact it is dangerous. Not just because anyone who has played much basketball builds a muscle memory of the court being rectangular with corners extending to a baseline, but simply because the natural flow of play will take people off of the edge of this circular court.

Of course, this is not something to go to the mattresses over. As frustrating as it is, this incorrectly built basketball court is not the problem; it is just a symptom.

The problem is that even though a strong public goods case can be made for local government’s role in parks, government is ill-suited to successfully provide parks. It is not for lack of good intentions and not even necessarily for lack of good, intelligent people. Rather it is because of a lack of good incentives or perhaps more accurately a good incentive structure.

Government doesn’t have the right feedback loop. Government actors do not have the tools they need to course correct as they make decisions. It doesn’t matter that it won’t be the same people who designed and built this park trying to run healthcare or trying to guide the financial system or trying to fight wars or trying to [insert whatever grandiose project you want government to do]. And it does not matter that there will be enormously greater resources devoted to the grandiose project; in fact that probably makes it worse.

One High Net Worth Investment Manager's Plea: "Raise Tax Rates to 70% NOW!"

Shout it (and dance it) from the rooftops! We need higher tax rates on the rich. I'm not greedy. This is all I ask.

Please raise rates like in the good ole’ days.

Give me a way to help rich people shelter income from the tax man.

Bring back all the intentional loopholes, the legal methods to ensure that old money stayed on top.

Help me tie up capital in ways that benefit the haves and fill my pockets as well as those of tax lawyers and Wall Street financiers. It isn't just me that is hurting. Plenty of other people were promised lifetime high incomes and prestigious positions. Now we are forced to sully ourselves with talk of "adding value" and "matching the benchmark"--as if I should have to justify my 6-figure bonus. I have an MBA, for God's sake!

I don't mean to lose my cool, but I have had enough. In this world of passive investing, low fees, minimal commissions, and democratized capital we desperately need a way to justify our enormous salaries which fund our lavish lifestyles.

I am so disappointed in recent politicians. I'll tell you something. This country is going to the dogs. You know, it used to be when you bought a politician, that SOB stayed bought. Now they are raising the standard deduction and taking away options like having taxpayers help rich people pay for stuff--no more tax breaks for $100,000 football suites, etc.

We had a great system. It was working just fine during the days of Ike. They warned that kid, Kennedy, not to go down that path of "rising tide lifts all boats". Don't let the camel's nose into the sheikh's tent. He did it anyway.

Dream of a better tomorrow starting today. Imagine how more complex and elaborate our schemes could be in the modern world of international world of finance. Give me a 1,000 billable hours and a few well lobbied-for loopholes, and I could craft a perpetual wealth-shelter machine to ensure no taxman or 99-percenter ever touched a penny of great-granddad's fortune.

First they come for the 150-foot yachts...


Taking my tongue out of my cheek, the sad reality is we are still far, far away from an efficient, effective, fair, and simple tax regime (see also the long version). Progress has been made, but so much remains.

In Defense of Gift Giving

[I seem to be on a defensive kick recently . . .]

As an economist by night, I was thinking about the economics of gift giving this past holiday season. 

This is of course not a new topic for economists to fret over.

Here is how I frame the solution: 

1. Time is THE valuable (scarce) resource. $20 represents my time. A unique item I search for and travel to acquire in 2 hours that I purchase for $5 represents a lot more. Can we strike a good equilibrium in all cases? Are we too rich to make these bargains any more?
2. Gift giving forces us to think about and act on the behalf of others. Is this being fully and appropriately communicated?
3. It should be redistributive: you and I exchanging $20 bills is stupid, but . . .  that is a bit of a strawman. Keep in mind it is not just monetary redistribution that is at work. We can redistribute time, effort, ideas (creative people probably have a burden to bear), et al.
4. It gives us permission: When he was alive, one of my grandfathers was a widower for most of my life. I remember him vividly at many Christmases handing out checks to each child and grandchild with a bit of a sheepishness saying, "This is the only way I know to do this. Get yourself something nice." The check was probably for more than he should have been giving I now realize. But more importantly I realize that there was a gift I was giving him in exchange. Delighted to receive cash as a child, I didn't realize my gift was giving him permission to do it in this manner rather than on his own attempt to shop for ten or so different people--I gave him back his time along with avoiding all the potential downfalls for disappointing results.
5. Gift giving demonstrates (signals) care and love AND it is positional (and yes that can be a negative in an economic-efficiency sense or other--see below).

As always, we have to strike a cost-benefit balance, and we should start with the assumption that in gift giving people are indeed making choices in at least their own best interest. The burden of proof should be on those claiming market failure.

The biggest concern I think we should consider is just what we are signalling and to whom. Just because you can shower your children with material luxury, should you use this as the very vivid and potentially public moment to do so? I am certainly guilty of potentially over indulging in selfish activities (gift giving and otherwise) in the holiday seasons--all of them.

The Best Defense is . . .

The game of football has changed in the couple decades in a fundamental way. Nowhere is this more acutely witnessed than in the college game. And perhaps no team more demonstrates the odd juxtaposition than the Oklahoma Sooners.

Last year Oklahoma had a very poor defense looking at the traditional statistics. While these do not outright lie, they also do not tell the full picture. Oklahoma played in a league with very good and innovative offenses. And Oklahoma itself had one of the all-time great offenses last year. Their yards per play and points per play, to name just two meaningful statistics, were at near record levels. Keep in mind that historically most teams who have touched the type of numbers Oklahoma put up last year did so playing lower-tier opponents. In contrast Oklahoma played in one of the tougher conferences (those who find this to be a controversial statement ignore results and are caught up in old-world expectations of what football "should" look like), and they competed in the college football playoff against an exceptionally good Alabama team. The Oklahoma offense was Platonic while the Oklahoma defense was non-Platonic beyond all recognition.

While the Sooners are the extreme case, this combination of great offense and bad defense (albeit not necessarily on the same team) is a growing phenomenon throughout the sport. Teams with "old-world" offenses fail to reach the pinnacle within their leagues cough...Michigan... and teams with "old-world" defenses such as, sadly for me, Oklahoma look like two entirely different teams between when they possess the ball and when they do not. This resulted in Oklahoma parting ways with its defensive coordinator, Mike Stoops, after a disappointing loss to Texas mid season (in case you don't know, firing a coordinator mid season in what is otherwise a very promising season is a very rare event). After scrambling to fill the gaps to finish the year, Oklahoma has cleaned house bringing in a promising and perhaps innovative group to run the defense.

So far this is just me discussing my rather unremarkable and unoriginal observations. While I absolutely do not claim to have the answers, I think I do have an advanced framework for discovering the solution. Here we go...

To restate the premise: Defensive strategies and tactics desperately need to evolve since offenses have evolved at a much more rapid pace and in a more dynamic way for some time now.

Defense has a chance to catch up before offenses figure out that they don’t have to punt every time on 4th down. If offenses figure that out and continue to innovate in other ways, defenses are screwed. Case in point, offensive production is up remarkably over the past 19 seasons (2000 vs 2018). Across all FBS-division college football teams the average production is up meaningfully in the categories of yards per play (11%), points per play (14%), and points per game (12%). Maybe it is too late for defense?

Assuming this is not a lost cause, let's focus on a solution. The key is to be disruptive. Yes, that has always been the key. It’s just that the strategy of how to achieve that has changed over time. Back when running the football was the dominant offensive strategy, defenses needed to try to limit offenses to about 3 yards per play. Achieving that play in and play out is much more difficult today. Limit an opponent to a gain of 2 yards twice in a row (creating 3rd and 6), and you just don't feel like down and distance is on your side. A crude but probably telling stat: In the 2000 season just 10 teams went the season averaging gaining over 6 yards per play. In 2018 46 teams did.

Defensive strategy seems to have fallen into a losers games where defenses are trying to be very safe and limiting every play relying on the offense eventually making a mistake. "Just don't get beat deep..." goes the saying. The problem is offenses don’t take as many iterations (plays) to score as they used to, and they are more explosive. Hence, they don’t need to be as steadily productive as they did in the past.

Defensive strategy has to shift the probability back in its favor. The key is to increase volatility which increases disruption. If you will more likely eventually give up a score (and this is increasingly the case for all teams in nearly all situations), you might as well give it up right away having taken a big chance to stop it. Simply put: Just get the ball back--create failure or fail fast. Second and 11 is not as difficult for an offense to overcome as it was in the past. Likewise, defenses need to realize that second and 2 is not as bad a position to be in as it once was. Defenses need strategies and tactics that increase the probability of turnovers and tackles for large losses at the cost of increasing the probability of giving up meaningful offensive yardage gains and scores. The defensive mindset needs to begin with the assumption that everything is four-down territory--don't assume an offense will punt except in the most dire of positions.

A critical next step is to think terms of making an offense have as difficult a time scoring as possible regardless of what they do in trying to score. Defenses need to push offenses into making high-risk, low-reward decisions. Lowering an offenses chances of success is not entirely enough. Defenses must make offenses choose lower payout expected values. Think about an analogy with basketball. If defenses had their way, they would make offenses shoot every shot within a zone that is within about 0-5 feet inside the three point line. What is the football equivalent?

The most disruptive defense one could imagine from an NFL fantasy lineup would perhaps be the five best pass-rushing defensive linemen and six players among the strongest defensive backs or fastest linebackers. Notice that I am not saying the best run-stopping defensive linemen or the fastest defensive backs (cornerbacks or safeties) or the biggest linebackers. This group is going to blitz (send a disproportionate number of players rushing toward the quarterback) nearly every play. The remaining players are going to attempt to shut down the quarterback's options. What would it look like in result? Lots of small yardage given up, painful amounts of big plays given up, but all at the benefit of relatively many great defensive outcomes (turnovers, big yardage losses, etc.). Of course, that is a fantasy team. But perhaps we can get close to that by selecting for players in those molds and for plays in that fashion. Consider an analogy from baseball. There is a reason The Shift has become very popular--it shifts leverage in favor of the defense in a number of ways.

Why so aggressive--blitzing and otherwise? Start by thinking about how a defense is going to stop various types of plays used against it. Consider the most impactful offensive play, a deep pass down the field for either a touchdown or a very large gain. The first, best way to stop the play is to prevent the quarterback from throwing it in the first place. The second, best way to do it is to stop him from throwing it well while at the same time disrupting the receiver running the route. The third, best (worst) way is to have a defensive back covering the receiver being thrown to attempt to break up the play at the point of the catch. This holds not just for the deep pass but for all passes down the field. And by extension of the logic it holds for all plays.

Think about a running play. Where does the defense most want to attempt to stop a run? At or before the runner even begins, which would be in the offensive backfield. If the runner gets free for 9 yards as compared to 8 yards, the difference is very minimal. If the runner goes for 20 yards or 15 yards, again the difference is minimal. I am not saying it is not a big deal to give up large rushing plays. I am saying a combination of negative yardage running plays (-1 to -4, say) and positive, larger yardage running plays (9 to 20, say) is preferable to consistently yielding 3 to 8 yards each run. Don't try to make the offense fail small each down. Just one large failure (a turnover or a big loss on 3rd down or a big loss on 1st or 2nd down greatly reducing the offense's play options ) would be enough to allow the defense to win the drive.

The essence of my philosophy is a shift in the risk/reward and, hence, outcome dispersion for each defensive play and set of plays in a drive. Great defense should be torturous to watch for both teams' fans. For the offense and its fans it will look unpredictable and threatening--at any moment it might end the drive. For the defense's fans it will look unpredictable and haphazard--at any moment it might give up a score. Note the classic fan pessimism at play in both cases.

I admittedly do not have all the answers for how difficult it is to coach defense in football today. I just am on the lookout for the next innovators who I think will employ strategies and tactics very different from what has worked before. 

'Oh, you left out a bunch of stuff' - 2018 New Year's Resolution fulfillment post

What better time to wake up from my no-blogging slumber than with the annual fulfillment of my perpetual New Year's resolution?

I used to strongly believe that “real-world” experience as a substitute for learning through formal study was over rated. There are two significant ways I have changed my mind. I now believe:

1. Most learning done in school is learning in name alone. For the vast majority of people very little is truly understood and retained much less applied in life.
2. Because of biases, failure to update/challenge conventional wisdom, poor feedback loops, and long cycles for knowledge updating, there is a chasm between the received wisdom and truth--what we could/should know but basically do not.

Bryan Caplan’s work as summarized in his book brought me around. This one has some irony. I probably shouldn’t be surprised that an esoteric, theoretical academic would be the one to set me free since my bias was built upon a disdain and rejection of those who (I still believe) unduly criticize and dismiss book/school learning and “theory”. I still highly value idealistic university education (at least in theory). I just now understand that experience in the world has much, much more value and applicability than I used to give it credit.

And it is not just that getting one's hands dirty learning by doing should be on equal footing. For most (see point #1 above) it is by far the primary way one should gain knowledge and wisdom and skills.

This change in view was for me a long time developing. As I remember it, the first major salvo came from Charles Murray when I read this piece. Caplan just pushed me from agnostic to full-blown evangelist.

Highly Linkable: Pay College Athletes Edition

With two important cases working their way through the courts (Jenkins v. NCAA and Alston v. NCAA), I continue to be optimistic that we are witnessing the beginning of the end for the government-protected, exploitative monopoly.

Just as Patrick Hruby explains in this Deadspin article, I have always found the argumentation along the lines "define specifically and prove explicitly how this change will work" to be shallow and weak. To argue that you lack the imagination to assume the market can devise a way to pay athletes, is no argument at all. As he concludes,

College athletes don’t need a pay-for-play plan, because pay-for-work isn’t a quantum leap. It’s just a small step in the direction of the world the rest of us already inhabit. The NCAA loves to talk about how college sports prepare players for The Game Of Life. There’s an easier and much more just way to do that.

As Ziggy might say, you'd have to have a Swiss cheese mind to not believe solutions will be discovered.

While we are on the topic of the ridiculous, Andy Schwarz takes apart the contention that most colleges couldn't afford to pay a market price for athletes.

But rest assured, Condoleezza Rice's commission fixed it all.

Highly Linkable: Counter-Conventional Wisdom Edition

Trying to get back into the swing of blogging and just beating the 90-day hiatus limit . . .

Looking through my saved articles for future linking, I notice that just about all of them can be labeled "counter-conventional wisdom". Here are a few that, yes, have some age on them in the world of "that's so yesterday's Twitter", but I think they have value enough to be shared.

David Friedman, whose latest book is on my to read list, wrote about attending a Jewish wedding which got him thinking about what I would call modernity-biased myths about the past. I particularly like the Columbus myth.

You can't go very long discussing cryptocurrencies with a skeptic before they bring up the supposed Tulip Mania of 1600's Netherlands. But as I believe I've posted (or intended to) before, this is a myth. Hat tip to Tyler (of course).

I know I've posted before regarding our new puritanical age. I'm in good company with Matt Ridley who makes the case for today's "Millennials" being new Victorians. Yet again the young kids these days are not fitting their own (or the perennial young kids these days) stereotype.

This example of all common sources being wrong by Scott Sumner is a great example of a common view that unfortunately does not get scrutiny or challenge by the watchdogs or fact checkers.

Economics as a discipline itself needs more heresy (and reversals such that the heterodox becomes the orthodox). Arnold Kling, never shy to challenge along these lines, offers four contentions.

Sticking with Kling, he outlines five myths clouding health-care policy in the U.S.