A challenge to Landsburg

Steven Landsburg is an economist I greatly admire. The depth and uniqueness of his mind and viewpoint are quite amazing. So it is with trepidation that I challenge an argument he has made several times before and has touched on in another guise yet again. I expect it is likely that I am not refuting Landsburg. More likely I am misunderstanding the argument and hence not addressing it or I'm making a weak argument--a weakness I cannot see.

The main argument is about wasteful competition. The first appearance I can recall is here. Followed by another here. Then came this very interesting question about taxing novelists for the same reason we may want to tax carbon. He followed the post with another for clarification.

There are multiple arguments being made in these posts, and I agree substantially with many. Where I disagree is in this concept of wasteful competition--that the additional athlete, football team, novelist, etc. is more socially costly than beneficial. If I have it correctly, the argument runs as follows:

1. The resources devoted to a marginal addition in output for good X can be substantial.
2. In many cases the output of good X before the marginal increase was already substantial.
3. The gain from the marginal addition of good X is slight.
4. Therefore, we have wasted resources on the margin since the gain does not justify the cost. There is a market failure.

I think there is more going on here. On the surface he appears to lack an appreciation for quality. It is as if at the extreme (perhaps an unfair reductio ad absurdum) he believes mediocrity is the optimum. Yes, that is an unfair characterization, but it is getting toward my point. Looking deeply I do not think we can be so linear in how we think about marginal improvement. It is multidimensional and part of a larger purpose.

The resources that flow into a given endeavor only look out of proportion to the marginal output when we narrowly define the output. The nth cereal on the aisle may not add much to the quality of my breakfast, but it may be a natural and unavoidable byproduct of the magnificent process that brings me cheap cereals (and so much more) on demand and basically without fail.

Consider also that although cost curves decline as quantity produced increases while economies of scale persist, only usually does quantity produced mirror the progression of time. It doesn't have to be the case that quantity and time are interchangeable as the X-axis. So while it may seem wasteful in isolation to see yet another novel published, that may be part of the cost of the first novel.

Finally, innovation often comes in unexpected surges emerging from dull periods of slight and arguably inefficient activity. The iPod was not just one more MP3 player. ESPN was not just one more way to see the already-watched sports.

As for competition and the fear it may become wasteful, be scared. You can't help that. But don't be afraid. We have to strive on for better and higher possibilities.

PS. Here is how I answered the novelist taxation question.

Highly linkable

As politicians seemingly fiddle as we begin to dance on the ceiling, it is important to realize it is going to be okay. This actually is business as usual--it is just not usually so obviously unproductive. Wasting resources (through an unfettered process of spending money) apparently looks to the media and much of the public as productive progress. It is not. Arguing about the terms under which the money spending process will continue apparently does not look as productive. It is not that different.

Hey, guy who sells ethanol. Is it a good idea to create and foster a monopolistic environment in which you can operate?

Ethanol guy: "Yes!"

Everybody else: "Hell no, are you kidding!?!"

Casey Mulligan makes a strong case about just how high and damaging tax rates are today including as a result of Obamacare. Grumpy says he may be underestimating how bad it is.

Here is the long (and excellent) and the short on why Fama was an excellent choice to share the Noble Memorial Prize in Economics as announced today. Shiller and Hansen are also fine choices in my opinion. It is just that I believe Fama casts a big longer and a bit stronger shadow.

WWCF: Gridless Power or Wireless Power?

Which will come first?

Gridless Power (household power commonly generated on site)

or

Wireless Power (batteries or battery-like power sources that largely self charge)

Both of these would be very big advances as respective cords are cut. For gridless power the aesthetic benefits would be dramatic gains all by themselves. Imagine a world where we are nostalgic for overhead power lines. The telephone pole as romantic as horse-drawn buggies. But don't forget the benefits of blackouts and brownouts being as foreign as breadlines are to us today. Whether the target of terrorists or ice storms (take a guess which one has taken out more power supply in the past 10 years), the centralized power system creates a dependency and hence vulnerability that we would certainly like to avoid.

In wireless power this could include simply batteries with life something like 100x greater than currently available. But imagine your iPhone actually charging from the motion it undergoes while in your pocket. Or perhaps from heat in the air. Or moisture--maybe water isn't the kryptonite of the mobile phone. 

Gridless power doesn't have to be solar; although, that is a big likelihood. You don't have to be a super genius like Tesla to imagine wireless electricity. And yes, these two overlap quite a bit--it seems. Sometimes things similar in concept end up being quite different in practice.

My WAG is wireless beats gridless in terms of large-scale affordability and consumer penetration by at least a decade. The economies of scale at work in the grid are quite powerful forces. The abundance of natural gas strengthens the inertia for the grid considerably. 

Saving football from itself

Football is at a major inflection point. These don't come along often. The first one of this nature was at the beginning of the twentieth century when Teddy Roosevelt "saved" football by urging rule changes. In 1905 there were reportedly 19 fatalities from playing football. Following that season an intercollegiate conference, forerunner to the NCAA, established radical changes for safety's sake. The NCAA would continue in this capacity, in-sport rule-making body, for another 50 years or so before becoming the cartel it is today.

Other inflection points have been the creation of two-platoon football the first time in 1941 ending in 1954 and the second time in 1965 and the widespread racial integration of the sport in the 1970s.

Today the inflection point is again safety related. The sport is getting more physical and more dangerous as society is getting less tolerant of violence and wealthier--meaning the value assigned to safety and health are growing. Just as when the highest scoring offense meets up against the lowest point allowing defense, something's got to give. If not, this could be the end.

Here is a spitball list of some potentially safety enhancing changes to the game. Perhaps changes like these would be enough to save football. To many traditionalists, myself included, these may seem quite unpalatable. But the truth is change of some kind has to come. We can continue to dance around this if we want to, but we might be left behind. Some aspects of football as we know it today probably will someday look totally removed from the real world--the actions of imbeciles with everything out of control.

• Get rid of the intentional grounding rule.
• Outlaw all blocking below the waist.
• Outlaw any tackling or blocking where the one tackling or blocking leaves his feet.
• Extend the automatic ejection rule for "targeting" (one that I applaud except for the poor decision to not allow the 15-yard penalty portion to be reviewed as the ejection decision is reviewed) to horse-collar tackles or facemask infractions to include helmet and head tackles. For facemasks, perhaps bring back the idea of a difference in severity by including the ejection for more severe facemask infractions.
• Outlaw zone defense including perhaps not allowing any defender to start play farther than 10 yards behind the line of scrimmage.
• End kickoffs and punts--force fourth down attempts. 

Let's keep it suboptimal

Last week while visiting the wonderful city of Seattle, I spotted a delivery truck with an unfortunate message painted broadly across its side. The truck was a produce delivery truck and the message was apparently an intentional advertising slogan. It read, "Let's Keep It Local!" I didn't have time to take a picture. Presumably based on the other advertising art this is a local fruit and vegetable company.

I have to admit my first reaction was a little hostile. My thoughts were: Will they sell to me? What if I plan to take it back to Oklahoma? At the Pike Place Market I purchased an extra honey crisp apple and mango with the intention of taking them home. What a shame it would be if those purchases had been prohibited based on my intentions to eat them abroad. But I'm sure the localizers do not care about my consumption venue, or that I can peel an apple in one long, curry strip. It is only the production origin that concerns them; I can imagine them saying. But that just leads to more questions:

• You're okay with exports, but you don't like imports? 
• So, you're saying you'd like to have your apple cake and eat it too? 
• Does it concern you that such a scheme will lead to your own wealth being reduced? 

Did I lose them with that last one? It is the mantra of the local movement that by "keeping it local" we keep both sides of the exchange--notice the "we" here, and remember there is no "we". We is an arbitrary fiction. It implies at some point people stop being one of "us" and start being one of "them". Such xenophobia is not just morally unhealthy. It is economically destructive--itself a moral wrong.

If you eat your own apple cake, you then won't have one left over. If you (import and) eat mine, you still have yours. All I ask is that you give me something you value less than the cake but that I value more than my cake. Like perhaps a Locks tour from Elliott Bay to Lake Washington. This is the essence of gains from trade. These gains expand as the market expands--as more of "them" become "us". 

Highly linkable

Back from bi-coastal travel with a backlog of blogs to write. Let's start with some links to get us caught up:

What is probably most amazing about this is that we don't find it as amazing as it is. (HT: Steven Landsburg)

Art Carden is demanding action "FOR THE CHILDREN" a la, Helen Lovejoy, in this first of what will perhaps become an on-going series (there have been three posts in this meme so far).

The United States is incredibly and perhaps paradoxically wealthy.

Caplan shows how Game of Thrones makes the case for pacifism.

The EA Sports proposed settlement in the on-going legal battle between college players and the NCAA cartel is a both a win for the players as well as a win for consumers as pointed out by Sports Law Blog's Rick Karcher. Probability of a strike or other work-stoppage demonstration is rising. A couple of years ago it was rumoured that a team in the NCAA March Madness tournament was planning on a demonstration including perhaps refusal to play if they made the Final Four. The team was eliminated in the Elite Eight round.

Posts like this one make me understand why I relate to Scott Sumner. Perhaps I should discount somewhat my agreement with his views on monetary policy fearing I have an unconscious bias.

Is the magnitude of U.S. gun violence evidence of civil war warranting international intervention? I think not so much. This article is hyperbolic and the arguments within fallacious I believe.  I found the biggest problem with the lumping of suicide deaths by firearms, accident deaths, and violent crime deaths. Those are quite different subjects. Attacking firearms is attacking the particular method and not the underlying conditions. Crimes aided by guns and accidents are the cost side. The benefit side, crimes reduced or prevented (including government-committed) and the joy of gun ownership, is completely ignored. But the article was thought-provoking, nonetheless.

WWCF: Social condemnation of hunting or human combat?

Which will come first?

Social condemnation of sport hunting

OR

Social condemnation of human combat sports

By social condemnation I mean when will we be past the point where being a hunter or being a fan of a human combat sport is acceptable in polite (general mixed) company. Yes, there is an underlying assumption here that the long-term trend is toward these ends. At some point the argument over rabbit season versus duck season will be moot--it won't ever be either. 

I think these come in degrees as they are long-term developments with stages for each. We need some ground rules on which will represent the true tipping point. First let's look at the levels we must consider.

For sport hunting I see it as a gradual outlawing by the spot an animal represents on the food/intelligence chain:

1. Apes, monkeys, dolphins, whales, dogs, cats, . . .
2. Elephants, lions, tigers, bears, oh my, . . . 
3. Deer, ducks, turkeys, fish . . .

For human combat I see it as a gradual abandonment if not outlawing by the apparent brutality of the sport:

1. Olympic-style wrestling
2. Boxing
3. MMA, cage fighting, etc.

We are already somewhere between 1 and 2 for sport hunting and nearly past 1 for human combat. Consider point three in this list in regard to sport hunting (this would represent a proxy as noted in the next paragraph), and consider how wrestling continues to be on the ropes. Here is my test for WWCF: when five state legislatures outside of New England pass broad legislation outlawing or highly limiting most items of the third type. We've already noted how politicians follow rather than lead. I feel it safe to say if this legislative test is passed, the overwhelming majority of voters must agree with the position. Alternatively, we might get to WWCF through other means such as the market for selling human combat evaporating. 

Note that sport hunting does not include harvesting of fish, lobster, elk, or other game for mass consumption on a secondary market. Hunting a deer and eating it, though, is sport hunting still whether or not the deer's head ends up on the wall. 

I think the key here is considering when does general public opinion pass what I will term a social acceptability threshold. At some point activities that were once common (e.g., smoking cigarettes, chewing tobacco, sexual harassment in the workplace, etc.) become beyond the pale. In the other direction eventually behavior once thought uncouth (e.g., interracial marriage, tattoos, etc.) become acceptable. I believe a large driver of this is the number of people engaging in the particular activity. 

In 1955 about 55% of men and 28% of women smoked. By 1990 the rate for men was equal to the 1955 rate for women while the rate for women had fallen about a fifth to about 23%.

For sexual harassment in the workplace note that female labor force participation may be the critical driver. Positively correlated with the LFPR trend would be female advancement in the workplace--probably with a lag due to the time it takes for the greater numbers of women to be experience-eligible for advanced positions as well as both active and institutional discrimination factors. When Don Draper was running things, the female portion of the labor force was about 33%. By 1990 it was nearly half (45%). 

Perhaps at some point I will have to awkwardly admit I do not have a tattoo. 

As for my prediction, I say that human combat has a shorter shelf life than sport hunting. This despite the fact that in the former behavior the participants are willing and compensated whereas in the latter behavior this is the case only on one side--and the other side doesn't just lose but dies. Alternative methods for population control of pest animals such as deer might accelerate the trend for outlawing sport hunting. But as we get wealthier and healthier, dangerous activities like human combat sports become more costly. This trend I believe dominates.