Saturday, April 26, 2014

What Basketball Strategy Can Tell Us About the Growth of Government

I believe there is a fundamental flaw in the U.S. Constitution and federal government structure. As foresightful as the founders were, they failed to appreciate the tenacity and momentum of government's reach for power. Allow me to illustrate with an analogy:

Some time ago basketball coaches realized there was a strategy they could employ to give them a systematic edge over opponents. What they realized was that while physical contact to gain an advantage over the opponent is generally prohibited in basketball, not all fouls as such were called. What's more, the referees exhibited reluctance to call fouls beyond a certain threshold. So a game with 100 fouls in it would only result in perhaps 40 fouls being called (40%) whereas a game with 50 fouls in it might result in as many as 30 fouls being called (60%). Therefore, a team that was naturally more aggressive would have an advantage as aggression escalated--sure they'd be called for fouls more often, but they would also get away with more fouls and they would create a more disruptive environment more suited to their style of play. To take the strategy further these aggressive teams would be built to accommodate the more aggressive style having athletes with more strength than finesse. As a result the officiating landscape of college basketball shifted to the favor of the aggressive teams. Because this was an emergent and unforeseen development, it can be said the rulemakers in basketball failed to appreciate the risk of this.

Similarly, the founders failed to appreciate how more and more government would overrun the checks and balances system created to prevent undesired government growth. Ultimately it is the role of the Supreme Court to prevent government behavior that is prohibited by the spirit or letter of the Constitution. And generally the hallmark cases brought to and decisions made by the court have been to limit government encroachment of freedom. But as the landscape of legislative spending and action and executive regulatory zeal has developed in favor of more not less, liberty has given ground. To wit, when we are debating if Obamacare imposes a fee or a tax, we have already lost.

The implications of this are sobering. We cannot depend on the Supreme Court to undo that which we as a society have evolved to allow--that is, a belief that government rightly and pragmatically provides solutions. Reversing the tide of government growth requires both changing our understanding of the role of government as well as recognizing that stronger impediments to government growth are needed.

Cross posted at

PS. This topic dovetails with the highly recommended recent Econtalk with Steven Teles discussing the "Kludgeocracy".

Monday, April 21, 2014

Highly Linkable

Let me axe you a question. Have you seen this yet? Welcome to the world of tomorrow!

Remember, its self-proclaimed goal is to be the most transparent administration in history. Perhaps he meant transparently self serving.

Bryan Caplan on Michael Huemer making the moral case for civil disobedience of unjust laws including lying about intending to and acting to thwart their existence.

Perhaps civil disobedience is all the Bag Man is up to as he compensates college football players. Somebody needs to do more for them it seems as even the NCAA is making some desparate changes.

The pace of change is moving rapidly now as I believe the tide of popular opinion is reaching a tipping point. Our side has the true moral high ground. Most people have chosen to ignore the arguments up until now, but that is quickly changing. I can hear so many beginning to say, "Well, I have always thought college athletes deserved more [clumsily define 'more']. It is just that until now [clumsily offer a justification for past injustices] . . ."

Fortunately, there is plenty of money in college athletics (Alabama's football program has higher revenues than any NHL team and 26 of 30 NBA teams) just as there is plenty of profit in non-profit universities.

And just for good measure in closing this sports-heavy link post, Northwestern's Pat Fitzgerald is in a battle with Kentucky's John Calipari to be the worst NCAA spokesman.

Saturday, April 19, 2014

The Truth About the Consequences of Limitations

Channelling Andy Rooney . . . Have you ever noticed how the large street signs for businesses remain long after the business it advertised has gone out of business? Sometimes the sign remains even if the building itself is destroyed? You ever notice that? You wonder why? Here's why...

Let me put the Ouija Board up before I stop trimming my eyebrows and start being insensitive and cranky. 

Now on to my answer.

There are at least two reasons at work in most communities, and they are related. First, putting up signs costs money. When a business operation ceases, the owners of the existing property probably hope to replace it with or sell it to a new business operation. That business will likely want a sign; so taking one down, which isn't free, just to put up another, also not free, is inefficient. 

Second, putting up signs costs money--no, I'm not being redundantly repetitive as I restate that again. In the second case I have in mind an artificial cost: a legal permit to put up a sign.

Because high-minded people don't like "ugly" signs that help people navigate to places they'd like to go including places they may not realize they want to go until they see the sign (but I digress), the high-minded people impose limitations on signs and billboards. This has the intended effect of reducing the signs that "blight" our view. The also has the unintended effect of encouraging signs to remain standing even after they don't serve an advertising purpose and are presumably maximizing blight including promoting false information... (Sorry, kids. That wasn't a sign for a Happy, Fun Burger. That was a sign for where a Happy, Fun Burger used to be.) 

I had been thinking about this phenomenon recently when I came across this Megan McArdle article on how limiting divorce may limit marriage in an undesirable way. She adeptly points out that limiting exit can limit entry, which means many couples will not take the generally beneficial step of formal marriage. 

We can say this about the sign permit effect: If you make signs and billboards difficult to put up, you'll make them difficult to take down as well. The unintended consequence of limiting signs coming up is that they will tend to stick around after their use life negating the purpose of the original limitation. We can generalize this to include things like marriage and employment, another issue McArdle brings up: If you make things artificially difficult, you risk discouraging the good versions and encouraging the bad versions of that thing. 

PS. One quibble with a point Megan makes in her last paragraph. She writes, "As conservatives are fond of noting, societies, like economies, are very complex organic systems. We do not understand them, much less control them with a few simple tweaks." I would say conservatives are fond of noting this when it serves their particular purposes. While libertarians recoil at the idea of tweaking society with near-ubiquitous consistency, conservatives are far too tolerant of tweaks in the "right" direction. 

Monday, April 14, 2014

How Big is the Middle?

Two recent Scott Sumner posts on inequality (this one and this one) got me thinking about this thing we like to call "middle class" as well as the two classes that bookend it, rich and poor.

The middle class has two interesting characteristics: just about everyone seems to think they themselves are in it, and no one seems to think a public policy action has a chance if it negatively affects it. As much as we might wish to dismiss these two bits of conventional wisdom, there are reasons to believe they are true. First off, they tend to be a bit self fulfilling as our self identification is a key factor to determine the groups to which we belong (you are who you think and say you are). Additionally, if most everyone thinks actions negative to the middle class will be defeated, then those actions will have a harder time finding support.

Second, most distributions that describe socioeconomic class tend to be shaped like the normal bell curve. In a standard normal distribution, just one standard deviation captures ~68% of the population. Two SD capture ~95% of the population. Just how much deviation from the mathematical average should we accept before we jump to the extreme categories truly rich and truly poor? To answer that we probably need a good definition of what are rich, middle class, and poor. Allow me to offer my suggestion.

My definition of socioeconomic class hinges on the scarcity of two good proxies for wealth: time and money. The rich are those who have no scarcity of money or of time. The poor are those who have a scarcity of both time and money. The middle class are those who have a scarcity of one or the other, but not both or neither. Obviously this casts most of American society in the middle class category. I believe that is a feature not a bug for reasons consistent with the arguments above among others.

Those in the middle class may and probable do vacillate between having money in relative surplus and having time in surplus. Consider this a bit of a middle-class trap. It takes a surge in one or the other to escape to the penthouse, but it likewise takes a dramatic turn of bad fortune to descend to poverty's doorstep. This coupled with the enormous absolute wealth America's middle class commands is a testament to just how good we have it.

To defend my definition I ask you to think about it from the standpoint of a person being asked to do something for a charity. A rich person will make time if the event is to their liking. Otherwise, they'll just write a check. A poor person has basically no options to offer help. A middle class person will tend toward doing for charity what they have the relative surplus in. Obviously as that changes over time, their charitable acts must change too. As an aside, this change presents a difficulty for the charities that grow accustom to a particular person's help. It also shows how poorly suited corporate charity initiatives are for large employee bases. A financial "suggestion" to donate to United Way or a plan for everyone to sing "If I Had a Hammer" with Habitat for Humanity are nice for the company PR ad but bad for the employees and by extension the charities they aim to support.

Sunday, April 13, 2014

Highly Linkable

I want to go to there.

We are so amazingly wealthy. Not only can we afford to use resources towards the manufacturing of superfluous jewelry; we can do so to the extent of using this magnitude of technology, craftsmanship in high focus in this case. I am not being sarcastic about affording it. Many manufacturers such as the one showcased here are truly profitable proving they improve upon the status and use of the world's resources.

The French labor unions are working hard to make sure nobody works too hard in France (or perhaps at all eventually--be careful what you ask for).

Speaking of unions and government interference in free-market labor, Ohio Republicans would rather the state subsidize one kind of non-employed workers than have them earn a wage.

Once we as a society realize that environmentalism is economics not religion, we will have advanced significantly from where we stand today. I took this article as a small, positive step in that direction.

First they came for the large fountain drinks . . . a lesson in bad scientism.

This one might be labeled fast and loose statistics applied to television, but it is pretty cool just the same. (HT: BoxScoreGeeks)

I look forward to reading Michael Lewis' Flash Boys, and I expect he'll pull some of the mystery out of high-frequency trading. But as Noah Smith skillfully points out, we just don't know if HFT is on net bad or good--too much remains in the shadows. Perhaps The Shadow knows, but the rest of us are in the dark.

As if we needed another example, Obama is a demagogue and a hypocrite. Thankfully, we have Mark Perry and Andrew Biggs to set us straight on the myth of gender-pay inequality. Unfortunately, they may have goofed on a calculation of the profit opportunity the assumed gap implies. Thankfully, we have Steven Landsburg to shore up the gap and improve still upon the argument. And finally, Megan McArdle offers thorough insight and reasoning on the issue.

Monday, April 7, 2014

It's Such a Fine Line Between Stupid and Clever

A common and easy mistake one can make is to rush to judgment on some issue and confuse stupid behavior with corrupt behavior. Either can look the same to an outside observer. The point of view one takes may simply be being shaped by the bias one brings to the situation.

To take two examples, consider Chris Christie in bridgegate and the NCAA in the student-athlete unpaid employee affair. I don't buy that Chris Christie is so dumb and unconnected as to have not known what was going on. And I also don't buy that the NCAA really believes the nonsense it espouses. But maybe that is just my bias against politicians and high-minded cronies. Still, I prefer to think that Christie is playing dumb without option (that is, he doesn't have any option but to play dumb, not that he is dumb and that's his only option) and the NCAA is crazy like a fox.

Yet, false conspiracy theories abound due to the mistake of always assuming smart people must be corrupt because the only other option is that they, smart people, acted dumbly. Maybe Obama really did believe Solyndra was a good investment and that the NSA was just playing Minesweeper ...

Bundled within all this are unintended consequences--innocence from corruption and stupidity. Case in point is what Megan McArdle brought up in her article which I linked to in yesterday's post. There can be perfectly legitimate reasons for things, especially emergent things, that have large and in some cases overwhelming side effects. Side effects that are unintended but look either stupid or cleverly corrupt.

Sunday, April 6, 2014

Highly Linkable

We're back from an unintended hiatus. Let's begin with some jokes one might overhear in the Lambda^3 house. (HT: Mungowitz)

The world is spinning fast for the NCAA. Northwestern players, et al. can unionize because they have been ruled as employees. If this stands, this potentially changes everything. No apple cart is safe from tipping. Of course, the NCAA isn't hesitating one moment to provide comic relief as events unfold. But Jeffrey Kessler may get the last laugh.

Before we leave the sports realm, the Box Score Geeks want you to remember that the NBA is not McDonald's.

Scott Sumner reflects on what he has learned from Fama and Lucas.

The state will even license con men (and women). Apparently, there is indeed no end to state licensure. I'm sorry, what did you say about the current unemployment rate? . . .

Speaking of employment problems, perhaps your potential employer is agreeing with your current employer not to hire you away. I've witnessed this type gentlemen's agreement in a couple of different situations. Megan McArdle assumes the case against it while, I believe, making more strongly the case why it is not as simple as it would seem. There are complexities here that legislation with its good intentions and unintended consequences may undesirably unravel.

Mike Munger has completed his Mungerfesto with the fifth installment. I give the overall piece a B+. Simply refining the presentation would elevate it to A-. Giving a more thorough treatment to how this is largely a second-best but necessary approach to our world's political economy problems given that the first-best approach is unrealistic (I believe this is his argument of direction versus destination) would make it A+.

I look forward to reading the new book from Max Tegmark recommended by Steven Landsburg. It is always fun to read material completely over one's head. If nothing else, it offers a humility we all should seek.

Speaking of humility . . . wow.