Market Power

You Can't Keep a Good Man Down

So, King had gall bladder surgery yesterday and he wrote his first blog post since the internal invasion.

Many thanks to all of you. I just took the most tiring, most exciting 10-minute, 150 foot walk ever taken by this human being and found I had a wire for my laptop here. I am shocked beyond words at the outpouring of friendship shown me the last few days by you all on the comments, in other posts and people who've come by the hospital so far. I'm a little too weak to do lots of blogging, so this is all for today most likely. I'll tell you the rest of the story sometime. But when I tell people that virtual friends can be just as vital as those in real time, your comments, thoughts and prayers will be Exhibit A for the prosecution. God blesses me with your friendship.

Yeah, but he's cursed you with blogging fever!  But I'm damn glad that you're doing better.  Now get some rest, dadgummit! :-)

Dennis Coates on Stadiums

Dennis Coates has written an outstanding opinion piece in the American on public subsidization of sports.  He nicely frames the subject and presents evidence on pro sports' impact on local economies, including the external effects of sports.  The whole piece is worth a read, but I'll post the concluding paragraph to whet your appetite.

Of course, even if the benefits of stadiums and arenas cover the subsidies, the subsidies still may not be sound policy. First, there may be enormous variation in the distribution of the consumption and public-good benefits. It is clear that not all citizens in a community benefit equally from the presence of professional sports franchises in their city. Indeed, because the tax revenues used for the subsidies are often generated from lotteries and sales taxes whose burden falls disproportionately on the poor, while the consumption benefits go mostly to relatively wealthy sports fans, the net benefits are distributed regressively. Second, we should consider the net benefits to the community of alternative uses of the funds spent subsidizing sports facilities. Good policy means using the money where the net benefit is greatest, not simply where the net benefit is positive. That’s something state and local governments should keep in mind before pledging millions of dollars to fund the next new stadium project. And it’s something Congress should remember when evaluating the future of U.S. tax policy.

HT to Tom Kirkendall

Get Well, King

King Banaian is in the hospital.

King is in the hospital at this time and won't be blogging for a while. We'd talked Saturday morning - he'd landed in the hospital then with some stomach problems. He's on a restricted diet so stomach issues cannot be ignored. He was feeling better and they could find no source of the problem. He came to the Twin Cities to do his afternoon radio show, drove back to St. Cloud only to return to the hospital on Saturday night.

Tests run today indicate his problem is his gall bladder. He'll wait for surgery because he is now running a fever and having heart palpitations. His St. Cloud blogging buddy, Gary Gross, has information here.

As of now, surgery is scheduled for Tuesday morning. King has received pain meds. I will keep readers posted. In the meantime, any thoughts and prayers for King and his family are welcome. Any comments you post will be forwarded to King's family. Thank you.

That's from his co-blogger, Janet.  Get well, King.  Your fellow MnSCU economist and friend, along with his family, send you and the rest of the Banaian crew the best.

Update: Gary notes King had surgery on his gall bladder this morning and is recuperating.  That's good news - not that he had to get sliced, but that he's recuperating.

Collected Advice for Economists, Young and Not-so-Young

There is advice for teaching Principles courses and for writing letters of recommendation that you may prefer not to write, but that you must.  Via the Door.

Allan Sanderson: Consider the Options

Cross posted at TSE

Allan Sanderson tells his readers that TANSTAAFO (Olympics, not lunch).

Whether to support the Games themselves or merely the city's official bid, the latter carrying a price tag of $50 million to $100 million, one hears that "only private money" is underwriting those activities; no tax dollars will be spent. "Private" implicitly refers to donations from corporations and wealthy citizens. However, in jargon that students learn on the first day of Economics 101, virtually all expenditures or allocations have an opportunity cost, whether it be for a firm or family.

If Boeing, Sears, Motorola or McDonald's gives $1 million to help finance our Olympic bid, that is $1 million that does not get returned to stockholders as dividends or plowed back into the company for new projects and production. In addition, that is $1 million that does not, then, support an exhibition at the Field Museum, a new gallery at the Art Institute, or an after-school youth program.

When I sit down each December to write out checks to local, national and international charities and other non-profit organizations, I am implicitly choosing how to allocate, say, $2,000 among various groups and activities. The slice that goes to WTTW Ch. 11 doesn't go to the Chicago Coalition for the Homeless or the American Cancer Society—or to the University of Chicago. It's still just $1 million or $2,000 no matter how a corporation, a wealthy benefactor or I cut it.

There is no free lunch in this world and no free Olympic Games either.

Via Stephen Karlson.

Should Cheerleading Be Banned in Cricket?

There is a new cricket league that has high hopes of bringing cricket to a wider audience.  But it's not without controversy.

Cheerleaders are taking Indian cricket by storm, but some are wondering if this conservative South Asian nation is ready for dancers with bulging breasts and gyrating bellies parading in packed stadia.

Many foreign cheerleaders have been imported to India with this month's inauguration of the India Premier League (IPL), a shortened form of traditional cricket that transforms the game into a more glitzy U.S.-style sponsored sport event.

But some outraged politicians say it is an affront to Indian culture while a few of the cheerleaders themselves complain lewd comment and insults from spectators is making their job a misery.

Here's the story.  Here's another story.  I've recently wondered if culture, like the economy or a language, is to what extent a culture should be actively managed by government.  I'm no anthropologist, but it seems that a region's culture is the long-run accumulation of practices, traditions, etc. that came about little by little for this reason and that.

HT to the comments at this TSE post.

Hop Head IPA, The Sequel

4/24/2008 This is my second go-around at making this recipe from Midwest Homebrewing Supplies.  The only difference between this batch and the first batch is that I am going to dry hop this batch.  I bought a stainless steel mesh tube especially designed for dry hopping that fits through the top of a carboy.  I didn't dry hop the last batch because I tried using a mesh bag with marbles in it (to help sink the hops to the bottom of the carboy), and that was too much of a pain.  Dry hopping this time around should be much easier.

Ingredients:

1. 9.3# Gold LME
2. 4 oz Aromatic malt
3. 12 oz Caramel malt 60L
4. 8 oz Victory malt
5. 1 oz Chinook alpha = 13% (boiling - 60")
6. 1/2 oz Cascade alpha = 6.3% (boiling - 45")
7. 1/2 oz Centennial hops alpha = 9.5% (flavor - 30")
8. 1/2 oz Cascade hops alpha = 6.3% (flavor - 20")
9. 1/2 oz Centennial hops alpha = 9.5% (flavor, aroma - 10")
10. 1 oz Crystal hops alpha = 4% (aroma - 5")
11. 2 oz Cascade hops alpha = 7.4% - whole leaf (dry hop)
12. 1t Irish Moss
13. White Labs California ale yeast (#WLP001)
14. Culligan pure water (bought at the local HyVee)
15. Priming sugar (3/4 corn sugar)

O.G. 1.088 - higher than before.

I heated 2 gallons of Culligan pure water to 160-162 degrees and added the cracked specialty grains, in a fine mesh bag, to the water.  I added enough room-temperature Culligan water to cool the mash to 154 degrees.  I turned the burner on my smooth-top range down to 2.5 and I held the mash at 154 degrees for 30 minutes.

During the mash, I heated approximately 2 gallons of sparge water to 170 degrees.  Holding the dual burner on my smooth top range held the water at 170 degrees until I was ready to sparge.

After sparging, I took the wort from the burner and added the malt extract.  I brought the wort to a boil, added 1 ounce of Chinook hops, and boiled for 15 minutes.

I added 1/2 oz Cascade at this time and boiled the wort for another 15".

I added 1/2 oz Centennial at this time and boiled the wort for another 10".

I added 1/2 Cascade at this time and boiled the wort for another 5".

I added the Irish Moss and placed the wort chiller in the boil to sanitize it.  I boiled this for another 5".

I added 1/2 oz Centennial and boiled for another 5".

I added 1 oz Crystal and boiled for another 5".

I took the wort from the burner, placed the hop bag in a strainer and let it drip. I then ran cold tap water through my wort chiller to bring the wort to 75 degrees.  I strained the wort through a strainer-funnel combination, added enough water to make 5 gallons, took a specific gravity measure, aerated the wort by shaking the carboy, pitched the yeast, wrapped my carboy in swaddling clothes, capped it, and placed it in my dining room.

Update:  4/29/2008 - A nice kraeusen formed by the 26th and there was obvious activity in the wort, but there were few bubbles in the airlock.  I pushed down on the carboy cap and bubbles started coming out of the airlock, and that's when I realized I had a bad seal.  I quickly sanitized a rubber carboy plug and another airlock and switched the cap for the plug.  I will have to wait to see if the bad seal or the replacing of the seal negatively affected my brew.

Update:  5/02/2008 - I racked the brew to the secondary this morning.  The Sp. Gr. measure was 1.012 and the brew tasted good.  I put approximately 1/2 oz whole leaf Cascade hops in my brew infuser and 1/5 ounces in a sanitized hop bag before racking.  I had hoped the infuser would hold all the hops, but this batch of brew is so hoppy that there wasn't nearly enough room for all the hops.  So I had to put the rest in a nylon hop bag. 

I had a difficult time fitting the hop bag through the top of the carboy but, with enough muscle and the use of a brewing thermometer, I was able to stuff it in.  The rest of the racking went well.

Update 5/08/2008:  I bottled the brew this morning.  I added 3/4 cup corn sugar to 1 cup Culligan drinking water, mixed, and brought the mixture to a boil.  I boiled it for 5 minutes and cooled the mixture with an ice bath.  I added the mixture to  the bottling bucket and siphoned the beer to the bucket.

Sp. Gr 1.012

The beer had a very hoppy aroma and tasted snappy, although my mom made a face when she drank some of the sample I took for the hydrometer reading.  I made a face, too, when I sampled the brew

I netted 40 12 oz bottles and 3 22 oz Bombers.

Dry hopping posed no problem.  My brew infuser slipped right out of the carboy and the remaining hops, in a hop bag, came out with a little elbow grease. 

Typepad Featured Blog

Market Power was recently listed as a Typepad Featured Blog:

Featuring “selected musings by an Academic Economist on the power of markets”, Market Power takes an interesting twist with many of its posts: it relates economic theories to sports. This makes for interesting reading, as you’ll see in subjects such as Globalization and Soccer, The NFL Salary Cap and an Incentive to Not Win and – just for you, Chicago – a PDF that documents the Empirical Analysis of the demand for White Sox and Cubs tickets. It’s not all economic theory, though - there are fun posts offering such treats as a recipe for Buttermilk Fried Chicken so you can chew on more than numbers for a while. Downloadable podcasts and PDFs, along with links to related blogs and studies, round out the collection of thoughts and opinions.

Ah, and don't forget the beer recipes.  It are go good with pizza!

Tyranny of the Market

I finished reading Joel Waldfogel's Tyranny of the Market where he explains why, contrary to what some writers (most notably Milton Friedman in Free to Choose) claim about market economies, "you can't always get what you want."  His thesis is that because of fixed costs, some markets are "lumpy," and people with unique tastes won't be able to get the goods the want unless there are a sufficient number of consumers available in the first place.  In a way, Waldfogel's book is the antithesis of Chris Anderson's The Long Tail.

It's instructive to look at the freest of free markets: the textbook "perfectly competitive" market, summarized by the demand and supply diagrams.  At the market price, there is almost always a subset of consumers who do not obtain the good.  Consider the following diagram.

Any consumer willing to pay at least $30 gets the good.  The consumers represented by line segment 3 to 5, those not willing to pay at least $30, do not get the good.  The market does not satisfy everyone, just those with maximum willingness-to-pay of $30 or more.  Other market structures with less competition result in fewer customers getting served.

Now I know that Waldfogel describes certain segments of a population with particular tastes, not a group of people that can't get the good because of insufficient willingness to pay.  My point is that not everyone is served by a market.

But that's really not the point when evaluating markets and evaluating whether they are "tyrannical."  In markets, people engage in trade with one another when it is mutually beneficial.  Markets per-se do not tend towards tyranny because of the voluntary nature of trade.  This is not the case with many government actions*, which involve imposing one group's will on another.

But in principle, Waldfogel's short run thesis is correct.  Not every person gets served, nor every group.  But over the long run, technological improvements bring products to underserved groups.  In fairness to Waldfogel he does admit this.  Indeed, Bryan Caplan notes his experience with a certain underserved market:

Now just last week, the market answered my longest-standing unrequited demand. Nineteen years ago, I got Bernard Haitink's 1988 performance of Die Walküre for my high school graduation. Eight years later, when I had the funds to complete my Haitink Ring cycle, it was impossible to obtain. Even when the internet multiplied my options beyond my youthful imagination, no one was selling Haitink's Ring.

Until... last week, when I did another seemingly quixotic search on Amazon, and found that EMI had re-released the entire tetralogy (here, here, here, and here).  To be honest, I'm so sentimental about this performance that I can't tell if it is a great recording.  But I am sure that it seems great to me, and is infused with nostalgia.

If I were like Waldfogel, I guess I would harumph: "Nineteen years?  It's about time!"  But that's not me.  I'm truly grateful that the market would dig up this obscure recording and mail it to me for under half the inflation-adjusted price I would have paid back in 1989. If that's your idea of "tyranny," what would count as Utopia?

And Doc writes:

I have moved about a thousand times. Each time I have bought new shower curtains and new shower-curtain rings. You know what? Every single time, the number of rings in a standard package has exactly matched the number of holes in the shower curtain. Amazing co-ordination, wouldn't you say?

I am an avid Missouri Tiger sports fan, having spent over 9 years living in Columbia.  In Minnesota, there are no radio networks that carry Tiger games and rare are the times that Tiger games are on the telly, at least up here in the Northlands.  But thanks to Yahoo!, DirecTV, CSTV, and other broadcast media I can follow pretty much any Tiger sports team at any time.  Thanks to my internet provider and the good folks who made Firefox available, I can keep up with the Tiger news the second it hits.  20 years ago that would not have been possible.

So Waldfogel overstates his case, and that's apparent from the title of the book.   Markets are not like people.  Markets are where buyers and sellers voluntarily come together to trade.  Markets cannot be tyrannical.  People can be and are tyrannical in market transactions, but they can be and are tyrannical in government affairs.  Waldfogel argues for government subsidies to help underserved populations.  Since subsidies must be funded by taxes, this involves substituting market outcomes with government outcomes.  Will this result in a net decrease in tyranny?

*I am in no way advocating some kind of anarchical state.  I do believe that government involvement is necessary, for example in the area of defining and enforcing private property rights.  But I tend to get a little cross-eyed when government micromanages private affairs.

Dentists Getting Involved in Politics - Keeping Monopoly Power Via Public Action

In a common refrain, potential competitors in a marketplace are being attacked by incumbents using the "we need to keep them out to keep our consumers safe" argument.

The proposal would change state law to allow for “oral health practitioners” — dental hygienists who would be trained under a new master’s degree program that would be offered by the Minnesota State Colleges and Universities system. After passing state exams and receiving their license, oral health practitioners would be able to perform some of the duties that can now be done only by dentists.

The Minnesota Dental Hygienists Association and other supporters of the plan say it would alleviate a shortage of dental care in rural Minnesota and among low-income groups while reducing the cost of dental care. But the proposal has run into intense opposition from dental associations that insist the original legislation was potentially dangerous and an unnecessary change in the way dental services have traditionally been provided in America.

But, you see, it's all about customer care and the quality of the product.  But no mention is made of the dental associations' attempt to maintain a measure of market power by the heavy hand of government.  Dental hygienists are trying to knock down a barrier to entry so they can enter the market and compete with dentists.  This means lower prices and wider-ranging and better service.  But it also means lower profits for the incumbents. 

So the dentists "get involved" via their lobbyists in the name of quality, although I have no reason to believe that allowing competition will actually *decrease* the quality of dental care that's available.  It is no more than "getting involved" to direct public policy for private gain.