Market Power

Is Access to The Internet a Human Right?

Doug Mataconis on Egypt's decision to cut off internet access to its citizens:

The most recent events in Egypt caused some to ponder a question that, on its face, sounds ludicrous: Has society reached the point at which Internet access is a basic human right? Is this public outcry just 21st-century indignation – one born of a world where “social networking” is nearly always something that happens in front of a screen?

Only in a land of First World concerns could the lack of Internet access be considered a violation of basic rights. They have no bread? Let them eat Google.

That last point is something worth considering. The protests in Egypt aren’t just political in nature, there are also deep, ongoing economic problems in the country, most especially the fact that the cost-of-living for the average Egyptian has skyrocketed in recent years.  Like most nations in the Middle East, Egypt is far from a free market economy so when the people have economic discontent it quickly becomes political discontent. In the long run, I’d imagine Egyptians are more concerned about the cost of housing and the fact that there’s high unemployment than they are about whether or not they can access Facebook.

Is internet access a right?  I'd say "no" because the resources used to give us internet access are scarce, like those that produce "health care".  Saying that someone has a right to scarce resources means someone else has an obligation to give the same resources up without compensation. 

 

Why Are Tuesdays Slow Business Days?

Ticket prices are highest on weekends, on average, according to online travel agencies, fare trackers and airline pricing executives.

When's the best time to buy? Travel experts have long said Tuesday is when sales are most often in place, which is true. An analysis of domestic fares shows that Wednesday also has good—and occasionally better—ticket prices.

Here is the story.  I found this very interesting because in my retail and restaurant experience, Tuesdays were the slowest days of the week in the places I worked.  If this is a general fact, what explains it?

 

Math Whiz

What happens when an academic argument gets downright pissy?  HT to Mark Stratton for the title.

Sports Leagues as Coasian Firms

Sports leagues are often considered to be economic cartels.  In the US at least,  leagues determine who gets to own member franchises, what territories teams can represent, and how many teams are in the league.  

The textbook case of pure monopoly shows that monopolists restrict quantity and thereby can charge a price above marginal cost.  Similarly, the monopoly league theory of franchise location holds that leagues keep some cities open so that league members can extract maximum rents in stadium subsidy negotiations.  See Los Angeles and the NFL.

On the labor side, leagues have tried cartelization to monopsonize labor markets for playing talent.  Successful forms of this type of cartelization are the NFL's Rozelle Rule and Major League Baseball's notorious Reserve Clause.  The NCAA's transfer limits in major college football and basketball monopsony power over the players on their teams.  

Unsuccessful, at least in a legal sense, forms of cartelization were MLB's Collusions 1, 2, and 3 in the mid 1980's.  Does the American Needle v. the NFL SCOTUS case belong in the cartel pile?  

Economics and league history thus tell us that sports leagues are cartels to some extent.  But cartelizaition does not explain why sports leagues exist in the first place.  Sports leagues can exist without economic cartelization - members just won't be as profitable.  So there must be another reason for why leagues exist.

An explanation that may fit the necessary condition for why leagues form comes from Ronald Coase's (1937) Nature of the Firm paper.  Coase argued that firms, centrally-directed collections of resources, form as a way to lower transactions costs.  They facilitate the costs of searching, information gathering, bargaining, and enforcing contracts.  Firms form to lower the costs of making transactions and thus provide value to their customers.

Where this transactions-costs-lowering argument seems to fit the necessary condition for league formation is in the setting of the various rules that define a sport.  For example, games can be played when the playing rules are unknown beforehand and determined on the spot, but this will generally be uninteresting to fans and frustrating to players.  One can make similar claims about playoff determination and champion definition.  And don't forget about setting a playing chedule.

Calvinball may be fun to read about in comics, but it would be frustrating to play and watch.

I know I'm not the first sports economist to think of leagues as rule-making bodies necessitated by the "peculiar economics" of sports.  Rod Fort notes this function of leagues in his Sports Economics text.  But I don't know of an association with Coase's Nature of the Firm.

Getting Ready for the Draft

The NFL draft is approaching.  While many of us away from the sport don't think much of, nor appreciate, the preparations the draft hopefuls make, the St. Louis Post-Dispatch has the story of two former Mizzou hopefuls as they work their asses off to make it to the NFL.  And like anything with value, it's costly.

Believed to cost around $40,000 to $50,000 a player between the fee for the program itself, meals, the two-bedroom condos with which each is furnished and transportation — in Gabbert's case, the use of a Chevy Suburban — the once-exotic concept now has become a virtual must.

"Absolutely," Dogra said. "There's so much at stake for these players in the NFL draft, and each draft slot can potentially be worth millions of dollars. … So typically you don't want to leave any stone unturned."

 

 

A Discussion with a Thoughtful a Student

The following came from a discussion I had with a student after I had defined central planning and markets.  It is, of course, paraphrased:

Student: Aren't firm's basically centrally planned units?

Me:  Yes.  So is a household.  But a firm typically doesn't oversee and plan an entire market.  In fact, you can argue that I am centrally directed from here (motions to head).  So markets are collections of centrally-planned units.

I, Toaster

The result of Mr Thwaites’s toaster-building effort was, of course, a product that no modern Brit (or modern anyone) would use, and much less purchase: It won’t toast.  Yet Mr Thwaites took nine months to build this worthless, and likely dangerous, toaster.  Assuming that he worked on his toaster project only one hour weekly, he spent a total of 36 hours building his toaster.  If his market wage is that of the median British worker’s wage, Mr Thwaites spent 103 times more time building his own toaster than he spent working to earn the income that he used to purchas the other toaster from a retail store.  103 times!!

That's Don Boudreaux at Cafe Hayek.  Read the whole thing, as they say.

One of the first things I ask my Micro Principles students is how many know how to make a pencil from start to finish.  I have never had a student, even one that's kidding, raise his/her hand.  Hell, it only costs 50 cents or so to buy one pencil at the most expensive place in town (the college bookstore).  For the minimum wage worker (lucky enough to have a job), that works out to working a little over 8 minutes to earn enough cash to buy a 50 cent pencil.  This question is, of course, inspired by the short and sweet I, Pencil.

Soaring Food Prices

So, food prices are soaring (link via Glenn Reynolds).  What's the cause?  Loose money?  Misguided stimulus spending?  Increased demand for food?  Decreased supply?  Misguided government programs (am I being redundant)?  All of the above?

Here's one interesting tidbit from the article.

Higher oil prices are also pushing up the cost of food — in two ways. First, the added shipping cost raises the delivered price of agricultural products. Higher oil prices also divert more crops like corn and soybeans to biofuel production, further tightening supplies for livestock feed and human consumption. Conley estimates that more than a third of the corn produced in the U.S is now used to make ethanol.

I don't have the answer to why food prices are soaring. But long-time readers know I am a critic of federal subsidies, protection, and mandates for ethanol (the trifecta of government support).  It would not surprise me if the price increases are partly due to the US government's hand-picked solution to our energy problems.  Keep in mind what a wise man once said: "there are not solutions, only trade-offs."

Self Interest vs. Selfishness

One of the things I try to impress upon my students in my Principles of Micro and Sports Econ courses is the difference between self-interested behavior and selfish behavior.  When a person acts in his self-interest, he is making a choice because he feels he'll be made better off.  But when a person acts in a self-interested manner, he can intentionally make others better off as well.    In other words, a self-interested person A may take another person B's well-being into account, but A does so because it makes A better off.  

On the other hand, when a person acts selfishly, he does not take others' well-being into account.  He makes choices because they make him better off, others be screwed.

Consider a basketball player who needs one more point to be the all-time scoring leader.  It's his last game and if his team wins this game, they will be champions.  They are down by 3 and there is 10 seconds remaining.  If the player looks only for his own shot merely to get the scoring record, then he is acting selfishly.

If, on the other hand, he passes the ball to open teammates with better shots than he has, potentially sacrificing the record for the better of the team, he is acting self-interestedly and not selfishly.

"The Ultimate Beer Dispenser"

The things the human mind comes up with to solve delivery problems never cease to amaze me.  From Doc comes a link to a truly remarkable beer dispensing machine.