Market Power

Troubles for North Carolina Football

If this "money trail" is found out to be what some are implying, then file it under "non-price rationing."

Since the NCAA and state of North Carolina probes began in July, UNC also began its own investigation into potential academic fraud involving a tutor. Multiple Tar Heels football players have been suspended from games and practices this season, and Blake resigned on Sept. 5, less than one month after a Yahoo! Sports report revealed his former position as an employee of Pro Tect. In a statement, Blake stated that he decided to step down because his presence was becoming a distraction to the football team.

I've said it before and I'll say it again.  The problem with corruption in the NCAA is not the fault of agents.  It's the NCAA's own steadfast sticking to the "amateur" status of athletes in football and men's basketball while their member schools rake in millions of dollars.  As long as player are not compensated by an amount less than they generate in terms of revenue and donations for NCAA member schools, we will continue to see these stories pop up in the press.

Rush Interview on CNN

CNN's John Roberts interviews the members of the legendary Canadian band Rush during their current Time Machine Tour.

What stands out to me in this interview is two-fold.  First is the body language of the members, Alex Lifeson, Neil Peart, and Geddy Lee.  There is no leaning away from anyone else.  Each looks comfortable with his band mates and it's obvious that these three men are truly friends, not just band mates. 

Second is drummer Neil Peart's chattiness.  Anybody who is familiar with the band and Neil's books know that he is someone who sees himself as just another guy, but who is embarrassed by the adulation people show him because of his world-class drumming talent, not to mention his intellect that comes out in his lyrics and books.  When he finishes a show, he immediately gets in his bus and leaves the venue.  He values his downtime and his alone time and he usually lets his band mates do the meets and greets before shows.  But in this interview, it's as if he's becoming more comfortable in front of the camera.

Why Keynesian Stimulus Programs Don't Stimulate

According to Keynesians, stimulus moneys will increase income in a local economy, some of which will circulate in the local economy, driving even more income.  But major road projects generate business disruptions as well which offset the gross impact of the stimulus project:

The project, which is funded solely by the American Recovery and Reinvestment Act of 2009, is the largest stimulus project of its kind in Tennessee and was intended to increase employment, according to an online letter from Gov. Phil Bredesen. Sevier County-based construction company Blalock and Sons was awarded the $38,698,150 contract to widen Highway 66.

However, only one on-site construction worker has been hired since September, confirmed Tennessee Department of Transportation Project Manager Jennifer Stone, while local retailers have had to cut back staffing and decrease work hours because of disruption from road construction.

"We try not to really lay anyone off, but we have certainly had to reduce people's hours, and some of those people have gone elsewhere for work," Ware said. "As natural attrition occurs, we haven't hired anyone to replace them."

Read the whole thing.  The manager of the project says that once project is completed, he expects business to be even better than it would have been had the road project not gone forward.  That won't happen unless a. the road project drives more people to come through the city than would have otherwise occurred and/or b.  the road project drives more people to impulsively stop at one of the businesses along the route.

Via Instapundit

Study: Betting Markets Overestimate the Performance of Teams from Moist Climates Playing in Dry Climates

My grad school friend Dan Kuester is mentioned prominently in this article on betting spreads:

After reviewing seven years of point spreads -- referring to the margin of victory expected of the favored team -- and game scores, economist Daniel Kuester found that the point spreads overestimated the performance of visiting teams.

When teams from relatively wet climates traveled to drier locations to play, Kuester's study showed that wagers on the host team would have won about 57 percent of the time.

Now that Dan's spilled the beans, betting markets should incorporate this information provided it makes the rounds.

Damn Right It's Good to be the Cupcake

The demand for cupcakes - typically lower-level college football teams that will travel to an established program and offer up their hides in exchange for a big payday - has soared over the past few years, especially with the addition of the 12th game in the regular season schedule.  The results are expected:  the price of cupcakes has exploded.

On the other hand, SDSU officials say the revenue from such games is needed. Which is a big reason SDSU agreed to play another power-league team Saturday at Missouri. For playing the game, Missouri will pay SDSU $800,000. Same goes for next year, when SDSU has agreed to play at traditional powerhouse Michigan for $1,016,800.

I'm not convinced that SDSU is that much of a cupcake.  But maybe that's just the pregame jitters for me.

There's a paper in here for an entrepreneurial person willing and able to dig around for cupcake prices.  The prices of cupcake games should depend on the number of regular season games, the demand for the home team's games (which partly if not completely explains the $200,000 between the Michigan and Missouri payouts), and other factors.

College Corruption and the Role of Externalities

From the LA Times:

Given the money they generate — most of USC's $82-million athletic budget comes from its football program — it's understandable that the stars of major college programs come to feel as if they deserve more compensation than the free education and exposure they're receiving. That's a powerfully corrupting force, and it will inevitably prove irresistible to some young athletes. Nor does it help that infractions usually are discovered after the cheaters are gone, leaving others to pay the penalty.

The link in the excerpt goes to a screed written by some hack.  In any case, basic economics teaches us that when third parties bear the costs of an action, you get more of that action.

Forced Cartelization During the Great Depression

From George Will comes an interesting story about forced cartelization during the Great Depression.

With his responsibilities as a father of four, Maged should have shunned a life of crime. Instead, he advertised his criminal activity with a placard in his shop window, promising to press men's suits for 35 cents. This he did, even though President Franklin Roosevelt's New Dealers, who knew an amazing number of things -- his economic aides were not called a "Brains Trust" for nothing -- knew that the proper price for pressing a man's suit was 40 cents.

The National Recovery Administration was an administrative mechanism for the National Industrial Recovery Act of 1933, which envisioned regulating the economy back to health by using, among other things, codes of fair competition. The theory was that by promoting the cartelization of labor by encouraging unions, and the cartelization of industries by codes that would inhibit competition, prices would be propped up and prosperity would return.

Maged was fined $100 and ordered to do some jail time.  After three days in jail, he was released after which he complied with the federal government's order.

Of course they had more smarts than that of the citizenry combined.  FDR encouraged cartelization of labor and business to encourage economic growth.  He didn't know his economic principles which tell us that cartelization inhibits voluntary exchange and, thus, economic growth.  One of the reasons the Great Depression lasted so long was the government couldn't get out of the way.  Is that happening again?  I hope not, but I am not encouraged with what's going on in Washington.

Link via Martin Andrade.

Mankato-area Storms 9/15/2010

The summer of storms here in 2010 kept on giving spotters and chasers treats yesterday.  According to the forecasts from a day earlier, yesterday was supposed to be a rainy, but otherwise non-descript day in our area.  A low pressure system was forecasted to go to our south, taking its instability with it and leaving my area with a day of moderate to possibly heavy rain.  But as the day progressed, the low migrated further north than expected and the Storm Prediction Center put my area in a risk for severe storms.  The low did not disappoint.

I spotted two storms, one virtually right next to each other with only about 5 miles between their edges.  Both storms skirted Mankato, one to the east and the other to the west, and followed parallel paths towards the northeast. Storm 1, the storm that passed to the east, was photogenic because it had an ominous-looking shelf cloud out front followed by incredibly heavy rain.  Here are two pictures taken about 5 minutes apart.  Both are looking southeast.

I was not in an area that allowed me to see the updraft for this storm.  From my perspective, the updraft, where the really nasty, but photogenic, stuff would happen, is to the right of this picture and obscured by rain.  I didn't get in a better position because the other storm that I chosen to spot had developed a small hook echo observable on the radar.  So I traveled about 5 miles north and west and got in position as the storm came over the Minnesota River valley.

By the time I got into position, Storm 2 had crossed into the river valley and had developed the "mothership" appearance and an obvious wall cloud. 

The storm was too close to me at this point to entirely fit in the viewfinder.  The image above is looking due west and the following picture is looking south-southwest. 

I fully expected to see ET whipping out his iPhone to phone home as the mothership approached.  I even thought I saw Richard Dreyfuss hiding in the trees behind me.  The pictures don't do this storm justice:  this was an incredible-looking storm to behold.

When the storm passed due north of my position, I was about a quarter mile or less away from the wall cloud.  Here's what the wall cloud looked like as it passed by.

The wall cloud soon dissipated, but a new one grew almost immediately as the storm moved off to the northeast.

Soon after I took this picture, the NWS issued a tornado warning for the area in its path.  I was sort of surprised to hear the sirens because while it had an obvious wall cloud, there was no obvious sign of rotation to me.  I tried to follow it as it scurried away, but it seemed to pick up speed and I was running low on gas.  So I let it go.  What cowards these storms are.  They come and freak people out and then run away.

*I use the word "treats" because to my knowledge, there was no damage done anywhere in our area although there were a few reports of severe hail.

Yup. There's a Market for That Too

If you play in a high-stakes fantasy football league and your starting quarterback goes down, what recourse do you have?  If you're like me, you try to find a decent back-up through a trade or from the scrap heap.  But if you're more serious, you might want to get some insurance through FantasySportsInsurance.com.  

 The website has pictures of a baseball player clutching his knee.  It also shows Tom Brady after hurting his knee last year.  That omen particularly stinks for me because Mr. Brady is the quarterback for my FF team.

Anyways, this is one of those entrepreneurial ideas that never even crossed my mind (probably because I'm not that entrepreneurial).  But in retrospect, it seems like a product that some people would find useful.  So why not try to make a buck and offer those people something of value in return?  Link via Craig Depken.

Cash for Clunkers was a Clunker

No surprise here:

A key rationale for fiscal stimulus is to boost consumption when aggregate demand is perceived to be inefficiently low. We examine the ability of the government to increase consumption by evaluating the impact of the 2009 “Cash for Clunkers” program on short and medium run auto purchases. Our empirical strategy exploits variation across U.S. cities in ex-ante exposure to the program as measured by the number of “clunkers” in the city as of the summer of 2008. We find that the program induced the purchase of an additional 360,000 cars in July and August of 2009. However, almost all of the additional purchases under the program were pulled forward from the very near future; the effect of the program on auto purchases is almost completely reversed by as early as March 2010 – only seven months after the program ended. The effect of the program on auto purchases was significantly more short-lived than previously suggested. We also find no evidence of an effect on employment, house prices, or household default rates in cities with higher exposure to the program. 

That's from a new working paper at the NBER by Atif Mian and Amir Sufi.

Although it hasn't made the headlines like cash for clunkers did, there is a program giving tax incentives to homeowners who put more energy-efficient heating and air conditioning units in their homes.  My wife and I took advantage of the credits and replaced our nearly 20 year-old units.  We were going to replace them anyways, but we installed the units a bit earlier than expected.  Once the tax credits expire, the heating and air conditioning market will clunk like the automobile market did after cash for clunkers expired.