Market Power

Missouri Tiger Football, A History in Pictures

A fella who goes by the handle of "Crazy Joe Devola" on Tigerboard has assembled this slide show containing dozens of photos from Tiger Football history. Very nice work.

Drugs are Good, M'kay. But Profits are Bad

From a Washington Post survey on pharmaceuticals and the companies who develop and make them:

By an overwhelming majority, Americans believe prescription drugs significantly improve their health and quality of life, but almost as many say the companies that make them put their profits ahead of the well-being of consumers, according to a new poll released yesterday.

The survey by the Kaiser Family Foundation found that 78 percent of adults say prescription drugs make a "big difference" in people's lives, and 91 percent believe drug companies contribute significantly to society by researching and developing new drugs.

But 70 percent think the pharmaceutical companies that produce them are more concerned "about making profits" than developing new drugs, according to the survey.

How did those shoes get on your feet (assuming you are wearing shoes at this time)? Did those shoes get on your feet because some benevolent government official didn't want your tootsies to get too cold on this last day of February, thereby issuing you a pair of shoes? Or did some shoe company, employing people you probably will never meet, produce them for you? How did the shoes get to your local store? Did some trucking company or some air freight company ship them to a store near you or did some other benevolent government official, knowing full well that you'd need to have shoes this morning, direct the shoes to be sent to the store? Why did the store sell you these shoes? Did that store provide those shoes for you because it wanted to be happy? The answer is no. What was that thing that each of the companies who handled your shoes responding to? That "thing" was thee ability to make profits - and it is the ability to make profits that allowed you to obtain the money necessary to buy those shoes.

Of course the drug companies are seeking profits. That's why they are spending so much to develop drugs. If we limit their profit-making ability, we blunt their incentives to do research and develoment. The more we blunt their ability to seek profits, the less-satisfied people will be with the medicines they acquire.

Non-Price Rationing

John Palmer at the Eclectic Econoclast has this post on subsidized medicine and this post on socialized medicine (medicine "subsidized" by Balco). What happens when the price of a service gets lowered below its market-clearing level (usually to make it more affordable for those with low incomes)? Many things develop, one of them being a waiting list.

Vikings Training Camp

Each August, the Minnesota Vikings hold their training camp on my campus. Last year, the Vikings ownership shopped training camp around in an attempt to get public funds to help cover the costs of training camp. Several cities from around the region set bids, but it came down to Sioux Falls, SD and Mankato. For awhile, it seemed Mankato would lose the camp to Sioux Falls. What happened? From an October 16th St. Paul Pioneer Press article:

The Vikings were strongly considering a more favorable bid from Sioux Falls, S.D., but they heeded the warning of Minnesota Gov. Tim Pawlenty, who told owner Red McCombs last October that the team's chances of securing a new stadium would be hurt if they took training camp out of the state.

Fast forward to October, 2004. The Vikings higher-ups were pleased enough with what they got out of Mankato that they committed to 3 more years. Mankato officials are also pleased. From the same article:

Mankato stepped up and covered the Vikings' estimated expense of $500,000, and Mankato agreed to help the team generate other revenue streams. That decision paid off, said Paul Wilke, president of the Greater Mankato Training Camp LLC.

He said a study showed that the economic impact in Mankato jumped from $3.2 million last year to about $5 million this year, and attendance increased from 30,000 to 71,000. Wilke added that the response from his community has been overwhelmingly positive.

"This is the best training camp we've ever had," said Wilke, general manager of the River Hills Mall in Mankato. "We've built a strong relationship with the Vikings. We're very excited about having three more years, and hopefully longer."

But yesterday's Mankato Free Press had this to say (paid subscription req'd):

Officials with the Greater Mankato Training Camp LLC, which owes Minnesota State University $50,000 in rent payments for last year's training camp, met privately with Gov. Tim Pawlenty Thursday to discuss some of the financial challenges the group is facing in hosting the Vikings each summer.

and this:

But the local organization still owes $50,500 of the $103,500 in rent it had agreed to pay MSU for the use of its facilities for the 2004 training camp. The contract between the LLC and MSU called for the full rent to be paid within 60 days after camp closed Aug. 19. The group said this is the last bill to be paid.

First off, why do the Mankato Training Camp folks have to ask the state for the cash? Attendance at last year's camp was higher than the previous summer. One of the reasons attendance at the camp increased was that the Chiefs and the Vikes scrimmaged at the Vikes' camp last summer. The summer before, the Vikes scrimmaged at the Chiefs training camp. I made several trips to my office during training camp and walked through some of the parking lots used by fans. Other than the Vikes-Chiefs scrimmage, I didn't see many out-of state license plates at the camp. Why, then, would the state want to buck up and help out if the training camp simply redistributes spending within the state.

Secondly, if this is such a boon to the local economy, why can't the Mankato Training Camp folks generate the private revenue to cover their costs? If this is the best training camp they've ever had and if the "economic impact" was truly $5 million, why couldn't they cover their rental payments with MSU on time?

Perhaps the training camp is not lucrative enough. A sponsorship for the training camp cost $25,000 last year. If a business did not think it would receive at least $25,000 additional profits as a result of the camp, then it would have no incentive to buy a sponsorship.

There is a potential free rider problem. The owners and employees of local bars, restaurants, and hotels are the primary beneficiaries of this local "economic impact". If Jake's Pizza (on the Minnesota State campus) thinks that (for example) the downtown bars and restaurants will kick in the requisite funds, then its owner doesn't need to. If all local businesses think like this, then it will be tough to come up with the cash. In such a case, if public funds are to be sought, the proper government to see for help is the local government.

So why do the training camp officials need government help? Probably because the public benefits of training camp aren't as lucrative as they are hyped up to be.

To Use or not To Use Day Care. That is the Question

My better 3/4ths went into work early this morning, so I took my durables to "school" (i.e. daycare). My 4 year-old durable went into his classroom first and then I walked my now 3 year-old durable to his classroom. On the way back, my eldest was the leader in the "potty train", a line of 4 year-olds getting ready to go to the can. They left in a big hurrah... lots of noise and activity. One "teacher" was left in the room after the rest had left. She was exasperated. I asked "Is it always like this?"

"Yes," she replied. "My friends ask me 'Why don't you get paid $20 an hour to work here?' "

"Because," I thought to myself, "if you and the rest of your coworkers were paid that much and gave the same sort of care, your 'students' parents wouldn't use the service." The reason we use daycare is because it is our lowest-cost form of caring for our kids. My wife is a pharmacist and I am an assistant professor, and the opportunity cost of one of us staying home and caring for our kids during the day is very high. But if our daycare costs tripled or quadrupled, then one of us (probably me) would stay home with the kids.

A second reason why day care workers are low paid is because many people have the requisite skills to work in daycare - the supply of potential workers is high.

The Helmet Project

Here is a site that contains a whole bunch of illustrations of American football helmets from various professional and collegiate teams. I got a big kick out of what I saw.

Labor Disputes in Sports

I posted this over at The Sports Economist, but students in my Collective Bargaing course and former students from my Sports Economics course may find it interesting as well.

As I mentioned in a previous post, strikes are weapons wielded by unions that are designed to impose costs on firms and lockouts are weapons yielded by firms designed to impost costs on unions. In theory, when times are good and demand is high, the strike imposes high costs on the firm. When times are bad, the lockout can impost high costs on the union because alternative sources of income are not as readily found during such times, all else equal.

The March 2004 issue of the American Economic Review had an article by Martin Schmidt (Portland State) and David Berri (Cal State Bakersfield) (it's a recent paper, so you either have to visit your local college library or you have to buy the paper) that examined the impact of labor strikes on the demand for sports in the NHL, NFL, and Major League Baseball. In the paper, Schmidt and Berri cite papers that show that strikes do impose costs on firms. For example, they cite a 1991 Industrial and Labor Relations Review paper by Richard De Fusco and Scott Fuess (which I have not read) that finds that, in the airline industry, strikes tend to redistribute wealth from shareholders of struck firms to shareholders of firms that are not having a labor dispute. What about sports? How do fans react when a labor dispute ensues?

Here is the conclusion to their article:

Our analysis offers historic evidence that suggests the consumers' threat has not been credible. In general, none of the events we examined had a permanent impact upon attendance in these sports. In fact, in almost all instances attendance immediately rebounded in the year following the labor conflict. This explains why strikes and lockouts are happening with increasing frequency in professional sports. If the levels of attendance in the postconflict era are equivalent to the preconflict time period, only short-run costs are imposed upon the conflict partcipants. Given the millions at stake in each dispute, our analysis would indicate that labor conflicts that disrupt the regular season of these sports are likely to occur again in the future.

If this is the belief of the NHL, this helps explain why they are taking a hard stance.

Happy Birthday, Jared Miller

My youngest son, Jared Miller, was born three years ago today. Happy birthday, big guy!

Economist Earnings

Last night, I wrote this post about economist wages and linked to this Wall Street Journal article. The article had some surprising figures in it regarding the pay of economists. The one that surprised me the most, as well as some commenters to my original post, was the following passage quoted below:

According to the Bureau of Labor Statistics, salaries for economics teachers, a category that includes professors, averaged nearly $140,000 a year -- based on a 52-week year -- in 2003, making it one of the highest-paid professions that the government tracks.

I'm not sure where this $140,000 comes from. According to this page at the Bureau of Labor Statistics web page, the average post secondary economics teacher earned, on average, $72,300 (based on 2,080 hours worked for a full year [52*40]). According to the Occupational Outlook Quarterly from Winter 2002-2003, the average post-secondary economist earned $62,820 in 2001 (page 10 of the pdf document, bottom right-hand corner).

Slavery and Capitalism

Is today's US wealth attributable to slavery in the early history of our country? No. Indeed, Don Boudreaux argues here that not only is this wealth due to capitalism, capitalism led to slavery's ultimate demise.

Thanks' to Newmark's Door for the link.