Market Power

Winter Rhetoric and Winter Reality

Here in Minnesota, we are in the midst of a, well, really cool winter storm.  I haven't watched the Weather Channel much in years - too many commercials and they, like so many media folks, use rhetoric that is too sensationalized.  I want a show with useful information, but too often I get commercials and low-grade entertainment.  But I imagine their forecasters are using the words "colossal", "massive", and "violent" to describe the storm.  I also imagine they are using words like "socked" and "slammed" to tell viewers what the storm is doing to those of us experiencing it.  You'd probably think we were hunkered down in our igloos, shivering around a candle.

We do that in July.

Meteorologically speaking, the sheer geographic coverage of the storm makes it a beast.  But in terms of impact, it's not that bad at all.  We had 6" of snow at my house last night and another inch throughout the day.  When the plow guy came this morning to plow out my driveway. I went outside to talk with him wearing my omnipresent Mizzou hoodie, shorts, and my Gore Tex shoes - but no socks.  It was about 27 degrees or so and there was no wind to speak of.  I wouldn't want to traipse around in the snow for hours on end dressed like that, but wasn't bad at all to have a 5" chat,

The roads were slick last night and today, but nothing a hearty northlander can't handle if he's careful.  I spent the day with the boys sledding on the growing pile of snow across the street and piling up snow into two snow forts on our patio.  The boys and I also had a snowball fight.  I won.

So rather than use terms like "slammed" etc., let's just say we had a nice, playful snow.  A perfect Christmas present.

Conspicuous Consumption - A Gold Porsche

Is this what Veblen imagined whenever he thought of conspicuous consumption:  a Porsche outfitted with 40 pounds of pure gold?

Source.

A Beast of a Storm

The folks here in Mankato talk almost reverently about the Halloween blizzard of 1991.  A multiple-day event, that storm dumped almost 30" of snow in the Minneapolis-St. Paul area.

We are now experiencing the beginning of a storm that could rival that storm in snowfall when all is said and done.  Here's the current National Weather Service map with all the advisories in the country.

Tornadoes and ice and snow!  Oh my!  This beast is spawning severe storms and tornadoes down in Texas, flooding (or expected to cause flooding) in Texas, Arkansas, Missouri, and Illinois and all types of icy precipitation in the central US.    All that color in the middle of the country is because of this one storm.  The entire state - the entire state -  of Minnesota is under either a winter storm warning or a blizzard warning.  The entire states of North Dakota, South Dakota, Nebraska, and Wisconsin and about 75% of the states of Kansas and Iowa are under some sort of wintry weather advisory.  This storm is a beast.  A beast!

I love it!  If it's got to be winter, at least let it snow.

The weather folks are forecasting at least a foot of snow here in south central Minnesota.  So far we've gotten just short of three inches of the white stuff here in Mankato.  But the snow is coming down heavily and some flakes are the size of quarters.  Plus it's forecasted to go on for the next 60 hours.

But like we here in the nort' lands say:  as long as there's no place to go, let it snow.  Let it snow.  Let it snow.

Sports: It's Always Been About the Money

From USA Today:

As we look back on the decade in sports, it will not be all about the Tigers, Kobes and A-Rods.

When we sum up the past 10 years, it will be all about the Benjamins.

Feh!  As if the "Awts" were any different from, say, the late 1800's when the Lords of MLB first employed the reserve clause in order to squash labor market competition for baseball players to lower player salaries and raise team profits.  As if the Awts were any different from the 1930's when the NFL first started using the draft, also as a means of squashing labor market competition.  As if the 1960's were any different from the Awts when the NFL first used it's member teams' collective negotiating power (i.e. colluded) to sell the media rights to its games, a collusion made legal by the 1961 Sports Broadcasting Act.

As if the Awts were any different from the 1970's and early 1980's when colleges colluded to sell the television rights to their games, a collusion found to violate US antitrust law in the famous 1984 SCOTUS ruling NCAA v. Board of Regents of the University of Oklahoma.  As if the Awts were any different from the 1990's when the stadium game was being played full tilt, and teams lobbied for billions of dollars of public subsidies for palatial stadiums, stadiums designed to keep people out, stadiums with multitudes of gold-plated amenities in which to play their games.

The motives today are the same as they ever were.  Sports teams, fans, players, and coaches are all motivated by self interest and all act more or less rationally.  That's been true since the beginning of human history and will continue to be true until history ends.

They Were Wise Men, Afterall

Terry Jones, playing Brian's mother in Monty Python's The Life of Brian, took the gold and the frankincense given to her by the three wise men.  But he hesitated over the myrrh and asked a question we have probably asked ourselves: ""What is myrrh?" "It sounds like some kind of animal to me... something with horns."  Well:

The resin of trees in the Middle East — known as myrrh — may help lower "bad" cholesterol, new research suggests.

The study author explained that myrrh resin could be used in conjunction with other plant materials to boost heart health, although it's not clear yet how people might consume it, and more research is needed.

In the study, published in the most recent quarterly issue of the International Journal of Food Safety, Nutrition and Public Health, Nadia Saleh Al-Amoudi from King Abd Al-Aziz University in Saudi Arabia noted that myrrh has long been used as a medicinal treatment for sore throats, congestion, and cuts and burns.

Now we know.

60 Most Influential People in the Sports Business

Street and Smith's Sports Business Journal has released their 50, er, 60 most influential people in the sports business.  Here is the list.

Via IJSF blog where Nick notes that the list is really more of a North American list.

Dildos and Rent Seekers

From the Globe and Mail:

When you're the young owners of a Toronto sex shop specializing in eco-friendly vibrators and other adult toys, getting the ear of a Member of Parliament can be a challenge.

So, entrepreneurs Kim and Amy Sedgwick started off slow. The self-branded “eco-sisters” wrote a letter outlining their concerns of a “dangerous” problem hidden away in Canadian bedrooms everywhere – chemicals used in the majority of Canadian sex toys that pose a potential health risk for women.

Never mind that the real (male) thing can also pose a health risk for women.  But I digress.

These women may not be rent seekers, but it's well-known that regulation is supported by those who will directly benefit from it.  Surely the eco-sisters sex shop will benefit from this type of regulation.

HT Doc.

Winners and Losers in College Bowl Games

It's well-known that in terms of accounting entries, many college athletic departments lose money. Some economists have questioned whether the expense and revenue entries are an accurate measure of the costs and benefits associated with athletic departments. One reason given is that athletics may benefit other parts of the school. Even if the athletic departments bleed money, other areas of the school may benefit.

A second argument given is that the revenue and expense entries are convoluted by the accounting conventions used by colleges. If athletic souvenir revenue is entered in the general university revenue account, then the athletic revenue accounts understate the "true" level of revenue. Similarly, it's not at all clear that the true cost of an athletic scholarship is as high as the posted tuition and room and board rate. If not, then athletic expenses as entered overstate "true" expenses.

In any case, the San Diego Union-Tribune has recently posted a couple of interesting stories about who benefits and who doesn't benefit from college bowl games. The answers may (or may not) surprise you. Here is one story. Here is the other story.

The DH and Broken Windows Fallacy

Frederic Bastiat's broken windows fallacy: if a window maker breaks windows to increase business, he certainly benefits (if he doesn't get busted, of course). But society is made worse off. Resources used to fix broken windows support window repair jobs, but would have been used in alternative ways and would have supported other types of jobs. Moreover, we'd expect that if fixing broken windows were optimal, people would have gone out and destroyed their own windows.

What the H-E-double toothpicks does this have to do with sports? This:

We've heard a lot over the past year about job creation. Everything is jobs, jobs, jobs. Such rhetoric is typically followed up by policy proposals (whether from right or left) that are nonsense, nonsense, nonsense. But since we're on the topic, the crack staff at the Tax Foundation has come up with one policy that would definitely create a lot of good-paying American jobs:

"The N.L. Should Be More Like the A.L. Act of 2009," which would "mandate that the National League enact a designated hitter rule or MLB lose its anti-trust exemption; and that the total number of roster spots increases by one. "

At first, this would create 16 new jobs (number of N.L. teams). But think of all the other jobs. There will likely need to be more balls and bats produced because a D.H. is more likely to break a bat or foul a ball off during a plate appearance than a pitcher batting. This will increase the demand for wood and forestry products. Think of all those jobs. We may even need another bat boy. Pitchers will wear out faster, thereby compounding this issue. And pitchers will probably be more likely to be hurt during the season due to more wear and tear (every 9th batter won't be essentially a free pass). Therefore, more replacement pitchers will be needed. Plus, this wear and tear will create more jobs for medical trainers. That can only be a good thing. More uniforms will need to be produced—more jobs! And Chuck Schumer will be sure that those uniforms are produced in America by a hard-working American as opposed to some "foreigner." The multiplier effects of this policy are just off the charts.

I realize this is sarcasm, but let me note that the broken windows fallacy applies. MLB roster spots are fixed in number. When a team places a DH on the roster, it comes at the expense of another player's roster spot, resulting in no new net jobs in MLB.

Moreover, the DH doesn't play in the field, so he doesn't need a glove. That means fewer jobs for the craftsmen and women who make baseball gloves. What will they do? They'll starve or be forced to eat their pets (ew!). Oh, the huge manatee!

HT to Kip via Doc.

Cross-posted at TSE

Two Observations on the Mark Mangino Settlement with KU

The University of Kansas has released the details of the settlement it reached with former football coach Mark Mangino.

In the afternoon, KU athletic director Lew Perkins released the details of the settlement agreement between the athletic department and Mangino that will pay Mangino $3 million as he exits. Mangino had four years remaining on his contract, which would have paid him $9.2 million ($2.3 million per year).

The settlement will be paid through private funds raised by Kansas Athletics; no state taxpayer funds will be used.

Here is the copy of the settlement.  Mangino will get the $3 million in a lump sum by Christmas eve. 

One thing this tells me is that Mangino and KU, by settling on 36.8% of his contracted salary ($8.16 million in present value assuming a 5% discount rate for both parties), were implicitly saying that the chances were about 63% (3/8.16) that he would have been found to have violated his contract.  Had the chances been 50-50, we'd expect Mangino to have gotten closer to $4.08 million.

Mangino and KU agreed that KU would pay Mangino's life and health insurance premiums for a few months, but these  premiums will likely be miniscule compared to the $3 million lump sum payment.  So it's safe to ignore them.

Of course, I have assumed that there are other things behind the scenes that could have driven the settlement away from the midpoint (differences in legal expenses, differences in underlying preferences for negotiation, different discount rates, etc).  Moreover, $3 million is a nice chunk of change... but it's not $8.16 million.

Secondly, where will this $3 million come from?  I assume that by "private funds" that KU is going to raise the funds through donors.  If so and given that donors have a fixed budget constraint of some sort, what will these "private funds" come at the expense of? 

There is an implicit assumption made by some people that donors have a fixed amount to donate to a given college.  If so, when an additional dollar is donated to athletics, it must come at the expense of academics.  There is some empirical evidence of this (I'm thinking of papers by Stinson and Howard (2004 and 2007).  But the same authors also have empirical evidence that they are not subsititutes (2008).

But it also possible that additional donor dollars come from budgets that would otherwise be allocated to other charities or to consumption.  It could also come from a fixed donor budget allocated towards athletics.  If so, the academic interests at KU have nothing to worry about.

Cross-posted at TSE.