Sports, Selfishness, and the “Winner’s Discount”

Posted on July 8, 2013 by Dude Where's My Freedom?

Selfish

This one is a little off-topic, although I think it deals with a lot of useful economic concepts.  I also happen to be a huge hockey fan, a sport which just recently went through a lot of free-agent signings, prompting debates over these issues.

Most people recognize that sports leagues are structured in a way to ensure parity and competitiveness.  Ideally, every team in the league, if it is managed well, coached well, and the players perform well, should be able to win a championship.  In pursuit of this goal, rules are often instituted to help establish parity, such as the worst team in the league receiving the top draft pick, or the institution of a salary cap.  One other way that teams at the bottom of the league can attempt to improve is through free agency.  At the end of their current contract, players become “free agents” and are free to negotiate terms and sign with any team of their choosing.  Through this mechanism, a bad team with a strong desire to improve can offer lucrative contracts to the top free agents, thus improving their team and restoring competitive balance to the league at the same time.

Of course, we must keep in mind that players are human beings, and as such, have a wide variety of preferences and motivations.  Some may choose to play for whichever team offers them the most money.  Others may value consistency and choose to stay with the same team they currently play with.  Others may be primarily motivated by the desire to play for a good team, and refuse to entertain offers from teams who have performed poorly for several years.  The extent to which a player is willing to sacrifice salary in order to satisfy other, less tangible preferences is commonly referred to as a “discount.”  Players who accept slightly less than the market value for their services to stay with their current team are considered to be giving a “hometown discount” to the team.  Likewise, players who accept less than the market value for their services to sign with a successful top-performing team in the hopes of winning a championship are said to be giving a “winner’s discount.”

For various reasons (one might suspect the creeping influence of socialism in popular culture, demonizing the profit motive and scorning wealth in general), players who choose to sign with the team that will offer them the most money are generally characterized as selfish.  They are said to have “taken the money,” with the strong implication being that such an act is greedy and harmful in some way.  Meanwhile, players who accept less money to stay where they are, or sign with an already-good team are thought of as virtuous or heroic.  Players who offer the “winner’s discount” are praised as un-selfish, despite the fact that this player is being just as selfish as the one who takes the money.  They merely have different priorities.  Both the player who signs with a bad team for a lot of money and the player who signs with a good team for well under his market value are attempting to satisfy their most urgent desires.  It just so happens that their most urgent desires are different.  A player does not sign with a great team for less than market value out of some sense of altruism or charity, but rather, they do so because they want to be known as a player that won a championship.  This is at least as selfish as a player signing with whichever team offers the most money.

In fact, my position is that the “winner’s discount” is actually more selfish, as it negatively impacts the competitive balance of the league.  Accepting less than the market value for their services means that players distort the free agent market.  Offering a “winner’s discount” makes it more likely that the best teams will stay at the top of the league, and makes it that much more difficult for the teams at the bottom to improve (in fact, under this same logic, teams who are very bad, or have been bad for a long time, often have to pay essentially a “loser’s premium,” offering greater than market value to attract quality free agents).  As a hockey fan, I would prefer a league that is very competitive, where every team is capable of winning a championship in any given year, and any team can beat any other team on any given night.  A highly competitive league benefits the fans.  Keeping that in mind, players who “take the money” are certainly doing their part to keep the league competitive.  While they also didn’t act out of charity (an individual player has no obligation to make career decisions for my benefit), their actions still provide spillover benefits to me, keeping the league competitive, and increasing my enjoyment of the game.

On the other hand, players who take the “winner’s discount,” or otherwise distort the free agent market, are making the league less competitive, thereby serving to lower the quality of the product for the fans, and harming the league as a whole.  Don’t get me wrong here; I am not judging anyone’s particular values or preferences.  Every player has every right to sign with whichever team they choose for any reason they choose.  But I’m tired of hearing the sports media worshipping the selfish players who distort the market by offering a “winner’s discount” and vilifying the selfish players whose actions serve to benefit the fans by “taking the money.”

Ultimately, I think this entire issue comes down to a bizarre cultural phenomenon, where desiring money is considered selfish and immoral, but desiring anything else is considered positive and virtuous, completely regardless of what the effects of those desires will be.  The culture has this completely backwards.  Since “taking the money” confers tangential benefits onto the fans, it is the least selfish thing a player can do.  The truly selfish players are the ones who lower the quality of the product in order to pursue their own ends.  Keep this in mind the next time you hear the sports media heaping praise on a player who was “willing to take less money,” for whatever reason.

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The Slippery Slope Is A Perfectly Valid Argument

Posted on July 5, 2013 by Dude Where's My Freedom?

It’s happened to all of us at one time or another.  You’re having an argument, calmly and coolly explaining to someone that although a particular policy might not have any immediate negative effects, you still oppose it because you believe that down the road, it will lead to negative consequences in the future.  Before you know it, you’ve been beaten.  Your opponent starts screaming “SLIPPERY SLOPE!” and declares the argument over, with himself the victor.

What a bunch of nonsense.  The infamous “slippery slope” is absolutely NOT a logical fallacy.  Rather, it is a simple attempt to acknowledge the obvious:  that occasionally, certain actions have consequences that might be long-term in nature and that might not be immediately obvious to the casual observer.  To declare that the slippery slope is a logical fallacy that can be dismissed in all cases is essentially to argue that every event in the universe is independent.  That any particular action cannot possibly lead to another particular action, and that any implication it might is automatically to be dismissed as proof that the person implying such is an idiot, not to be taken seriously.

In the political realm, the slippery slope accusation is most often invoked against those who oppose a certain change in policy.  Let’s say that Policy X is currently being debated.  Those in favor of Policy X believe that it will confer benefits onto the nation as a whole, both immediately, and into the foreseeable future.  Meanwhile, the opponents of Policy X cannot readily identify any immediate harm that may come as a result to it.  Their opposition relies solely on the fact that they believe Policy X will lead to negative consequences several decades from now.  Obviously the appropriate thing to do would be to evaluate the claims made by both sides.  Are these negative future consequences likely?  If they did happen, how severe would they be?  To the extent that the argument can be settled, it should be settled by an evaluation of the likelihood and severity of the potential positive benefits or negative consequences suggested by either side.

Unfortunately, in modern political discourse, this sort of evaluation is incredibly unlikely.  It is far more likely that the proponents of Policy X will simply declare that the opponents are making a slippery slope argument, and that therefore their entire argument can be discarded as a fallacy.  Sadly enough, most people seem to accept this as perfectly legitimate reasoning.  It is not.  The fact that human beings are capable of anticipating future events proves that a slippery slope argument can be perfectly valid.  To automatically dismiss any “X could lead to Y” argument as fallacious is to essentially resign yourself to a deterministic world where no actions we take can possibly affect future events.  Where nothing we do ultimately matters anyway.  I consider that to be unbelievably depressing, and that’s not the sort of world I choose to live in.

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The ABCT Explains The Student Loan Bubble

Posted on July 3, 2013 by Dude Where's My Freedom?

 

Good luck with that.

Everything you need to know about the student loan rate hike.

2007 Trends in Higher Education Series:  Student Loans

I’ve heard a lot of whining over the last few days from the college student crowd over the impending doom of the fact that the interest rate on certain federal student loans (about 55% of the federal student loan market) is set to double “unless Congress acts.”  Most of the media coverage on this is typically vapid, lacking in the basic facts required to fully understand the issue (although the Washington Post article I link above is surprisingly useful).

Missing entirely from the conversation on all of the coverage, unsurprisingly, is one simple question:  How exactly did we arrive at a situation where the interest rate for student loans is determined by the decree of politicians, rather than by traditional market forces, and why should we continue to tolerate such a bizarre state of affairs?

Personally, student loans have never been a part of my life, so this is not a topic I’ve done a great deal of research on.  Given that private education loans are still legal, one can assume that the reason federal loans dominate the student loan market is because they are preferred by consumers, for various reasons.  The most likely reason would be that they cost less, in terms of offering a lower interest rate.  Given that private loans have to respond to market forces, and will therefore charge a legitimate interest rate which genuinely reflects the time preferences of the market participants, the fact that government loans charge a lower rate tells us something useful.  It tells us that the recipients of these loans are receiving a subsidy from the federal government in the form of a below-market interest rate.  Whether the loans are called “subsidized” or not is irrelevant.  Students are receiving a product for lower than its market value, with the difference being made up by the taxpayer.

One might think that students would be very grateful to the taxpayers for this generous gift.  If they were left to their own devices to obtain credit without government subsidizes, we can presume they would be paying a significantly higher (but appropriate) rate of interest.  But alas, our culture of entitlement has blinded them to the obvious fact that they are receiving free money from unwilling taxpayers.  Instead, they decry that their rates are about to rise.  As a side-note, even the “un-subsidized” Stafford loans (which already have the dreaded 6.8% interest rate) already make up a larger percentage of the student loan market than all private loans combined.  We can infer from this that even after the rate on the “subsidized” loans doubles, it will still be a below-market interest rate, and recipients will still be, in effect, getting free money at taxpayer expense.

It’s tough to blame short-sighted college students, most of whom have very little understanding of real economics, for favoring programs that transfer wealth from others to themselves.  However, they should understand that they are receiving a gift, and as such, have absolutely no business dictating the terms of the gift to the giver.  In a free market, interest rates would be set by the traditional forces, the time preferences of the public at large, with appropriate risk premiums assigned based on all relevant factors (most of which are probably illegal to consider these days).  While this procedure likely would result in higher interest rates for the majority of students, it would also provide an easy and consistent framework within which individuals could recognize how rates are determined, and project what they are likely to be in the future.

The alternative, relying on the government to provide subsidized loans, means that the rate is set by one of the most dysfunctional bodies in the history of the world.  It means that partisan wrangling, party politics, and favors owed are the primary factors in setting the interest rate for future loans.  Regulatory uncertainty rules supreme, as political forces rather than market forces determine the future for prospective students.  Attempts by Republicans to tie the interest rate on these loans to current treasury-bill rates, while a step in the right direction, still result in a government subsidy rather than requiring students to obey market forces in the same way that everyone else has to (not to mention the fact that t-bill rates are largely influenced by the actions of the federal reserve…).

The long and short of it is that federal involvement in student loan markets distorts the market, which has led to some pretty terrible consequences, not just for taxpayers, but for students themselves.  Interest rates are a form of price, and prices convey valuable information about individuals’ preferences.  Distorting market prices in the name of “helping students” ensures that the information students receive is incorrect.  Perhaps if students were required to pay the true price of their education, they would be a little more circumspect with their money.  Perhaps they wouldn’t flock in large numbers to obtain degrees that do little to increase their employment opportunities post-graduation.  Astute readers might note that this entire chain of events is quite similar to the Austrian Business Cycle Theory’s explanation of recessions, depressions, and financial crises, briefly summarized as:  The Fed artificially expands credit, entrepreneurs view low interest rates as evidence that capital investments will be profitable, eventually they find out the low interest rates were phony and their investments aren’t profitable after all, and the whole thing blows up.  By offering an artificially low interest rate for student loans, the federal government tricks students into believing the cost of their education is lower than it actually is, thus encouraging malinvestment, which will ultimately be disastrous for students, as well as the economy as a whole.

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US Government: Information Is Classified Until We Say It Isn’t

Posted on July 1, 2013 by Dude Where's My Freedom?

US army blocks access to Guardian website to preserve ‘network hygiene’ | World news | guardian.co.uk.

I got a real kick out of reading this story, as it reminded me of a recent anecdote I had told to some friends online.  Shortly after the NSA wiretapping story broke, several e-mails went out to all of our regional offices re-iterating that it is the official policy of the United States government that classified information retains its classification until proper authorities de-classify it.  Even if it has already been released to the public at large by the media.  Officially, the government’s position was that the details of the NSA spying program were classified, and therefore anybody who talked about it, whether it was Edward Snowden, Glenn Greenwald, or some Joe Schmo army private who heard about it on the news, was compromising classified information and potentially subject to penalties.  The e-mail went as far as to “recommend” (not specifically order) that we all avoid accessing any news media websites on our work computers, because doing so might accidentally cause us to access classified information (which the news media was freely reporting), for which we could theoretically be charged with the crime of accessing classified information on an unclassified network.

Most of my friends found this story to be completely ludicrous, but I wasn’t really phased by it at all (more evidence that I was on the inside for entirely too long.)  At the time, most of us figured it probably wasn’t a very big deal, because after all, if they really didn’t want us pulling up these websites, they wouldn’t send us a kindly recommendation against it, they’d simply block the sites from the network.  Well surprise surprise, that’s exactly what they’re starting to do.  The potential precedent here is quite interesting though.  For now, we’re just talking about one agency blocking certain sections of one particular media outlet on the work computers of government employees.  Not necessarily a huge deal.  And we should be relieved that a spokesperson has assured us “The DoD is also not going to block websites from the American public in general, and to do so would violate our highest-held principle of upholding and defending the constitution and respecting civil liberties and privacy.”

But my question is, why not?  Top government officials including the President and high-ranking Republican Congressmen have decried Edward Snowden as a traitor, and lamented the fact that the exposure of these programs has needlessly harmed their efforts to catch terrorists, thus putting additional American lives at risk.  They assure us that the entire reason these programs exist and must be kept secret is to keep us safe.  That being spied upon, although constitutionally questionable and opposed by many, is a necessary procedure.  So why not censor the press?  Surely that would help keep us safe too, wouldn’t it?  Why not block websites that reveal classified information, not just from being accessed by government employees at work, but from the Internet entirely?  If the only standard these days is “it can be claimed that this makes us safer,” then surely censorship of the Internet passes that test.  These are the types of questions we need to start asking the government.  If we passively allow them to do one creepy and unconstitutional thing in the name of safety, what exactly is stopping them from doing other creepy and unconstitutional things?  If they’ll spy on us, why wouldn’t they censor the media for our own protection as well?  Where is the line?  How is it determined?  The line was supposed to be the constitution, but we seemed to have discarded that as a constraint upon government long ago…

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Nanny State Wants To Lower Your Standard Of Living (For Your Own Good)

Posted on June 28, 2013 by Dude Where's My Freedom?

How to curb obesity: Tax calories, study says – The Washington Post.

What a shocker!  A bureaucratic government panel of “experts” proposes to make us better off by requiring us to pay more for the food we enjoy.  Yes, our wise and benevolent overlords are literally supporting a dramatic increase in the cost of living for everyone in the latest effort to fight the “obesity epidemic.”

This particular article doesn’t make the leap from “public health” to “national economic interest” but trust me, that angle is coming too.  As we continue down the road to socialized medicine, we will see more and more justifications for these sorts of nightmarish policies on the basis of the fact that the obese people are costing all of us more money, and action is necessary in order to help balance the budget or what have you.

As any student of Austrian Economics knows, all taxes diminish human quality of life, for the simple reason that the government is far less likely to spend money on things that satisfy your most urgent preferences than you are yourself.  A tax on food; however, is especially “regressive,” and becomes even more regressive the more specific and targeted the tax becomes, as the poor are more likely to purchase unhealthy food than the wealthy.  The net effect of the tax will obviously be to increase food prices.  Food, being a basic necessity, is a highly inelastic item.  We will continue to buy it, even as prices rise.  Unfortunately, as we are forced to spend more on food, we will have less money available to purchase other items we highly desire.  But suppose the tax targets unhealthy food only, and the prices of healthy food remain constant.  And, for the sake of argument, suppose all poor people react the exact way the government wants them to, and immediately switch from unhealthy food to the now (relatively) cheaper healthy food.  Even in this “best-case scenario,” human quality of life is diminished, because the poor are now being forced, for economic reasons, to eat food they do not enjoy as much.  While this may make them healthier, the trade-off between future health benefits and current enjoyment of life’s pleasures is a personal decision, which individuals should be free to make without government coercion.

Remember, there are still people who starve to death in this country.  But the bureaucrats are so wholly obsessed with the fact that some (typically lower-class) people might choose to eat at McDonalds three times a week and drink Diet Coke instead of wheat grass juice that they see no problem in a massive tax on all food.  After all, it gives you “the biggest bang for your buck.”  The statists are more interested in social engineering than they are in saving lives and raising the human standard of living.  Perhaps some people like fast food and sugar because it tastes really good?  Perhaps these people have thought the issue over, and decided they’re comfortable sacrificing a few years of their life-span in order to enjoy the foods they prefer during life.  Is that not their right?  Is it really our duty to punish them for making this choice?  Is that really the way to serve the public good?

 

Which of these kids has the highest quality of life? Trick question! It’s impossible to know based on their weight.

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Thank God For Incompetent Government Employees

Posted on June 26, 2013 by Dude Where's My Freedom?

As a libertarian, I always strive to judge people based on their individual merit, and not fall victim to believing in any sweeping stereotypes or generalities based on someone’s association with any particular group.  However, there is one particular group of people for which this is rather difficult to avoid:  government employees.  Let’s be honest here – a rather large percentage of them are some mixture of stupid, lazy, and corrupt (I should know, I used to be one!).

Now, your average Democrat or Republican will lament this fact as a sorry state of affairs, one which we should be actively seeking to improve.  Why, we need the best and the brightest among us to be serving the “public good!”  One obvious solution (to them) is to offer higher pay and more elaborate benefits for public sector “service,” despite the fact that government employees as a whole already make more money than their private-sector counterparts.  The Republican reformer might suggest some sort of “get tough” policy, where the weakest employees are identified and fired.

We libertarians can have a laugh at the expense of government employees all we want, but we should also keep in mind that it is a net benefit to society that government employees are generally incompetent.  Remember, some of the government’s stated objectives are to spy on us, monitor our activities, steal our money and use it for pet projects, debase our currency, and fight unnecessary foreign wars.  Do we want these initiatives spearheaded by the best and brightest, or do we want them managed by corrupt morons who couldn’t hack it in the voluntary sector?  The worse the government employees are, the less likely it is that the government will be able to achieve its objectives, most of which are completely opposed to the idea of individual freedom.  Imagine how much trouble we’d be in if everyone who worked for the government was intelligent and highly motivated to succeed in their job.  Freedom wouldn’t have a chance!

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They Can’t Be Listening All The Time

Posted on June 21, 2013 by Dude Where's My Freedom?

“Come on man, think of how many phone calls are made and how many e-mails are sent every second!  The NSA only consists of so many people!  They can’t possibly be listening to us all the time!”

A common refrain from those who would attempt to convince you that the NSA spying program will be ineffective due to a lack of resources.  This might seem fairly obvious, but whether someone is actively listening live during the moment is entirely irrelevant.  Please keep in mind, the intent of this NSA surveillance program is not to simply eavesdrop on us for the perverse pleasure of NSA agents.  I suspect that live surveillance is a pretty uncommon occurrence reserved for incredibly unique circumstances.

Now I have no particular expertise in this matter, I haven’t done a lot of research on the particulars of NSA programs.  I’m just theorizing here how I think the government would operate.

The intent of the program is to collect data.  It’s not that actual NSA agents are “listening” to your phone calls so much as it is that NSA servers are constantly receiving data from your cellular company with detailed records as to who you called, how long you talked to them, and how often you call them.  No live person is “reading all of your e-mails,” but rather, some computer algorithm is scanning all of your e-mails for certain buzz-words, and then filtering them accordingly.  All of this information goes in a massive database to be used against you, should the need ever arise.  Just something to keep in mind the next time someone dismisses this program as a likely failure because there are so many e-mails and relatively few agents.  Live surveillance is not the point – information gathering is.

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The Political Class Doesn’t Care What You Think

Posted on June 17, 2013 by Dude Where's My Freedom?

Americans Oppose Syria Intervention 3-1 – The Washington Examiner

US Says It Will Give Military Aid To Syria Rebels – BBC

Two headlines that go lovely together.  Just file this little nugget away the next time you have to listen to a statist extol the virtues of a “representative” democracy, or laughably claim “we are the government.”  The American people overwhelmingly oppose arming the Syrian rebels, under virtually all circumstances.

Our ruling class of political elites; however, simply doesn’t care.  They’re going to do it anyway.  The “Democratic” President has decreed it will be so.  The Republican “opposition” isn’t really opposed at all.  The only real criticism from the GOP is that they want even more direct intervention, and they wanted it a lot sooner.  The two parties have come together in a heartwarming bipartisan compromise, and as usual, such bipartisanship is directed at screwing the public at large and doing something that will make our country worse off.

We are not the government.  The government is not representative of the public.  They are a separate class, committed to ruling over us like cattle, wholly disinterested in our wants, needs, desires, and opinions.  They know what’s best (after all, foreign intervention has just worked so remarkably well for us over the last few decades) and they are going to pursue it, “the people” be damned.

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What Exactly Do You Want The Government To Do About The NSA?

Posted on June 14, 2013 by Dude Where's My Freedom?

Why Libertarians Have Better Things to Worry About Than the NSA – Reason.com.

John Stossel has gotten a lot of flak from the “liberty movement” for a recent piece he wrote for Reason in which he basically dismissed the NSA scandal as something he “can’t get that worked up about.”

In all honesty, I basically agree with him, although for different reasons.

The main reason I can’t get worked up about this is because first of all, it doesn’t surprise me in the least.  This is something I already figured the government was probably doing.  Having my suspicions confirmed doesn’t do much for me.

Secondly, I have to ask all the conservatives and the libertarians who are somewhat sympathetic to the state (like Stossel), what exactly they would like to see happen here.  What government response to this government overreach would satisfy them?

Hypothetically, let’s just suppose that Obama’s reaction to this scandal was to immediately call a press conference in which he said the following:  “I had no idea about this scandal, but I find it completely morally reprehensible, in clear violation of the constitution, and I will not tolerate it whatsoever.  I hereby order that the NSA be entirely shut down, and I will personally man the detonator to blow up their headquarters, which will be broadcast on live TV.  Every single current NSA employee will be fired and prohibited from ever working in any level of government ever again.  I will also sign an executive order permanently barring the collection of this type of data by any other agency, violation of which will be considered treason and will be punished by execution.  As soon as these actions are complete, I will hereby resign the presidency, as this happened under my watch, and I take full responsibility.”

Let’s call that the “best case scenario” for the Glenn Becks of the world.  My question is, do you REALLY think that would stop the government from spying on us?  Do you really think they wouldn’t just set up a new, even MORE secret agency?  Would President Biden be a significant improvement?

Some people just refuse to recognize that we have reached the point where we cannot rely on government itself to fix the problems that a bloated and tyrannical government caused.  It is laughable to even consider that somehow, the President, or Congress, or the Supreme Court would put an end to the NSA spying program.  Even if they said they did, why would any sane person believe them?  Government is oppressive force, and it stands fundamentally opposed to individual freedom.  It is corrupt not by coincidence, but by definition.  The only way to reduce its power is to eliminate it completely.  This starts by calling it what it is – beyond all repair.  We solve this problem not by convincing Congress to tell the NSA to promise never to do it again, but by rendering government so impotent that it doesn’t have the resources to engage in such a program, and/or doesn’t have the reach, power, or capability to do anything useful with the data it already has or is still able to collect.

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Yes Barack, We ARE Going To Have A Problem…

Posted on June 12, 2013 by Dude Where's My Freedom?

This video is completely mindblowing.  This man is completely and totally out of touch with reality.  There are a LOT of problems here, but let me just mention a few…

Is he actually admitting that his own executive branch is corrupt and tyrannical and that other branches need to step in and restrain him?

Is he implying that somehow the individuals that comprise the other branches of government (the Congress and the Supreme Court) are significantly different and hold significantly different beliefs than the executive branch?

Hasn’t he spent his entire time in office attempting to emasculate, belittle, and generally ensure that the the other branches are as weak as possible and can’t possibly restrain him?

Honestly, I thought I was at the point where nothing surprised me with this guy anymore, but this video is so beyond creepy.  The American government is truly a lost cause.

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