Cartoon Physics, Debt and Calvinism

Posted on June 17, 2008 by Jorge Costales

On the one hand, I tend to be in philosophical agreement with the kind of people who feel that our societies are in decline. So when I read David Brooks column about how debt is undermining values required for a free and prosperous society, I did so uncritically and in agreement.

On the other hand, in my personal life, I tend to not trust people’s memories about best meals, hottest summers, most exciting game, etc. It just always seems too easy to think that what just happened was the best or worst or that things were better in the past. It’s the type of inconsistencies we see in others, but not ourselves. Recently. there was an interesting article from the noted writer David Mamet [see end of post], in which he realizes that his politics didn’t match his personal beliefs.

What I’ve learned over the years is that people don’t appreciate being challenged on observations mostly meant to avoid silence. So nowadays I quietly nod and secretly wish their heads will explode [invoking Law #11 of Cartoon Thermodynamics – no real pain would be felt], as people begin to regale me with how they would categorize yesterday’s heat.

But when they put it in writing, that changes everything. After I read Richard Posner’s post about Brooks’ column, I see how an open mind should work. I should always be applying my doubting instincts, especially on those views with which I am in agreement. See an excerpt below.

Max Weber argued convincingly in his famous book The Protestant Ethic and the Spirit of Capitalism that the frugality and industriousness promoted by the early Protestants in opposition to the opulence of the Roman Catholic Church were values conducive to and perhaps critical in the rise of commercial society. Protestants who believed in predestination wanted to show by their modesty, austerity, and avoidance of lavish display that they were predestined for salvation.

But saving plays a less important role in economic progress today than it did in the sixteenth century. Its role in powering economic growth has been taken over, to a large extent, by technology. The great rise in standards of living worldwide is due far more to technological progress than to high rates of savings, that is, to deferring consumption.

At the same time, now that we have efficient debt instruments that in former times did not exist or were extremely costly, the role of personal debt (Brooks does not criticize corporate or government debt) in human welfare is more apparent than it was. Apart from its role in solving short-term liquidity problems resulting from delay in the receipt of income, debt enables consumption to be smoothed over the life cycle. Without debt, a family might have to wait 20 years before it could afford to buy a house. Of course, debt creates risk for both lender and borrower, as the subprime mortgage crisis has dramatically illustrated. But if the risks are understood, it is unclear why the assumption of them should be thought harmful to personal or social welfare. At worst, debt leads to bankruptcy, but bankruptcy is not the end of the world either for the borrower or for the lender.

What is true is that easy credit facilitates bubbles, such as the housing bubble and the related mortgage-financing bubble, and the bursting of a bubble can, as we have been relearning recently, cause economic dislocations. This may require some regulatory adjustments; it does not require a return to Calvinism.

Wow – that might be Posner’s best post EVER!!!

David Mamet: Why I Am No Longer a ‘Brain-Dead Liberal’

An election-season essay

By David Mamet

published: March 11, 2008

John Maynard Keynes was twitted with changing his mind. He replied, “When the facts change, I change my opinion. What do you do, sir?”

My favorite example of a change of mind was Norman Mailer at The Village Voice.

Norman took on the role of drama critic, weighing in on the New York premiere of Waiting for Godot.

Twentieth century’s greatest play. Without bothering to go, Mailer called it a piece of garbage.

When he did get around to seeing it, he realized his mistake. He was no longer a Voice columnist, however, so he bought a page in the paper and wrote a retraction, praising the play as the masterpiece it is.

Every playwright’s dream.

I once won one of Mary Ann Madden’s “Competitions” in New York magazine. The task was to name or create a “10” of anything, and mine was the World’s Perfect Theatrical Review. It went like this: “I never understood the theater until last night. Please forgive everything I’ve ever written. When you read this I’ll be dead.” That, of course, is the only review anybody in the theater ever wants to get.

My prize, in a stunning example of irony, was a year’s subscription to New York, which rag (apart from Mary Ann’s “Competition”) I considered an open running sore on the body of world literacy—this due to the presence in its pages of John Simon, whose stunning amalgam of superciliousness and savagery, over the years, was appreciated by that readership searching for an endorsement of proactive mediocrity.

But I digress.

I wrote a play about politics (November, Barrymore Theater, Broadway, some seats still available). And as part of the “writing process,” as I believe it’s called, I started thinking about politics. This comment is not actually as jejune as it might seem. Porgy and Bess is a buncha good songs but has nothing to do with race relations, which is the flag of convenience under which it sailed.

But my play, it turned out, was actually about politics, which is to say, about the polemic between persons of two opposing views. The argument in my play is between a president who is self-interested, corrupt, suborned, and realistic, and his leftish, lesbian, utopian-socialist speechwriter.

The play, while being a laugh a minute, is, when it’s at home, a disputation between reason and faith, or perhaps between the conservative (or tragic) view and the liberal (or perfectionist) view. The conservative president in the piece holds that people are each out to make a living, and the best way for government to facilitate that is to stay out of the way, as the inevitable abuses and failures of this system (free-market economics) are less than those of government intervention.

I took the liberal view for many decades, but I believe I have changed my mind.

As a child of the ’60s, I accepted as an article of faith that government is corrupt, that business is exploitative, and that people are generally good at heart.

These cherished precepts had, over the years, become ingrained as increasingly impracticable prejudices. Why do I say impracticable? Because although I still held these beliefs, I no longer applied them in my life. How do I know? My wife informed me. We were riding along and listening to NPR. I felt my facial muscles tightening, and the words beginning to form in my mind: Shut the *uck up. “?” she prompted. And her terse, elegant summation, as always, awakened me to a deeper truth: I had been listening to NPR and reading various organs of national opinion for years, wonder and rage contending for pride of place. Further: I found I had been—rather charmingly, I thought—referring to myself for years as “a brain-dead liberal,” and to NPR as “National Palestinian Radio.”

This is, to me, the synthesis of this worldview with which I now found myself disenchanted: that everything is always wrong.

But in my life, a brief review revealed, everything was not always wrong, and neither was nor is always wrong in the community in which I live, or in my country. Further, it was not always wrong in previous communities in which I lived, and among the various and mobile classes of which I was at various times a part.

And, I wondered, how could I have spent decades thinking that I thought everything was always wrong at the same time that I thought I thought that people were basically good at heart? Which was it? I began to question what I actually thought and found that I do not think that people are basically good at heart; indeed, that view of human nature has both prompted and informed my writing for the last 40 years. I think that people, in circumstances of stress, can behave like swine, and that this, indeed, is not only a fit subject, but the only subject, of drama.

I’d observed that lust, greed, envy, sloth, and their pals are giving the world a good run for its money, but that nonetheless, people in general seem to get from day to day; and that we in the United States get from day to day under rather wonderful and privileged circumstances—that we are not and never have been the villains that some of the world and some of our citizens make us out to be, but that we are a confection of normal (greedy, lustful, duplicitous, corrupt, inspired—in short, human) individuals living under a spectacularly effective compact called the Constitution, and lucky to get it.

For the Constitution, rather than suggesting that all behave in a godlike manner, recognizes that, to the contrary, people are swine and will take any opportunity to subvert any agreement in order to pursue what they consider to be their proper interests.

To that end, the Constitution separates the power of the state into those three branches which are for most of us (I include myself) the only thing we remember from 12 years of schooling.

The Constitution, written by men with some experience of actual government, assumes that the chief executive will work to be king, the Parliament will scheme to sell off the silverware, and the judiciary will consider itself Olympian and do everything it can to much improve (destroy) the work of the other two branches. So the Constitution pits them against each other, in the attempt not to achieve stasis, but rather to allow for the constant corrections necessary to prevent one branch from getting too much power for too long.

Rather brilliant. For, in the abstract, we may envision an Olympian perfection of perfect beings in Washington doing the business of their employers, the people, but any of us who has ever been at a zoning meeting with our property at stake is aware of the urge to cut through all the pernicious bullshit and go straight to firearms.

I found not only that I didn’t trust the current government (that, to me, was no surprise), but that an impartial review revealed that the faults of this president—whom I, a good liberal, considered a monster—were little different from those of a president whom I revered.

Bush got us into Iraq, JFK into Vietnam. Bush stole the election in Florida; Kennedy stole his in Chicago. Bush outed a CIA agent; Kennedy left hundreds of them to die in the surf at the Bay of Pigs. Bush lied about his military service; Kennedy accepted a Pulitzer Prize for a book written by Ted Sorenson. Bush was in bed with the Saudis, Kennedy with the Mafia. Oh.

And I began to question my hatred for “the Corporations”—the hatred of which, I found, was but the flip side of my hunger for those goods and services they provide and without which we could not live.

And I began to question my distrust of the “Bad, Bad Military” of my youth, which, I saw, was then and is now made up of those men and women who actually risk their lives to protect the rest of us from a very hostile world. Is the military always right? No. Neither is government, nor are the corporations—they are just different signposts for the particular amalgamation of our country into separate working groups, if you will. Are these groups infallible, free from the possibility of mismanagement, corruption, or crime? No, and neither are you or I. So, taking the tragic view, the question was not “Is everything perfect?” but “How could it be better, at what cost, and according to whose definition?” Put into which form, things appeared to me to be unfolding pretty well.

Do I speak as a member of the “privileged class”? If you will—but classes in the United States are mobile, not static, which is the Marxist view. That is: Immigrants came and continue to come here penniless and can (and do) become rich; the nerd makes a trillion dollars; the single mother, penniless and ignorant of English, sends her two sons to college (my grandmother). On the other hand, the rich and the children of the rich can go belly-up; the hegemony of the railroads is appropriated by the airlines, that of the networks by the Internet; and the individual may and probably will change status more than once within his lifetime.

What about the role of government? Well, in the abstract, coming from my time and background, I thought it was a rather good thing, but tallying up the ledger in those things which affect me and in those things I observe, I am hard-pressed to see an instance where the intervention of the government led to much beyond sorrow.

But if the government is not to intervene, how will we, mere human beings, work it all out?

I wondered and read, and it occurred to me that I knew the answer, and here it is: We just seem to. How do I know? From experience. I referred to my own—take away the director from the staged play and what do you get? Usually a diminution of strife, a shorter rehearsal period, and a better production.

The director, generally, does not cause strife, but his or her presence impels the actors to direct (and manufacture) claims designed to appeal to Authority—that is, to set aside the original goal (staging a play for the audience) and indulge in politics, the purpose of which may be to gain status and influence outside the ostensible goal of the endeavor.

Strand unacquainted bus travelers in the middle of the night, and what do you get? A lot of bad drama, and a shake-and-bake Mayflower Compact. Each, instantly, adds what he or she can to the solution. Why? Each wants, and in fact needs, to contribute—to throw into the pot what gifts each has in order to achieve the overall goal, as well as status in the new-formed community. And so they work it out.

See also that most magnificent of schools, the jury system, where, again, each brings nothing into the room save his or her own prejudices, and, through the course of deliberation, comes not to a perfect solution, but a solution acceptable to the community—a solution the community can live with.

Prior to the midterm elections, my rabbi was taking a lot of flack. The congregation is exclusively liberal, he is a self-described independent (read “conservative”), and he was driving the flock wild. Why? Because a) he never discussed politics; and b) he taught that the quality of political discourse must be addressed first—that Jewish law teaches that it is incumbent upon each person to hear the other fellow out.

And so I, like many of the liberal congregation, began, teeth grinding, to attempt to do so. And in doing so, I recognized that I held those two views of America (politics, government, corporations, the military). One was of a state where everything was magically wrong and must be immediately corrected at any cost; and the other—the world in which I actually functioned day to day—was made up of people, most of whom were reasonably trying to maximize their comfort by getting along with each other (in the workplace, the marketplace, the jury room, on the freeway, even at the school-board meeting).

And I realized that the time had come for me to avow my participation in that America in which I chose to live, and that that country was not a schoolroom teaching values, but a marketplace.

“Aha,” you will say, and you are right. I began reading not only the economics of Thomas Sowell (our greatest contemporary philosopher) but Milton Friedman, Paul Johnson, and Shelby Steele, and a host of conservative writers, and found that I agreed with them: a free-market understanding of the world meshes more perfectly with my experience than that idealistic vision I called liberalism.

At the same time, I was writing my play about a president, corrupt, venal, cunning, and vengeful (as I assume all of them are), and two turkeys. And I gave this fictional president a speechwriter who, in his view, is a “brain-dead liberal,” much like my earlier self; and in the course of the play, they have to work it out. And they eventually do come to a human understanding of the political process. As I believe I am trying to do, and in which I believe I may be succeeding, and I will try to summarize it in the words of William Allen White.

White was for 40 years the editor of the Emporia Gazette in rural Kansas, and a prominent and powerful political commentator. He was a great friend of Theodore Roosevelt and wrote the best book I’ve ever read about the presidency. It’s called Masks in a Pageant, and it profiles presidents from McKinley to Wilson, and I recommend it unreservedly.

White was a pretty clear-headed man, and he’d seen human nature as few can. (As Twain wrote, you want to understand men, run a country paper.) White knew that people need both to get ahead and to get along, and that they’re always working at one or the other, and that government should most probably stay out of the way and let them get on with it. But, he added, there is such a thing as liberalism, and it may be reduced to these saddest of words: ” . . . and yet . . . “

The right is mooing about faith, the left is mooing about change, and many are incensed about the fools on the other side—but, at the end of the day, they are the same folks we meet at the water cooler. Happy election season.

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My Interview with The Hardball Times

Posted on June 16, 2008 by Jorge Costales

Please check out my interview with The Hardball Times. I owe a big thanks to John Beamer for giving me the opportunity to express my thoughts in such an extended format. Aside from hopefully making a good argument about how much reasonable people can deduce about a MLB team’s finances, even without actually having access to their financial statements, I believe I make a good case about how MLB can address their revenue sharing problem – see the excerpt below.

Beamer: The Marlins don’t use revenue sharing for its intended purpose. Is this a problem and any idea how it can be fixed? 

Costales: The issue of how to deal with teams which don’t use revenue sharing [RS] monies for their intended purpose is a problem for MLB. It undermines the entire revenue sharing structure which most would argue has served MLB well. Whatever “on-field performance” has come to be interpreted as in order to meet CBA provisions is almost irrelevant; it clearly was meant to help low-revenue teams compete by allowing them to increase their payroll beyond their normal means—MLB’s version of the ‘keep hope alive’ mantra.

The 2008 Florida Marlins are making an argument against a salary base. The fact that no salary base was part of the new CBA probably means that it had some support, but not enough votes this time around. But not wanting teams to profit from RS monies received is a two-part equation. Salary expenses are only one side of it. The other is revenues.

Why not limit RS receiving teams revenues by forcing them to refund a certain amount of the RS monies received back to their fans? Begin with season-ticket holders and other fans which have purchased ticket packages. Reduce ticket prices dramatically for defined periods.

The mechanics can be worked out obviously, but the philosophical rationale is straightforward—eliminate the incentives for teams to pocket their RS monies. That way, those teams who wish to go with young players and minimum salaries can do so, but without the full MLB welfare check. What is it we say in business: a principle is not a principle until it costs you something.

This idea would address MLB concerns about teams pocketing RS monies, avoid a salary base which limits a team’s independence, create goodwill among their loyal fans and likely increase attendance. It probably won’t happen, but someone please tell me why it shouldn’t happen?

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Tim Russert, Catholic – RIP

Posted on June 13, 2008 by Jorge Costales

… what they know, you can learn. What you know, they’ll never understand.

That quote perfectly captures the advantage I’ve always felt coming a lower-middle class background.

Whenever someone passes unexpectedly, my thoughts run reflexively to my own mortality and then to my relationship with God. I take comfort in knowing that Mr Russert was a practicing Catholic. See the excerpt from an article regarding a commencement speech he gave in 2004.

In a speech emphasizing Catholic values, “Meet the Press” anchor Tim Russert told the Boston College class of 2004 yesterday that their Jesuit education is a special gift, and also called for measures to prevent clergy abuse of children. Russert, who described himself as “a respectful servant in the laity of the church,” also said the key to a meaningful life is understanding, “What is God’s work here on earth?”In his keynote speech, Russert described having a private audience with Pope John Paul II in 1985, to ask him to appear on the “Today” show. Russert said he forgot his concerns about NBC’s ratings and instead thought about “the prospect of salvation.”

“You heard this tough, no-nonsense hard-hitting moderator of `Meet the Press’ begin by saying, `Bless me Father!’ ” Russert said.

He gave the following career advice to Robert Costa:

I’d first met Russert that June, while interning for PBS’s “Charlie Rose” in New York. My important duties that day were to get Russert coffee and walk him out of the Bloomberg building after the taping. I told him I’d love to work on “Meet the Press.”

“You’re being too nice,” he said at the time, laughing. “Guys like you should want to host the show.” More seriously, he added, “Look, you just have to get out there and do it.” Russert took in the swarm of people on Lexington Avenue and asked “Where are you from, son?”

“Bucks County, Pennsylvania,” I said. Russert gestured to the people rushing by. “All of these folks,” he said, “don’t let them intimidate you. When I first started working for Pat Moynihan, I thought all of these Ivy League guys were ahead of me, that I could never catch up. Then Senator Moynihan took me aside one day, when I told him I didn’t think I had it in me to compete in the big leagues, and he said, ‘Tim, what they know, you can learn. What you know, they’ll never understand.'”

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Great Writing and a non-GIST Alert

Posted on June 11, 2008 by Jorge Costales

Ever read or see* something you really enjoyed and discover later that it was considered that way by a lot of other people – otherwise known as the gratuitous inconsequential spotting of talent [GIST]. I’ve always remembered great articles I read in Sports Illustrated as a teenager about Tom Seaver and Jim Palmer. Recently, I discovered through the Sports Illustrated vault of past articles, that they were produced by writers considered among the best of their time, Pat Jordan and Frank Deford. Jordan’s recent article provides insight into how the relationship between athletes and writers has deteriorated.

Michael Lewis is already well know, so no GIST credit can be claimed, but his article [warning it’s long – a 23 page printout] is still amazing. The topics read like a personal wish list to me; baseball, communism, immigration, economics and native Cubans capacity for survival. The story takes you from a Federal courthouse in Key West to a Correctional Facility in California, with pit stops in Canada, Havana and Camagüey. Along the way, on a smaller scale I admit, Mr Lewis may have done for Victor Mesa what Tom Wolfe did for Chuck Yeager – shine a light on a larger than life character.

No ideological rant could be as damaging to any delusions of adequacy the Cuban government may still harbor, than this example of Lewis’ reporting:

On either side of the highway as you leave Havana you see to the horizon fields now fallow that under better management would be making someone rich. Much closer, right beside the highway, you see Cubans selling the items most easily pilfered from the government and resold on the black market—fruit, milk, eggs, giant cheese rounds, live turkeys—while everyone from small schoolchildren to little old ladies waits for buses that run only in theory. On the road itself you see horses, mule-drawn carts, bicycles, army jeeps, ancient tractors, sugarcane cutters, and Soviet dump trucks belching hot black smoke. What you don’t see is anything resembling an automobile. The moment we leave Havana, in a 2003 Korean-made rental car, we become an object of wild curiosity. Everyone we pass stares in to see what sort of important person must be inside this exotic vehicle. “They probably think we’re either artists or musicians or maybe famous baseball players,” says the young Cuban guide I’d talked into coming with me.By the time I reach the province of Camagüey—birthplace of Gus Dominguez—I’ve seen almost all the Cuban teams, talked to managers and players, and gotten a general sense of the caliber of play (high). But there are two things, in addition to cars, that I never saw. One is other tourists, who seem to be well imprisoned either in Havana or at beach resorts. The other is journalists. I’d been to a dozen games but had yet to encounter a single Cuban reporter. The games are on national television, they get written about in the national paper and get argued about on the streets—and yet no one interviews baseball managers or players. “The journalists don’t even want to talk to us,” the Camagüey manager tells me. “They think they know everything. I tell my players: Don’t read or listen to them. They don’t know anything.”

* – My all-time GIST was the fact that my favorite Hawaii Five-0 episode – the Monopoly clues thief – turned out to star legendary actor Hume Cronyn – as the only bad guy McGarrett ever liked.
** – GIST also named in honor of the proverbial character actor and director, Robert Gist, a native Miamian.

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A lesson in how to insult

Posted on June 9, 2008 by Jorge Costales

Courtesy of George Will commenting on Sen McCain’s ability to give a speech:

“McCain is fortunate. The eerie narcissism of Clinton’s speech the night that Obama clinched the nomination distracted attention from McCain’s badly delivered speech the same night, in New Orleans. If he really opposes torture, he will take pity on the public and master the use of a teleprompter.“

See the entire column.

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Florida Marlins Finances: Pigs get fat, hogs get stadiums?

Posted on May 31, 2008 by Jorge Costales

Please click on the spreadsheet to enlarge or print.

While most have heard of the Forbes reporting on the valuation and profitability of MLB and the Marlins, I think having their work summarized in a P&L financial statement format will help us fans understand this issue better. For those who really want to get into it – Free pocket-protector anyone? – please see the related postings on the right side of the page under Florida Marlins Finances.

Back in April 2008, we got some attention at 2 of the more serious baseball blogs: Sabernomics & The Hardball Times [THT]. Then in June, an interview with me was posted in THT. Aside from an initial concern over being labeled a ‘fiend’ on a web site whose title includes the word ‘hard,’ I am very appreciative to John Beamer from THT for the opportunity.

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A Lesson in Thinking

Posted on May 30, 2008 by Jorge Costales

Please read Richard Posner’s analysis of a proposal to pay kids to go school. Aside from the insights, admire the way he builds the argument:

  • Background into Friedman’s proposals re welfare in the 1960’s
  • How Friedman’s cash grants morphed in the earned income tax credit
  • Why children affect a normally libertarian mindset
  • Why compulsory-schooling and child labor laws are necessary
  • Analysis of why some parents don’t send their kids to school
  • How paying them could be expected to impact those factors
  • Identifying a potential unintended consequence – lowered truancy but continued poor quality of education

————————————————————————
Entire Posner Post
Paying Children to Go to School–Posner’s Comment

The Mexican and New York City programs are well described in Becker’s post and in a recent article in the Financial Times by Christopher Grimes, “Do the Right Thing,” May 24, 2008, http://www.ft.com/cms/s/0/a2f1b24a-292a-11dd-96ce-000077b07658.html?nclick_check=1. I cannot comment on the Mexican program; nor do I oppose social experiments financed by private money, as in New York. But I am skeptical about the New York program, and if I were a New Yorker I would be reluctant to support public financing of it.

Before Milton Friedman proposed to replace welfare programs with a negative income tax–that is, a cash grant with few if any strings attached–welfare programs were in part devices by which the government endeavored to buy good behavior from the poor. Hence food stamps, but not food stamps that could be used to buy liquor. Or money earmarked for health or education.

Friedman’s criticism of such programs was that people have a better sense of their needs than government bureaucrats, so that if the government simply gave poor people money they would allocate it more efficiently than the welfare bureaucracy would do. This philosophy was eventually adopted by the federal government in the form of the earned income tax credit. The danger in giving the poor money (or anything else for that matter) is that it will reduce their incentive to work; this problem was addressed by the replacement of welfare by workfare at the state and later the federal level.

Friedman’s analysis requires qualification, however, when the issue is the welfare of children. The reason is that not all parents balance their own welfare with that of their children in an impartial manner. That is why we have laws forbidding child neglect and abuse. It is also why we have compulsory-schooling laws and forbid child labor. These are paternalistic laws in a quite literal sense, but are justified to the extent that there is legitimate concern that not all parents are faithful agents of their children. Nevertheless, as a general rule parents both know better than welfare officials what is good for their children and love their children more than the officials, however well meaning, do, so any proposal to expand the role of government in controlling children should be viewed with caution.

Public school is both free and compulsory, and schooling adds considerably to a child’s lifetime income prospects, so we must ask why some parents do not compel their children to attend school regularly. One reason might be that some of them do not value their children’s welfare. Another that they cannot control their children. And a third that they do not think their children benefit significantly from regular attendance. I would guess that the second and third reasons are more common than the first.

Paying children to go to school would probably have at least some effect in countering all three cases. However, the benefits would be limited to children who, but for the payment, would attend school less frequently. I do not know how those children could be identified in advance, which means that the program would confer windfalls on some, perhaps many, children. (It would be odd to disqualify children on the basis of their good attendance!) In addition, there would be substantial costs, both direct and indirect, to the program. The direct costs would consist of the costs of distributing the money to the kids, making sure that it is not appropriated by the parents, and monitoring the children’s school attendance. (So: more bureaucracy.) The indirect costs would include perverse incentive effects–some parents would spend less on their children to offset the payments that the children would be receiving for staying in school. Also, giving children their own source of income would reduce parental control and by doing so weaken already weak families. And some children contribute more to family welfare by occasional truancy than by consistent school attendance–for example, they may be older children helping to take care of younger siblings in households in which the parents work full time, or in which there is only one parent. Also, how does one end such a program? If the payments are suddenly withdrawn, will the kids feel aggrieved and resume truancy with a vengeance?

The largest indirect cost, I would guess, would consist in relaxed pressure to improve the public schools or to allow them to be bypassed by means of voucher systems. High rates of truancy may be due in significant part to low quality of schools. Paying children to attend school will reduce truancy rates some but without improving school quality, and perhaps without improving the education of the children receiving the payments. (School quality may actually decrease, with more crowded classrooms–crowded by kids who don’t really want to be there.) Suppose that a school is in session 200 days a year, a student is truant 10 of those days, and if paid to attend would be truant only 5 days. Then the effect of the payment would be to increase the number of days the child was in school by only 2.5 percent. If it’s a bad school, there might be zero benefit from this modest increase in attendance.

Granted, there are many children in New York who are truant for much longer periods. An article by Harold O. Levy and Kimberly Henry, “Mistaking Attendance,” New York Times, Sept. 2, 2007, http://www.nytimes.com/2007/09/02/opinion/02levy-1.html?_r=2&ex=1189396800&en=1d2692cb89c474d7&ei=5070&emc=eta1&oref=slogin&oref=slogin, estimates that 30 percent of New York public school students miss a month of school every year. But they may be children who for mental or psychological reasons, or extreme family circumstances, cannot benefit significantly from additional schooling. The beneficial effects of paying children to go to school are likely to be concentrated on the kids who are casual rather than extreme truants, and those benefits, as suggested by my numerical example, may be slight.

Another component of the program is paying children for performing well on standardized exams. Such measures reward work more directly than paying for attendance, and also avoid the bad signal that is emitted by bribing people to do what the law requires them to do (i.e., attend school until 16 or 18, depending on the state), but they may largely reward intelligence rather than study. Working hard in school is no guaranty of getting good grades. Scholarships for promising students and awards for high performance have good effects, but the paid students are unlikely to qualify in competition with students who do not have to be paid to attend school.

Paying children to attend school is a band-aid approach at best. Far better would be a voucher system that would create competition among the public schools to serve children better.

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Morality and Globalization

Posted on May 28, 2008 by Jorge Costales

Perception: Globalization may have been oversold. We are beginning to see unanticipated problems which should give us pause.

Economic Reality: The idea behind Globalization – defined as the increased integration of the world’s economy – is that resources should be allocated by markets, instead of government’s. That idea has been and remains a great success.

“Countries don’t get rich by staying isolated. Those that embrace trade and foreign investment acquire know-how and technologies, can buy advanced products abroad and are forced to improve their competitiveness. The transmission of new ideas and products is faster than ever. After its invention, the telegram took 90 years to spread to four-fifths of developing countries; for the cell phone, the comparable diffusion was 16 years.”

The above quote is from a column by economist Robert Samuelson.

To take the globalization / free trade argument to another level, check out the posting by one of those heavyweight-ivy-league blogoshere-icon economist types – Greg Mankiw. He’s for it and writes:

“Economists’ devotion to free trade is based not only on the positive conclusion that it leads to a bigger economic pie but also on a couple of related philosophical positions.”

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Iowa’s immigration problem?

Posted on May 27, 2008 by Jorge Costales

Perception: The Federal Government is addressing the problem of immigration which is costing US citizens and residents their jobs.

Economic Reality: A 3.5% unemployment rate is the equivalent of full-employment. Raids in Iowa have more to do with presidential politics than immigration.

Below is an excerpt from the WSJ Editorial – May 24, 2008:

“Federal immigration officials raided an Iowa meatpacking plant this month in what is being called the largest operation of its kind in U.S. history. Nearly 400 of the plant’s 900 employees were arrested on immigration charges. Do you feel safer?

Ever since immigration reform died in Congress last year, the Bush Administration has made a show of stepping up enforcement. But do homeland security officials really have nothing better to do than raid businesses that hire willing workers – especially in states like Iowa, where the jobless rate is 3.5%? These immigrants are obviously responding to a labor shortage for certain jobs. Giving them a legal way to enter the country would free up homeland security money and manpower to focus on real threats.”

See rest of the WSJ editorial [subscription required]

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Hanley Ramirez signing – Change in strategy?

Posted on May 19, 2008 by Jorge Costales

Please click on spreadsheet to enlarge or print.

At first glance, the signing of Hanley Ramirez appeared to signal a shift in philosophy for the Florida Marlins management. If there was going to be a shift, this would have been the logical first step.

But as the numbers in my spreadsheet above indicate, this signing by itself does not represent any commitment of the $105 million in Revenue Sharing [RS] monies the Marlins will probably receive over the next three years prior to the planned new ballpark opening. The RS estimates are based on the statements by Pittsburgh Pirates President, Frank Coonlley, who disclosed that the Pirates would be receiving $35 million in RS monies in 2008. That level of RS monies are consistent with the Forbes estimates regarding Florida Marlins revenues from 2002 through 2007 – see the Marlins Profit and Loss statement I have compiled [link to updated version]. By any criteria of how RS monies are allocated – Marlins have less Local Revenue and lower Payroll – the Marlins should receive a greater share of RS monies than the Pirates.

Put another way, in 2006 & 2007 the Marlins pocketed 100% of the Revenue Sharing monies received [about $72 million]. In the case of the 2007 season, they did so with a major league salaries level of $30 million. They then reduced their major league salaries by $9 million for the 2008 season. So even after the new Ramirez deal kicks in for the 2009 season [$5.5 million], they would still be under their 2007 salary levels – levels at which they were able to pocket all RS monies. Think about it, even after the Ramirez deal, the Marlins are currently on track to be under their 2007 major league salaries level of $30 million for the three years [2008 thru 2010] prior to their stadium opening.

Why is that important? Because part of the company line the Marlins will put out as valid reasons for not spending money on other players is that due to their low revenues and the Ramirez deal, they can not afford to do much else. The Ramirez deal, as of today, does not even bring them back up to their 2007 level of salaries, let alone dip into using their Revenue Sharing monies for the first time since 2005.

A recent article by Juan C. Rodriguez from the Sun-Sentinel [link expired] points out that Ramirez was worried about making a mistake by not holding out for an additional $30 million dollars. An ESPN article addresses how Ramirez would have benefited from the Ryan Howard arbitration awarded salary of $10 million for 2008. My spreadsheet provides a reasonable scenario under which Ramirez could have made an additional $30 million by going the arbitration then free agency route. But that route entailed a risk of injury and or sub-par performance. This is a good example of how to quantify the cost of avoiding risk when it comes to professional athletes salaries.

The joy in South Florida over the Ramirez signing is probably the latest example of the Societal Stockholm Syndrome, the scenario whereby victims begin to feel sympathy for their captors.

Posted in Marlins Ballpark & Finances | Tagged , , | 1 Comment