Market Power

Musings by an academic economist on the power of markets and the power over markets.

Saturday, January 22, 2005

Econometrics Pun

If Random House Publishers were to become the world's #1 book publisher, would this be an example of stochastic dominance?


If You Really Hate the Kansas Jayhawks

I assume this piece of "seatery" is owned by someone who is *not* a Jayhawk fan.

Bombs away!


Alternatives for the New Washington Baseball Club

Click here. I like the name The Washington Mighty Bureaucrats" with the mascot "Pete the Pork Barrel."


Fini! Fertig! Finished!

Hockey fans, looks like you'll be unable to watch any NHL games this year. If you are a hockey fan and "lucky" enough to live somewhere up in the nort' lands (where we are currently in a blizzard that has, for some reason, knocked out my furnace!), then you can watch some college hockey (like the WCHA) to get your fix. I know - that's like a beer snob settling for some Stag Beer, but sometime we gotta do what we gotta do, eh?

Here's an article from the Minneapolis Star-Tribune describing the current situation and here are two pertinent quotes:

On the players' side:

Nine hours of talks over two days -- first in Chicago, then in Toronto -- failed to make any progress. In a message delivered Friday, players are being told to plan for no season at all.

And so, several time zones away in Finland, Wild player rep Dwayne Roloson started making phone calls.

"We've been told that, for all intents and purposes, the season is going to be lost," said Roloson, one of seven Wild players playing in Europe during the NHL lockout, which reached 128 days Friday. "We've been told to prepare the guys that the season is going to be cancelled. Try to get over to Europe, play a little this year. Might as well get some games in when you can."

On the owners' side:

"The season's done," Detroit Red Wings senior vice president Jimmy Devellano told the Detroit Free Press. "There's no chance that the right deal can remotely be done in the next little while. There's too many I's to dot and T's to cross. You are not going to get this collective bargaining agreement done in two days, three days, one week or two weeks. It's over."

There was similar rhetoric after talks in December failed to make progress. But none of it sounded as dire as that going around Friday.

Who will blink first? The players have outside opportunities which improve their bargaining position. But the outside opportunities are imperfect substitutes in terms of money and non-pecuniary benefits (according to a guest on the Tony Kornheiser Show recently, if you play hockey in some towns in Siberia, you get to stay on your game, but you have to deal with the curfews). But the productive playing-life of a player is short, and having the prospect of cancelling two seasons staring them in the face may be a bit more than they are willing to swallow.

The team owners seem united, but they don't seem to have alternative opportunities to use their hockey-related resources (that raises another question - what sorts of resources possessed by team owners are "hockey-only" resources? If the team plays in a publicly-owned stadium, does that increase the owners' resolve?).


Tales from the Crypt

The NHL lockout is a worthwhile discussion at the local watering hole, if for no other reason, because of the lack of interest in it. But Archie Bennitz was so pissed off at the lack of negotiations, he instructed his son to express Archie's displeasure in Archie's death notice:

Bennitz called (NHL Commissioner Gary) Bettman and (union leader Bob) Goodenow “skunks for denying him the pleasure of watching the NHL on TV this year,” the obituary in the Ottawa Citizen read. Bennitz also urged Bettman to step aside in favor of Wayne Gretzky.
I've heard about burying a grudge, but sheesh!


Friday, January 21, 2005

More Summers Apology Stuff

King at SCSU Scholars posts about the Lawrence Summers flap I have posted on below. He focuses on the misinterpretation of statistical results and the reverse of the fallacy of composition - whatever is true for the whole must be true of the individual. It's a good read.

Every once in awhile when I mention that, on average, college graduates earn more than those who have no college degree, a student will say that he/she knows someone who has not completed college but does very well for him/herself. Bill Gates' name often comes up in such discussions. Yes, by the definition of the average, you will always find examples like this. The average is a measure of the middle value of a variable (and not the only measure) and thus has values above it and below it. But people sometimes forget to account for this. When we say one average is larger than another, all that we are saying is that this particular middle measure for one variable is higher than that for another variable.

It's also important to note, as King's post does, that the average, strictly speaking, is a measure of a middle value of observations taken from a sample. The population is a collection of everything of interest. The sample is a subset of the population. As such, the average doesn't account for every value in the population, only those "lucky" enough to have been observed in the sample. The larger the sample, the more representative it is of the population and the more likely that analysis of it will reveal the true nature of the population. Even if the sample is small, there are well-developed techniques that allow us to make statements about the population based on the sample. Moreover, the more we sample from the same population and the more techniques we use, the more we learn about it. Unfortunately, if people squelch some research because they find its direction or findings offensive, then repeated sampling will be less likely to occur and we will be less likely to learn about how things work.



What is wrong (or right, depending on your perspective) with this picture?

I've got 4 things that I find right with this picture:

S-N-O-W!!!!!!!!!!!!!! It's about time!


More Stuff in Defense of Lawrence Summers

My co-blogger, Skip Sauer, at the Sports Economist, links to this morning's Wall Street Journal column by Ruth Wisse in which she further defends the comments made by Harvard's Lawrence Summers. I posted (here and here) on his comments and the repercussion of the squelching of his summary of a line of research that some find offensive.


Thursday, January 20, 2005

Russell Roberts on the FDA

Russell Roberts of George Mason University has some comments worth reading regarding the FDA at his Invisible Heart website. Here is another post by Professor Roberts at Cafe Hayek on the same subject. Both are worthwhile reads.


More on the Summers Disturbance

Here is another article about the controversy around Lawrence Summers' presentation regarding the underrepresentation of women in math and science that I commented on earlier. The controversy surrounds Summers' discussion of a research hypothesis, currently being explored, that there may be some innate difference between men and women that are, in part, an explanation.

For those not accustomed to the jargon of economics, Gary Becker's Human Capital Theory treats choices in skill acquisition (such as education or on-the-job training) much like a factory treats the acquisition of a piece of machiney. The machinery generates a large cost now but generates benefits (as well as other costs) into the future. The purchase decision is thus an investment decision - the factory owners must weigh the long-term benefits against the costs. Human capital refers to the skills and knowledge possessed by a person, skills and knowledge that come at a large initial sacrifice but that can generate benefits over time.

One of the difficult thing to do in examining questions based on Human Capital Theory, such as the research referred to by Professor Summers, is controlling for innate ability. For example, it's well known that on average, people with college degrees have higher lifetime earnings than those without college degrees. How much of this is due to the hard work of faculty and staff?

Well, we also know that people with more innate ability are more likely to go to and succeed in college. How, then, can we attempt to nail down the effect that education per-se has on a person's earnings independently of a person's innate ability? Since the ability is "innate", it is possessed at birth. We thus need to gather information on very young people. There are various ways one could account for this. One way is to study identical twins who take different education paths. Another way is to use parental information as a control. Another way is to examine various sorts of test scores given to kids when they are very young to measure their ability and then use this information as a control in a future dataset containing the same subjects at an older age.

But this is easier said than done, and it's one of the reasons that controversies continue to crop up when researchers, to the best of their abilities, undertake studies where they need to control for innate ability.

Thanks to ktoe grrrl for the link to the BBC article.


Rockin' Mommies

You can keep your Desperate Housewives. With two small durables, it's hard for my better 3/4ths to watch much else other than Clifford, Thomas the Tank Engine, etc. But I can always sneak away to listen to a little agressive music.

In college, I played guitar in a garage band called "Paralyzed", named after an old Ted Nugent song. I still play guitar. I'm also a father. So I can sympathize in more ways than one with these ladies: Housewives on Prozac and Frump. There's another all-mommy band named Placenta. One word: Ewwwww.

Here's an article from Yahoo! about the mommy rock-band genre.

I wonder if I could get a band together with a bunch of experienced academic economists. We could "sing" about graduate school, the tenure process, journal referees (being one and being disected by one), and homothetic utility functions.


Wednesday, January 19, 2005

Welcome, Students

I have finally gotten the nerve to tell my students about this blog. I hope all y'all find it interesting.


Offensive Academic Inquiry

From the online version of the Chronicle of Higher Education (paid subscription required):

Harvard University's president, Lawrence H. Summers, has come under fire by some scholars for suggesting that one reason fewer women make it to the top in mathematics and science may (emphasis - Phil) be the result of innate differences from men.

Some prominent female scholars have called his remarks offensive, while other academics say his comments synthesized some current research on gender differences. Mr. Summers said his views, delivered on Friday at an economics conference in Cambridge, Mass., have been "misconstrued."

Nancy Hopkins, a professor of biology at the Massachusetts Institute of Technology who led at 1999 panel on the status of women there, walked out in disgust in the middle of Mr. Summers's speech, she said. News of the incident was first reported on Monday in The Boston Globe.

About 50 people attended the conference, sponsored by the National Bureau of Economic Research and titled "Diversifying the Science and Engineering Workforce: Women, Underrepresented Minorities, and Their S&E Careers," at which Mr. Summers gave a luncheon talk. While no transcript of his remarks exists, conference attendees say he discussed several possible hypotheses for why fewer women than men are in the top ranks in science and math at elite universities.

He discussed the theory that women with children are reluctant to work the 80-hour weeks that are required to succeed in those fields. Conference attendees said Mr. Summers then discussed the possibility that men and women may have different innate abilities that were previously attributed to socialization.

When Ms. Hopkins heard that, she said, "I was profoundly upset."

"That kind of discrimination holds people back," she said.

Others had different feelings:

Not everyone was offended by Mr. Summers's speech. Paula E. Stephan, a professor of economics at Georgia State University, said that Mr. Summers had organized a set of comments on current research findings on the topic and also put forth potential remedies, including providing professors with more child-care services.

I emphasized the word in the first paragraph above that clearly shows that Professor Summers was summarizing the research, not stating a known fact - the word "may". He did not say that women "do" have innate differences that cause them to be underrepresented. He said that research has explored the topic that women "may" have innate differences, a testable hypothesis that can, over time, be shown to be true or false by careful and dispassionate examination of the data.

Covering up such explorations for fear of offending people is one of the big challenges that researchers in the academic universe face. Such outcries in academia create walls that keep important topics from being explored and discoveries from being made.


Car Safety Regulations

Have they really done any good?


Do Not Try this At Home

Ouch!... except for this guy.


Monday, January 17, 2005

Who Needs an Ice Box?

Not the people who live in Embarrass, Minnesota, where the mercury fell to -54 F last night.

I'm ready for summer. How about you?


Sunday, January 16, 2005

Lost In Translation

Dadgummit. I can't stop blogging even though I said it would be a light week. I never said I was George Washington!

Here is an article from Der Spiegel on the landing of the Huygens probe on the surface of Saturn's cloud-shrouded moon, Titan. Here is the translated version from Google's translation service.
Anyways, things got a little fuzzy in translation. I like this passage from the translation:

The European landing equipment "Huygens", which was seven years long on board the NASA probe "Cassini" to the Saturn on the way, penetrated the close cloud cover of titanium and transmitted a data set to the earth, on whose evaluation the scientists will presumably work years.
Far out and groovy, baby. Data sets from heaven! This reads like it came from the bible. Call me when the data set is completely perpared and ready to use - in Stata.


Don Boudreaux on Salaries in Sports

Don has this comment on why the Carlos Beltran contract (in particular) is not a social injustice.

Basically, he argues that the skills that it takes to be a major league baseball players are in relatively short supply while teaching (and research) skills are in relatively abundant supply.

As such, his argument is a variation on the diamond-water paradox. Water is essential for life while diamonds most surely are not. But the price of diamonds is so much higher than the price of water. Why?

Basically, relative to the demand for each commodity, the number of diamonds available for purchase is small while the amount of fresh water available for drinking is much larger. Since diamonds are relatively scarce, the value of obtaining one more diamond is large: hence the higher price of diamonds. This paradox helps explain why the price of a product is not a measure of its social value. In the market, the price of something is determined by the interaction of how much it costs to "make" it and how much people are willing to sacrifice to obtain it. To an individual, the net value of obtaining something is the difference between how much that person values the thing and how much the person must to sacrifice to obtain it. To society, the value of the good is the sum of the individual net values: the so-called consumer surplus. Since water is so plentiful, it is relatively low in price even though it is so beneficial. Surely it is of more value than diamonds. Yes, it is - and the same argument goes for highly-talented baseball players.


Smart Clothes

Have you ever felt that you were being watched???? One of these days, the gawker may be your clothes!

Thanks to Tyler Cowen for the tip.


Here's What I Do All Day

Click here.

But I only wear a suit when everything else is in the wash. Thanks to Ben Muse for the tip.


Light Blogging?

Did I really say I would be doing light blogging over the next week? What a liar.


Big Ben

The sheen is off Big Ben. See here for some comments by Steelers fans.

By the way, I love the last comment in the group. I'll have to ask my better 3/4ths if I can rename my kids "Doug" and "Brien."



When I travel the 450+ miles from Nort' Mankato, Mn. to Columbia (Mo) USA for a football game, many times I am looking more forward to the pregame and postgame festivities. I love tailgating.

So do Steelers fans! Heck, they apparently get a little "debauchery" at their tailgates, according to the article. What's a tailgate without a little debauchery? Like beer and brats, a smattering of debauchery is the sprinkling on the icing on the cake.

Who are the best tailgaters? I have limited experience, but I am very impressed with the tailgating at Kansas City Chiefs games.



I am not a Nebraska Cornhusker fan, but I respect their fans and the football program they have. Last year was trying to any Husker fan after they had their first losing season in a long long time. That was expected as the Huskers played a radically different offense than the one that the players were recruited for. Things may be about the same next year after a myriad of defections from the Husker squad. Several players have opted to leave the program, many apparently realizing their talents are not good matches for the current program.

But you don't keep a big dog down for too long. It sounds like the current recruiting class that the Huskers have amassed is very solid. Of course, we won't see how this class will play together as a unit for a couple of years and we won't know how well Bill Callahan will perform as a college coach, but things look good for the Huskers on the recruiting front. In college athletics, even with the myriad of rules they operate under, the rules of the marketplace still hold (not that that's a bad thing). The programs with the strongest demand will be most successful in the long run. Nebraska is one of those programs.

BTW, did I imply that Nebraska has a strong demand for its football program? About 1,000 NU fans were expected to go to the US Army All-American Game in San Antonio, Tx. yesterday to see several Husker recruits play.


Art Prodigy

Marla Olmstead is an artist whose works are being sold to people around the world for prices ranging into the thousands of dollars. Here's an article about her and here is a quote from the article:

"They have vibrant colours, they're very expressive in the way the paint is applied, brush, spatula, her fingers. Some are Kandinskyesque and some are Pollockesque."

She's also 4. I guess we can forget about the PBSKids slogan "where a kid can be a kid."

I offer these bits of art from my two year old who did this work when he was 1. Notice how the colors interplay with one-another to display the intense feelings he had that day after he was denied extra sugar in his oatmeal. Do you feel the pain?

Bidding starts at $100.