Dan Snyder's Curse

Owner's should be wary of the winner's curse in NFL free agency. It seems that we routinely see highly-regarded players bust in free agency. See: Washington Redskins.

The reason could lie in economic theory. It's the "winner's curse," or Dan Snyder's Curse. Assume the common critique of free agency is correct and that the teams that "win" in free agency by signing the big name guy actually regularly overpay for the player on average. The reason this may be is that teams pay for a player based on their estimation of his value: some definite, but unknown dollar amount.

The problem is that even the best scouts could never precisely predict a player’s value. Some overestimate his worth, others underestimate. The team that ultimately signs a player will be the one that maintains the highest estimation of his value, which likely is a team that overestimated and, as a result, overpaid.

Of course, this doesn't universally hold true. But the greater a player's bargaining power, the less the gap between his estimated value and his actual value will be (expected profit), and the more costly an error in estimation of his value is.

Ascertaining Greed

Self-righteous vitriol is rampant these days. Hurling "greed" at Wall Street has become a popular sport, but I submit that participation in the sport is a hopelessly hypocritical endeavor.

Isn't any income above a subsistence level inherently "greedy"? By definition, any amount beyond subsistence levels is not necessary. It only serves to further one's material interests in excessive comforts.

Moreover, the existence of a world of "rational actors" -- individuals who operate to maximize their own self-interests -- is the underlying assumption of most of public policy. What is so surprising about financiers being rational actors?

Do we really think that only a select group of businessmen maintain profit-maximizing motives (ie. greed, or "hubris" if you really want to go self-righteous, pseudo-intellectual)?

If we're ridiculing those who are greedy, the criticism should not stop at the financial sector. Doubtless, we all are regularly driven by the same motives of self-interest maximization.

The Libertarian Future or Present?

Maybe "South Park Republican" (read: libertarian) is an accurate description of generation X/Y conservatives.

The results of the straw poll taken of 1,757 CPAC attendees reveals some suggestive statistics. The poll does not break down the statistics by age group, but a slight majority of respondents were students.

While it is difficult to say that any of the positions voted on are necessarily contrary to a libertarian perspective, three of the four issues that received the bulk of attendee support are truly fundamental principles of libertarianism. Of the 12 possible issues, 43% of respondents rated reducing the size of the federal government as the first- or second-most important issue to them. The second-most supported issue, reducing government spending, received a cumulative 24% of the vote. At a close fourth, only behind winning the war against terrorism, was lowering taxes with a cumulative 22% of the vote.

"Promoting traditional values," the only issue listed that could be construed as possibly contrary to libertarian ideals, only received 4% "first-most" and 4% "second-most" votes. It would have been interesting to see how the vote broke on gay marriage, clearly contained within the amalgam of "traditionally values," but not necessarily an issue "traditionally values" immediately conveyed to the survey respondents.

Perhaps the poll is skewed by a slight majority of students. Perhaps it isn't. Either way, these results are a damning criticism of the present voice of conservatism's overemphasis on domestic social policy. At best, the message misrepresents the future of the Republican party. At worst, it misrepresents the party's present composition.

Deadly Rent-Seeking

Secretary of State Hillary Clinton and other opinionists are absolutely correct that Americans demand drugs and that the resultant profitability of drug trade into the United States through Mexico is fueling violence in Mexico to capture market share. However, that Americans crave a product, the sale of which is profitable, does not mean Americans bear moral culpability for the violence resulting from attempts to capture that market share. Americans demand many products (like corn, beef, sugar, televisions, clothing, etc.), the sale of which is profitable. Capturing market share for those products would likewise be more profitable for any individual producer or supplier (see: advertising). That Mexico has not been able to stop Mexican drug traders from violent rent-seeking is not the fault of Americans. The same violence could result from any product whose shipment required transportation through northern Mexico.

Antitrust Suspicions Vindicated

The Senate judiciary subcommittee on antitrust, competition policy, and consumer rights will hold hearings inquiring as to the anti-competitive implications of the BCS. Maybe Dartmouth will finally get a rightful opportunity to win the national championship. Well, once we climb out of the FCS (Division I-AA), that is.

Conflating Stimulating the Present and Robbing the Future

Milton Friedman warned in Free to Choose, "If all we want are jobs, we can create any number--for example, have people dig holes and then fill them up again or perform other useless tasks... Our real objective is not just jobs but productive jobs." Obama and Co. have proposed an economic plan that includes spending $200 million on employing people to relay sod on the mall -- $200 million to dig holes, and fill them up again.

Is the BCS an Antitrust Violation?

I'm from north Florida, about 45 minutes from Gainesville. My brother attends the University of Florida, and the majority of my high school friends are Gator grads. I will be in Gainesville on Thursday night with friends watching the National College Football "Championship" game between the Florida Gators and the Oklahoma Sooners. I am a devoutly loyal fan of a professional football team from north Florida, but I couldn't care less whether the Gators win or lose on Thursday.

The absence of a playoff system to determine the champion of college football completely removes all legitimacy from the sport, and I cannot devote time and emotion to something I don't believe to be legitimate. I know I'm not alone in my apprehension towards college football because of the bowl system. The collusive activity keeping the bowl system intact has restrained my consumptive interest in the sport, and the endless complaints about the system suggests that it restrains the interest of others, too.

This sparks a question: Is the existence of the bowl system to the exclusion of a an alternative, more reasonable system (read: playoff system) to determine the sport's champion a violation of antitrust law? The basic standard, if I recall correctly from undergrad, for establishing illegal anti-competitive business practices is whether the practices represent an "unreasonable restraint of trade." I've never heard an argument that could lead one to conclude that the bowl system is reasonable.

Here's hoping I get that coveted unpaid internship with the FTC this summer. I'm taking down Dartmouth Dining Services first, the BCS second.

Barney Frank, Paul Krugman, and the Apocalypse

It is a safe argument that congressional irresponsibility is a cause of the present recession. A rarer argument is that the irresponsible use of language by Democrats in congress is a cause of the recession. Accordingly, I'll fill the void and make it: the grossly inaccurate language of Democrats in politics, economics, and the media comparing the present economy to the Great Depression is a cause of the economy's problems, or at the very least stands to exacerbate them.

Consider that the short-term prosperity of the economy is foremost a function of consumption, and consumption is a function of consumer confidence and consumptive ability. Consumer confidence reached an "all-time" low in December since the Consumer Confidence Index was created in 1967. Yet consumptive ability, roughly measurable by the unemployment rate (6.7% in December), is only slightly worse than it was during the first recession of George Bush's presidency (6.3% in June 2003).

What are the determinants of consumer confidence? The economic condition of individuals is certainly a gauge consumers use, but given the disparity between consumptive ability and confidence, in this case it has clearly been overwhelmed by other barometers. It seems clear that two extraordinary conditions have primarily driven the extreme lack of confidence. The first is the erratic and dramatic behavior of the stock market during October and November. The second is the pervasive, apocalyptic language comparing the economy to the Great Depression among Democratic politicians and the media. The Dow has stabilized, but the apocalypse continues in relentless media reports.

If the nature and frequency of such reports continue, it stands to reason that consumption will be hindered by depressed confidence beyond that which it would if characterizations of the economy were accurate by Democrats and the media. The economy will suffer in the short-term as a result.