Oldie but goodie

Back before I became an astronomer, I still could tell there was something funny about the phrasing in this article (or here for cached version):

The scientists believe that the last time large amounts of matter so dense and so hot existed was a few millionths of a second after the Big Bang, the explosion credited with giving birth to the universe.

(Emphasis added.)

Umm, yeah. There were a lot of other explosions vying for the title, but in the end the Big Bang narrowly edged out Krakatoa and the Hindenburg. Personally, I was hoping Krakatoa would be credited with giving birth to the universe.

Just the facts, Bob.

Why is the Howler making fun of a Russian scientist's name?

Workers and the means of production, and the NBA

DA readers FB and NB have raised some questions about what I'm suggesting with respect to professional sports leagues. Am I saying it should be illegal for rich guys to own teams? Am I saying that team owners don't do anything valuable? Am I discounting the value that coaches provide by teaching the players how to play proper, winning basketball? Am I suggesting that NBA teams should have a different management structure from the one they have?

I'll respond briefly to these specific questions, and then I'll try to re-cast what I'm saying slightly differently.

Q: Am I saying it should be illegal for rich guys to own teams?

A: No. I'd just prefer for it to be different.

Q: Am I saying that team owners don't do anything valuable?

A: No. Team owners choose the people to run the basketball side of the business and the people to run the non-basketball side of the business (the General Manager, and the Team President or CEO, respectively). Hiring two people is certainly worth something, at least if it's the right two people. (I'm not sure if Charles Dolan, owner of the Knicks, did anything of value when he chose Isiah Thomas as General Manager.) Some team owners do some or all of the duties of the GM and/or the CEO, in which case they contribute the value of not just the guy who hires two people (what could that be worth, $100,000 per year?), but also the value of the GM (maybe $3M per year) and of the CEO (maybe $1M per year). So a very active team owner might be worth $4.1M per year.

Q: Am I discounting the value that coaches provide by teaching the players how to play proper, winning basketball?

A: No, not at all. But, a league with really good players and crap coaches will draw much better ratings than a league with really good coaches and crap players. In other words, the players contribute much more value.

Q: Am I suggesting that NBA teams should have a different management structure from the one they have?

A: No, that's not what I'm saying. I don't know what the right management structure is, and that's beside the point. I want a different ownership structure.

* * *

Here's the point: as a consumer of the NBA and as a supporter of labor in general, I wish the players owned the league. They could own the league, as I pointed out in the example in the previous post. The key is that the players already possess the means of production. Sure, they don't contribute all the value – team doctors, coaches, team-builders (General Managers), and others all contribute some value. But the majority of the value of each team is wrapped up in the sinew and gray matter inside the players' bodies.

See, it's difficult for workers to own a business in which they don't own the means of production. If there's a large building, or a fancy machine, or some other physical entity that the workers do not own but that is vital to the business, it is pretty difficult for the workers to own the business.

But when the workers already own the means of production, then there is NO NEED for a rich-dude owner. The NBA owner's $20M/yr is just a huge source of inefficiency. With 30 teams, that's $600M/yr that we, the consumers, ultimately pay for, but for which we receive no value. Insane. Half a billion dollars just completely wasted.

* * *

Finally, here's one more objection that DA reader NB raised: Let's say the players pulled the coup I suggested, and the investment bank went along with their plan, and now it's the Players' Basketball Association (PBA) that everyone watches. Let's say that the public likes it just as much as they used to like the NBA, and the TV contract is just as rich. Well, now there's still that $20M of profit each year per team (on average), only since the players are the owners they just split up the profit amongst themselves. The consumers won't benefit at all; only the players will.

Even if this objection is true, I'd still prefer this scenario to the current economic model. At least the guys making the profit would be the ones who generate the profit through their labor.

Mr. Sampson?

Great question for Gonzales's Chief of Staff Kyle Sampson that was suggested by an anonymous poster on TPM Muckraker's live coverage of the Sampson's Senate testimony today:

Mr. Sampson, if the firing process "wasn't scientific or well-documented" and you didn't make the decision, then how do you know the firings were not for improper reasons?

(comment posted at 01:45 PM, if you're looking for it)

I hope a staffer for some Senator reads that thread (or reads this blog).

Franken, news, the Moon, ...

1. Minnesota candidate for Senate, Stuart Smalley, tonight on the Late Show with David Letterman: "Republicans run for office claiming that government doesn't work, and then they get elected and they prove it."

2. That's what we call the news.

3. Today (3/28) I saw a really interesting talk about the Moon. Specifically, about Transient Lunar Phenomena, or TLPs –

Ever since the invention of the telescope, and even for a while before then, some people who have stared at the Moon for long enough have occasionally seen flashes of light. The TLPs haven't occurred just anywhere – it looks like only about 10% or less of the Moon's surface has experienced these flashes. In recent years, there has been increasing evidence that at least some of these TLPs might be related to outgassing events.

See, the Moon has a (very thin) atmosphere that probably consists largely of gas that sometimes bubbles up from its deep interior. Sometimes when this gas bubbles out, it might flash brightly enough that Earthbound observers notice it as a TLP.

A team from Columbia, led by Arlin Crotts and Cameron Hummels, is building a dedicated lunar monitor that will live at Cerro Telolo and will photograph the Moon every 0.1 seconds ad infinitum (while the Moon is visible in its field of view). Within a year or a few years they will have an unbiased data set that is of superior sensitivity to the entire prior history of human observations of the Moon.

On free markets

DA reader JS points out, in response to the post about why NBA players should own the league, that although I say that the business model according to which sports franchises operate is "funny", it's actually quite common:

I like the idea. But I don't think the NBA model is uncommon. What about things like financial firms? People can own them, and the value comes from the people who work for the firm rather than from any physical entity like a factory. He's right. A lot of the stock market consists of people who provide no value but own the right to draw profit from companies.

I hope to return to this issue, but I'd like to take a slight meandering detour first.

* * *

In my introductory economics course in college, I heard what I think is a pretty standard story:

(a) A perfectly competitive market (PCM) leads to a certain kind of optimal society, one characterized by "Pareto Efficiency".

(b) Pareto Efficiency is defined by the following property: It's impossible to make anyone better off without making someone worse off. There are plenty of societies where you can make someone better off without making anyone worse off, and those societies aren't in a state of Pareto Efficiency. (Example – if I have some bread and jam in the back of my fridge that's going to go bad because I won't eat it, and I give it to a homeless person who's starving, he's better off and no one is worse off, so I think this would show that our society isn't at Pareto Efficiency.)

(c) Many Economists think that a Pareto-Efficient society is the ideal that we should strive for, so they praise PCMs. It's not completely clear to me that Pareto Efficiency would be the ideal society – I could imagine that some people might be doing badly enough in a state of Pareto Efficiency that the society would be better off overall if we improved the lot of the worse-off members, even if it slightly lessens the tremendously advantaged lot of the best-off members. But anyway, I think Pareto Efficiency would be a pretty good status to achieve, and PCMs are, if not part of the perfect society, at least pretty darn good things.

But a free market includes many features that many industries don't have. There is no collusion in a PCM, but tacit collusion is common in many industries and sports leagues are explicitly allowed collective bargaining, which is a form of collusion. There are no barriers to entry in a PCM. There are huge barriers to entry in many industries (including sports leagues). There's perfect knowledge in a PCM (and therefore no need for advertising). There's tons of advertising in many markets (including sports). And so on.

During the intro econ course, the professor will try to demonstrate in many examples that government regulations are bad by asserting (if not proving) that if a society is at a state of Pareto Efficiency and then adds regulations, it will end up away from this optimum point.


But here's the rub:

One final feature of perfectly competitive markets, according to the intro econ professor, is the zero-profit condition. In a PCM there is no profit, because with no collusion, zero barriers to entry, and perfect knowledge among the consumers, new firms will keep entering the market and underselling the existing firms, thereby driving down prices, until they are all selling at cost, at which point there's no profit left.

But wait a minute – many many industries have huge profits, which apparently ipso facto means that they are not at Pareto efficiency. (It's my understanding that only relatively few markets, such as the pork bellies market and timber logs market, are actually close to perfectly competitive.) What, now, is the reason to avoid government regulations? Is it obvious that if you start off away from the optimum point and add regulations you will end up further from the optimum point? Not to me.

I'm sure that serious economists have thought about this and probably have a very good response. But, having only taken a few low-level economics courses at the undergraduate level, I never saw such a response. If you have any comments, please let me know.

A modest proposal: players should own the league (and eat babies)

I'd like to venture away from physics and toward economics:

I had intended for this blog to be more of a commentary on science and on contemporary science-writing, but I haven't posted in half a year so the initial grand designs appear not to tickle my writing bone.

So, while I wait to be inspired with posts related to the original purpose, I'll write a few serial installments of my manifesto.

It seems to me that there's a lot of inefficiency in the economic model according to which professional sports leagues operate. What, exactly, do team owners own? Well, they own the right to make decisions regarding the team and to collect the money the team makes. But that's a weird thing to own, isn't it?

Some sports teams are very profitable. So owning the rights to the profits of a sports team can be a great thing to own. But does it make sense?

In many businesses, it makes some sense for the owner to reap a profit. Although the workers contribute the value of their work, the owner contributes the value of his capital, which is an essential part of the final product. Example: In a factory, the owner provides the factory, and the workers work in it. Of course there's value inherent in the factory – the workers couldn't make whatever they make without the machines they need to make it. Marx wanted the workers to own the means of production, but he didn't deny that there is value in the means of production.

But a sports franchise is a very funny kind of business, because in many cases the owner owns nothing that's related to the means of production (often – as with the Celtics – the owners don't even own the arena). All the owner owns is the right to make money from what the workers – the players – do.

The owners of the Celtics (not to pick on them, but they're my favorite team so I pay more attention to them than to other teams) make something like $20 million per year. Some years it's less. Some years more. Their best player, Paul Pierce, makes only $15M this year. So, the ownership group (led by a fellow named Wyc Grousbeck, who seems like a great fan and whom I have nothing against except for a few quibbles with some management decisions) pockets as much money or more (for contributing no value) as the best player on the team does (for all the obvious value he contributes). If Wyc Grousbeck went on vacation and didn't do anything related to the Celtics for a month or so, fans wouldn't notice a lick of difference. If Pierce went on vacation for a month, well, earlier this season the Celtics lost 18 straight games while he was out, so we know what his absence means to the squad.

I don't think I need to belabor the point that the players contribute nearly all of the value in an NBA franchise. So I'd like to propose a superior economic model.

Imagine this:
° The NBA players all stop playing for the NBA. They then go to some investment bank – Goldman Sachs, for instance – and they say, "We want to start our own basketball league. Will you loan us some money so we can get off the ground?" Goldman Sachs does this sort of thing all the time. They finance people who have a great business idea but don't have enough capital to implement it.
° Goldman Sachs says, "Why will anyone watch your league?"
° The players respond, "Because we're the best basketball players in the world. People might have some affinity for team names like 'Celtics' and 'Knicks', but eventually they'll just want to see the best basketball players in the world."
° Goldman Sachs would say, "Sounds good to us."

In this new system, there wouldn't be an inefficiency to the tune of $20M a year going to a rich guy. The players could hire a management system and organize into teams with coaches and general managers. Because there wouldn't be such a huge inefficiency in the form of these owners, ticket prices would be lower, and ultimately fans would be happier.

And players should eat babies.