The Economics of Sports

With Lance Armstrong back in the news for doping, the newest EconTalk Podcast about the economics of sports couldn't have come at a better time. While the business and financing aspects of sports industries are interesting, this podcast gives a rough introduction to the economics of sports, which is different, and much more interesting. Basically its goal is to apply economic thinking and methodology to answer questions about sports industries. Classic topics include: the economic impact of new stadiums, differences in labor relationships between sports (college football versus NFL, for example), strategic incentives for regulators and players (example: doping), and of course using econometrics to evaluate players and teams (example: Moneyball's sabermetrics). Ever wonder why so many sports stadiums are out in the middle of nowhere surrounded by a moat of roads and parking lots? How about why Stanford is able to compete with massive taxpayer-funded state school behemoths? Better get listening.

A Better Kind of Pundit

The intersection of the [top-tier] politics and economics blogging community with mainstream journalism happened a while ago, but even still it's great to see a cable news show so explicitly adopt certain stylistic traits of professional blogging such as: 1) arguments backed up by data and academic research 2) a willingness to respond to criticism 3) admission of mistakes in a casual, college-bowl-like dialectic.

Visit NBCNews.com for breaking news, world news, and news about the economy

The Curious Preferences of Poverty

Most popular non-fiction books on development economics, foreign aid, and extreme poverty can be grouped into three broad camps. The first camp targets its analysis on state formation and institutional development. This is very much a political-philosophic approach, with major figures being Francis Fukuyama, Samuel Huntington, Amartya Sen, and more recently Daron Acemoglu and James Robinson with their wonderful new book Why Nations Fail.

The second camp blames stagnant growth and instability on "development traps": negative feedback loops that keep poor countries poor. Under this paradigm, sufficiently large doses of well-coordinated foreign aid can jolt a country out of the trap and into a virtuous cycle of autonomous growth and institution-building. Jeffrey Sachs' The End of Poverty has the best articulation of this view, with Paul Collier's The Bottom Billion deepening the theory by cataloging more structural roadblocks to development.

The third camp, in direct opposition to this "big aid push"  idea, finds little evidence for entrenched poverty trap-stricken countries. According to this approach, development assistance is often counterproductive due to the misaligned incentives and limited information of foreign aid planners. William Easterly's The White Man's Burden is the best example of this perspective.  The disagreement between camps 2 and 3 is roughly analogous to the central planning-versus-free market cleavage in political philosophy.

Poor Economics, a new book by MIT economists Abhijit Banerjee and Esther Duflo, is an aggressive attempt to buck that well-trod dichotomy and identify a novel approach. They attempt this feat by going meta, grouping camps 2 and 3 together as "grand theory" approaches and balancing them against their own "no theory" approach. In their view, studying development should involve using rigorous data (especially from randomized trials) to make limited claims about which techniques work and which ones don't.  

Photo Credit: Jim Davis

The book is structured by topic, with chapters investigating various aspects of the economic lives of poor people. Many of the specific findings are incredibly interesting: poor people often choose fewer tastier calories over more cheaper calories; parents might not encourage education for their kids for fear of losing their assistance around the house. The limited conclusions at the end of the book are equally novel: the poor bear responsibility for too many aspects of their lives compared to rich people who have many "right" decisions made for them, like chlorinated water, fortified food, automatic savings, etc.

Poor Economics is an interesting and important book, but its conceptual framing is flawed. It's filled with tons of fascinating little nuggets of information, but that's pretty much it. The attempt to go all meta and establish a new "big theory vs. little theory" framework falls into a common fallacy. Camp 3 is more critical theory than anything else, and labeling it a "big theory" just like camp 2 is akin to calling atheism a religion and 'off' a television channel. Instead, Poor Economics is most accurately viewed as merely a superb implementation of the camp 3 approach. Banerjee and Duflo, whether they admit it or not, are dutiful and committed searchers.

Obnoxious Advertising and Retaliation

I recently stumbled across this interesting quote by the graffiti artist Banksy sharing some thoughts on advertising:

"People are taking the piss out of you everyday. They butt into your life, take a cheap shot at you and then disappear. They leer at you from tall buildings and make you feel small. They make flippant comments from buses that imply you’re not sexy enough and that all the fun is happening somewhere else. They are on TV making your girlfriend feel inadequate. They have access to the most sophisticated technology the world has ever seen and they bully you with it. They are The Advertisers and they are laughing at you. You, however, are forbidden to touch them. Trademarks, intellectual property rights and copyright law mean advertisers can say what they like wherever they like with total impunity. Fuck that. Any advert in a public space that gives you no choice whether you see it or not is yours. It’s yours to take, re-arrange and re-use. You can do whatever you like with it. Asking for permission is like asking to keep a rock someone just threw at your head. You owe the companies nothing. Less than nothing, you especially don’t owe them any courtesy. They owe you. They have re-arranged the world to put themselves in front of you. They never asked for your permission, don’t even start asking for theirs."

The best way to read this quote is as a normative statement concerning the boundaries of J.S. Mill's harm principle, which basically says people should be free to do what they want as long as they're not harming other people. Mill did not consider offensive acts necessarily harmful, and didn't view coercive action to reduce mere offense as morally justified. According to Banksy, many advertisements in public spaces, by virtue of their aggressive and meddlesome nature, do violate the harm principle and thus forfeit their right to physical integrity.

Presumably Banksy thinks it's okay to deface ads in public spaces only because the economic and social policies that encourage them are morally lacking. Ideally he should want a different set of rules that match up with his conception of what a public space should look like.

Banksy's analysis comes to some foolish conclusions: by extending the boundaries of the harm principle to include offense, we're left with an almost infinitely broad rule. City dwellers are constantly looking at random stuff that has been created by other people with various purposes in mind. What separates marketing activity from other sorts of advertising, like political advertisements, notifications about public services, and marketing material for cultural events? Is a business that's offended by the signs and posters displayed by striking workers in a picket line morally justified in defacing or destroying them? Banksy would probably say no, even though they follow from the logic he sets up. Frankly speaking, our modern urban society would fall apart if everybody went around asserting ownership or control over anything that offended them. I think it's more likely that Banksy just doesn't like the aesthetics or symbolism of most corporate marketing, and he's indulging in some poorly-considered rhetorical nonsense.

So what about our system as it stands today? Could we actually have a setup now that gets pretty close to an optimal arrangement, based on the median attitude towards graffiti in public spaces? Let's think about it. If Banksy got his wish and the harm principle was extended to make retaliation for offensive ads fair game, several things would happen. First, the returns on physical advertising would collapse: anybody spending money to design and implement physical advertisements would probably see them defaced or destroyed immediately. We would likely see fewer ads in easy-to-deface places, and more ads in hard-to reach places, like buildings. This would dramatically increase the barriers to entry for smaller firms and non-commercial groups wishing to advertise--probably not the most open and democratic outcome!

Even while dramatically raising the costs of advertising for most groups, Banksy's vision would paradoxically see the costs of amateur graffiti crash to zero. In easy-to-reach areas, this would create a emphatically non-aesthetic mess of tagging and retaliatory defacing. The website 4chan is an interesting social experiment in anarchic anonymous collaboration, but I'd rather not see the same dynamics played out on corner store windows across the country.

With our current setup, graffiti is a serious enough crime as to deter most potential offenders, keeping our buildings and public surfaces relatively clean. We have ads in public spaces, but often the really terrible ones are targeted by the individuals and groups most affected--homeowners, local businesses, neighborhood groups, etc. Additionally, a certain set of die-hards will always be willing to risk getting caught defacing bad advertising in order to make their point. It seems like tweaking some regulations on the margin is the way to go if we're concerned about overly-intrusive ads in public spaces. Or maybe we could just go camping.

The Horror of Freedom

These RSA Animate videos just get better and better:

Upvote for Aggregation Innovation

When discussing the internet--a topic both accessible and interesting--most people seem to have some pet analysis that they deploy regularly, steering the conversation to a place where their favorite conversational lines can flourish. One that I hear often is that the internet has progressed along a sort of dialectic. First, early content-creators provided info for the masses. Next, as costs plummeted (due to better technology, infrastructure, and user interfaces) the masses became content-creators themselves, causing an explosion in the amount of information available on the web. I'm talking about the rise of things like social networks, blogging, and Wikipedia. The third trend, which is supposed to be happening now, is innovation in methods for sorting through that crush of information. The best example would be Pandora, but stuff like Stumbleupon and Google+'s "circles" idea also illustrates the demand for information-filtering and -structuring services.

This model is fun and useful, especially when thinking about the explosive popularity of sites like reddit. Now, any attempt to analyze, define, characterize, or label the multifarious and sublime reddit is ultimately doomed to failure, but it's a start. Reddit is possible for many reasons: the existence of free image and video sharing websites, the hyperlink navigation system, its prodigious size and diversity, its non-invasive design and style, sheer inertia and luck, etc. But the most critical ingredient in reddit's success is its total reliance on a wildly undervalued aggregation innovation: the upvote/downvote system.

Every hour of every day, thousands of people are submitting content on reddit--pictures, videos, links, discussion comments, interview questions, whatever. Every topic imaginable is represented, but for simplicity's sake let's focus on just pure humor, which plays an outsize role for most users. All of this content is presented as a massive list, with multiple nested threads. Users then vote on the material, registering approval with an upvote and disapproval with a downvote. The votes are then aggregated, pushing popular content up in the rankings, while burying unpopular content. What results is basically a hyperactive cultural laboratory driven by a sped-up Darwinian variation-and-selection process where only the best content makes the front page.

A lot of what reddit pushes to the front page is silly, but that's only because what's silly is what people want. The upvote/downvote system is just a highly effective mechanism for producing desired outcomes based on the preferences of users. In r/funny we have what is probably the single-most reliable source for high-quality humorous material in the world. In r/aww we have a shockingly effective cuteness delivery vehicle. For a subreddit with a more specific or empirical purpose, such as r/whatsthisbug, we basically have a real-time, interactive, micro-Wikipedia.

By virtue of this sped-up Darwinian selection process, reddit is a fabulous resource for social scientists: by looking for regularities in submissions that do well or poorly, we can identify interesting psychological biases or preferences in the user base. A good example of this is reddit's consistent interest in objects and animals that coincidentally take on human characteristics (i.e.machines that look like faces, animals making complex emotional expressions, etc.). Keeping in mind the long history of humans finding human-like agency in ridiculous things, reddit provides the richest dataset for testing hypotheses dealing with this question.

The consensus of scholars who study different methods of aggregation seems to be that all have certain strengths and weaknesses. We have elections, with different voting systems that favor certain types of candidates. We have wikis. We have markets, which can be understood as preference-aggregating institutions, their outcomes relying on the informational role of the price signal. Prediction markets are an interesting subset. The upvote/downvote mechanism has only just emerged as a serious alternative, yet already it has demonstrated astounding outcomes on a wide variety of topics. It is utterly devoid of any rigorous intellectual attention, but that will surely change as more and more applications are discovered and adopted by successful organizations.

Note: some might consider the rise of smartphones and the mobile internet (and thus its fusion with other technology like gps, photography, and videography) the fourth "macro-trend" in the internet's historical narrative. Perhaps, but my guess is that once some reboot of the Grafedia idea becomes fabulously successful (just wait), we'll instead see smartphones as just the first step in a more general process of blending the real world with the internet (augmented reality technology like Google Goggles is advancing rapidly).

Information Nexus

1. Six Rules For Dining Out (more here)
2. Beautiful Mathematics Documentary
3. Will Wilkinson on Health Care
4. Rap News: Yes We Kony
5. A Delicious Takedown of Senator Olympia Snow

Deep Analysis of a Silly Thing

Science fiction is really effective at presenting social and philosophical concepts to the reader in an interesting and easy-to-digest manner, and the recent spate of highly intellectual articles about The Hunger Games is a great example. Matt Yglesias evaluates that fictional world through the lenses of economic theory and political economy. Michael Lewis gets into the mathematical aspects of the lottery system, and considers the contenders' behavior via a game theoretic model. But the most provocative article concerns the social justice dimensions of the book and movie:

"The clear problem with this isn't that girls will want to hold out for a Prince, but that it might foster the illusion their value is so innately high that even without pretty clothes or a sense of agency a Prince will come find them. Sleeping Beauty and Snow White are worse: they don't even have to bother to stay alive to get their Prince. 

The Hunger Games has this same feminist problem.  Other than the initial volunteering to replace her younger sister, Katniss never makes any decisions of her own, never acts with consequence-- but her life is constructed to appear that she makes important decisions."

This agency-based critique is interesting, but sort of looses its teeth once you consider the standard it sets up. Think about most action movies, especially those starring your typical white male lead. The only reason those guys survive the whole two hours is because of constantly recurring dumb luck. What is the exciting "just-in-time" moment if not a deus ex machina? Characters in action movies are constantly making vital decisions that run counter to the probability, but always survive. The fact that action heroes succeed due to random luck and not their decisionmaking ability or personal qualities reveals the illusion of their agency also.

Luckovich

Is the TSA Just Security Theater?

The Economist hosts a week-long debate on the topic. Bruce Schneier says yes:

"An even more meaningful response to any of these issues would be to perform a cost-benefit analysis. These sorts of analyses are standard, even with regard to rare risks, but the TSA (and, in fact, the whole Department of Homeland Security) has never conducted them on any of its programmes or technologies. It's incredible but true: he TSA does not analyse whether the security measures it deploys are worth deploying. In 2010, the National Academies of Science wrote a pretty damning report on this topic.

Filling in where the TSA and the DHS have left a void, academics have performed some cost-benefit analyses on specific airline-security measures. The results are pretty much what you would expect: the security benefits of most post-9/11 security changes do not justify the costs."

The Art __ Video Games

The Smithsonian American Art Museum in Washington, D.C. recently opened a new exhibition: The Art of Video Games: From Pac-Man to Mass Effect. It runs through September, then goes on tour. I arrived with high hopes: most regular consumers of video games have for years recognized their merit as an artistic medium, and it's great to see a real art gallery concur. Furthermore, flaunting the most artistic aspects of the highest-quality games is a great way to re-introduce the rapidly-changing industry to a wide swath of older non-players who often seem to define all video games by their shittiest, most addicting and violent elements. Unfortunately, I walked away sorely disappointed.

The show is basically divided into three sections. First, an introduction to the medium and a brief justification for the exhibit's existence. This area is eclectic and contains some cool concept art and quotes from game designers. Next, viewers have the opportunity to actually play some games: huge screens and modified controls are set up for legends like Pac-Man and Super Mario Bros., as well as more recent games like Flower. The final section, which comprises most of the exhibit, is a series of identical kiosks, one for each major game system (Nintendo, Xbox, etc.). A touchscreen lets the viewer watch game clips and listen to a brief analysis using a hand-held telephone speaker. Each kiosk sports four popular games from the system, one each for the following categories: 'action', 'target', 'adventure', and 'tactics'.

On the face of it, the exhibition suffers from three basic defects. First, there exists a strong focus on the gameplay mechanics and technical details of games, rather than on their artistic aspects. Innovations in graphics resolution and context-sensitive control schemes are interesting, but not really relevant. Compounding this is an unfortunate desire to provide mainly representative samples of games. Due to the restrictive nature of a gallery show, viewers are only able to get a small taste of a game relative to its length and richness. But instead of having this taste draw from the best, most artistically sophisticated moments of a game, we're supplied with boring screenshots and clips from mundane parts. And here's the thing: the best video games simply can't be broken down like that. People play for the peaks of enjoyment--the boss fights, the cinematic cutscenes, the particularly quirky or detailed rooms or characters. Incidentally (though perhaps not), these peaks also tend to be the most 'artistic' in the classical sense, and were unfortunately mostly absent from the exhibit.

This brings me to the second point: the poor use of the gallery format to showcase the artistic aspects of video games. Generally speaking, it's best to let the art do the talking in any show, which means limiting intervention to decisions about the order of works and to small white informational  plaques with vacuous blurbs. For art forms specifically designed with the gallery show in mind, this works pretty well. Visual artists want to differentiate their work, and so galleries are filled with a diverse assortment of art--paintings of different sizes and shapes, sculptures, etc. The problem comes with gallery shows consisting of art never designed for the gallery. If the exhibition topic is visually homogeneous (say, video games played on simple television screens), there exists a design challenge: how to convey the art's diversity and richness to the viewer? This exhibit certainly failed that challenge, and in spectacular fashion (20 identical plastic kiosks, really!?). There's great scope for exploring the capacity for gallery space to amplify the artistic value and diversity of video games, but instead the exhibition muted the artistry through dull homogeneity. Imagine the sublime voice acting of Bioshock booming through the gallery corridors, or the cinematic cutscenes of Blizzard enjoyed in a darkened theater setting. Many modern video games are filled with screenshots of such visual heft that they almost scream out to be displayed on a massive wall in some gallery, but instead we get tiny television screens.

Thirdly, the general failure of the exhibit to demonstrate the artistic aspects of video games is due in large part to the way it is organized conceptually. Essentially, the gallery is a list, compiled using two dimensions of analysis: time (past to future) and gameplay emphasis (action, target, adventure, tactics). Although employing a chronological structure is understandable for contextual reasons, I take issue with the equal weighting of each historical period. Frankly speaking, video games today are much more artistic than they were in the past. With access to higher informational content and processing power, there is simply more space for artistic pursuits within games (as well as non-artistic pursuits; video games are much longer now). As such, more gallery space should have been spent showcasing modern games. On a related note, as the video game industry has grown in size and prestige, its games have changed dramatically. We have games-within-games, narrative-based games, multiplayer games, sports and simulation games, etc. All of this complexity confounds and renders meaningless the categories used by the exhibition kiosks. Older, less complex games adhere to these categories better, but it begs the question: why, in an exhibition purportedly featuring the artistic value of video games, do we have an organization scheme driven by gameplay mechanics?

This brings us to the real conceptual problem: the muddling of the different dimensions of value of video games, preventing the distinctly artistic value to shine through. Usually when an art gallery picks some obscure topic traditionally considered non-artistic and does a show, it works pretty well. That's because the topic's other dimensions of value are relatively boring. Take motorcycles, for example. Say I wanted to do a show about the art of motorcycles. You can imagine it: exquisitely detailed and creative paint schemes, strange metalwork, etc. The show would probably be good, in part because it would be focused squarely on the artistic stuff. Motorcycles have other dimensions of value, but no museum-goer much cares about the safety, transportation, speed, or comfort of the motorcycles. But here's the problem for video games: their other, non-artistic dimensions of value are really interesting. Gameplay mechanics is interesting! The difficulty balancing and camera angle setup and controls stuff are really fascinating and worthy of thoughtful inquiry also. But that stuff isn't artistic per se, and shouldn't have dominated an exhibition marketed as showcasing the art of video games.

The bottom line seems to be this: the relation between the idea of art and the video games themselves was vague and confusing. The show had some good bits, but overall it seemed more suited to a 'history of video games' classification than anything else. So what would a more conceptually sound exhibition look like? Without trying to define what art really is, there seems to be an important distinction between the art in video games, and the art of video games. This distinction can best be described as a continuum, going from existing artistic categories to novel artistic categories. Let me explain. First, video games showcase a wide variety of art from many existing media (music, architecture, interior design, story, etc.). Second, video games allow the player to experience this art in new ways (musical cues based on player decisions, exploring the architecture of a virtual building, etc.). Third, video games also create new artistic categories (immersiveness, storyline linearity and replayability, etc.). There's certainly quite a lot of nesting within this continuum (many video games contain short films, which are themselves collections of other media), and I don't think it's possible to draw a strict line between any level. It's not clear what cinematography actually is, but it's a useful concept and over time the public has accepted it as a legitimate dimension of artistic value. Perhaps it's too big a job for a single art exhibition, but it would be great to see a show starting with areas like 'architecture in video games', or 'the music of video games', then gradually moving on to higher-level stuff like 'storyline interactivity' or 'multiplayer experience' in later rooms. And then you could get into the artistic movements...

Calories Are Not Just Calories

"Another way to view the connection to the Black Swan idea is as follows. Classical thermodynamics produces Gaussian variations, while informational variations are from Extremistan. Let me explain. If you consider your diet and exercise as simple energy deficits and excesses, with a straight calorie-in, calorie-burned equation, you will fall into the trap of misspecifying the system into simple causal and mechanical links. Your food intake becomes the equivalent of filling up the tank of your new BMW. If, on the other hand, you look at food and exercise as activating metabolic signals, with potential metabolic cascades and nonlinearities from network effects, with recursive links, then welcome to complexity, hence Extremistan. Both food and workouts provide your body with information about stressors in the environment. As I have been saying throughout, informational randomness is from Extremistan. Medicine fell into the trap of using simple thermodynamics, with the same physics envy, and the same mentality, and the same tools as economists did when they looked at the economy as a web of simple links. And both humans and societies are complex systems."

That's philosopher Nassim Nicholas Taleb, from the new section, 'On Robustness and Fragility' in the updated edition of The Black Swan. It's a bit jargon-heavy, but goofy neologisms are a signature trait of Taleb's, and probably constrains original thinking less compared to other more stylistically-traditional authors. It's just a taste of what's to come in his forthcoming book 'Antifragility,' which extends the ideas in Fooled By Randomness and The Black Swan into positive territory, rather than just negative (e.g. discussing what we can and should do, rather than just what we can't and shouldn't). Expect fascinating sections on economics, philosophy of biology, epistemology, medicine, and nutrition.

For a further preview, check out this great EconTalk interview with Taleb. I'm especially excited to get Taleb's full take on the potential health benefits of fasting, especially after reading this great cover story in Harper's.

They're All a Bit Crazy, But...

Andrew Sullivan endorses Ron Paul for the GOP presidential nomination. He's for Obama in the the general election, but has some good points.

Ramirez

Whither Our Technological Utopia?

At fairly regular intervals it seems I stumble across someone writing about the importance of the humanities--and that math and science and economic growth are muscling their way into everything, to the detriment of human flourishing. This thesis was best articulated by C.P. Snow in his classic essay The Two Cultures, and more recently Mark Slouka's spectacular essay Dehumanized: When Math and Science Rule the School. The trouble, we're told, is the jettisoning of humanistic study for its own sake in favor of economic growth and national competitiveness as the sole ends in public life.

Yet in the past few years I've noticed something strange. More and more math, science, and technology advocates are making essentially the same argument for their own side: that the monolithic goal of economic growth is stripping from the world the intellectual justification of their pursuits. The wonder of science and technology has always been felt most strongly through big, paradigm-shifting advancements, and for whatever reason their frequency has declined lately. Peter Thiel addresses some of these issues in his sprawling essay The End of the Future; Neal Stephenson, in his essay Innovation Starvation, bemoans the loss of inspirational national projects and critiques the current mood in science fiction.

A recent Scientific American article suggests that NASA, with its vague ambitions and neutered horizons, should repurpose itself to identify dangerous asteroids and develop defenses against them. While this is certainly a worthy goal given the costs and benefits, such a change would give me pause. Must NASA have a specific, clearly measurable goal? Is a vague and open-ended mandate not what inspires and defines the agency? Perhaps I'm just a softie--a big asteroid project might be better than no project at all.