Monday, May 31, 2004

Colorado recruiting, reorganization, & incentives 

Most of the stories on the Colorado recruiting scandal and the institution's response have been negative, including reports that 5 of the 8 members of the Independent Investigative Committee recommended that administrators be fired. Although the reports are sketchy, the fingers seem pointed more at Colorado AD Richard Tharp than Gary Barnett. The Colorado program had problems long before Barnett arrived on campus. The athletic department, it is alleged, '"evaded and ignored repeated directives to implement policy changes" and maintained a facade of "plausible deniability."'

It strikes me however that President Hoffman has responded appropriately. Gutting the program and restocking it with a new regime of coaches and administrators would merely answer the call of those howling for blood. It might quell the poison pens in the press, but it would not change the incentives or address the lack of institutional control that allowed the scandal to develop. Hoffman's response addresses both incentives and institutional control.

Colorado's restructuring of oversight is briefly described at the bottom of this article in the Rocky Mountain News. Among the changes:
- The athletic department will be integrated with other academic departments to reduce its autonomy. The athletic director will no longer report to the chancellor, but to the provost. The provost is the chief academic officer for the school and reports to the chancellor.

- The provost will develop and oversee athletic department policies guiding academic decisions, such as admissions, financial aid, eligibility, progress toward graduation and academic support - with the advice and counsel of the Academic Policy Board.

- The vice chancellor for administration will review and approve athletic contracts and sponsorships - a job now done by the athletic director.

- The athletic department's compliance officer will take on new duties related to monitoring athletic compliance with campus policies and practices.
These are useful steps at ratcheting up the central administration's control over the athletic department. What about incentives?

Being an economist, perhaps Ms. Hoffman understands a factor which many might miss. Barnett and Tharp are handsomely paid at Colorado, but are worth essentially zilch, zip, nada to any other campus in the country. If Ms. Hoffman is serious about reform, she wants people in the Athletic Department that have a significant stake in achieving it. Most coaches and ADs are alike - like anyone else, they are in large part creatures of the incentives they face. But Barnett & Tharp are now unique in one important sense: if they fail to do what Ms. Hoffman wants, they are toast, finished, unemployable. They have every incentive to deliver the goods to President Hoffman.

More information about the problem in general can be gleaned from the transcript of last March's Congressional Hearing on the problem. Colorado's response in the area of recruiting visits is certainly no whitewash, and is detailed there about 2/3 of the way down (search for 'recruitment policy changes').

Smarty fever is catching 

Jennie Rees surveys the landscape. From Secretariat's owner to Classic winning trainers, to people who don't know one end of a horse from the other, all are in awe of Smarty Jones. Here's Steve Cauthen, the last jockey to ride a triple crown winner, 26 years ago: "The way he won the Preakness, with his ears pricked, he could win the Belmont as impressively as any horse has since Secretariat. If he does that, then we have an icon."

Sunday, May 30, 2004

A Q&A with Smarty Jones 

Smarty takes questions from Fred Faour in the Houston Chronicle. Its a good interview. Here's a sampler:
Q -- If you win the Belmont, you will become the leading money earner of all time in thoroughbred racing, thanks to $10 million in bonus money. What do you think of that?

A -- I need an agent. I haven't seen any of that money. All I want is one of those plasma TV's in my stall, and maybe some extra oats and peppermints. Is that too much to ask?

Q -- What's your favorite snack?

A -- Lion Heart. Sorry he's going to miss the Belmont.

Q -- What do you hope to do after the Belmont?

A -- Win a bunch more races, retire at 4 and go to stud. I'm not ready to think about retirement yet, but the idea of people bringing you fillies every day for a couple of months sounds pretty darned appealing.
It's a funny piece, worth reading. Not to be missed however - should you care about the most interesting horse since Spectacular Bid (twenty three years ago) - is Faour's serious piece in the same issue. Here's a snip:
Smarty's accomplishments so far are impressive enough. If he wins on Saturday, he will be just the second horse to emerge from the Triple Crown undefeated (Seattle Slew was the other).

He has won at eight different distances on five different tracks, all with jockey Stewart Elliot aboard. Only one horse has finished closer than a 1 1/2 lengths to Smarty. His win in the Derby was visually impressive, as he dominated a good field on a sloppy track.

But the Preakness was a race for the ages. In that race, Smarty took control on the turn and drew off to an 11 1/2-length victory, the largest margin in the history of the race.

But that doesn't even begin to tell the story of how impressive he was that day. The final time of 1:55.59 was faster than the 1:55.89 run the day before in the Pimlico Special for older horses. That race was won by Southern Image, a 4-year-old who has won five straight and emerged as one of the best older horses in the country. In addition, the Pimlico surface was playing slightly faster on Special day than Preakness day.

The Beyer speed figure for Smarty Jones' Preakness was 118, the highest in a Triple Crown race since Easy Goer's 122 in the 1989 Belmont, which was the second-fastest Belmont ever run.

Globeform (www.globeform.com), an international racing service, gave Smarty Jones a 141 rating for his Preakness. It is the highest number ever given by the service. According to the Web site, Smarty "is the best horse since Globeform ratings were introduced in 1990."

That's the best in the world over that period.
The race is this Saturday; mark your calendars.

Friday, May 28, 2004

The effects of steroids in baseball, or lack thereof 

Jason Stark has an informative, fact-filled column at ESPN. Everyone interested in baseball should read it, especially reporters who were beating the drum of scandal earlier this spring.

Gene Orza (who I've criticized before) offers a good punch-line for the story:
Players have never gotten credit for all the work they do (to become better, stronger athletes)... People want to attribute success not to hard work, but to cutting corners. And that's ridiculous. We live in an age now where guys are working out year-round, constantly, every single day.
Successful endeavor is often regarded skeptically by those who lack the talent, perception, and drive for stellar achievement. This is an unfortunate trait in our society, and all too common. Thanks to OBM for the link.

Home runs, spin, and optimal pitching strategy 

The WSJ's Science Journal column ($) has an interesting discussion of topspin, backspin, and home runs. It turns out that, ceteris paribus (speed of pitch, bat, and accuracy of contact), a curve ball is more likely to be hit out of the park than a fastball. Why? According to Mont Hubbard of UC Davis, it's in the spin.
When a curveball leaves the pitcher's fingers it has topspin, which means the top of the ball rotates in the direction of flight (toward the plate). Fastballs, in contrast, have backspin, with the bottom of the ball rotating in the direction of flight. Topspin causes a ball to experience a downward force, because the rotation changes the distribution of air pressure around the ball so there is more pressing down on the ball than up. Hence curveballs' habit of suddenly plunging, to batters' dismay. Backspin, in contrast, generates an upward force, somewhat like the one that keeps an airplane aloft, which is why a fastball rises unless the pitcher gives it a countervailing spin.

When the bat makes contact, the most obvious thing it does is reverse the ball's direction, so it heads toward the field rather than the plate. But contact also changes the ball's spin. Assuming good contact in each case, a fastball that arrived with backspin therefore leaves with topspin, while a curveball arriving with topspin leaves with additional backspin and thus more home run potential.

"A curveball already has batted backspin," says Prof. Hubbard. "With a fastball, in order to give it backspin and let it benefit from aerodynamics, you have to reverse the spin," which is tough to do. The well-hit curveball heads for the field with more of the kind of spin that gives it fence-clearing lift and distance.
Let's put this in the context of optimal pitching strategy. Used sparingly enough, a curve ball is more likely to fool the batter, reducing the accuracy of contact. This offsets the effect of spin on the likelihood of hitting the ball out of the park. Thinking about this using economic logic yields some interesting conclusions. First, assume that only home runs matter, or at least that the probability of hitting a home run summarizes the (in)effectiveness of a pitcher. Second, assume that as a given pitch is thrown with greater frequency, it is more likely to be expected by the batter, and thus more likely to be hit out of the park. That is, there is declining marginal effectiveness of each pitch type. Third (and this is false but useful for the moment), assume that the effectiveness of one pitch type has no impact on the effectiveness of another.

Under these conditions, optimal pitching strategy implies that the probability of hitting one out of the park is the same for all pitches thrown by a given pitcher. If one pitch had a lower probability at all times, that would be the only pitch ever thrown - what economists call a "corner solution." This come close to describing some modern day closers. They throw fastball after fastball for a period of short duration (an inning). Where the simple analysis above goes wrong is in the assumption of independence across pitch types. A curve may be thrown despite the greater likelihood that it's blasted out of the park, if it makes the fastball more effective, reducing that probability. But again, the economic prediction is that the higher probability of the curve being hit is offset by the reduction in probability for the fastball - the effects
balance each other in an optimal strategy.

The physics and the economics are both interesting. I wonder what the data say?

More McCann 

The Harvard Gazette offers a timely discussion of Michael McCann's research on the fate of high school ballers entering the NBA draft. McCann's study (which I mentioned earlier here) debunks the myth that high school draftees as a class suffer either athletically or economically. Even Korleone Young, the poster-child for failure ("for every Kobe Bryant, there are three Korleone Youngs"), makes a decent living playing in Europe these days. Most do far better.

McCann states in the article that a rule which bans high school players from being eligible for the draft could be successfully challenged as an illegal group boycott. Well, a group boycott is certainly what the NFL has done with Clarett, Williams, and other young players with the talent to play pro football.

The best and worst of hockey 

Last night's 3rd period in game two of the Stanley Cup Finals had both the best and worst of hockey on display: fluid movement from the Lightning yielding three quick goals in succession, and vigilante justice from the Flames once the game went out of reach. Die hard hockey fans may have a different view, but I can do without the vigilante justice and consequent stoppages of play. Here's an account from ESPN's column, "Flames lack edge, then lose it:"
The Flames were unable to explain their loss of intensity; much the same way as the Lightning couldn't after Game 1. In the end, about all they could muster were the usual send-a-message fisticuffs that prolonged the inevitable and sullied the end of the game.

'It's the Stanley Cup finals. We expect it to be intense,' said Warrener, explaining away the late-game encounters. 'It kind of boiled over in the third. So what. It's part of hockey. When a guy slew-foots our goalie, we've got to do something.'

Warrener pinned the act on Lightning instigator Andre Roy. Sutter said he didn't see it, as he says after pretty much all of these kinds of incidents since he was fined for creating one late in the regular season."
Hockey is what it is, I suppose. The commentary (led by Gary Thorne) used the fighting to predict a compelling series in the forthcoming games. Maybe - the series is tied at a game apiece. But if it's fighting and the consequent stoppages of play that's on offer, I can skip it. I'd rather watch players intent on fighting for the puck and passing it than fighting each other.

What could NY City do with $600 Million? 

So asks a television ad purchased by Madison Square Garden, opposing the $600m subsidy to build the Jets a new stadium in Manhattan. Here's Mayor Bloomberg's bombastic retort:
"There is an allegation that one company in order to protect their own commercial interest is trying to stop jobs coming to this city. That's an outrage, nobody's going to pay any attention to it and if that's the only opposition we have to doing what's right for this city, then we're in great shape."
If it is jobs that justify the subsidy, all the evidence implies they'd be a mighty expensive purchase. It's Mayor Bloomberg's comment that's outrageous. Whatever their interest, MSG is asking the right question.

Wednesday, May 26, 2004

St. Michael's Day 

Forgive me the indulgence, but this is a special day for Arsenal fans. Its the fifteenth anniversary of May 26th 1989, when fortune began to smile on Arsenal. It's the last game of the season, away to Liverpool, the Gunners needing a 2-0 win to take the title. As Arseweb notes in its commemoration, "Liverpool hadn't lost by two goals at home in donkey's years." Anything less and the title stays at Liverpool, where it seems permanently ensconced.

Arsenal lead 1-0 in the final minute, when Michael Thomas changes the course of history: "Arsenal come streaming forward now in what will surely be their last attack... Thomas!!! Right at the end!"

Spitzer v.Grasso, mano a mano 

Spitzer, the NY attorney general with a nack for making headlines at the expense of financial industry executives, and Grasso, the former kingpin of the NYSE, have been trading shots in the press the past few days. Spitzer has sued Grasso over his $200m parting gift from the exchange. The Washington Post has a blow by blow account.

In the WSJ ($), Holman Jenkins takes a look at the case. Jenkins' columns are always interesting even when they are speculative because his opinions combine analysis with information ignored by the average columnist. At the core of Spitzer's theory is the assertion that the NYSE board was uninformed, and essentially duped by Grasso when they voted to award him his millions.
New York nonprofit law .. requires compensation to be reasonable and commensurate with services performed. We'll see what a court has to say about that. The NYSE may be organized as a nonprofit, but somebody might take a look at the vast revenues that flowed through the exchange for the benefit of its seat owners, the real pot of money Mr. Grasso was charged with guarding.

In fact, the NYSE makes a lousy proxy for concerns about corporate compensation. It represents a completely different kettle of guppies than the typical Berle & Means quandary of dispersed, impotent owners and all-powerful, unaccountable management. The NYSE is owned by seat holders who show up on the premises every business day. Their livelihood depends on the place. They elect its board. They know what a telephone is for. They have every means and incentive to wield their collective clout to make sure their interests are being served.

Now some NYSE "specialist" firms will tell you they were afraid of Mr. Grasso; they didn't really know what was going on. If pressed on why they bungled a matter so close to their own interests, they shrug their shoulders like an errant teenager and say they aren't sure why they didn't keep a closer check on things.

So we'll answer for them: They stood back because Mr. Grasso was serving their needs marvelously. Consider the years 1995 through 2000, when the handful of small, little-known businesses that control floor trading pocketed profits of $2.12 billion. The average yearly return on their invested capital: a princely 21.35%. Mr. Grasso's retirement payoff after 35 years at the exchange may have been gross and unsightly, but it was a small fraction of the riches he helped to preserve for the New York Stock Exchange's most privileged constituents....

For his part, Mr. Spitzer has intimated that he didn't really want any part of the Grasso mess; it was dropped in his lap by John Reed. We have no trouble believing it. New York's Attorney General, heir to a local real estate fortune, has specialized in presenting his wealthy business targets with both a problem and a solution, the latter involving writing a big check with their firm's money. He may not exactly provoke gratitude (except among CEOs more than usually afflicted with Stockholm Syndrome) but he's seen as someone with whom business can be done.

His political ambition is zeppelin-like, lurching over Manhattan in unmoored, alarming fashion. He was obviously eager here to limit his political risk by portraying the NYSE's famous board as victims rather than culprits in the Grasso pay scandal. But no judge or jury will fail to understand that he's giving them a pass for his own political interests.

Mr. Grasso understands this too, and has semaphored that he will drag them into court, forcing them to choose between pleading gullibility, inattention and incompetence or undermining Mr. Spitzer's case. True, even a court victory might not get Mr. Grasso his good name back, but more than a few would applaud his show of resistance to a budding demagogue.
If Jenkins is correct, Grasso's verbal salvos can be interpreted as a signal that he's not going to accept Spitzer's typical deal, at least not anywhere near the expected terms. He's threatened a $50m countersuit, with the proceeds to be donated to charity. That suggests the makings of a potential settlement, but I'm betting we'll see a few more rounds before the case gets to that point.

Tuesday, May 25, 2004

Headline of the week 

From the Economist($): Do London a favour: give the Olympics to Paris

It's an opinion piece, and here's the gist of it:
NOW that the shortlist for the 2012 Olympics has been announced, there will be a great banging of national drums as statesmen and sportsmen in London, Paris, Moscow, Madrid and New York unite to make their case. The Economist would like to make its case, too: please, please can we not have the Olympics in our home town...

There is little doubt that London could do the Olympics proud if it got them. What is less clear is whether spending a couple of billion pounds of public money on having an extra half a million people in town for a few weeks sounds like fun...

The economic case for holding the Games in London rests on two ideas: first, that they will lead to a lot of investment from which the host country will benefit for years to come; second, that they will bring an economic boom. Neither stands up to much scrutiny.

The Olympics may well lead to investment that would not otherwise happen. The question is whether it should. If neither private nor public sectors have yet got round to building an Olympic-size stadium or swimming pool in London, nor to regenerating the lower Lea Valley (site of the proposed Olympic village), that is probably because those projects don't make economic sense. Holding the Olympics doesn't much improve the economic case for them, as the expected £2.4 billion ($4.2 billion) public subsidy suggests.

As to the economic boost the Olympics could bring, that argument may wash in a second-level city seeking to win attention for its nascent tourist industry or to mop up a labour surplus (such as Barcelona). But London is already on the tourist and economic maps. Conditions on its sardine-packed underground argue against the flood of extra travellers the Olympics would bring. Its labour market is already tight (unemployment in the city is running at 3.5%) and anybody who has recently tried to get a builder may question the need for an injection of demand into the construction industry.

But if taxpayers and commuters are unlikely to benefit, there is one class of people that relishes the idea of holding a big party and sending the bill to the exchequer: the politicians, in particular London's left-wing mayor, Ken Livingstone. Getting the Games would give him an excuse for slapping an extra charge on the council tax and extracting more money from the Treasury. Let us hope that the International Olympic Committee does not indulge him.

Luckily, London seems unlikely to win. Paris is the bookies' favourite by some distance. In the traditional spirit of Anglo-French feeling, we pray that it will triumph.
The commentary may be cheeky, but it's on the money.

3-0 to the NFL 

The NFL won its appeal in the Clarett case. Greg Skidmore at the Sports Law Blog finds the decision satisfactory. I find it both illuminating and evasive.

Judge Sotomayor's decision references a number of cases upholding the exemption of restrictions in collective bargaining agreements from antitrust, both in sports and elsewhere. The discussion is authoritative and informative. It notes that the exemption does not apply when the restriction imposes harm on business competitors who are not party to the contract. This is not the case here: the harm is imposed on an prospective employee who is not party to the contract.

The court points out that CBAs encompass numerous issues, and that selecting one clause for antitrust scrutiny may upset the balance of compromises among employers and employees. It is not obvious to me that this concern should protect an anticompetitive restriction - simply address the issues without violating the law! Nevertheless the sanctity and primacy of collective bargaining to this court is readily apparent in the decision, making it clear that an antitrust challenge faces heavy going. The decision clearly implies - and the 2nd circuit has said this before in reference to the NBA draft - that if the NFL wants to cap salaries, the union can offset the negative effect on their wages by limiting the wages paid to future players in subsequent drafts. Prospective players are clearly harmed by this, but the restriction passes muster under the 2nd court's interpretation of the law.

The decision is evasive on two major counts. First, apart from mentioning the NFL's claim that the rule protects young players from physical harm, the decision wastes nary a sentence on the issue. The reason is clear - since labor law trumps antitrust, there is no need to judge the reasonableness of the restraint. Second, in announcing this in unabashed terms, the court tiptoes around the real issue here:
In the context of this collective bargaining relationship, the NFL and its players union can agree that an employee will not be hired or considered for employment for nearly any reason whatsoever [emphasis added] so long as they do not violate federal laws such as those prohibiting unfair labor practices ... or discrimination.
That the restriction is discriminatory is obvious. But youth is apparently not a protected class, unlike minorities or the elderly. I find this odd.

Not all courts allow collective bargaining as much latitude as the 2nd circuit. In the Mackey case, the "Rozelle rule" on free agent compensation was struck down by the eighth circuit. Following Supreme Court precedent, one of the tests applied was whether the restriction "primarily affects only the parties to the collective bargaining relationship." This test clearly conflicts with the approach of the 2nd circuit to labor problems. The decision simply notes that the approaches disagree, and not surprisingly, the decision in Clarett sticks to the precedent adhered to in prior cases in their circuit. An appeal to the Supreme Court might establish which approach they prefer, and thus clarify matters.

I'm not as enamored with labor law as Judge Sotomayor, and I'm not as pleased with the decision as Skidmore. By resting so completely on its "labor law trumps antitrust" basis, the appeals court ducked the most interesting questions in the case. Nevertheless, the decision is clearly exposited and informative, so it will go on the reading list for my sports economics class.

Monday, May 24, 2004

King Kaufman pays his respects 

Here's a fine column on Doug Pappas at Salon.com. As Kaufman writes, "Coverage of Pappas' passing has been nonexistent in the mainstream press. He was too good to go unmentioned." Its nice to see Pappas get his due in a venue like Salon.

Gasoline and price responsiveness 

Craig Newmark has some pithy comments and links to an informative article on car sales. People spout nonsense about "needs" and the lack of response to gasoline prices, while substitution takes place before their very eyes. And that Mercedes is truly ugly; give me a Mini Cooper any day.

TV channels a la carte? 

Momentum is building to force cable and satellite companies to offer a la carte pricing on a per channel basis. My initial reaction is that this is nuts. If the problem is one of monopoly, then you'll get monopoly results whether you price by the bundle or by the unit - a la carte pricing doesn't address the monopoly element itself. When it comes to premium channels, we already have a both methods of pricing - would you like HBO or TMC or both? The vast majority of people who want stripped down service can generally order a basic package for under $20 per month, or put an antenna on their roof if they wish and watch broadcast TV at zero marginal cost. Few do. Those who are complaining want much more than that from television. They may wish they were spending less money on it, but I have my doubts they would if they got the pricing method they're asking for. USA Today has the story.

Burgers & lager, or a few million quid? 

The Guardian has a story full of interesting facts and observations on Arsene Wenger's revolution at Arsenal. The process began in the dressing room, where "the professor" convinced a group of hard headed, hard drinking footballers to change their ways.
[E]ight years ago Wenger had to prove himself. The Arsenal dressing room had proved too big for Rioch [former manager] to handle, so how did the Frenchman with the funny accent and the oddly apposite Christian name go about beginning his overhaul of the club?

'He intellectualised to the players,' Dein [the vice-chairman] explained over lunch last week. Come again? 'The biggest problem for any manager nowadays is motivating multimillionaires. Arsene reminded the players it said professional footballer on their passports and invited them to behave like professionals and be the best. He told them they could carry on with the burgers and the lager and end up in the Third Division, or adopt his philosophy, extend their careers at the top level and make a few million quid. They listened to that. It's no secret that Arsene was not impressed with the culture he inherited. So he changed it, revolutionising the club and setting new standards in English football.

'Everyone is at it now, the diet and so on, but that's fair enough. We progress when we all learn from each other. If you ask Steve Bould or Tony Adams, or Martin Keown who is still up for another Premiership contract at the age of 37, they are all physically and mentally in good shape. Mentally is very important these days, it is not just a physical game any more. That's why a lot of clubs employ sports psychologists. We don't need one, Arsene does the job.'

That would be in addition to Arsene's other jobs of making Manchester United's life a misery, scouting opponents, sourcing top talent from all over the globe and transforming players discarded by other clubs into world-beaters. Dein does not like to boast, you understand, but he can quote a few statistics.

There are 10 nationalities in the current first-team squad. There have been 102 first-team comings and goings under Wenger, at an overall transfer deficit of £40million. That averages out at around £5m per season - not bad given the success rate and the fact that Arsenal made £56m from television and prize money this season alone.
The article goes on to discuss how Arsenal plan to capitalize on their recent success, achieved with modest means and shrewd management. Their plans to build a new stadium in North London have been widely chronicled in the British press. It hasn't been easy - where in North London could one find a suitable property at a reasonable price? And it won't be cheap. The price tag will come in at £300m-£400m - that's pounds, my fellow Americans. And it's all privately financed. If this were an American football team, they'd be begging for a subsidy and threatening to move to a new city.

Sunday, May 23, 2004

Cauthen on Smarty 

A Q&A with Steve Cauthen, who rode Affirmed to the last Triple Crown victory in 1978. Cauthen is as heady and articulate a rider that ever sat on a horse.

Saturday, May 22, 2004

The Smarty Jones phenomenon 

Smarty now has his own website, reading room, and apparel stores at yahoo and horsehats.com. He'll soon have his own boulevard too.

You can get to the stores from Smarty's site as well. The pin at the yahoo/NTRA store is way cool (it's neat & simple - a facsimile of the Chapman's silks), but I'll take the bucket hat, which could come in handy on my next fishing trip.

Footnote: Tim Price's story in the Star-Telegram (via Smarty's reading room) is packed with good information on the horse and his Belmont prospects. Don't miss the section at the bottom, which has interesting observations from Mike Sellito, jockey agent for Jose Santos, who won the first two legs of the Triple Crown last year with Funny Cide.

More evidence that government is too big 

From today's Washington Post:
Six months after the Sept. 11, 2001, terrorist attacks, Congress approved an $8 billion program to repair this city's damaged office towers, build apartment buildings and finance the rebirth of the financial district.

But two years later, city records show that much of the money, dubbed Liberty Bonds, has gone to developers of prime real estate in midtown Manhattan and Brooklyn and to builders of luxury housing.

Local and state officials -- over the objections of their own downtown development chief -- gave one developer $650 million from the Liberty Bonds to erect an office tower for the Bank of America near Times Square, miles from the shattered precincts of Ground Zero. According to city records, another developer got $113 million to build a tower for Bank of New York in Brooklyn. One of the few projects downtown has gone to actor and sometime developer Robert De Niro, who picked up nearly $39 million from the bonds in November to build a boutique hotel in Tribeca, directly north of Ground Zero.

Congress designated $1.6 billion of the Liberty Bonds for rental housing. Nearly all the money from those bonds has gone to prominent developers to build luxury apartment towers in the neighborhoods around Ground Zero, accelerating its transformation into one of New York's richest neighborhoods, the city records show.
I have nothing against luxury housing in lower Manhattan - it meets the market test. But luxury housing that meets the market test doesn't require $1.6 billion in subsidized bonds.
Today three-bedroom apartments near Ground Zero rent for $6,500 a month -- and sell for more than $1 million. Manhattan residential occupancy rates -- more than 95 percent -- are higher than before the terrorist attacks, according to real estate statistics.

Yet the state and city agencies that award the bonds -- the New York State Housing Finance Agency and New York City Housing Development Corp. -- awarded nearly all the residential Liberty Bonds to subsidize the rental market.

Common Cause New York reported that 30 percent of the state's residential share of Liberty Bond proceeds went to Leonard Litwin, who is a major campaign contributor to Pataki.

State housing officials said that political favoritism played no part in their decisions and that loans were handed out "on a first-come, first-served basis." Litwin, they say, had projects in the works and simply got in line when the Liberty Bonds came available.
That's it folks -- projects already "in the works" get millions in subsidies. What good are the subsidies then?

On Google, aggregation of information, and the wisdom of crowds 

The phrase "madness of crowds" traces back to Charles Mackay's classic book on financial panics. James Surowiecki's new book, The Wisdom of Crowds: Why The Many Are Smarter Than The Few And How Collective Wisdom Shapes Business, Economies, Societies And Nations, looks at the other side - some might say the typical, non-pathological side - of collective decision making. Here's a taste of the analysis from Surowiecki's column in Forbes, applied to Google:
Google has succeeded for a simple reason: It regularly finds the Web pages that are most valuable and puts them at the top of the list. The heart of the technology that lets it do this is the PageRank algorithm (after cofounder Larry E. Page), which essentially asks Web page producers to vote on which other pages are most worthwhile. Each link to a page counts as a vote. Google is a republic, rather than a pure democracy; sites that have more links into them are effectively given more voting power. But the principle is fundamentally democratic--let the masses decide. Given the Wild West nature of the Web, you'd think that this would lead to chaos or irrationality. Instead, it leads to a remarkable order.

How does this work? What Google is relying on is something I call the wisdom of crowds: Under the right circumstances, groups are smarter, make better decisions and are better at solving problems than even the smartest people within them. On any one problem a few people may outperform the group. But over time collective wisdom is near-impossible to beat. No one, you might say, knows more than everyone....

The wisdom of crowds can be seen at the racetrack, where the odds on horses coincide very nicely with their probability of winning. (That is, if you look at a large collection of horses that went off at 4-1 odds, you find that 20% won.) And, of course, collective wisdom is also at work in markets, which is why it's so hard to outperform the market over time. Just as Google's PageRank encapsulates the knowledge of Web users, so does a market price embody, as the economist Friedrich Hayek suggested, all of the tacit knowledge and wisdom of investors and traders.
In the Journal of Economic Literature (JSTOR, subscription), I reviewed the economics of racetrack betting. There is a wealth of evidence at the track which sheds light on Hayek's theory of prices as information. (Here's a preliminary version if you can't access JSTOR). In the Journal of Finance (JSTOR, subscription), Bill Brown and I argue that models of financial prices are inherently limited relative to the complexity of the problems that markets assess. What we can't model (the "error term" in a regression equation) is often complexity that markets assess appropriately. Data on basketball point spreads (in contrast to stock prices) allow one to test the argument. And it works!

Surowiecki's book is reviewed here, (if the New York Times links are working when you read this). He may be taking these claims a bit far, but I believe the "irrational exuberance" argument has been oversold. His book might provide a useful antidote.

A brief appreciation of Doug Pappas 

I was saddened on my return from the fishing trip to hear that Doug Pappas had passed away. I knew Doug only from his work on the business of baseball, and through conversations with others. His web site has long been a treasure for folks like me who ask economic questions and need facts to forge an answer. He made data, analysis, and commentary available to anyone with an internet connection. And it was all good; really, really good. Doug's site is a testimony to intellect, diligence, and conviction. It's a measuring stick for the best that the web can be. His passing is a loss to our community, but it's also a reminder of the good things we can produce with this form of communication. Thanks, Doug.

Now, can anyone figure out how to keep alive the Bud Selig Countdown Clock, appropriately placed at the top of Doug's blog?

Update: SABR's web site has a nice obituary (via Baseball Musings).

Rice trustees to keep football, Div. 1A status 

The "tough question" was asked, and the trustees' answer is that they want to play. "We have unanimously concluded that, in today's world, Division I-A remains the best place for Rice," said trustee chairman Bill Barnett. Most of the story contains the usual bureaucraspeak. My man Lance Berkman (scroll down for the quote) cuts to the chase on the issue:
"I wasn't really that concerned about it, to be honest with you," said Berkman, who led Rice to its first College World Series appearance in 1997. "There's no reason for Rice to drop football or ever go from Division I."

Berkman, who attended Rice from 1995-97, wasn't surprised there was a small faction at Rice who wanted to reduce the role athletics plays at the school.

"I think one thing that nobody's mentioned so far is that Rice is in Texas, and you're not going to be in Texas without people being avid sports fans," he said. "That's just part of our culture. It's just unrealistic to expect that we're going to be some purely academic institution in an Ivy League environment when you have to exist in the environment that you're a part of."
Chronicle columnist John Lopez thinks the whole saga may be part of a strategy to rally supporters of the athletic department. Owl alumns, prepare to open ye wallets!

Tuesday, May 18, 2004

Thailand to buy 30% of Liverpool? 

The government of Thailand have bid 60 million pounds for 30% of Liverpool FC, and claim they are on the verge of an agreement. This is unusual, to put it mildly. Apart from Manchester United, English football clubs, like racehorses, have been horrible investments. Most clubs are forced by competition to dissipate all their rent, and then some, on player wages to keep from being relegated to a lower division. They routinely "raise capital" from supporters in order to maintain their competitive position. Bankruptcy is a common risk when things go bad - see Leeds and Leceister, two clubs that have dropped through the trap door this season. Liverpool have not faced this in decades, but one must still wonder what could be going on in Thailand to make this a justifiable investment. Here are some clues from the BBC, but this looks a lot like hubris on the part of the prime minister to me.

Monday, May 17, 2004

Gone fishin' 

Maybe I'll catch a transsexual cobia. See you next week.

When will a transsexual get her first gold medal? 

I find this headline a bit strange: IOC Gives Go-Ahead for Transsexuals to Compete in Olympics. Date check: this is May 17, not April 1. Even Renee Richards, the notable transsexual of my era, was taken aback by the IOC decision.
One of the best known cases of transsexuals in sports involves Renee Richards, formerly Richard Raskind, who played on the women's tennis tour in the 1970s.

...Richards, now a New York opthamologist, was surprised by the IOC decision and was against it. She said decisions on transsexuals should be made on an individual basis.

"Basically, I think they're making a wrong judgment here, although I would have loved to have that judgment made in my case in 1976," she said.

"They're probably looking for trouble down the line. There may be a true transsexual -- not someone who's nuts and wants to make money -- who will be a very good champion player, and it will be a young person, let's say a Jimmy Connors or a Tiger Woods, and then they'll have an unequal playing field.
Perhaps they are not worried about a transsexual Olympian, as there are few transsexuals who are competitive in sports. The linked article in the Washington Post mentions a transsexual golfer who participated in a professional tournament in March. Could she have been motivated by money? Not likely, in my opinion, but I wouldn't switch for any conceivable price. And some folks do strange things for fame and fortune - just surf by one of those "reality TV" shows for evidence of that.

The "Beckham Boom:" 16,000 babies, & the power of sport 

England's record against Argentina in the World Cup had been a tortured one: Maradonna's "Hand of God" goal in 1986, knocked out on penalty kicks in 1998. But revenge can be sweet, as it apparently was in the 2002 World Cup. From the Daily Telegraph (registration):
[T]here was a demographic blip in February 2003. Actually, so substantial was this statistical aberration, it might be called a surge. Or even a spurt. In February 2003, 16,000 more babies than usual were born, a bubble sizeable enough to have a considerable effect on provision of education and health resources.

...And the reason for the surge? The nation's maternity hospitals were groaning precisely nine months after June 2002 - that heady few weeks when the Cross of St George fluttered from the aerial of every cab (or at least those seeking fares in the area bounded by Offa's Dyke and Hadrian's Wall), when our mornings were sound-tracked by John Motson asking us what we had for breakfast, and when the working day finished no later than 11 o'clock in the morning, when everyone headed to the pub to watch the game.

It was the World Cup in Japan and Korea, that short spell of unbridled optimism, when, against all available evidence, the nation kidded itself that its footballers were about to conquer the planet. Or at least it did until Ronaldinho left David Seaman all over the pitch. But before the buck-toothed Brazilian stepped up to snap us out of our collective self-delusion, there was one game in particular that inspired celebrations of lasting significance: the match on June 2 in Saitama, when England beat Argentina 1-0.

The identity of the scorer that night in Japan has been immortalised in the term being coined by demographers to identify this trend. From now on, this sudden rash of February babies is to be known as "The Beckham Boom".

Will Smarty Jones win the Belmont? 

The record of horses attempting to win the Triple Crown is poor. It is a demanding task that only the best can withstand. There are no cheap Triple Crown winners. Great horses like Alysheba, Spectacular Bid, and Sunday Silence failed in the last leg of the sequence. Smarty Jones has yet to establish the credentials of a Spectacular Bid, who lost just one race after the Belmont, to Triple Crown winner Affirmed in the 1979 Jockey Club Gold Cup.

More recently, five horses have attempted to land the treble: Silver Charm, Real Quiet, Charismatic, War Emblem, and Funny Cide. Funny Cide himself romped home in the Preakness by nearly 10 lengths. But he had the task of facing Empire Maker in the Belmont, who looked to be the better horse and proved it during the race. Of these five, Silver Charm was indeed a top quality racehorse, and Real Quiet was close behind. Both suffered narrow and somewhat bizarre defeats in the Belmont. Silver Charm cruised by Touch Gold on the turn, loafed a bit in the final furlong, and Touch Gold found another gear to fly by him at the wire. Real Quiet was poorly ridden by Desormeaux who moved too fast too soon, fouled Victory Gallop in the stretch, and was nailed by his nemesis at the wire in the only photo finish to decide a Triple Crown. These two were good ones, just not quite good enough on the day.

Smarty Jones has put himself in that class. He's fast, and does everything the right way. He's proven that he can cruise along effortlessly, quicken when called upon, and stay a distance of ground. The only thing we've yet to see is how he'd respond in a ding dong stretch battle, but that's because he's won his races so easily. It's hard to fault him for that.

There may be another superior horse in this generation - Tapit, Eddington, and Rock Hard Ten all have promise but have yet to put everything together. Perhaps there is another possibility lurking in the shadows. But beating Smarty Jones looks to be a very tough proposition right now. He's holding all the cards at this point, and I think he's going to win.

A good weekend for the classics 

Troy, cinema's version of The Iliad, drew $45.6m worth of customers in theaters this weekend. Smarty Jones, the best horse many a racetracker has seen in some time, was surely the reason TV ratings for the Preakness jumped 29 percent over last year. Smarty did not disappoint his fans. Mark your calendars: the Belmont is June 5, when he'll be a very short price to win the Triple Crown. The champagne will be on ice in the Sauer household.

Saturday, May 15, 2004

Hail the immortals 

Arsenal 2 - 1 Leicester City

Special interests at work 

Trade and protection are always contentious issues, because protection creates rents that are at risk should trade barriers be removed. Daniel Sumner, a UC Davis ag economist "with impeccable credentials" studied US Cotton subsidies. Sumner's research was done on behalf of Brazil for a recent WTO hearing. Here's what he found:
During 1999-2002 ... cotton prices slumped to about 30 cents a pound, and Sumner calculated how the nation's 25,000 cotton farmers would have behaved if the $3 billion to $4 billion a year in domestic and export subsidies had been removed.

He concluded that the United States, the biggest exporter of cotton, would have shipped about 41 percent less cotton abroad; that would have raised the world price about 12.6 percent.
This research has some people hopping mad, which is why you can find the story in the newspaper. Cotton interests are up in arms over the fact that Sumner did his research on behalf of another country (more accurately, that his research was effective in threatening their subsidy). Here's Sumner's response.
"I think the WTO is incredibly important, for the world as a whole and for agriculture," he said. "I think it helped the decision-making to have someone familiar with U.S. farm programs, and who had analyzed them for a while, to be involved in the case." The only way to do that, he added, was to work for one side or the other, and though he would have gladly given the same information to the U.S. Agriculture Department or trade representative's office, "I suspect they wouldn't have wanted it used."

Here's the rhetoric from the cotton interests:
"If this was governmental or military related, it might be called treason and court martial proceedings would be in order," Earl P. Williams, president of the California Cotton Growers Association, was quoted as saying in the Western Farm Press. "Furthermore, I would hope that anyone that supports the UC system financially would step back and question continued support until this issue is resolved."
This conflict occurs in academia far too often. Like Tyler Cowen (hat tip), I applaud Prof. Sumner. A different view was expressed by the Dean of the Ag school at Davis, Neal Van Alfen:
"if you have close working relationships with a broad group of people, you want to think twice about developing relations with their competitor."
Van Alfen should get a job in politics, not academics.

Perfect records at risk 

Smarty Jones is 7 for 7 going into this afternoon's Preakness Stakes. There's likely to be more pressure on the pace, and hence on Smarty, than in the Derby. If he wins again, superstar status awaits. Here's Jennie Rees' Preakness story.

Arsenal are "On the brink of immortality" as they take the pitch in the 38th and final game of the season. They are heavy favorites to become the first unbeaten side in modern English history. Paul Hayward makes interesting observations while considering the achievement:
If Arsenal's quest to become the first team since Preston 115 years ago to go through a campaign in the top-flight undefeated is a mere 'stat', ... how come so many great English sides never managed to post a zero in the losses column?

It was beyond Spurs in 1961, Don Revie's Leeds, Brian Clough's Nottingham Forest and countless illustrious Liverpool teams - not to mention Sir Alex Ferguson's eight Premiership-winning ensembles. There is enough spurious record breaking in modern sport for us to be legitimately excited by a new standard being set in the domestic game - especially one set with such grace and style.

These are some of the many reasons to be cheerful (and not tycoon-obsessed) at the top end, but there are countless others in the leagues below. When no sentence seems able to work its way along the page without containing the names Roman Abramovich or David Beckham, I remind myself of two eternal truths: 1. Four clubs make it into the Champions League each summer and 88 don't. 2. More people watch live football in the three Nationwide divisions than they do in the Premiership.
That last stat is one to file away for future reference.

Friday, May 14, 2004

Hayek, applied to terrorism 

David Henderson has a column at Tech Central Station which considers the problem of predicting a terrorist attack. The CIA is necessarily centralized and hierarchical, which limits its ability to gather, interpret, and convey what "Hayek called 'knowledge of particular circumstances of time and place.'" These limits motivated DARPA to consider running betting markets on terrorist attacks. Leaving aside questions of morality and effectiveness, prices in any market reflect information otherwise hidden from a centralized agency. In concise and modern terms, prices are efficient summary statistics (at least relative to any feasible alternative). This was a key plank in Hayek's argument that the price system was better than central planning as a means of organizing economic activity.

Henderson points out that two important responses to the 9/11 attacks required decentralized action in light of "particular circumstances of time and place."
Think of two good things that happened on that horrible September 11. The first was the actions of the heroic passengers on United Flight #93. They got information about the hijackers' true intentions, not by waiting for some central government announcement, but by acting in the moment to get information from friends and loved ones. They quickly figured out that they would not be on a free trip to Cuba, but on a one-way trip, probably to a high-value target in Washington. So, with little to lose, they acted to protect the lives of strangers in Washington. And they succeeded.

The second good thing was a centralized agency, the FAA, letting its air traffic controllers figure out, in a decentralized way, how to bring a few thousand planes down safely in a few hours. As USA Today reported (August 13, 2002), after 9/11, the FAA started to write a manual for clearing the skies so they could have a more organized plan the next time. Then it stopped. FAA officials realized that they couldn't plan for the next time because the situation would be different. Instead, the FAA would have to trust that hundreds of air traffic controllers would cooperate the next time as they did so well on that awful day.
These are examples of spontaneous and effective reaction by individuals in difficult circumstances. I find Henderson's characterization of the Flight 93 passengers apt: "with little to lose, they acted to protect the lives of strangers in Washington." It helps I think, to be reminded of that. It makes one more optimistic in what is essentially a negative era.

Read Henderson's entire column, particularly if Hayek' theory of information is new to you. Hayek's thinking applied to terrorism is worth considerable reflection, a view I'm sure is shared by many others.

Thursday, May 13, 2004

The Smarty Jones buzz 

USA Today reports that 5,000 people showed up at Philadelphia Park just to watch Smarty Jones stretch his legs in a workout. And in Arkansas, where Smarty established his creds preparing for the Triple Crown, he tapped out Oaklawn Park on Derby Day. Via Ron Rapaport (again):
How big was Smarty Jones on Derby Day at Oaklawn, where he won two races before the Kentucky Derby? The horse drew so much betting interest, owner Charles Cella says, that the Arkansas track ran out of money. "Everybody who had tickets worth more than a thousand, we had to write them checks.''
Good luck to Smarty in the Preakness. Logic tells me he'll have a tougher time than in the Derby, since everyone now knows he's the horse to beat. He's a cool customer though, as I've mentioned before. Composure will be an important asset if the pace gets hot at Pimilico. A hot pace sets the race up for a late run from Imperialism, who is apparently fresh as a daisy despite all his travels. If I were jockey Kent Desormeaux though, I'd forget about the bad trip in the Derby and let Imperialism run his own race. Trying to match strides with Smarty before they turn for home would compromise Imperialism's chances.

A belated commentary on Spiderman 

Perhaps Mark Cuban was right - the Spiderman plan was purely about generating publicity. Merely announcing that logos would be placed on the bases guaranteed millions of dollars of publicity for the movie. But does MLB have to lie about it? From Ron Rapaport:
MLB said the promotion was geared to kids as young as 6, but the film, Steve Zipay of Newsday notes, is rated PG-13. Of course, if MLB really wanted to increase interest among youngsters, it might consider scheduling the playoffs early enough for them to watch.
Good point. I can live with commercialism in baseball - its been integral to the game for a century - but let's be honest boys.

Tax breaks, congress, and the costs of complexity 

Reader Barry Posner wrote yesterday to mention that a tax break for car racing similar to one I'd noted earlier - "Are stadium tax breaks going Federal?" - has been passed by the U.S. Senate. Tracks have been using a 7 year depreciation schedule on their facilities for tax purposes, based on a rule that applies to amusement parks. The bill would cement this practice in law, blunting the IRS' argument that the proper time frame is 15 years. Barry calculates that the quicker depreciation schedule reduces the associated taxes by about 30%.

The bill that contains this provision is a whopper. Its origins lie in a WTO ruling that $5 billion in U.S. export subsidies violate trade agreements. Europe has retaliated with a 7% trade duty on specific products, slated to increase to 17% by next March should the subsidies remain in place. Undoing the subsidy and eliminating the retaliatory tariffs seems worthwhile.

But politics being what it is, the game became one of replacing existing subsidies with new ones. As Jonathan Wiseman wrote in April
Congress's task seemed simple enough: Repeal an illegal $5 billion-a-year export subsidy and replace it with some modest tax breaks to ease the pain on U.S. exporters.

But out of that imperative has emerged one of the most complex, special-interest-riddled corporate tax bills in years, lawmakers, Senate aides and tax lobbyists say. The 930-page epic is packed with $170 billion in tax cuts aimed at cruise-ship operators, foreign dog-race gamblers, NASCAR track owners, bow-and-arrow makers and Oldsmobile dealers, to name a few. There is even a $94 million break for a single hotel in Sioux City, Iowa.

Even one of the tax lobbyists involved in drafting it conceded the bill "has risen to a new level of sleaze."

"I said a few months ago, any lobbyist worth his salt has something in this bill," said the lobbyist, who would only speak candidly on condition of anonymity. "Now you see what I'm talking about."
The tax code is a gordian knot of monstrous proportions due to legislation like this. Here's an estimate of the costs of tax complexity (via Robert Samuelson):
The resulting tax code is so confusing, complex and contradictory that it costs taxpayers (in accounting fees and the value of their time) about $100 billion annually to complete their returns, estimates economist Joel Slemrod of the University of Michigan. In 2003 that roughly equaled the combined spending of the departments of education ($57.4 billion), homeland security ($32 billion) and state ($9.3 billion).
To put things in perspective, $100 billion amounts to about $1000 per household. My household would very much appreciate tax simplification, as would most any other. But it is far easier for Congress to pass laws with tax breaks than to cut the knot and "simplify" matters. Chalk up the $100 billion as one of the costs of democracy.

One final note: the tax mess is not a partisan issue - Tuesday's vote on the bill was 94-5.

Headlines and futures 

The headline reads "Oil futures gush to new high." "Crude oil and gasoline futures rose in New York to the highest end-of-session levels in two decades," notes the NY Times.

Are gloom and doom lurking around the corner? No. What the papers don't find terribly interesting are futures prices in the true sense of the word - prices beyond next month. These prices suggest the current spike is temporary. Prices are projected to fall by $3 through the end of the year, and another $9 over the next decade.

Here are the current prices in the futures market from the WSJ for the December contract through 2010, from the WSJ ($).
Jun '04 $40.79
Dec '04 $37.49
Dec '05 $33.29
Dec '06 $31.12
Dec '07 $29.92
Dec '08 $29.07
Dec '09 $28.42
Dec '10 $28.27
More information which punctures the gloom and doom mythology is catalogued at Knowledge Problem. I particularly recommend this excerpt of Robert McTeer's recent op-ed in the WSJ, which led me to check out the data.

Good stuff on Clemens 

Richard Justice of the Houston Chronicle provides an informative account of the Clemens phenomenon. I'm biased - I've been a fan of the club since the days of the Houston Colt 45s - but surely this is the story of the season so far in baseball.

More on Pittsfield 

The most interesting stories on John Thorn's tracing of baseball's origins to Pittsfield are from local writer Tony Dobrowolski, in the Berkshire Eagle:

Joy in Mudville! Pittsfield scores a first: 1791 bylaw banned 'baseball' near meetinghouse

Who founded baseball? Who knows?

Athletes & politics 

Kevin B. Blackistone writes on the political loyalties of athletes, which apparently lean Republican in a big way. Most interesting are the observations of famous black stars, given that the black population votes overwhelmingly for Democrats.
Deep in the Georgia pines, Frank Thomas grew up poor in a house full of Democrats.

Then he signed a multimillion-dollar contract to play first base for the Chicago White Sox, and almost immediately pledged allegiance to Republicans.

"I have no choice," he explained once to the Chicago Tribune. "I'm a rich man now."

...Charles Barkley wondered aloud to his grandmother once about why their family always supported Democrats.

"Because Republicans are only for rich people," Barkley recounted her answering.

Sir Charles thought about the explanation for a second, then shot back: "I'm rich!"

...Remember what Michael Jordan was said to have responded when asked if he would get behind Harvey Gantt, the black Democratic candidate in his home state, North Carolina, who was bidding to upset the ultra-conservative Republican Sen. Jesse Helms? "Republicans buy Nikes, too."
These observations have implications for the future of politics. Black incomes have been rising relative to white incomes in recent decades. Its a long process, but convergence of income between the races implies that the Democratic monopoly on the black vote will ultimately crumble.

Wednesday, May 12, 2004

Baseball's history extended 

Baseball historian John Thorn has established that the game's origins now extend to 1791, in Pittsfield, Mass. How do we know? The town passed a law which restricted where the game could be played. Thorn uncovered the law initially through an internet search, and ultimately tracked down the original source:
The document is a sheet of tan paper, slightly smaller than 8 inches by 10 inches. The words it contained voiced concern over broken windows in a new meeting house, or church. In part, it read:

" for the Preservation of the Windows in the New Meeting House no Person or Inhabitant of said Town, shall be permitted to play at any Game called Wicket, Cricket, Baseball, Batball, Football, Cat, Fives or any other Game or Games with Balls, within the Distance of Eighty Yards from said Meeting House."

Violators were warned that they would be fined five shillings.

Thorn, 57, lives in Kingston, N.Y. He said the discovery of the document began by accident. He has been writing baseball books for 30 years, and the eighth edition of his "Total Baseball," a 2,688-page statistical encyclopedia he edits, is near completion. He is also writing a book on baseball's origins, and it was that effort that had him up late.

"A year ago, at 2 a.m., I was searching the Net for baseball with various spellings: B-A-S-S, B-A-S-E, B-A-S-E with a hyphen,'' he said at the news conference. "For some reason, I don't know why, I was looking at the University of Michigan's site 'Making of America.' There was a reference to a 1734-1800 history of Pittsfield, and there it was. It was not just a reference to a game of ball, but it was the real thing: baseball."
Thorn was ultimately led to the original document via a conversation with Jim Bouton, of all people. Read the story at the NY Times for the details. Not surprisingly, the town that was once ticked off with ballplayers is now pleased to lay claim to the game's origin. Who'll be next?

NAFTA & the Expos 

The Oregon legislature is considering a piece of legislation called the MLB Jobs Bill. The implied intent, (leaving aside the effect or lack thereof) is to create jobs for people in Oregon by inducing MLB to relocate the Expos from Montreal to Portland. If this were a car factory, an "Auto Jobs Bill" would be carefully scrutinized by the Canadians to see if it violated the North American Trade Agreement, which precludes such subsidies. And rightly so.

But what about the Expos? Do subsidies which entice teams to relocate across the border violate NAFTA? David Luchuk considers the question:
Chapter 11 prohibits governments from taking any action that degrades the value of a foreign investor's property. This is tied to the concept of expropriation. Expropriation is the taking of private property by government. NAFTA uses a broadly expanded definition that applies to any government action that results in a seizure of property "tantamount" to expropriation. This is called regulatory expropriation. Is the legislated relocation of the Expos a regulatory expropriation? Again, it's not clear.

In 1998, the Government of Canada looked into NAFTA's applicability to professional sports. That special sub-committee dismissed the idea of using NAFTA to challenge the legality of tax breaks at American sports facilities. Nonetheless, one of the law firms it heard from during those sessions strongly recommended using Chapter 11 to raise such a challenge. This firm argued that capital subsidies and preferential tax treatment in the United States unduly diminish the value of foreign investments, namely Canadian sports franchises.

These proceedings are a matter of public record. One of North America's foremost authorities on trade disputes recommended that the Government of Canada pursue this line of inquiry. This predates the relocation debate by several years.
The basis for the recommendation can be found here (pdf, lengthy). There are useful facts in both links.

While we're on the Expos, I highly recommended Luchuk's abbreviated history of baseball in Montreal for those interested in the history of the game. They've been playing ball in Canada much longer than I thought.

Plans for a sports palace 

The Dallas Cowboys' lease at Texas Stadium expires in 2008. The Cowboys have played there since 1971, when they moved from the Cotton Bowl in Fair Park. Now they want to go back, and do things in a big way. How big? 75,000 seats under a retractable roof, with "open end zones linked to fan decks that could increase capacity to 100,000." And the stadium is just the start of it. The complex will include residential and commercial development, including a "Texas-size hotel featuring waterfront views, and amenities such as spas, golf courses, and convention centers." That's big. This drawing gives one a good idea of the scope of the project.

The cost of the stadium is reported to be $650m. The Cowboys propose paying $225m, and are asking for $425 million in public subsidies from Dallas County. The current proposal finances the subsidy with a 3% increase in the hotel occupancy tax, and a 6% increase in the tax on rental cars. The Cowboys argue that their complex will "drive business to the metroplex," but hotel owners are opposed. The tax hike would raise the rate to 18%, the highest in the country, according to the city's hotel association. Mary Kay Cosmetics says it will move its $115m annual convention elsewhere if the tax hikes go through.

It looks like tough sledding for the Cowboys. Owner Jerry Jones is hoping for a voter referendum on the proposal this fall, citing the urgency of finishing construction before the Texas Stadium lease expires in 2008. He wants an answer from the Dallas County Commission by June 30. The County just yesterday commissioned a study of the project which has little chance of being completed by Jones' deadline.

My take? If the stadium/hotel/commercial/residential complex has economic merit, it will obtain sufficient financing in the marketplace, with little or no public subsidy. If public investment is required, the investment could be financed from revenues directly from economic activity taking place within the complex. Come to think of it, if I were a hotel owner and Jerry Jones was asking for a subsidy to compete with me, financed by a tax on my business, I'd be hopping mad.

Tuesday, May 11, 2004

Pitching luck 

JC at Sabermetrics has a cool post in which he examines the difference between a pitcher's ERA and his predicted ERA, based on his propensity for strikeouts, walks, homers, and line drives. As expected, among this year's Braves, Ramirez has been enormously lucky. Hampton has been both unlucky and horrible, but mostly horrible. Sometimes you make your own bad luck...

Not very sporting 

Dog fighting is resurfacing, in southside Chicago, of all places. There's an organization fighting it, the Chicago Dog Advisory Workgroup (DAWG). Cook County police arrested 191 people for animal related offences last year, up from 169 in 2002. Sounds serious.

What does it mean? Good luck to DAWG, but I'll bet this is a manifestation of a deeper social problem.

On Yankee dynasties 

Bob Cohn lays out facts and useful observations on the modern Yankees and their predecessors in this column. A taste:
How can a team that has failed to win a World Series the last three years be wrecking the game when, once upon a lifetime, they absolutely laid waste to it?

During the 18 seasons of what might be called the "Yogi Yankees," New York played in a single, eight or 10-team American League. While winning all those pennants and finishing no lower than third, they had an aggregate winning percentage of .624.

Let's say the current Yankees "dynasty" began in 1994, when New York finished first but had no World Series in which to play because of the strike. Call them the "Derek Yankees," after Jeter, the All-Star shortstop whose first full season was in 1996. In the ensuing 10 years, as Steinbrenner has outspent everyone by millions, they have compiled a .604 winning percentage, managing to reach or exceed the Yogi Yankees' 18-year average exactly twice.

...Inequity? Rubbish, or something similar, says Jim Bouton, whose landmark 1970 bestseller, "Ball Four," rocked the baseball establishment. He has continued to poke at the powers that be.

"It's a charade," Bouton says not only of using the Yankees as the poster child for baseball's economic disparity but of the economic disparity, period.

"It has nothing to do with the Yankees," Bouton says. "The owners needed to create a problem, and the solution is that the players should take less money. ... It's obvious that small-market teams do have a chance."

Many have doubts about that, even though so-called small-market or moderate-sized payroll teams, the Florida Marlins and Anaheim Angels, have won the last two World Series. But there is no doubt that from the late 1940s into the 1960s, fans of other American League teams were resigned to their teams having almost no chance of playing in October.

Nowadays, largely because of the three divisions in each league and the wild card, more teams and their fans have hope. The Yankees? They are one of many good clubs. Indeed, they might prove to be great, especially if Jeter starts hitting and the pitching holds up.

Generations ago, they didn't have to prove it. You knew they were great.
My take? Free agency allows the Yankees to recover more quickly from a series of blunders than they did in the past. But the limit on roster size means they can only sign so many players. Free agency allows all clubs to shuffle pieces of the puzzle in and out. As a result the Yanks face more competition each year for their roost at the top of the baseball world, and they are spending like mad to try and keep it.

Monday, May 10, 2004

American Soccer Player Taunted in Norway 

Next time someone claims that Americans are racist and backwards relative to our friends in Europe, remember this story. This is not an isolated event, as I've noted before.

More on sports at Rice 

Richard Justice, a thoughtful reporter at the Houston Chronicle, argues here that Rice football is worth the investment.

Some interesting stats from the article: sports at Rice represent 3.2% of the school's budget, and direct costs for football (excluding scholarships) total $8m per year. These are significant but not grossly disproportional numbers. Add in the opportunity costs of the scholarships (85 * $30,000) and football costs $10.5m per year. A school can do lots of things with $10.5m, hence considering alternatives is an important task.

Sunday, May 09, 2004

Does ballpark revenue buy better players? 

As Doug Pappas has chronicled, Bud Selig has been wandering the country making the claim that various teams can't be competitive in their current ballparks. Selig's proposition implies the following chain of effects: a new ballpark increases revenue, the revenue increase will be spent on talent, and the talent increase will make the team more competitive. Is this proposition true? As an economist, I'm naturally skeptical, but willing to consider Selig's claim in the light of logic and evidence.

I like the new ballparks, don't get me wrong. So do lots of people, hence they increase demand to attend games, and the revenue increase is real. But will these revenues be spent on increasing the team's talent? Economics implies they will only if the new stadium increases the revenues from winning additional games. If this effect is absent - i.e. if nicer accommodations and a more competitive team are not complements - then a profit maximizing owner will just pocket the cash and the composition of the team will be unchanged.

Colleagues Jahn Hakes and Chris Clapp (Jahn's student) have examined this question. In a paper forthcoming in the Journal of Sports Economics, they document the extent of the "honeymoon effect" of new ballparks on attendance and revenue. However, "contrary to expectations, there is no systematic interaction between new venues and team performance upon attendance or stadium revenues. This non-complementarity implies that a profit-maximizing owner would not use a new stadium's revenue stream to increase team quality of play."

Craig Depken of UT Arlington has looked at a similar question. What happens when teams sell corporate naming rights to the stadium? Typically, this yields a nice boost of a few million per year in revenue. Do owners plow this revenue into higher payroll? He's quoted in this story on the Rangers' sale of naming rights to The Ballpark in Arlington:
The hope that Rangers management might use the $2.5 million annually due the team under the 30-year Ameriquest deal to buy some great talent is probably a pipe dream, said Depken: He crunched some numbers this year to see whether teams that sold naming rights had higher payrolls. "There is no difference," said Depken, whose calculations covered the late-1980s-to-2000 seasons. "The owners are putting the difference in their pockets."
Economic reasoning thus does not imply that increases in ballpark revenue will be invested in player talent. Better seats, improved sightlines, and general ambience could be complimentary with player talent, but there is no systematic evidence of this effect. Further, as Hakes and Clapp show, the "honeymoon effect" on attendance is of limited duration. The sale of naming rights is more clear-cut. This is a pure cash windfall, and should have no impact on the marginal returns to talent. Depken's work confirms that it doesn't - owners simply pocket the cash.

There is a case to be made for investment in new stadiums, but not the one made by Selig. I started with a question, and I'll end with one for you to consider: Who does Selig think he's fooling?

Should Rice play major college football? 

Dagobert Brito, Rice's Peterkin Professor of Political Economy thinks not. His analysis of the problem is appropriately economic and not polemic.
Rice University can field completive competitive teams in many sports without compromising academic standards. Football is an exception. The number of players in the nation that are academically comparable with the Rice student body is so small, and there is so much competition for these players, that it is not feasible to recruit a sufficient number of players with academic credentials comparable to the Rice student body.

Other elite schools that do play Division I-A football without adverse consequences can do so, not because their football teams are academically better than Rice's team, but because the schools are larger. Football players are 6.5 percent of the male undergraduates at Rice. They are only 3 percent of the male undergraduates at Duke and Stanford universities.

Among the 500 top high school football players in the class of 2004 in the United States, only five listed SAT scores of 1300 or above. Rice was able to recruit two of them. The average SAT score for the Rice football team is just under 1100, and the national average for NCAA Division I-A football teams is below 900. The Rice football team has good scores relative to the rest of the country, but the average SAT scores of the Rice student body is almost 1400.
Brito also happens to be a Rice alum, and is not opposed to sports per se. He simply believes that Rice football has failed to serve a useful function for the school, and given the size of the student body, is unlikely to do so. As for me, I share the doubt that Rice gains much by competing with Tulsa and Louisiana Tech, and the Owls have demonstrated over several decades that they fail in football competition with the major Texas programs.

Brito's commentary comes on the heels of a McKinsey report which focuses on athletics at Rice. More discussion of the issue can be found here.

Friday, May 07, 2004

On the decline of a sport 

Horse racing was one of the "big three" sports at the turn of the 20th century - along with baseball and boxing - before an abolition movement shut down tracks in all but three states. But it made a comeback in the 1930s, as states turned to pari-mutuel wagering as a means of raising revenue in difficult economic times. No less than ten states legalized parimutuels in 1933, the biggest "liberalization" of gambling on record. Racing quickly returned to the forefront of national attention. In the late 30's and 40's, horses like Seabiscuit and Citation would travel by railroad from one racetrack to the next, and be met by cheering crowds at stops in between.

No more. Racing had accepted a devil's bargain, accepting the chains of state regulation and taxation in return for its right to exist. While other sports developed dynamically in the post-war period, horse racing remained stuck in a time warp it is only now attempting to crawl out of.

Two routes are being followed today. The short term route is to beg the state for the right to run "racinos," i.e. to install slot machines at the tracks and split the take with the state. The long term route involves consolidation of ownership, and integration of the top level of competition - to have national figures making the rounds across the country as Seabiscuit and Citation once did. Churchill Downs is pursuing both routes throughout the country (Churchill now owns tracks in Florida, Illinois, Indiana, and California, in addition to Kentucky). This is no mystery: Churchill states its business strategy here for all to see.

In today's Washington Post, Steven Pearlstein gives a fine account of racing's decline and current dilemma. He believes that the short term fix is a "fool's game." Racing - particularly the folks in charge at places like Churchill - should take this warning seriously.

Thursday, May 06, 2004

Modeling football strategy 

Football Outsiders reprints some nifty analysis by William S. Krasker, who has launched an excellent analytical site on football, footballcommentary.com. Krasker picked up where David Romer left off, adding refinements to the dynamic programming model of a football game. The post at Football Outsiders analyzes controversial choices made in critical situations from last season. Here's a taste:
Packers Go For The Touchdown Versus The Eagles

In the divisional round of the playoffs, with 2:00 remaining in the first half, Green Bay led Philadelphia 14-7, and faced 4th and goal at the Philadelphia 1 yard line. Packer coach Mike Sherman made the controversial decision to go for it rather than kick the field goal, but Ahman Green was stopped for no gain, and the Eagles took over on downs.

This situation is quite similar to the one the Panthers faced in the wildcard round against the Cowboys, which we have already analyzed. Once again, a naive analysis based solely on expected points would say that Green Bay should go for the TD if the probability of success exceeds 3/7.
There are two factors which complicate matters beyond the naive analysis: field position conditional on success or failure, and diminishing returns to scoring. The latter dominates in Krasker's model, which raises the required probability of a touchdown from .43 (3/7) to .46. Even so, Krasker concludes that Sherman made the right call in going for the TD.

There's more good analysis at both sites. But be prepared to spend some time there if you go - neither site is for hit and run readers.

The low carb diet - 1860s version 

Tyler Cowen recently opined on the high cost of the current mode of dieting. Carbs are cheap and protein is dear. This lends an economic angle to the following fact, reported by the surgeon general: in the U.S., "women of lower socioeconomic status ... are approximately 50 percent more likely to be obese than those with higher socioeconomic status."

The cost of dieting is not a new issue however. In the WSJ($), Cynthia Crossen provides a delicious account of a prior incarnation of the modern low carb diet. The case in a nutshell: it worked then too, but the medical establishment neither understood nor appreciated it. They just carped about it.

Dr. Harvey put Mr. Banting on a diet that banished potatoes, bread, butter, milk, sugar and beer -- the patient's favorite foods. As was the custom in late-19th-century England, Mr. Banting continued to eat four meals a day. But instead of buttered toast for breakfast, he ate four or five ounces of meat or fish. At lunch, rather than bread, beer and pastry, he ate fish, vegetables and fruit. Tea and supper were similar, although supper included two or three glasses of claret, sherry or Madeira. Champagne and port were mysteriously forbidden.

In less than a year, Mr. Banting lost 46 pounds and could comfortably wear his old suits on top of his new ones. He pronounced the diet miraculous and not only paid Dr. Harvey's bill but also gave him a hefty bonus.

He also decided the diet should be publicized to help other sufferers of "that dreadful tormenting parasite." But he knew that respected medical journals weren't likely to publish an article written by an undertaker based on personal experience. So in 1863, Mr. Banting printed and distributed 1,000 copies of his "Letter on Corpulence" at his own expense.

The response from the public was enormous. In the next eight months, Mr. Banting printed 50,000 more copies of the pamphlet, some of which found their way to Germany, France and the U.S. He received nearly 2,000 grateful letters from satisfied dieters, and his name became synonymous with dieting, so that people could be heard saying, "He should bant," or "She's been banting."

But if the public was sold, the medical establishment was not. Mr. Banting soon became a target of ridicule in newspapers and magazines, which suggested Mr. Banting's diet was unscientific and couldn't be explained in biochemical terms. Only wealthy people could afford to eat so much meat and so little bread, yet some doctors complained that the diet was "too great a sacrifice of personal comfort" for their affluent clients.
Great stuff.

Wednesday, May 05, 2004

Nice pic 

Smarty Jones graces the cover of Sports Illustrated, the first Derby winner to do so since Sonny's Halo in 1983. If you look, and the title of Rick Reilly's piece intrigues you - "Why I Hate Smarty Jones" - he's just jealous. Among other things, as Reilly notes, Smarty has "his whole sex life in front of him."

A dinner conversation among competitors 

Vinters, to be precise:
Few of Franzia's fellow vintners have openly criticized him, but over a recent dinner with his buddy Ernest Gallo, a fellow Modesto resident, Franzia says Gallo complained that Bronco wine is too cheap.
Which brings to mind Adam Smith's famous observation that "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some diversion to raise prices."

Franzia is the man behind Two Buck Chuck, decent California table wine at an affordable price. It appears he didn't take up Ernest Gallo's "suggestion," which is good news for consumers. The article discusses his attempt to expand the concept to restaurants, who have thus far not been persuaded. Good luck "Chuck!" Via Truck and Barter.

Thanks for the subsidy 

And oh by the way, our accountants throw curves and sliders as well:
Yankee Stadium is owned by the city. So is Shea Stadium, home of the New York Mets. Supervising them falls to the Department of Parks and Recreation.

The ball clubs pay rent. But the city is stuck with sweetheart deals from the past, including one blessed by a certain baseball-loving former mayor, that allow the teams to deduct planning costs and other expenses from their rent bills.

This has led to some interesting arithmetic. Perhaps nothing beat the time in the 1990's when the Yankees tried to get New York taxpayers to subsidize the cost of an engineer who supposedly worked 168 hours a week. Care to guess how many hours there are in a week?

TIME and again, city auditors have found both ball clubs resorting to what might be described in this age of steroids as performance-enhanced bookkeeping.

Last summer, the city comptroller, William C. Thompson Jr., announced that the Mets owed the city more than $4.5 million. The club, he said, had a tendency to overstate its deductible expenses and understate its income from luxury boxes, concessions stands and the like. Not surprisingly, the Mets challenged his figures, but he held firm.

The pattern with the Yankees is similar. In late January, the comptroller's office issued an audit concluding that the team had improperly inflated its expenses by nearly $483,000 in a single three-month period of 2002.

Even with legitimate deductions, the ball clubs are able to slash their city rent charges in ways sure to arouse envy in any New York tenant. In 2003, the Yankees used various expenses to lower an $11.4 million rent bill to one of $5.1 million. The less prosperous Mets managed to take a $5.8 million bill and turn it, poof, into one of $311,000.
That's some talent, eh? From Clyde Haberman in the New York Times.

Professional runners and the 4 minute mile 

In a fascinating article in The Guardian, Peter Radford argues that the 4 minute mile barrier was broken long before Roger Bannister's feat in 1954.
There were no celebrations on May 9 1970 to mark the 200th anniversary of the first four-minute mile, and no tours were organised to visit the gates of Shoreditch Church in London, where James Parrott, a costermonger, completed his measured mile in four minutes.

He had started at the Charterhouse Wall in Goswell Road, crossed the road, turned right and then ran the length of Old Street for a wager of 15 guineas to five (£1,380 to £460 in 2004 values). Parrott had wagered that he would run inside four minutes, but the men with whips and poles who had been positioned to keep his way clear did such a good job, and the conditions were so near perfect, that as he sped along Old Street it was clear he would be well inside the target time.

But James Parrott appears in no history of athletics and he has never received any recognition from the myriad statisticians and enthusiasts of athletics facts and figures. The truth is that they don't believe it. Way back in 1770, runners must have been third-rate, mustn't they? And those who measured the distance, timed the event, recorded it and reported it to the newspapers, were all probably incompetent in doing their jobs, too, weren't they? An eighteenth-century, four-minute mile, run by a man wearing snug-fitting, thin-leather lace-ups is not to be taken seriously. But the eighteenth-century, four-minute mile story does not end there.

In the late autumn of 1787, a runner by the name of Powell went one crucial stage further. He engaged himself to run a mile in four minutes and wagered the extraordinary sum of 1,000 guineas on achieving it (£780,000 in 2004 values). As part of his preparations, Powell ran a time trial at Moulsey Hurst near Hampton Court five days before Christmas. This was one of the oldest sporting venues in the country, and some of the best cricket and boxing matches and foot races of the previous 50 years had been held on its turf - several under royal patronage.

The purpose of the time trial was to assess his condition and for his backers to make a decision about how they would bet. The trial was a success and the newspapers reported that Powell ran 'within three seconds of the time' (ie within 4:03), but no details have yet come to light about the eventual run. However, it is clear evidence that runners and their backers believed that running a mile in four minutes was possible in 1787 and that they were willing to stake very good money on it.
Radford argues that the Victorian obsession with amateur sport is responsible for England's decline in running prowess prior to Bannister. The ability to train without having to otherwise work for a living certainly benefits the modern athlete, but this was denied by the 19th Century sporting ethos. "Before the Amateur Athletic Association became the controlling force of athletics in 1880, men and women of all social classes ran for money on the streets and on the moors and greens of England. Later, the sport was policed to eliminate the undesirables who ran for money, or whose jobs tainted them and rendered them 'professionals'." There's evidence to support the claim, and much more in this rich, well written piece; recommended.

Tuesday, May 04, 2004

At the intersection of bookmaking and insurance 

The owner of Oaklawn Park was on the hook for half of the $5m bonus offered to any horse who could sweep the Rebel Stakes, the Arkansas Derby, and the Kentucky Derby. Having seen Smarty Jones win the first two with aplomb, Charles Cella was not about to risk $2.5m should the colt win the big one. So he called his bookie, ahem, insurance broker, and increased his coverage:
In October, half of the Oaklawn bonus was insured by Levin Insurance Services of Goshen, Ky. When Smarty Jones captured the Arkansas Derby by running the final one-eighth of a mile in 12.5 seconds, the Cella family started work on insuring the remaining $2.5 million.

..."We huddled up that Monday and called our broker and said, 'We've got to cover this horse because he's going to win this race,' " Lou Cella (Charles' son) said. "We closed the deal on Thursday before the Derby. It was last minute."
Why Thursday? That was after the post position draw, and the morning line of 9-2 had been set and evaluated by the betting market. Why not just bet in the parimutuel market at Churchill Downs, where private rooms are available for people of Mr. Cella's stature? Two reasons; first, to avoid reducing the odds by pouring half a million or so on Smarty in the parimutuel pool. Second, using the "broker" avoids the 15% takeout. Tracks and horsemen are currently agitating over rebate shops. The rebate shops kick back a significant percentage to high rollers who route their betting through them, avoiding the higher takeout in effect at the racetrack. I presume Mr. Cella will not be taking a lead role in the industry's efforts to derail the rebate shops.

From Derby winner to 4th in a $4,000 claimer 

That's the life of journeyman jockey Stewart Elliot, whose flawless ride guided Smarty Jones to the wire in Saturday's Kentucky Derby. On Monday, it was back to work at Philadelphia Park.

Wonder what happened to your pick? Here's a horse by horse account from The Bloodhorse. There are some interesting quotes in the story. But unless your nag was The Cliff's Edge (lost both front shoes) or Minister Eric (breathing problem that may require surgery), the stock excuse is "he didn't like the sloppy track."

Update: Tapit's trainer Michael Dickinson got off the best line in that regard: "I trained him to breeze, not swim."

No wine for Cody 

Licensing restrictions create (1) monopoly rents, and thereby (2) political opposition to their removal. At least that's what I tell my students in microeconomics. This story about a hearing to issue a liquor license in Cody, Wyoming could not provide better confirmation of both points.
There will be no new sports bar on 1328 Beck Ave. in Cody - at least not one that serves beer and wine to the billiards-playing customers - and a high-end wine store will not fill the empty building at 1420 Sheridan.

Plans for the two prospective businesses were hampered Monday when the Cody City Council opted to hang on to its single remaining unassigned liquor license.

The neighborhood is being well-served as it is, local business owners told the council.

Representatives from Eastgate Liquors, Whiskey River and Cooter Brown's voiced opposition in a public hearing. Becky Nose of the Proud Cut Saloon said the Liquor Dealers Association also was against the move.

"We all have a large investment in our businesses, and it is a distinct disadvantage to have direct competition in that area," said Mark Westerhold of the Silver Dollar Bar.

Councilman Joe Bush also inquired about the sports bar's proximity to residences and churches, as Wyoming state law does not provide for distance requirements.

This is not the first time the license has been sought by prospective business owners. Cody has held on to the retail liquor license for four years.

The number of licenses a city has available is based on its population. Cody received its 19th license after the last census.

"According to the 2000 census, the population had risen to such a degree that the city was eligible for one more under state law," City Manager Laurie Kadrich said.

The city is also allowed an unlimited amount of restaurant liquor licenses, of which there are eight.

But the retail license is the more valuable of the two, as it can be bought from the city for $1,000 and sold on the market for around $30,000.
The difference in price suggests the rents are rather modest, but all the same, this is a textbook example of the political economy of licensing. My condolences to the wine drinkers of Cody.

Has Andrew Zimbalist Joined the Dark Side? 

Andrew Zimbalist, a leading critic of stadium subsidies, has issued a report in support of the plan to bring the Nets to Brooklyn. The $2.5 billion project involves housing and retail development on a 21 acre site, in addition to the basketball arena. Zimbalist concludes that the $690m in public subsidies will be repaid by over $800m in additional public revenues.

You can be sure that this figure is not based on the usual "economic impact" mumbo jumbo that Zimbalist and others have effectively criticized. In that sense, Zimbalist has not swapped a white hat for a black one. But he does admit in this story that he signed with the developer because "I like the project." I don't know much about the project to like or dislike, but $690m - apparently composed of tax breaks - is a lot of cash. Moreover, the relevant concept is the opportunity cost of $690m in public funds. I'm willing to allow that this project may yield the best return on the investment, but its no slam dunk.

Footnote for future reference: this Brooklyn web site collects stories on the political machinations swirling around the project. Getting through all the political hurdles won't be easy. If you are lookng for summer reading, The Dodgers Move West gives a fine account of the process from an earlier episode, one that the current proposal may, or may not, resolve in some way.