I like Patrick Maholmes and, all else equal, prefer the Kansas City fan base if for no other reason than they seem less interested in settting things on fire.

But alas, the Eagles are probably going to win because the value of quarterback play became so dominant that the incentives to innovate and invest in alternative strategies has finally resulted in an equilibrium where the opposing team is dominant in every other area of play. Which is a long-winded way of saying that annoying old people who rail on about line play, running the ball, and defense, who have been consistently wrong about everything for 20 years, finally get to have their moment in the sun and say “I told you so” and you, smart person who values your mental health, will simply smile and nod and not take the bait to argue with them further.

Or maybe Maholmes’s ankle is back to 70% and they win? Who knows? We’re talking about a sport that, 19 games deep, is almost entirely determined by the two interacting random probability generators: injuries and general luck.

Enjoy the excuse to socialize and eat junk food, which for many of us is 90% of the utility proposition in watching the game.

*probably

Policies can create their own entrenched consituencies, bad policies doubly so. Restrictions have long strangled the supply of housing in California, much to the detriment of the states inhabitants. This cost, of course, was spread across the entire population, while the resulting dramatic increase in housing prices proved to be a windfall for incumbent property owners. The immediate constituency of beneficiaries, however, has probably been less important than the capital committed property owners that followed, taking on larger and larger debt obligations, each generation of new homebuyers more terrified than the last that the rug might be pulled out from under them, more committed to maintaining an obiviously terrible status quo that they nonetheless found themselves bought into.

Economists refer to this as a transitional gains trap. Once the effects of the policy are internalized into the market, no one subsequent to the first generation of incumbent beneficiaries ever benefits. But, and this is most important, if the policy is *undone*, those who bought into the market after the policy was in place stand to lose. In the case of California housing, the potential losses could be significant.

Imagine you bought this house today (care of Andrew Baker’s cheeky tweet):

Now imagine you just bought this house today, only to read this headline tomorrow:

Darrell Owens gives all the necessary details. The point isn’t whether this or other policy eventswill the be the final blow to the California housing blockade. Or this legal case. Or this political agenda. The point is that the walls are closing in. Transitional gains traps depend on sufficiently concentrated benefits and diffuse costs. It may be the simple case that the costs of the California housing are so enormous that they are economic crippling for the majority of the population. The costs are too big to politically diffuse.

Transitional gains traps are impossible to costly get out of. Someone always loses. All you can really do is try not to fall in them yourselves. Even if the house actually does have good bones.

Yesterday Noah Smith wrote a persuasive blog post about what police reform might look like. Similarly Jen Doleac wrote a thread about policing reform, in the comments of which Kevin Grier absolutely gave me the business while righteously criticizing the implication that law enforcement institutions could be even remotely trusted to reform themselves. I always find it awkward trying to respond to criticism when I essentially agree with every point being made.

she left murdering unarmed citizens off her list of favorite strategies. Not every post that mentions you is worth amplifying Mike!!!!

— Angus “burnt ends" Grier 🦧🍄🚀🥃 (@ez_angus) January 29, 2023

I’m fine with Kevin’s criticism, to be clear, because I think it comes from the frustration that policing has arrived at it’s state along a tide of winking half-asssed internalization of some reforms exceeded only by the whole-assed petulant refusal of others. While the broader chattering classes and technocrats have been trying to adjudicate whether the dominance of White Supremacy within the culture of policing necessitated its wholesale defunding, law enforcement has managed to quietly be on an apathetic half-strike in major cities while bearing no material cost that I am aware of and remaining as militarized as ever.

What I do want to reconcile is the notion that the decentralization of policing across states, counties, and cities is an opportunity for reform because I’m not optimistic we’re going to get any meaninful action at the national level. What we can hope for, agitate and campaign for, is state and local reform. No one is getting elected to the presidency if they can have the “defund the police” label successfully slapped on them. A town, however, can fire its police and reform an entirely new force under different job expectations, with different hiring objectives (de-escalation, human services), qualifications (higher training bars), and bigger salaries. A town or small state can change the burden on police unions or even hire entirely parallel to them. We can decide that law enforcement is important work where you can make a professional salary with attractive benefits, but like other such jobs you can be fired with or without cause because someone else wants your job and might be able to do it better.

Yes, we've innovated our way right to the top of the table. pic.twitter.com/1RmJipdsNl

— Angus “burnt ends" Grier 🦧🍄🚀🥃 (@ez_angus) January 29, 2023

I don’t want to give the impression I think the problem of law enforcement in America can be solved with a few paragraphs. I guess all I want to do is remind you that Charles Tiebout has a pretty good point: local public goods always face the competition of those offered by their neighbors. Maybe the single most important contribution any of us can make to improving the deadly, destructive disaster that is the current state of law enforcement is to push your local government for reform. Your state could end police retention of seized property or end qualified immunity. Your sheriff’s office deputies could be at-will employees. Your city could require the police union to self-insure against civil lawsuits.

Because it only takes one place to start a Tiebout chain reaction, a place where people want to live and work that much more because they’re less afraid that the police are going to hurt their family or friends. Less likely to ignore theft and assault. Less likely to tase their teacher to death. Beat their neighbor to death. That’s sounds like a nicer place to live or start a businesss. The time for half measures is over, which unfortunately probably means the opportunity for national reform has passed. There are 18,000 police departments that can and need to be reformed.

Maybe we can start with yours.

A group of congressmen are (again) opposing raising the US debt ceiling, which (again) threatens to put the US government into default on a portion of the US debt. There is some uncertainty about the magnitude of the consequences of a US default, varying between very bad and globally catastrophic. Phrases like “taking hostage” and “political extortion” are thrown around too casually in the discourse when opportunities for politically leverage are taken advantage of, but in this case I think the scale of consequences makes it completely appropriate. A threat to force a US debt default through the mechanics of a mistake made when legislating bond issuance rules during World War I is an act of political extortion that holds the global economy hostage.

The obvious solution is to eliminate the debt ceiling, but we have failed to do so because of the same political incentives underpinning our problems today. Some economists and economics-adjacent folks have suggested a policy solution, itself similarly born of an unintended legislative loophole: the trillion dollar coin.

As far as specialty areas go, I’m about as far from a monetary specialist as an economist can get, so I’m not going to litigate here whether putting the coin on the balance sheets of the Federal Reserve would be inflation neutral or compromise the independence of the Fed. What I want to consider is the Lucas Critique.

Specifically, the Lucas Critique applied to political economy after minting a trillion dollar coin. In briefest of terms, the Lucas Critique says a model of the world generated from past data to forecast a policy’s effects is wrong as soon as that policy changes the rules. We (rightfully) do not like the status quo as created by the current rules, but it is extremely difficult to predict the consequences of a big rule change, via loophole exploitation, made to fix the status quo because the underlying data generating process has been fundamentally altered.

I don’t know if minting a trillion dollar coin is a good idea or a bad idea. What I do know it is that we should be humble when trying to forecast the consequences of shifting the power to radically impact the balance sheets of the Federal Reserve from a elected body of 435 congressmen and 100 senators to a cabinet member appointed by a singular elected President.

Let’s ask two questions. I like to ask myself a version of these two questions when evaluating change in political options or rules:

1. Why is the opposition reacting the way it is?
2. What would Trump have done ?

The first is because it forces me to consider what the underlying incentives and strategies really are. The Republicans, as it stands, do not seem to view the trillion dollar coin as a policy outcome to be avoided. They’re, historically, the anti-inflation party. They represent a lot of bond holders. Hyper inflation should terrify them, so maybe they agree with the prediction of inflation neutrality. On the other hand, they also know that electoral college favors them and, with the growing aspiration within the party to win over Latino voters for the next few decades, maybe they like the idea of shifting more power away into the executive branch.

The second question is important because it forces me to acknowledge when I’m relying on norms to produce the outcome I prefer. Say what you will about Trump, the man was never concerned with norms, traditions, or the consequences for anyone but himself. This question also allows me to consider obviously ludicrous things that no one could get away because he got away with exactly such things. So, let me ask you this: if the Secretary of the Treasury can order the minting of a trillion dollar commemorative coin and deposit it in the Federal Reserve balance sheet, what other ways could the Treasury reallocate funds on US balance sheets? What if we stopped assuming it would only be used in the most benign, inflation neutral way possible? Why can’t they use it to loan money to Russia or pay for the balance of global debt held by a small country that specializes in off-shore banking? Or, stepping back from the brink of “The President stole a trillion dollars”, what are the ways in which a President could trigger an economic or constitutional crisis by appropriating the power to significantly increase M1? What are the ways this new option would be internalized in the political marketplace and equilibrium of power?

The point is this: political norms, especially those constraining power at the highest level, are more fragile than we sometimes appreciate. Nothing exposes this more than big changes to the rules of governance. Game theory and mediocre movie plots now considered, let’s return to the Lucas Critique. A political compromise made to expedite bond issuance under the pressures of The Great War produced an political lever that has been exploited for decades. This was an unintended consequence. As a current wing of the Republican party has put more and more weight on this lever, the opposition is now considering exploiting a loophole, itself an unintended consequence of the otherwise innocuous coinage act. It’s hard to forecast the effect of such a fundamental shift in the rules and distribution of power because it immediately renders obsolete the model currently informing our expectations.

Cards on the table, if we’re at the zero hour and it’s either a) mint the coin or b) default on US debt, I think we should mint the coin. Defaulting on the debt of the country that provides what is without question the currency tying together the global economy scares me enough that some sort of workaround gambit becomes a necessary risk. But what will be the unintended consequences of minting a trillion dollar coin? I don’t know.

And neither do you.

I was once told that papers are never finished, only surrendered. It’s one of those turns of phrase who’s observational accuracy has only increased. I don’t know that I’ve felt good about submitting a paper for review in over a decade, and that includes the one’s that were accepted and subsequently published.

When I submitted papers early in my career I felt great. There was both a sense of accomplishment and eagerness to learn what the reviewers might think, a hopeful optimism. That eagerness didn’t reflect overwhelming confidence so much as naivete as to what the review process entailed. Now I know too much.

What I know, what I always know, is that more could be done. More alternative empirical specifications could be added to the robustness section. Newer models could be considered for the underlying mechanism. Older models too. Different literatures could be engaged and contended with. Summary statistics could be visualized. Specifications could be bootstrapped, a different identification stratgy used. I never applied for administrative data in Denmark. Wait, they don’t have this policy in Denmark. I could have tried Sweden. Or Dallas. Wasn’t there a close election in Baltimore in 1994?

This isn’t a rant or lament about the journal reviewing process. For every petty or uninformed referee report I’ve received in my career I’ve received three that were entirely fair and one that was so good the reviewer deserved to go in the acknowledgements of future drafts. This is more a reflection on a trap born of our own knowledge and imaginations.

There are so many tools at our disposal, so many data sets, so many options that I worry that we are collectively succumbing to a paradox of choice. The paradox of choice, for those who do not recall, was a theory that suggested that the number of options facing consumers was net lowering their utility because of the search and decisionmaking costs those options entailed. I think this theory is deeply wrong, but I am also going to be incredibly unfair to it here and simply dismiss it out of hand as a consumer theory. Instead, I want to consider a more collective application to the modern social scientific enterprise.

Every research paper is an attempt to contribute new ideas and refine old ones. There is occasional handwringing over the paucity of new ideas in economic research and the abandonment of broad swaths of traditionally difficult economic subjects. Explanations for these pathologies tend to be more sociological than economic in construct, invoking political preferences or mood affiliation. Others focus on the institutions of academic research, specifically faculty hiring and tenure. I’d like to add the paradox of choice to the mix.

There are countless methodological, theoretical, and rhetorical choices that can be made that will result in nearly identical research contributions. If your aim is to contribute a wholly new idea, then every one of those choices comes with the opportunity cost of the countless alternatives. If, on the other hand, your contribution is a refinement of a pre-existing idea in an already rich vein of research, then the choices you made are the contribution. For refinements, the choices made are a reason to recommend acceptance of your paper. For newer, more original contributions, your choices can be more easily framed as reasons to reject it. A more cynical academic might fear that the more original the contribution, the more likely the referee is to succumb to the Nirvana fallacy, disapproving of your paper’s choices relative to an imagined paper more perfectly in line with the choices the referee would have made if they had thought of the idea.

Now consider these two mechanisms in parallel for a young researcher. Not a wonderkid that faculties on other continents are already talking about. Consider an above average newly minted PhD from a top 25 economics department. They are executing their first research project since accepting a tenure track position, a defined question with explicit policy relevance. There are dozens of data sets they could pursue, hundreds they could build, and a countless number they could imagine feasibly existing. They could pick a workhorse model or contruct an entirely new pathway forward from dozens of building blocks. There are 3-4 “hot” identification strategies in their field, but they could also consider something off the beaten path.

Research projects aren’t binary constructs, “new” or “refining contributions”, but it’s not unreasonable to place their contributions on a spectrum of “entirely new” (i.e. Newtonian physics) to “marginal refinement” (i.e. weakening the asssumptions in a minor mathematical proof). From the start, our new faculty member will observe the inherent riskiness of overdifferentiating from the field, turning every choice into a reason referees might reject their paper. This will push them down the spectrum towards marginal refinements. Then they will start the iterative process of executing and writing up their research.

As they execute their analysis they will see the forking paths of alternative choices. Different specifications will be added to robustness tables. Alternative models will merit their own appendix. They will begin to write defensively, trying to anticipate and refute arguments from their mental model of a reviewer. They will try to divert an imagined conversation away from the conclusion that the choices made in the paper are wrong. The risk of newness only becomes starker. There must be, and remains, the contribution in the paper, but it will become narrower, buttressed on all sides by the rising masonry of appendices and references, it’s only weakness the narrow channel through which its contribution is made. This iterative process will continue until the opportunity cost of time not spent on their next project forces the unconditional surrender of their paper to that still unvanquished tyrant, diminishing returns.

All of this is weighing on young faculty shoulders. A million choices to be made, a million reasons to be rejected. So what do you do? You find your tribe. A tribe not based in the schools of thought that dominated the 1970’s but in the schools of methodological choices. This is how we estimate gravity models of trade. This is how we estimate monopsony rents. This is how we model the impact of the minimum wage on employment. If you want to be cynical, there are no doubt similar tribes of policy outcomes, but I don’t think those are what haunt the face-on-desk stress dreams of assistant professors working on a Sunday night.

We can get more new ideas the same way we can get bolder, more enthusiastic young researchers. Not by reducing their choices, but by lowering the price of those choices. Easier said than done, and maybe I’ll write up some thoughts on how lower the prices of researcher choices, but the first step is likely cultural i.e. I have no idea how to pull it off. The most important step may simply be reorienting how we read papers, shifting the focus from “What did the authors do right or wrong?” to “What do we learn from this?”

I’m fond of telling my wife that most people wouldn’t call us rich, but sometimes Costco makes me feel like I am. By the standards of the past, including both of our upbringings, the goods that our Costco membership makes accessible to us is something that never ceases to amaze. I’ll look at our cart some months and find myself astonished at the goods we are about to casually purchase. It really goes to show you how far solidarity can take you within a proper union.

Sure, its probably better described as a consumer’s union, but the principles are largely the same and the value of the outcome is undeniable. Consumers rarely find themselves with significant bargaining power. Its not terribly problematic most of the time – competition pulls prices towards a market clearing level and everyone walks away sufficiently happy. But the fact remains that bits get taken out here and there. The world is full of little price markups where markets get thin, where consumers face a tradeoff – either pay the premium of shallower local tributaries or swim back to the well-populated seas of the median consumer.

What Costco offers is a memberhip in their union. Pay your dues and let us bargain on your behalf. The solidarity of your consumer dollars will grant you leverage like you will rarely experience in your consumer life. It’s not a democratic union, but you can costlessly exit at any time, which is more than I can say about every democratic people’s republic. You can only count on the incentive of retaining your membership to motivate your buying representatives, but that as it turns out is a $28 billion incentive. They serve their members through two purchasing streams: massive amounts of the stuff nearly everyone buys (produce, milk, eggs, chicken, etc) and a rotation of goods each of which maybe only 1 to 2% of their members buy. Those goods are the real miracle, the stuff that where markets would be so thin that a member might find their buyers union negotiating 30 to 50% lower prices. Most of the goods on any day don’t match their needs but over the course of the year are fundamentally changing the standard of living for a household.

Costco is a miracle of socialism. We can only hope they will be ruthlesslessly copied in other channels of our consumer lives.

My favorite sports blog was Deadspin. Sure, it was filled with some sophmoric politics, but it was also the most reliably uncompromised takes on sports that were available. Then it got bought out. Their corporate overlords tried to reign them and their union in, but it all fell apart, culminating in a massive staff walkout. In a moment of shining glory, several of the former staffers and editors decided to take the plunge and start their own site as a subscription based enterprise.

They organized their structure as a partnership, based in both a more democratic ownership structure and a committment to making their simple enterprise one built to serve their writers. Not quite a workers cooperative, but not a component of a broader media company either. If anything, it’s structure probably more closely resembles a medium sized legal or accounting partnership (I don’t actually know, I’m just speculating based on tidbits from stories and podcast discussions including some of their writers).

They wrangled together a team of talented, often incredibly talented writers. Does some third-year college English major politics creep through the writing sometimes? Sure, but if that’s too much of a burden you should probably just go ahead stop reading anything, in any medium, on any internet, ever again. Do I think the economics of some of their very best writers to be absolutely silly? Yes again, but I actually find it a healthy reminder that incredibly smart people can be incredibly wrong about things outside (or inside) of their expertise. I would do well to remember this myself.

What they do have, however, is Ray Ratto, who’s voice of crushing condescension I hear in my head whenever I watch someone do something obviously stupid with the well-lubricated confidence of a professional sports person. They have David Roth, whose casual vocabulary of metaphor is unmatched in my life. They have a score of writers who are confident they don’t just have to chase down every scandal around the next catfished college player or the indiscreet unsolicited selfies sent by future embezzlers. They can just do their job and be confident that it is what their subscribers are paying them to do. It also means that freelancers and intermitter writers can work for Defector and know that the paycheck will reflect the market rate for competence and not the market rate for new college grads living at home and telling their parents the real pay was the exposure.

Defector can do all of this for their partners and employees because they have cut out the media middlemen without having to give up the scale of each going independent on Substack. They have essentially found a way to pull off the dream of every failed new magazine of the 90s – they made their own thing and found customers to pay them for it. They leveraged the internet in all the ways we hoped, unburdened with phystical printing, untethered to a single regional labor pool, and unbeholden to corporate ownership whose revenue ambitions could never be aligned with the best way to serve the employees and the readers those employees actually want to serve.

Defector media is a miracle of capitalist entrepreneurship. We can only hope they will be ruthlesslessly plagiarized in dozens of other media subjects.

Which of course brings it back to one of my favorite hobby horses. Capitalism and socialism are no longer a useful dichotomy, if they ever were. It’s all just competition, there are always prices. The only things that change are the currencies and the rules. Sometimes you bargain with dollars and contracts. Sometimes with favors, promises, and threats. Sometimes power comes from resources, other times from which end of the sword you’re holding. Unions, cooperatives, corporations. They are all just different ways of organizing, of solving a collective action problem. The rewards to organized solidarity can be enjoyed by anyone, whether it’s members of a private buyers club or electricians in a federated union. The fruits of entrepreneurship, of producing a good in an innovative way that better connects producers of sports content to the consumers of that content, will always be available to those willing to take a risk in a competitive marketplace.

To be clear, Costco doesn’t solve the externalities of wide varieties of consumption any more than Defector Media will cure inequalities of wealth. They don’t offer miracle cures. What they offer is steps taken towards a better world that don’t conveniently align with the typical political allegiances and policy mascots of a middle class suburban consumer or Brooklyn-based blogger. Because they’re not politics. They’re something that actually has to work.

Equities are an excellent long-term investment in part because they offer nearly zero value outside their prospect to grow in value. Ownership of a share of a publicly traded firm exists as nothing more than byte in a digital ledger, asbsent any aesthetic or collectible value. In contrast, a beautiful painting or a bottle of whiskey offers consumption value. You can speculate on the future value of such assets, but the prospective consumption value will always be baked into the market equilibrium price. If you want to maximize the expected growth in the market value of your holdings, focus on investment assets that have near-zero consumption value. It is because of your sports team’s failure to invest solely in assets based on their value as inputs into the production of wins that they suck and should immediately fire everyone.

Yes, in years past your sports team used to be bad. They were bad for many reasons. They were poorly managed. Fewer resources were invested in your team. They existed in a less attractive city to live for prospective players and other employees. They were badly coached and never listented to you.

But then a miracle happened.

I can’t speak to the specific miracle(s) that happened to your team, but it likely includes one or more players undervalued by the market that came into your team’s employ only to subsequently reveal their true value through the quality of their play. They were outstanding and, in turn, your team started regularly winning at a rate previously considered unachievable. Supporters grew emotionally attached to their outstanding players. They hung banners, wore jerseys, gifted bobbleheads to wide-eyed children. Being a fan of your team began to pay emotional dividends that went beyond simply cheering for a winning team. It meant being a part of something emblematic of teamwork, a source of collective joy.

And that’s where it all began to go wrong.

Players are employees. They signed contracts reflecting their market value which was itself a collective estimation of their future output. Your team benefited from employing this underpriced input, freeing up resources otherwise constrained by either finances or a cartel…I mean league-mandated salary cap. Contracts aren’t forever, though, and those contracts are starting to run out. You beat the market once, but those assets are now properly valued. Furthermore, the uncertainty discount that applied before is long-gone, replaced by the premium that applies to a sure thing. Whether or not you can afford them, they will no longer offer any advantage, in terms of freed up resources, relative to any other player in the market.

But that’s not your biggest problem.

Your team’s biggest problem is you, the fan. You are emotionally attached to this cohort of players that brought you previously unknown levels of success. Success you’ve grown maybe just a bit accustomed to. Returning to past, lower, standards of quality, of winning, will not return you to your previous level of contentment. You’re gonna complain. Gripe. Call in. Tweet. Boo. You demand they retain these players you’re emotionally attached to so you might maintain the standards of winning you are entitled to.

We haven’t even gotten to the bad part yet.

There’s going to be a de facto auction for the players whose contracts are up. A bidding war. And in that bidding war the team that values them the most is going to get them. Which is obviously the team whose fans are desperate to retain their beloved heroes. Congratulations, you’re now a textbook example of the the winner’s curse. You’re going to win an auction already buoyed, not by the average value in the market but by the teams that have overestimated their future value. That certainty premium probably got a little too big because at least one poorly managed team doesn’t seem to appreciate that playing thousands of minutes of professional level sports takes a grinding toll on the body and that eventually leads to injuries at worst, athletic decline at best. But you’ve paid even more for these players than that the team that over-valued them the most because the team used to be so bad for so long and then they showed up and the team stopped being bad and you love them for it.

The rest of the market is evaluating them as inputs into the production of wins. You’re getting additional consumption value out of having their specific last names on your jerseys. Of seeing their faces and hearing their voices and remembering the good times. You’re getting the warm fuzzies of a good hang. And every dollar you pay for that hang is one less dollar to spend on other players. Other inputs into the production of wins.

So you need to ask yourself, next time you’re mad that your team isn’t good anymore, why are they bad? Is it bad luck? Limited resources? Poor management? Or is it because of you and your insistence on getting more out of supporting a sports team than just victories accumulated within a ledger that accounts for competitive success that you in no way contributed to?

Maybe your sports team is bad because you were part of a fanbase that wanted more than just wins. A fanbase that wanted to let the emotional investments they made in specific humans pay out for just a little bit longer. Your sports team is bad because you are rationally maximizing the emotional consumption value out of supporting them. It’s your fault and that is totally ok.

But if this goes on much longer they probably should fire everyone.