David R. Henderson  

Economics Everywhere Even in Sports

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Early February in even years not divisible by 4 is one of my favorite times. First, the AT&T golf tournament is here and, although I'm not a big fan of golf (cue Mark Twain), I get to see gorgeous views from the Goodyear blimp of an area less than 2 miles as the crow flies (and that crow does fly straight) from where I live.

Second, and this is the divisible by 4 part, the Winter Olympics are on. Last night, I watched two of my favorite events--curling, which is relatively new in the Olympics, and speed skating.

Now to the economics, first at the AT&T. Here's a segment of a news story in this morning's Monterey Herald:

But the one thing most people don't know is that new volunteers are required to purchase the uniform for $185. Along with accommodations like getting a hotel room, transportation and food, a week's work can cost as much as $1,000.

This is from Juan Reyes, "Crowd Control, in a polite manner," and the article is about golf marshals, the people who tell you to be quiet when a golfer is hitting.

Notice that not only are the marshals not paid but also that they pay to be golf marshals. How did the sponsors decide not to pay the marshals but also to charge them? Presumably there were enough qualified volunteers that they could require the volunteers to pay for their uniform and for their own expenses. (Some of the marshals are from out of town.)

One of my favorite New York Times editorials ever is the famous "The Right Minimum Wage: $0.00," January 14, 1987. By the way, I'm willing to bet dollars to doughnuts that the author of that NYT editorial was Peter Passell, an economist on the editorial board who earned his Ph.D. in economics at Yale in the early 1970s.

But something about the title has always bothered me: who's to say that the right minimum wage is 0. Couldn't it be negative? That is, wouldn't it make sense in some circumstances for workers to pay to have the jobs. The AT&T example shows that the answer is yes. I can think of three reasons why people would pay to have jobs:
1. They get valuable training,
2. They get a lot of pleasure (the AT&T example),
3. They get a lot of prestige out of association with the employer (possibly the AT&T example.)
Can you think of others?

Now to the Olympics. Watching my fellow Canucks, John Morris and Kaitlyn Lawes, curl last night, I was curious about their backgrounds. So I googled and found out that both were born in Winnipeg (where I was an undergrad) and that Kaitlyn is a sales representative for Goldline Curling Supplies. I find that striking, so to speak. Why? Because it says something about the growth of wealth in Canada and northern United States, which is where almost all the curling in North America happens. Sales representative? There are enough curling supplies sold that this company needs a, and probably some, sales rep? Yes. It's because people want, not just the curling rocks, which haven't changed much, but also those special brooms and shoes. When the commentators were discussing the brooms and shoes last night, I turned to my wife and said: "You know what we used for brooms and shoes when I curled, briefly, in 1967? Brooms and shoes." Not special ones: Ok, the brooms were a little special, but they were very similar to the one I use to sweep the floor of my garage. But Canadians and northern Americans are wealthy enough to buy this special equipment.

Then we watched speed skating, and one commentator did an excellent job of showing the kinds of skates the speed skaters use, noting that a leap in technology in the late 1990s--the blades rotate vertically every time the skater raises his foot--changed the game. This is a small change. But that's the point. Some innovator figured it out and probably made some good money at it, and people were wealthy enough to buy it.

Economics everywhere.

By the way, see here for a funny human moment: this is the kind of thing I love about the Olympics. Also, I've become quite fond of the American team involved.


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COMMENTS (8 to date)
Jerry Brown writes:

They might get power from the job. Think what Presidential candidates spend for a job that pays 400k per year (with room and board). Campaigns can spend hundreds of millions in the attempt just to get the job.

Jerry Brown writes:

One problem with people paying for jobs that have large side benefits associated with them could be that you are going to lose any sense of 'equality of opportunity'. Those who's circumstances allows them both to pay for the job and forego any compensation for living expenses are going to be the only ones who can take such a job. That probably is not the most accurate way to ensure that those with the most ability to do the job have a chance at it. That is probably not so important for a job that consists of holding a 'quiet please' sign, but it might have very important effects on job performance in other fields.

Mark writes:

Jerry Brown,

Unless uncompensated (or negatively compensated) labor is a de facto investment with hope of future returns (as political positions may be said to be for many), it seems to me it should generally be conducive to greater ‘wealth/income equality since it is basically rich people frittering their time away in costly (if only because of opportunity cost) hobbies and status pursuits, leaving the more monetarily rewarding work to poorer people who, per the law of diminishing returns, value labor with positive wages more than rich people. In fact, even kids of rich people getting jobs in politics or journalism is probably less an investment with a financial return than pursuit of status. A rich family investing tens of millions of dollars to get a son as a senator is, in net, probably redistributive downward, even in the long run.

A good example/analogy I think is choice of college major: one might say rich kids are privilege in getting to pay lots if money to study art history and things they enjoy or confer status, since they’ll be taken care of financially anyway, while poorer students have to treat their education like an investment and study less interesting or less glamorous things that will make them more money; but inasmuch as one views wealth or income inequality as a bad thing, this phenomenon is a good thing: rich people erode their fortunes on status and pleasure while poor people prioritize wealth accumulation, forego such amenities, and gradually replace the rich people. This is how the bourgeoisie economically overthrew the nobility in 19th century Europe: the former prioritized income and profit while the latter prioritized status and pleasure.

Phil writes:
for a job that pays 400k per year (with room and board)

Actually, it is just room. Except for official functions (e.g., a state dinner), the President pays for the food he and his family consume in the White House. They pay for their laundry, and they even pay the wages for the waitstaff that clean up after private meals.

Jon Murphy writes:

Sports are great for economic learning. I first fully understood and appreciated spontaneous order watching people at the Boston Garden at halftime during a Celtics game.

Mr. Econotarian writes:

The interesting thing is that unpaid volunteer labor is basically outlawed for for-profit companies due to the Glatt decision about unpaid interns.

Under Glatt, the question is who is the "primary beneficiary” of the relationship. Under this test, an employment relationship is created when the “tangible and intangible benefits provided to the intern” are less “than the intern’s contribution to the employer’s operation.” And if you are an employee, that means minimum wage, hour restrictions, etc.

PGA Tour could make an argument that they (and the independent tournaments they run) are exempt as 501(c)(3) public charities (estimates are they give away about 16% of about $1 billion in revenue). PGA Tour could also argue that the shushers get an expensive front-line view of the tournament that could be directly correlated with ticket costs.

A writes:

A related debate is occuring in LA's improv community. A major theater, UCB, does not provide money to performers. Some performers are pushing for payment. If you read between the lines, some arguments assume that UCB makes super-normal returns, so that payments wouldn't significantly affect the existing model. Others seem to identify wealth exchange only through literal monetary transactions. More cynically, some performers seem to recognize the disproportionate benefit to the less experienced, and are seeking to remove a layer of competition. All these interests unify under deliberately vague terms like "fairness". Humans are interesting.

Micke writes:

Is there a mirror to the funny NBC video? That one is not avialable outside of the US.

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