Russ Roberts

Grab Bag: Munger and Roberts on Recycling, Peak Oil and Steroids

EconTalk Episode with Mike Munger
Hosted by Russ Roberts
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Epstein on Property Rights, Zo... Boudreaux on Market Failure, G...

Michael MungerMike Munger, of Duke University, and EconTalk host Russ Roberts clean up some loose ends from their previous conversation on recycling, move on to talk about the idea of buying local to reduce one's carbon footprint and then talk about the idea of peak oil. They close the conversation with the Rick Ankiel story and the implications for the Barry Bonds saga.

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0:36Intro. Grab bag, pot luck: environmental issues, sports, topics from listener emails and comments. Recycling: in earlier podcast, Munger argued that if you have to pay someone to take something from you, it's garbage. Recycling is even wasteful if you have to pay more for it than putting it into landfill. Listener asked: it might be the case that the cost to you is cheaper to put it in landfill instead of recycling, but that might not capture all of the costs. Suppose landfill cost is 0 to you, free garbage pickup for you no matter how much you throw away. For example, in Northeast in some cities, you can put whatever you can fit inside of bags, no matter how much it weighs. Or, if cost of dumping is artificially low, you might make the wrong decision and dump, recycling too little. It's all about getting the prices right. Not Bob Barker. How much do we distort those prices and lead people to do the wrong thing. Free recycling encourages too much recycling, also wrong decision. Summary: We charge too little for disposal. We want to keep people from dumping too much, and as a result, there is not enough recycling if that were the only thing we did. Might be something worth recycling. However, we often go too far in the other direction, saying that's wrong, giving them a free blue bin in which they can put anything they want to recycle.
8:06Related stories: Meeting of Department Chairs at Duke, 4 hours. Talk about kind of car people owned over lunch. Prius, Honda Hybrid--everyone around the table had some kind of hybrid car. Chairman of Chemistry dept. explained they were probably a resource waste relative to cars of comparable size, at best a wash for net resources. Stunned silence. Humanists, Dept. of Indignation Studies. He was asked, "What kind of car do you have?" Answer: "Oh, I drive a Prius, but that's just because you have to if you're gonna be a faculty member." Ironic. Physicist Enrico Fermi [Bohr?] story: Student noticed he had a horseshoe over his door. Student: "You don't really believe in that, do you?" Fermi: "No, of course I don't believe in it. But they say it works even if you don't believe in it." Mike drives a '97 Dodge Minivan. Low cost to him because car is so old.
12:06Don Boudreaux podcast, buying local, division of labor, virtues of exploiting the powers of specialization: limiting yourself to dealing with just people in your local vicinity is often very costly, doesn't allow you to take advantage of people far away who have talents. Write-in question: Doesn't that ignore the issue of carbon footprint? Image: Striding the planet leaving a Yeti-like footprint. Virtue in buying local not on economic grounds: even though local product is more expensive, when you look at the full effects like that it wasn't shipped, you should buy local. People do worry about this point. Slow foods movement, organic composition of foods, food co-ops with goal to get fresher higher quality organic foods but also self-consciously want to reduce carbon footprint of transportation. Which of two alternatives that have the same quality use fewer resources? Hard to answer: How do you compare two gallons of gasoline with forty kilowatts of electricity? What does "fewer resources" mean? Economists have a magic conversion metric for doing these comparisons: prices. The cheaper alternative is the one with the lowest price. "People who don't care at all about the environment are still going to make the environmentally correct choice provided that prices accurately reflect the value of those resources." Which they will under a competitive market. But it's always possible to say, "Well, no market is actually competitive." What other metric? I don't want to buy this foreign apple because it uses 30 calories of fuel to provide one calorie of nutrition. But if it's in the local store it must be efficient in some sense. If the apple from New Zealand is cheaper than the locally grown apple, (assume both markets are equally competitive, lots of competition, not a case of exploitation of monopolist), tells you that the cost of the N.Z. apple is cheaper than the cost of the local apple. How can that be, since the N.Z. apple bears transportation costs? One answer: those transportation costs are cheaper than you think, better packaging, etc. But it's certainly true that the N.Z. apple involves some transportation costs. However, the N.Z. apple has cheaper other kinds of costs, such as labor costs, land costs, other distribution issues with moving apples around. If you only care about transportation costs, then the 30-calorie argument is relevant. But those are not the only precious resources. Time is valuable, too. Full costs are lower. You might still say you don't care about that, that you are willing to waste resources of one kind to save resources of another kind. But I (Russ) care about other resources, e.g., having jobs to people in N.Z. and Chile. Full picture is more complicated than just transportation. Suppose you want to buy local because you want to have a connection with land around you. Fine to credit that preference! Great! Go for it. But difficulty is when people say not "I like that better", but "You should like it better" and want to create policies that make it impossible to import apples from N.Z. It's a little more complicated that just likes and dislikes: If you are buying locally because it's emotionally satisfying, that's fine; but issue is if you are telling me to buy local because it's wasteful to buy from far away just because of the transportation costs. I'll grant you that it's more in transportation costs, but don't generalize to all costs. Paradoxically, when considering all costs, something far away is making it cheaper.
21:43Carbon offsets. Suppose transportation costs are more because there are uncompensated externalities in terms of carbon footprint, so more carbon is produced by one and that should count more but it doesn't in a price system. In Middle Ages, Catholic Church started selling indulgences, had to do exercises or say ritual sayings, dead weight loss to capture this. Person who had been bad could buy way out of it and Church got value of it. Carbon offsets similar. Suppose I feel guilty about driving a Hummer, big carbon footprint. If I could buy carbon offsets, I could go ahead and sin. Treehugger.com, carbon neutral myth, offset indulgences for your climate sins. Pay for 30 acres of trees in South America, net effect of driving Hummer isn't very high. Carbon as a unit of resource that counts more than everything else doesn't trump the idea that we can convert between different kinds of resources using the price system. Starting to be criticized by people within the environmental movement themselves. Terminology issue: plant a bunch of trees versus giving money to company looking for alternative energy sources. Latter is an indulgence, wing and a prayer, not quite an offset. First of planting trees does something real. Bids up value of trees.
25:13Peak Oil. There's a finite amount of oil, we use a growing amount of it; therefore we will eventually run out. Claim is that even though we've used it, we've found more; but eventually there has to come a time when the amount of reserves start to fall. Has a sinister sound to it, but to an economist it's irrelevant. Once oil is a resource as opposed to a nuisance--originally crude oil was a yucky thing and just ruined land, but once it was valuable it was scarce. The only reason there appears to be enough to go around is that prices adjust to ration it. If we got to a world where we'd found all reserves and we were using those falling reserves, price would start to rise faster than in the past. Offsetting that is the opportunity for human ingenuity to use the remaining oil more effectively, more incentive as prices rise. Light sweet crude (less than 1% sulfur), running out, but plenty of sour crude: easier to make gasoline out of light sweet crude, but easy enough to make diesel fuel and other things out of sour crude. "We have never and will never run out of anything." As prices go up, people find more ways to find more of it; and as prices go up people find more ways to do without it. Alternative fuels will become more economical, we will switch to them, and never run out of oil. Julian Simon-Paul Ehrlich bet. Paul Ehrlich, in The Population Bomb, said "If I were a gambler I would take even money that England will not exist in the year 2000." Thought England wouldn't be able to provide for it's own food. Didn't work out. Simon challenged Ehrlich to a concrete bet on something they could actually measure, not just whether England would "cease to exist". September 29, 1980, each put up $1000 allocated to five different resources: bet was that prices would fall, in inflation-adjusted terms, over the next ten years. Ehrlich picked chromium, copper, nickel, tin, and tungsten and bet the prices would rise. Ten years later, not only had the prices fallen in inflation-adjusted terms, but some prices had fallen in nominal terms despite high inflation. 800 million population increase, largest in one decade, which Ehrlich's argument would have put even greater price pressure on these things. Simon won because you don't have to know the way human ingenuity will out of self-interest will find outstrip scarcity. A lot of engineering problems are really economic problems. The ultimate resource is really human creativity. Policy and government choices do matter, though. Price of crude oil has been rising over the last few years, people presume it's permanent, but it could well be because of instability in the Middle East. Trend can deviate. Tungsten is finite, so in theory Ehrlich has to be right: but that misses is the infinite human resource, creativity, that we will find better ways to use it. We always wish there were more, of course; but it's foolish to worry about our children and grandchildren will run out, though, because creativity and price system will make sure we don't feel the pinch of that. Jared Diamond's book, Collapse, societies that use up resources, but those countries didn't have efficient price signals. Prices provide incentives to solve the problems, but price system has to be able to function. What if a few hundred million Chinese and more and more kids start going to school and using pencils, so we start to run out of pencils, so don't we need a study, spillover effects to graphite, tennis rackets.... But it's already happened without a government czar having to take charge of it because of the price system. But someone might ask: what if? It only takes one. Pollution, catastrophic event won't automatically fix itself. Ruining ocean or air, no owner, no property right or price in place to help solve pollution. Policies do matter; but planning for shortages is a red herring.
40:03Sports and steroids, form of pollution: Rick Ankiel story. Munger a Cardinals fan. Ankiel was a rising star, shot at Rookie of the Year, 20-year old, Russ at game, Cardinals/Braves, Ankiel fell apart, had to be taken out of the game. Career ended, minors, surgery. Then tried to be an outfielder around 2004-2005, rare change, Babe Ruth went the other way but was clearly capable of doing both. In middle of pennant race, he hits home run in his first game, Cardinals suddenly surging; then news of a 2004 prescription for human growth hormone, alleged to have purchased a year's supply. Cardinals did very well during that period. Sad news for Cardinal fans, tragedy. But it started with criticism of Barry Bonds, some substances were illegal. Before 2005 human growth hormones (HGH) weren't even illegal. Is Ankiel a "cheater"? Should this level of opprobrium attach to steroids and drugs? Maybe they should be illegal because they harm the person, but that's different from achievement stemming from drugs. Does it give you an unfair advantage? Maybe for a runner, but how about hitting or pitching a baseball? Mike is an avid baseball fan and also a coach. Technique and practice help; but surely muscle bulk matters. Weight-lifting helps--is that cheating? There is evidence that HGH doesn't actually help--unlike steroids, it just adds bulk. It's true that if you hit it on the fat part of the bat a major league player can hit a home run. But if you don't hit it on the fat part of the bat, can you do better if you've used steroids? Ty Cobb--would he have had a higher average with steroids? Would have won more of the fights at second base and in bars. But some singles might have been hit more sharply. But maybe not much effect. Ichiro. Steroids turns fly balls into home runs. Russ's NPR commentary on Ankiel story; defending Barry Bonds. Suppose you have a rule that is not enforced, maybe not even enforceable, honor system, not supposed to take steroids. Second possibility is you have no idea who is using it, watch Sosa and others suddenly getting to be one of the greatest people in the world, what would you do? Let's get it out of baseball. Suppose you are a sales rep for a Fortune 500 company, paid on commission basis; people decide sales reps should sleep more, government passes a law requiring it. Start noticing your competition coming out of their meeting haggard, you start thinking these guys are cheating. Maybe you report them. Your commissions are going down even though you are a good salesman; people look at you for your now-cheaper car. USA Today runs list of top ten, and suddenly you've dropped down. Would you start sleeping a little less on purpose? With less sleep, people work harder and serve clients better, more people working in the factory you've sold those products to. Bonds: Love to hate him, love to love him. People like watching home runs, Bonds has a beautiful swing, sees two pitches a game and doesn't miss 'em. Incredible skill. What if he were listening by radio to a guy giving him hints--that would be cheating. Branca, Thompson ashamed, kept secret for decades. Bonds case does have some cheating. Refuse to answer questions, answer elusively, deny. Different from weight-lifting, where people boast of it. But so many people doing it. Barry Bonds is the only guy who hit 73 home runs on the steroids. For others it didn't make a difference. Bonds had skill or a good trainer. To this argument people say that in that competitive environment you can't blame people for taking steroids; but there are others who didn't do it, didn't have this explosion of power. Is it unfair? Some truth to it. But because of these people who took steroids, unfair advantage or not, baseball has become popular, with higher salaries that also help those who didn't take steroids. Those who didn't take steroids may yet have healthier lives ahead of them. Trade-offs made by the individual ball players. Actors and actresses use surgery to advance their appearance--do they deserve their Academy Awards? We don't say we have to put an asterisk on that Academy Award because that person had a face lift or had a pectoral implant. Jets have accused Patriots of cheating, Belichick, Ravens, sports are not what they use to be. Answer is: it's not. We're the reason. Romance about athletes, play for the love of the game, but fact is enormous amount of money is at stake. People look for an edge. Have to be realistic.

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COMMENTS (31 to date)
scott clark writes:

Russ, you are a great host; Mike is a great guest. I enjoyed this podcast, like listening in on a conversation between to old friends.
But to be honest, the podcasts are more impactful when they come along with a focus, as when they accompany an article by Munger, or if you are talking about a new book, that sort of thing.

But you definitely deserve an easier, probably more enjoyable podcast week. Thanks for all the consumer surplus.

Mungowitz writes:

To be fair, Scott, we felt like we had to respond to some of the criticisms we got about some of the earlier podcasts. That was some of the "grab bag" focus.

I always learn a lot when I talk to Russ. I think that's part of why it is so fun to do a podcast with him.

And, it turns out that some (not all) of the stuff I learn from Russ is actually TRUE.

Lee Kelly writes:

It is interesting that local produce "just tastes better". I have to wonder, before it became more expensive to buy local produce, if it was not nonlocal produce which would "just taste better."

eric writes:

Obviously you guys can wing a great program like this each week. Like two buddies out drinking after work. Great show.
I would like to know more about some the carbon offset, trading schemes, and such that different governments are putting into place. The more I learn the more I fear the outcome will end up like the steel industry in atlas shrugged.
Finally, all steroids should be legal. For the same reason the government shouldn't be able to tell you how many children you can have or to whom you can distribute your podcast. I am a soldier and it sucks to hear that congress has spent the past 3 months interviewing baseball stars about steroids while I have been fighting.

luispedro writes:

For the "food miles" bit, I think you missed an important argument:

Accepting (as I do) that reducing CO_2 is an important goal that is not captured by prices, what does that have to do with miles per se?

Under certain reasonable conditions the difference in CO_2 spent from local vs imported food is in the imported food's favor.

The closest place I know to buy local produce is 8 miles aways. A round trip is 16miles. I know people who drive a lot more than that to buy local. Since I am only transporting a small amount of produce, this is so inefficient compared to flying a plane full of produce, that it might just make up the difference in miles.

What do miles matter? Only total CO_2 per pound should matter. There it's not clear (to me) why buying local should be the default option.

Floccina writes:

It is not even clear that buying products grown in the USA causes less petroleum use. Because of the effeceincy of shipping large amounts in large volumne ships it is quite possible that you use more energy driving a pound of rice home the store than shipping it in bulk as far as it can possibly be shipped on the earth.

http://www.ethicurean.com/2007/03/18/rice-and-energy/

“Summary

The two tables below summarize the results for the Bangladeshi and California rice with rows for production and transport. The first table is the total energy. The second is for “non-biological” energy, which excludes human power, animal power, and seed energy. In both the A and B estimates, California rice requires more energy to produce — 20 and 60 percent more. The Bangladeshi rice’s ocean voyage requires about 14 times more energy than the California rice’s truck trip. When considering total energy sources (biological and non-biological), the California A scenario’s energy input is about 23 percent lower than the Bangladeshi scenario’s input, but the California B estimate is about 18 percent higher. When considering non-biological energy sources only, California A is only 13 percent lower, while California B is 32 percent higher.

Energy inputs, all energy sources (in megajoules for 2.5 kg of rice)


Bangladesh California A California B
Production
15.5 16.0 24.8
Transport 5.96 0.42 0.42
Total
21.5 16.4 25.2

Energy inputs, non-biological energy sources only (in megajoules for 2.5 kg of rice)


Bangladesh California A California B
Production 11.6 14.8 22.9
Transport 5.96 0.42 0.42
Total 17.6 15.2 23.3 “

BTW we do not buy petroleum just to have it we are buying transporation and that can get cheaper for ever.

Floccina writes:

Another link on shipping:

http://peakoildebunked.blogspot.com/2005/08/55-will-peak-oil-make-long-distance.html

"REALITY: A kilogram of rice (in Japan, where I live) costs about $3.64. The fuel cost of transporting this rice by container ship, at current fuel costs, over a distance of one-half the circumference of the earth, is about $0.015 (one and a half cents). Ship fuel accounts for 0.4% of the cost of the retail product."

Paul writes:

Great podcast, one of my favorites along with the scalping episode, and the Brian Caplan talk. I love hearing about the economic aspects of things which are not usually considered an "economic topic".
Thanks!

enb writes:

I enjoy all the podcasts. I prefer focused podcasts but like periodic ones that address listener questions and comments, but that sports analogy went on and on and ON.....

re: peak oil, it would be interesting to have a 'peak oilist' such as Matthew Simmons to discuss/debate the issue.

Verdejoe writes:

Great podcast. I too prefer the in depth, but a periodic response to listener comments is welcome.

The bet between Simon and Ehrlich was particularly intriguing. I am left wondering, however, which resources do in fact increase in price. Given that the inflation rate is an average, some resources must increase in price greater than that inflation rate? Am I missing something? If so, what? If not, then assuming a symmetric distribution around that inflation rate (which may not be resonalbe), wouldn't we expect that 50% of the resources increased at a price greater than the rate of inflation?

Michael Munger writes:

Great comments! And good questions. You people are better at answering them than I am, though.

Still, some thoughts:

1. To Joe Green: You may be right about average inflation, but I think a lot of the price increases have been in processing. Consumer goods have increased in price, but (a) they have increased a LOT in quality (computers, cars, telephones...it's hard to think of something that isn't WAY better than it was ten years ago.) and (b) the share of final cost represented by physical inputs has probably gone down.

2. Sorry about the baseball thing. That's no analogy, though: we both LOVE baseball.

3. Excellent links on peak oil, and on CO_2. You people are the best!

IQBust writes:

I guess the big assumption is that the pricing mechanism is efficient. This is a big assumption to make.

Mike Munger writes:

IQBust: People always make this objection, as if it were somehow profound.

It may be, but I have no idea what it means. I just don't understand its implications.

Prices rise as things become more scarce. When prices rise, people (1) use less of the commodity to reduce their costs, and (2) find ways to produce more of that commodity, to increase their wealth.

Now, suppose that the price mechanism is not "efficient." I THINK (I already admitted I don't know) you mean that the price rises too little, or too much, compared to some idealized "value" that only you, and perhaps some other cognescenti, understand.

That is possible, maybe even likely. I am SURE that there are inefficiencies in pricing, in terms
of incomplete information, fraud, and capital constraints.

But the price still DOES rise, as goods become more scarce. And people really do use less, and produce more, even if the exact values are incorrect from some idealized perspective. So, even with grossly inefficient prices, all the claims I've made about not running out of things still follow, without amendment.

And, here's the cool thing: given your unique, inside information into the true workings of the universe, YOU CAN MAKE MONEY! All you have to do is buy or sell options or futures, taking advantage of the spread between the inefficient values observed in the market, and the correct values known only to the few (including you, apparently, IQBust!).

I trust you are already doing this, of course, since this is the clear implication of your objection. How is it working out? Have you retired yet?

Salaam Yitbarek writes:

As usual, I was doing something else while listening, and I don't recall any discussion of future generations. That is, even assuming everything's perfectly priced out, future generations' preferences aren't reflected in the prices. What to do about that?

Sorry if you talked about this and I missed it. I'll listen again anyway, as is my habit.

And, we don't like steroids because watching robot athletes is boring. Bigger and faster to the nth degree actually makes things less interesting. Even though athletes will get bigger and faster in future generations, at least without artificial enhancements, the process will be slower. Plus, it's bad for the athletes, and it's not much fun being entertained by folks you know are taking significant health risks for your entertainment.

Russ Roberts writes:

Salaam,

We didn't talk about future generations. But why would you assume that prices don't include the demand by future generations? I know this is a standard concern about resources but future prices affect the profitability of use today vs. speculation that would set aside resources for the future. Plus, generations are tied together through altruism. Is there any evidence that this generation has been punished by the selfishness of past generations? We live much better than they do. Our children and grandchildren will live better than we do. I'm not sure what the issue is for resource use. There is an issue with the discount rate but I think that's a red herring. Maybe we can get into it in a future podcast on global warming and the Stern Report.

On the athletic question--to compete at the highest level in most sports appears to be very destructive of your body, particularly football. Steroids is part of that problem, but most of it is weight-lifting generally. There is something unpleasant about watching and encouraging people via competition to shorten their lives. But there are significant rewards for the successful and it's hard to know if they would enjoy a better life if the players were smaller, healthier but less interesting because they are smaller. Interesting question.

gator80 writes:

Great podcast. I especially enjoyed the discussion of resources and, as a baseball fan, about performance enhancement.

I would like to add a couple of points regarding the incentive to use performance enhancers, such as steroids. First, they do not, as you claim, help only home run hitters. They help all players. (I am not advocating their use, just pointing out their effect.) Hitting, whether for contact or for power, and pitching, both involve similar explosive rotational movements. The better the body is at such movements, the better the chance for success at baseball. You'll catch up to more fastballs, make more contact, make more solid contact, and get more hits, including home runs. Similarly, pitchers will have more zip on their pitches.

Second, you focused your discussion on players of the caliber of Barry Bonds. But there is an enormous incentive for players of lesser ability to use steroids. If you are an AA or AAA level player with perhaps one shot at the bigs, and the riches that will follow, you are very motivated to try anything you can. Even with the late-season increase in roster size to 40, there are only 1200 big league players. There is not much margin for error if you want to become one of them. The risk of either getting caught or having physical problems decades in the future can seem low relative to a multi-year multi-million dollar contract.

Jeff Henderson writes:

Excellent podcast. You guys should make a spin-off podcast. The informal feel is refreshing, entertaining and great for people new to economic thought.

A while ago I got in a conversation with a friend about the destruction of rainforests. I suggested that if people in the third world want to improve their lives by using nutrient-rich rainforest soil to grow crops, it really isn't our place to stop them. My friend's response (in less calm and articulate terms) was that this doesn't necessarily yield a net social benefit because in the process of clearing a section of forest, many species are wiped out. He offered some staggering figures about the amount of undiscovered and unclassified species in the rainforest (something seems strange to me about counting the number of things yet to be discovered, but what do I know?). He claimed that by destroying such a large amount of biodiversity we forever remove the possibilty of benefiting from a yet-to-be discovered species. Perhaps deep in the Amazon, there is a fungus that can cure cancer. Even though destroying forest for farmland benefits some people, by doing so we might be forsaking the opportunity to benefit the entire world. To be honest, I didn't quite know how to respond. How can the price system account for these yet-to-be discovered resources?

Mark Bonica writes:

I was just tickled to find out someone else is driving around in an '97 Carravan (I inherited mine from my wife), and has used the same calculus as I have not to buy a Prius. Have your headlights fogged over?

I concur with the comments about a side show for Dr. Roberts and Dr. Munger - I think the two of you have some great chemistry.

Dr. Roberts - I was surprised by your comment to Salaam above about prior generations not punishing future generations. The US Social Security and Medicare funding questions seem to indicate a disregard by the older generation for the coming generation. The fact that since the beginning of the industrial revolution progressive generations have lived better than their predecessors seems to be more tied to improvements in total factor productivity than altruistic behavior of the prior generation. If anything, wouldn't we see the improvements in total factor productivity precisely because of self interest during the current generation (i.e., they want to get rich - the side benefit being they find better ways to increase return on resources)?

A. Linn writes:

Your steroids analysis highlights just why Bonds' (and others') cheating is so pernicious. Bonds is, we presume, one of those steroid users who creates pressure on all other players to "juice" or fail. We recognize that this is unhealthy for players and bad for the business and the game of MLB.

It's bad for the business and the game because, unlike you (per your expressed preference), most fans enjoy watching a ball fly 400+ feet when they believe they're witnessing a manifestation of human talent combined with hard work, rather than human talent augmented by chemical assistance. Suspicion doesn't mix well with athletic competition.

Pointing out that "juicing" can be economically rational is not instructive, as this is a moral issue. It's also economically rational for me to quietly grab your wallet if you drop it on the sidewalk.

LowcountryJoe writes:

Yes, I have to agree, Mungercasts are always more entertaining and without any substance lost, either. I'm just grateful that Mike didn't attempt to sing another ditty to the tune of Santa Claus is Coming to Town [price gouge for ice. Mike, if your reading this, you SLEIGH me!]

I bet he and Russ would be great guys to catch a ballgame with. I, myself, would not be able to resist the temptation of invoking the name of Don Denkinger when the timing was right.

Alex J. writes:

Regarding competitive pressures on MLB players: "The graveyards are full of middling swordsmen." Compared to the size of the population, even the size of would-be baseball players, the MLB rosters are tiny. You need every leg up you can get to make it to the top level. This is unlike the salesmen in the comparison, because you can reach the 90% level and still be successful. 90th percentile baseball performance probably wouldn't get you into the minor leagues.

shawn writes:

alright...I'm calling dibs on 'mungercast'.

The phrase is coined.

In all seriousness, though, I do appreciate this podcast format. It's helpful as an 'introduction' for friends, I think...as a synergistic relationship, though. I wouldn't want *every* 'cast to be like this, but having it occasionally is fun and intriguing; especially, as has been mentioned, when it's with el Munger.

Mike Munger writes:

Denkinger! DENKINGER!

That's not "LowCountry Joe," that's "LowBlow Joe."

What a bad, BAD call.

I still seethe: Denkinger.

Jeremy Nighohossian writes:

Russ, you asked for our impressions on the grab-bag format. I like it, but I think it should be a sporadic offering. Maybe once a month or every other month you could talk about random topics that may be in the news.

I'm from the St. Louis area, so I probably was a little more interested in your Cardinals discussion than the average listener. I think you used poor analogies to bolster your support of steroids (or at least your non-aggression towards them). First, "you need to use them if you want to compete" doesn't make it right. I thought of this while I was driving: other people cut me off in the line. I want to get places, too, so I should also wait until the last possible minute, then cut into the lane, right? I think we have to decide whether using steroids is morally right or amoral. Right now, I'm undecided.

Second, your Academy Awards analogy doesn't work because getting physical enhancements doesn't help you win the award. You win the award based on your acting ability not your appearance. It does make you more marketable as an actor/actress, however.

I really enjoy listening every week, and thank you for taking the time to do this for us.

Kurt Navratil writes:

I thought someone (Russ or Mike) mentioned Francis Foray, though I can't find anything in the synopsis - am I wrong? If not, could you provide some bibliographic info - I'm sure the spelling is incorrect.

Thanks,
K

Russ Roberts writes:

Kurt,

Can you tell me where in the podcast that name showed up?

Jayesh writes:

Fascinating as always.... i have never seen a baseball game & dont much get it, but enjoyed the discussion on the economics nonetheless.... i feel the drugs should be illegal because its a slippery slope, & with stakes so high, its only a matter of time before people will start pumping steroids into children & make them old by 30..... being a doctor, i believe this is possible. the only solution is to ban all performance enhancers that aren't a result of hard work. steroids not included.

T L Holaday writes:

Is "Hardwood on Easter Island" the example of running out of a commodity to which Munger refers? If so, it seems to me he dismisses it with hand-waving, more or less "Yes, I agree that the Easter Islanders exhausted the hardwoods necessary to sustain the offshore fishing their population required, but it does not count because there was no true price mechanism."

Does Munger have a test to determine (well in advance of a collapse) that an economy's price mechanism is not a "true" price mechanism? Is he confident (for instance) that the present level of direct agricultural subsidies in the U.S. market have negligible effects on the price signals consumers are given, and is that confidence based on reasons?

Russ Roberts writes:

T L Holaday,

I don't know anything about Easter Island but my guess is that no one owned the hardwoods there. In the absence of property rights, common property often gets abused and sometimes gets destroyed. I suspect that's what Mike meant by "no true price mechanism." When stuff is owned and traded, price go up as it becomes more scarce.

Certainly agricultural price subsidies distort the signals consumers (and producers, including foreign producers) receive.

mulp writes:

Your hypothetical to examine the use of drugs in sports was REALLY LAME. REALLY LAME. Let's use the real world which I was very aware of as I grew up, "go pills" and truck driving.

A lot of people came out of the military after WWII and Korea and later from Vietnam and went into truck driving. And to increase their productivity, they reached back into the military service and grabbed the go pills aka speed. This became a really critical competitive advantage when the trucking companies got rid of drivers as employees and made them private contractors who rented or owned the truck and got paid by the mile. If you didn't use speed, you probably couldn't drive enough to make the payments on the truck. We also had wage controls imposed on the drivers, tho they were price caps, because they were required to drive less than so many hours a day, over a few days, and then over a week or two, and when you get paid by the number of hours on the road: you get the cargo at 2pm and must deliver it before 6am the next day and the distance requires that you drive 15 hours to deliver it and you needed to drive 8 hours to get to the pickup, well, you pretty much need to violate multiple laws: drug possession, drug use while driving, falsifying log books, and driving in excess of the allowed hours.

And to be honest:
-- almost everyone did it
-- almost everyone knew it was going on
-- almost all the drivers did it without serious bad effects
-- the respect they got plus their long term financial status depended on them doing this.

And the adverse effects of sports people using drugs is hardly any different than the military supplying speed to combat troops and the incentives of mercenaries in Iraq using these same performance enhancing drugs (where they are not illegal because contractors aren't covered by a governing legal authority), and the eventual use of speed when truck driving.

Ok, so some of these drug users have problems with judgement and become overly violent or aggressive.

Ok, so some of them over dose or die from genetic problems that caused cardio vascular problems aggrevated by the drug use.

Ok, so they set an example and established a culture where the laws were ignored or the risks minimized, and junior high kids start following their example.

I learned the most important lessons on economics from Milton Friedman and his columns in Newsweek?? and so I say, make the drugs legal and set the price at the cost of the drugs and the cost of dealing with the problems caused by the drugs. All drugs. And I believe that the way an economy works best is if all the information about the economy is available to all. So, that means the government has a role in this market, but as one who sets the rules and enforces them, and does so by making the information available to everyone.

So, fine, anyone can get steriod or human growth hormone or whatever, and at a market price, but it goes into a public database just like stock trades where it can be reviewed and analyzed.

One of the questions that might be asked and found in the databases is, "do any of these drugs work, how well, and at what long term costs?" Maybe kids under 16 shouldn't be allowed to use the drugs, but this could be determined scientifically from the data, but to get the data, what better way than to have the little league coaches putting kids on the drugs with their parents permission and seeing if the outcome is better in the short term and the long term than not using drugs.

When Russ, I think, said something like "they might be harmful" he introduced his values into the discussion without explaining that he favors a free market approach for Bonds or whowever, but not for his own kid.

And I suspect, that is the reason he came up with the really lame example of requiring salesmen to get more sleep: debating drugs is just way to toxic for "conservative" economists who quote Milton Friedman unless they work for the Cato Institute. And we know "liberals" hate Milton....

Full disclosure, I'm a "liberal" who disagrees with Milton on a number of points, but I hate the fact that I never had, and never will get a chance to debate issues with him, because we would likely agree that we can't know enough to resolve the points were we disagree.

And I don't know enough about baseball to really appreciate it, but I know it from a player turned sports analyst who got beaned and told that his continuing to play would result in likely death or severe disability if he got beaned again. He chose to stop; Ali however, continued to box and he is clearly paying the price that my player acquaintence. For both sports, baseball and boxing, I have been told that the beauty comes from the thinking and psychology, not from the physical endurance. Both my baseball acquaintence and Ali came from an era where the steriods were pretty much limited to the body builders. Do you think Arnold the Governater didn't use steriods?

Michael writes:

Russ, thanks for another great podcast with Mike Munger. It's good to see someone attacking the insane concept of Peak Oil which, like so many other paranoid left-wing theories, is full of talk about secret agendas, tyrannical organizations and helpless individuals. Anyone who cares to take a look at economic history will notice that table salt (which is created naturally even more slowly than oil) was once more valuable by weight than gold, and far more jealously sought than oil is today. Wars were fought over it and vast fortunes were made from it. Now, we've discovered ways to process it more cheaply, and we've discovered alternatives like refrigeration and canning that have reduced its price from several hundreds of dollars per ounce (in today's dollars) to a commodity price akin to topsoil or scrap metal. Peak oil thinkers conveniently ignore this. I suppose that 150 years ago, there were probably people on soapboxes in London's Hyde Park, screaming about Peak Whalebone and the coming socio-political collapse caused by unaffordable corsets. It's amazing how little ingenuity it takes to refute the victim mindset.

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