How To Put The Adverse In Adverse Possession

It’s been six months since Category 5 Super Typhoon Haiyan struck Southeast Asia, killing at least 6,268 people in the Philippines alone.

The storm deposited an ocean freighter in the middle of a neighborhood in Tacloban, one of the hardest hit cities. The homeowner would love to take possession of the ship, putting it to productive use, but can’t find the owner. He’s even launched an Internet campaign to aid in the search.

I wonder what the rules are in the Philippines for our old friend Adverse Possession (Wikipedia), especially now with the emphasis so strongly on the adverse part.

Do you know anyone who’s missing a ship?

Posted in Adverse Possession, Economics, Natural Disasters | Tagged , , , | Leave a comment

Income Inequality Institute Will Pay Paul Krugman $25,000 Per Month

Paul KrugmanPaul Krugman, the new face of Income Inequality

From Gawker: Income Inequality Institute Will Pay Paul Krugman $25,000 Per Month The publicly funded City University of New York has offered Paul Krugman what it marketed as “a relatively comfortable perch” at CUNY’s Luxembourg Income Study Center, a research arm devoted to studying income patterns and their effect on Inequality. Here are the details:

  • He’ll be paid $25,000 per month.
  • He won’t be expected to teach or supervise students.
  • He’ll immediately have tenure and will serve as a Distinguished Scholar, soon to be promoted to Distinguished Professor.
  • He’ll receive a research/travel fund of $10,000 (which surely means only one annual first-class trip to Luxembourg).
  • If he requests it, he’ll be provided an office and personal computer.
  • If he requests it, he’ll be assigned a graduate assistant for 15 hours per week (now that’s an underpaid job that will have a lot of eager applicants).
  • He’ll be eligible to apply for special research awards.

I can’t help but thinking this is really just a license fee for use of his name and image. Having Krugman on your faculty is probably a Positional Good (Wikipedia). Is he there to study income inequality or merely bask in it? When the Gentleman Economist previously complained that Krugman was too strong a fan of inflation, it was never expected he’d take it this far.

Posted in Economics, Education, Inequality, Positional Good, The One Percent | Tagged , , , , | Leave a comment

Examining NCAA Labor Cartel Propaganda

Patrick T. Harker

Patrick T. Harker, President of the University of Delaware and NCAA propagandist

(More on the NCAA labor cartel here)

Recently the National Labor Relations Board (be sure to download their smartphone app – if you can think of a reason why they need one) ruled that football players at Northwestern University were employees and have the right to form a union and bargain collectively. The NYT covered it here: College Players Granted Right to Form Union.

Seeking political leverage over this legal and economic threat, the NCAA has fought back with a propaganda piece on the same platform: Student Athletes Shouldn’t Unionize.

The author is Patrick T. Harker, President of the University of Delaware and member of the board of directors of the NCAA-Division I. If you’re looking for a predictor of his position on this price-fixing labor cartel, please note he’s also a director at the Federal Reserve Bank of Philadelphia, home to another kind of price-fixing.

Let’s analyze what he’s saying:

Student Athletes Shouldn’t Unionize

Already he’s starting in with the “Student Athlete” misnomer. The NLRB decision noted players spend more hours per week (40-60) on sports than they do on their studies, often more hours than in a typical full-time job. Everyone else of the tens of thousands of people associated with NCAA sports are employees paid a market wage. If these athletes are working more than full time and generating tens of millions of dollars in revenue, it’s simply dishonest to imply their primary role is that of a “student”. A better title would be “Contract Athlete”.

NEWARK, Del. — LAST week’s ruling by a regional director of the National Labor Relations Board that players on Northwestern University’s football team were school employees, and thus eligible to unionize, has been celebrated by those who believe that it will benefit student athletes everywhere.

It won’t. Player unions would be a disaster for universities, for college sports fans and, most important, for student athletes themselves. The prospect of college football players bargaining to exchange scholarships for salaries is still remote, but if it comes about, even the most valuable athletes would be worse off.

First, some bold hypocrisy…

Harker’s 2011-20112 salary was $735,681, for which he surely argued the University needs to pay a market rate for his skills, using the very price discovery and market discipline he denies to his athletes. Given that the football team’s 99 players each receive no salary, he is truly in the 1%.

…followed by a bogus argument…

He claims this development would actually hurt athletes. This defies logic. Given that their salaries are zero and can’t go negative, isn’t it mathematically impossible for things to get worse for the players?

…backed up by phony logic:

He claims that if football players were to receive salaries, it would be at the expense of their scholarships. Nobody’s been talking about “exchanging” scholarships for salaries; this is a dishonest scare tactic.

Turning student athletes into salaried employees would endanger the existence of varsity sports on many college campuses. Only about 10 percent of Division I college sports programs turn a profit, and most of them, like our $28 million athletic program at the University of Delaware, lose money. Changing scholarship dollars into salary would almost certainly increase the amount schools have to spend on sports, since earnings are taxed and scholarships are not. In order just to match the value of a scholarship, the university would have to spend more.

Really? The University of Delaware loses money on its athletic program? I’d like to see the comprehensive accounting on this. Strong sports programs famously generate huge flows of alumni donations. I doubt these were accounted for. This sounds like Hollywood accounting in which a movie can sell $500 million in tickets and still claim a net loss.

The University of Delaware football stadium (Go Fightin’ Blue Hens!) seats 22,000 – having received four major expansions since 1952 – and consistently sells out for home games. If they say they’re losing money, somebody’s either incompetent or lying.

And even if honest accounting showed the program really was losing money, then why continue it as it is? Why should students and taxpayers funding an education at a state school be forced to subsidize a lavish $28 million per year athletic program?

He’s again repeating that false claim that scholarships will first have to be converted into salaries. And he then tries to scare us by claiming this portion of the players’ compensation will become taxable and thus actually reduce their income.

We are among the many schools that have already had to trim varsity sports in recent years. Should costs increase, we and many other schools would face pressure to cut back further.

If his remarkable investment in athletic facilities (five stadiums, three arenas, two golf courses, a 4,000 seat field house, etc.) was “trimmed” recently, I can’t imagine what it was like before.

Without question, some big schools have lost their way. On some campuses the pursuit of athletic dominance has eroded the ideal of the student athlete. Players at these schools have every right to complain, particularly when the demands of competition effectively prevent them from being students. But the answer is not to organize and essentially turn pro. This would only further lessen the priority on learning. If scholarship athletes already find it hard to balance schoolwork with team commitments, under arrangements that obligate educational opportunity, think how much harder it would be if they were being paid to play.

Translation: If you think we overwork them now, to the detriment of their education, imagine how hard we’d work them if they actually earned a salary!

The answer for young athletes who want to be paid to play is not to target universities, which have a different mission, but professional sports leagues like the National Basketball Association and the National Football League, which still bar high school athletes from turning pro. If players are good enough to earn a living at that age, I say, let them. Very few, however, are that good. At the college level, even the highest-ranked teams field relatively few players who will ever play a day of professional sports.

The problem isn’t “young athletes who want to be paid to play”, but colleges that on the one hand use their athletes to relentlessly pursue their commercial goals while on the other claiming those very same athletes are unworthy of any commercial consideration.

Strong athletic departments do two things well. They afford young athletes the chance to reach their full potential,

Giving the colleges a full four years to exploit that potential for commercial gain…

and they prepare them for life when the cheering stops.

…if you consider four years of financial exploitation leading to arrival at graduation flat broke and burdened with student loans to be “preparation”.

For the vast majority of student athletes, that life begins at graduation. For the exceptional ones who make it to the pros, post-sport life begins soon enough. The average length of a pro football career is only about three years.

If the average pro football player plays four years in college and then three in the pros, this means more than half his money-generating productivity was confiscated by his college.

Valuing education doesn’t have to compromise an athlete’s potential.

Straw man, prepare to be knocked down by a college lineman…

Here at the University of Delaware, Elena Delle Donne played women’s basketball from 2009 to 2013, earning top collegiate honors and helping the team become one of the best in the nation. She was a top pick in the Women’s National Basketball Association draft and was later named rookie of the year. In college, she maintained a 3.6 G.P.A., earning a degree in human services.

…and one swallow does not a summer make.

My own experience as a student athlete was more typical. I was a good student in high school, and a good football player. My options at graduation were greatly multiplied by my success as an athlete. I accepted financial help to play at the University of Pennsylvania, where I majored in engineering. An injury in my junior year brought my football career to an end. Then I discovered my passion for research, went on to earn a Ph.D. in engineering and embarked on a path that has taken me places I never imagined when playing on a defensive line.

This is the reality for most college athletes, even in the five major conferences. If the football players at Northwestern think they will do better for themselves by collecting a salary in college, they’re wrong.

He earned a Ph.D. in engineering and then went on to become a White House Fellow, university president and a director of both the Goldman Sachs Trust and a Federal Reserve Bank? No, his experience was not “typical” and that’s not the “reality” for most college athletes. This is the 1% talking.

My advice, even to those talented enough to turn pro straight out of high school, is the same: Play ball but be smart. Earn a degree.

Start with business or law, so you can get a fair deal while you’re there.

Patrick T. Harker is the president of the University of Delaware and a member of the board of directors of the National Collegiate Athletic Association, Division I.

University of Delaware Football Stadium

 22,000 paying fans but not a penny for that small group of contract athletes in the center

They say the definition of “spin” is “hope disguised as observation”. Harker’s piece is dishonest propaganda and contains the well-crafted spin of a press release from a special interest lobbying group. I suspect it was written by political operatives at the NCAA (that might be plagiarism in the classroom, but not in the board room). His role here is that of a corporate lobbyist, not an educator, and he’s not acting in the best interests of his students. With his phony logic I’m sure eyes are rolling in his university’s academic departments.

The one guy at the top makes $735,681 and the 99 guys at the bottom who actually do the physical labor all get nothing. Two hundred years ago Delaware had another name for this arrangement.

Patrick Harker and the NCAA are on the wrong side of history.

Posted in Cartel, Economics, Education, Inequality, Labor, Monopsony, The One Percent, We're Waiting For You | Tagged , , , , , , | Leave a comment

Flash Boys: A Wall Street Revolt, by Michael Lewis


For 300 million dollars, your web browser could receive this post three milliseconds faster

I’ve just finished reading Flash Boys: A Wall Street Revolt by Michael Lewis, an exposé on the rampant parasitism at the core of the U.S. stock markets that’s driving the race for faster data connections in which thousandths and even millionths of a second confer bankable advantages.

The key theme is that those at the center of all this plumbing face tremendous conflicts of interest and have plenty of opportunities to optimize for themselves at the expense of ordinary investors. Throughout it all they can publicly claim to be merely providing “liquidity” or “stability”. Every transaction has a buyer and a seller, but the long line of parasites that stand between them live in the shadows and with lightning-fast computers and data links can repeatedly extract hidden tolls on order flow.

Because of these opportunities, order flow by itself is so valuable there’s a large market in the buying and selling of the right to steer an order to a particular exchange or dark pool for matching. It’s true that spreads have shrunk over the past twenty years, but sharks lurk in these dark pools.

For many readers, this will be the first time they’ve had to consider time intervals so small. Lewis helpfully quantifies them by counting how many would fit within a blink of an eye. Milliseconds (thousandths of a second) and microseconds (millionths of a second) abound, and there’s even a scene where a discussion of how to route a fiber optic cable across a country road – straight across or diagonally – brings up nanoseconds (billionths of a second).

It will also be for many the first practical evidence the speed of light is something less than infinite. At 186,282 miles per second, the maximum speed photons – and thus trading information – can travel is 186 miles per millisecond in a vacuum, reduced to about 125 miles in fiber optic cable. It turns out this is a significantly limiting factor for all sorts of geographic and routing decisions for Wall Street’s biggest players. It’s an argument for tunneling through the Allegheny mountains rather than routing through a pass, say, or even trenching through a specific parking lot instead of making a small detour.

It’s important to note that high frequency trading, to the degree that it means faster communications, is not in itself a problem; faster speeds are only a tool used by insiders to put their own interests ahead of their customers. It’s a little disturbing that the best way to make money in these markets might not be from participating in them, but in parasitizing them. If these markets are a river of capital and information, investors are being sold down this river.

I would have liked to see more about specific technologies used to speed up communications, and more about the various traps laid by these HFTs (High Frequency Traders). It would have also been interesting to hear more about the potential microwave competitor hinted at near the end of the story. I have yet to read Andrew Blum’s Tubes or Sal Amuk’s and Joseph Saluzzi’s Broken Markets; both might be good companion volumes.

The book feels like it was rushed to the editors, and could have benefited from another three months of reporting. Maybe when you talk about milliseconds long enough writing a book seems like an eternity. And it’s a little short on content; some chapters seem bolted on as filler. This story might have worked better as a long magazine piece.

Regardless, (or irregardless, as they might say in these New Jersey data centers), Lewis is a captivating writer and Flash Boys is a good adventure story.

Posted in Asymmetric Information, Books, Capital Markets, Crony Capitalism, Economics, Money, Moral Hazard, Technology, The Future | Tagged , , , , , , , , , | Leave a comment

I’m Really Glad This Exists:

How Many People Are In Space Right Now (go ahead – click on it)

A self-explanatory domain name, a clean single-page website, and a need I didn’t realize I had.

Best wishes, you lucky few.

Posted in Technology, The Future | Tagged , , | Leave a comment

This Landslide Caused More Than One Phase Change

This Landslide Caused More Than One Phase Change

“This was a completely unforeseen slide…” – said no geologist or soil scientist

A Phase Change is the transformation of a system from one state of matter to another. Think of ice cubes melting in your soft drink while water condenses on the outside of the glass. Some phase changes aren’t so predictable, as when a rain-soaked slope suddenly liquefies and flows downhill.

On Saturday, March 22nd, the hillside above Oso, Washington (Pop. 180) turned to mud and roared down into the valley below, burying a mile of State Highway 530, damming the North Fork of the Stillaguamish River and then scouring a rural neighborhood before entombing it.

The earth science is fascinating, particularly how otherwise solid soil can be quietly lubricated with rainwater until something gives way under the force of gravity, and once in motion turns to mud and then knocks adjacent soils out of their own solidity. Within seconds a million tons of wet debris can be moving at highway speeds. No one’s covered this better than John McPhee in his 1990 essay “Los Angeles Against the Mountains“.

The amount of earth that slid downhill in Oso would fill three million dump trucks. It buried a square mile of land and killed at least 41 people.

But there was a second phase change that took place when that hillside collapsed, in the politics of personal choices and the natural desire to help others in need; of rugged individualism and government-funded disaster recovery.

Despite 60 years of warnings about the 10,000 year history of mudslides in that valley and recent slides in that same cut, residents over the years continued to buy and build. It might even be that the known risks lowered property prices, making it more attractive. If they were offered property insurance against ground movement it was surely too expensive. They were repeatedly warned and they ignored the facts and the science.

This second phase change occurred when the land turned to mud and they found their town destroyed. Now will come the pleas for disaster relief, designation of an official disaster zone, money to help people get back on their feet, and millions of dollars for construction to prevent a recurrence. Their political state underwent a phase change from regulation-spurning rugged individualists to needy communitarians in the blink of an eye.

Responsibility avoidance helps obscure things: “This was a completely unforeseen slide,” said John Pennington, Snohomish County’s emergency manager. This reminds one of Wall Street bankers testifying before Congress after the 2008 financial meltdown, professing the same ignorance when just about everyone knew what was coming. When you’re leveraged 33-1 in a vastly overpriced market, or after weeks of near-record rain and you’ve logged a steep unstable slope looming above you like an iceberg in a shipping lane, a collapse cannot be “unforeseen”.

Here’s a hint: if landslide insurance seems ridiculously expensive, it means your insurer knows something and they’re pricing it into the premium. That’s not gouging, that’s science.


 I hope Oso won’t much rebuild

Posted in Economics, Geography, Insurance, Moral Hazard, Natural Disasters | Tagged , , , , , | Leave a comment

Genius Uses One First Class Airplane Ticket To Eat Free For A Year

airport lounge

I’ll just work here until dinner

From Gizmodo: Genius man used one first class airplane ticket to eat free for a year

American comedic actor, director and writer Harold Ramis, who recently died, made a career out of understanding the appeal when the little guy gets one over on the system. If he were still with us, I’m sure he’d be grinning broadly at the tale of a China Eastern Airlines customer at the Xi’an airport in Shaanxi who bought a First Class ticket and proceeded to the executive lounge for a nice meal at the free buffet. Afterward, he changed his ticket to the following day and went home.

Over the course of a year, he returned and dined some 300 times, without actually boarding his flight, adjusting his departure date daily before ultimately cancelling for a full refund right before the ticket expired.

Here’s what I’m hoping: that he was a retiree who took public transit to the airport every day and stayed from lunch until dinner. He made himself at home in the lounge, read the paper, worked on his laptop using the free Wi-Fi; got caught up on all his e-mail, texting and social media; enjoyed a couple of meals and a few drinks, spent some time at the bookstore, stopped by the counter to change his ticket, and then headed home with a few smaller buffet items for the next day’s breakfast.

Oh, sure, we could talk about the Free Rider Problem (Wikipedia), but in a time in which everyone hates the airlines, it’s refreshing to see an underdog so deftly navigate the system.

Well played, sir.

Posted in Air Travel, Free Rider Problem | Tagged , , | Leave a comment

Jon Stewart Weighs In On The NCAA Student-Athlete Labor Cartel

More on the NCAA Student-Athlete Labor Cartel here.

Part 1:


Part 2:

Posted in Cartel, Economics, Education, Labor, Monopsony, We're Waiting For You | Tagged , , , | Leave a comment

Uber Starts To Play That Stupid Surcharge Game

uber_app surcharge

What’s next, charging for a carry-on bag?

From the S.F. Gate: UberX to charge $1 fee for passenger safety

(More on Uber here)

Uber has just jumped the shark. Today they announced a new $1 add-on fee for “Passenger Safety”, claiming it will go for an “’industry-leading’ background check process, regular motor vehicle checks, driver safety education, the development of safety features in the app and insurance”.

While I understand this is a propaganda move to show they care about safety and forestall more regulatory intervention, this is a really bad idea. Let us count the ways:

1.  If you’re hiring drivers and their vehicles to serve the public, isn’t “Passenger Safety” part-and-parcel of what you do and therefore a regular cost of doing business? Why does this expense get carved out of your Profit-and-Loss Statement and billed separately to each customer? You wouldn’t itemize for your electric bill or office supplies, so why this?

2.  It’s a clever way to increase the size of the bite Uber takes out of the money flow between customers and drivers while pretending they’re not. Drivers get paid a percentage of the fare. Want to bet this new fee goes 100% to Uber and is exempt from that calculation? Uber will now get to have their cake (“Drivers get 80% of the revenue!”) and eat it too (redefining commissionable revenue to mean something less than the total bill).

3.  Consumers really, really hate it when they get nickeled-and-dimed with extra fees on their final bill. Widely regarded as an outright scam in the hotel, airline, rental car, concert ticketing and cell phone industries, this is not going to earn them any fans. Start acting like TicketMaster or LiveNation and the Internet will pound you good and hard.

4.  Now Uber pricing will be more opaque than ever. First, there’s a minimum fare, then separate charges for both time and mileage, then that sum gets multiplied by a possible surge pricing factor that runs from 1.25 to 8.0 or higher, and then this additional surcharge gets added on top of that. How much will this trip cost? You’ll know when they bill your credit card after you’re done.

I’m surprised Uber is feeling confident enough in their mindshare and market share to start acting like an arrogant monopolist.

I’m still predicting that whoever gets market power in this business won’t be able to help themselves and will start squeezing drivers on one end and passengers on the other. And it will start to look like this.

What’s next, a fuel surcharge? A dispatch fee? A monthly membership fee? A convenience fee? A San Francisco Accelerated Clutch Replacement Recovery Fee?

Posted in Economics, Pricing, Taxis, You're Not Helping | Tagged , , , , | Leave a comment

Lyft and Uber: A Tale of Two Cultures


Gentlemen, start your smartphone apps

Today included a two-stop ride-sharing journey with a woman who drives for both Lyft and Uber. An observant amateur anthropologist, she clued me in to more on the differences between between these two competitors.

First, women are much more likely to drive for Lyft than Uber. She knows plenty of female Lyft drivers, but none at its competitor. I’ve noticed that some 95% of my Uber drivers are men.

Lyft passengers tend to ride up front; Uber passengers in the back. While taking fares for both companies simultaneously, she’s constantly adjusting the passenger seat.

Uber aggressively recruits Lyft drivers, offering $500 after they complete their first 20 fares. This confirms my suspicions that Uber considers the competition for drivers to be as critical as that for riders. By contrast, Lyft doesn’t offer inducements to their competitor’s drivers to jump ship.

Lyft passengers are younger and all seem to be in the same demographic, “Like they might all be comfortable at the same house party”, she says. Not so for Uber.

Lyft passengers tend to work for smaller, newer companies; Uber passengers for larger, more established firms.

Lyft emphasizes community more, both for passengers and drivers.

Lyft drivers have typically never driven professionally before, while Uber drivers tend to be former cab and limousine drivers.

The jury is still out on whether this market can support two competitors, even if they serve such different market segments. I’ll bet executives and venture capitalists at both firms are pondering this very question.

Posted in Culture Matters, Economics, Monopoly, Monopsony, Network Effect, Taxis, The Future, Winner-Take-All Market | Tagged , , , , , , | Leave a comment