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Should Denver’s Big Air Be Free? 27 January 2011

Posted by magicdufflepud in Economics, Skiing.
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It’s not often that I find at topic at the intersection of skiing and economics. In fact, this might well be the first time. But here we are. I hope you’re as excited as I am. Anyway. As you may have seen on some network (I don’t know which one it was), over the course of the last two days Denver hosted America’s first municipal ski and snowboard Big Air competition. No US city had attempted anything like it, much less pulled in an FIS World Cup event–the kind reserved for places like Aspen or Innsbruck.

Denver, though, dumped money into the project, erecting a 106′ ramp in the middle of Civic Center Park, a downtown icon between the capitol and Denver’s city and county building. Copper Mountain provided the machines and crews to make (literally) tons of snow. Skiers and riders competed for thousands of cheering fans. Switchfoot played.

Thing was, Denver charged for it. General admission tickets for the viewing area went for $45. VIP passes, which included dinner and drinks, set visitors back up to $200. Fine, you might say, but in a front page story in the Denver Post, some folks in Denver howled about this misuse of a public space. After all, parks were public, they said. Here’s Larry Ambrose, c0-chairman of the Inter-Neighborhood Cooperation Parks and Recreation Committee:

“It would be much better if it was free. I am not sure our parks should be venues. . . . I don’t want to say it’s a terrible idea. It’s a little silly. If it were free, it might be acceptable.”

His concern about using parks as venues holds merit. Why not use Mile High instead? But it only makes sense that a city pursuing the Olympics might demonstrate its public snowsports chops by hosting an event like the Big Air. It becomes a civic undertaking and a matter of civic pride: Denver demonstrated to America that is could plan, support and draw crowds to a ski and snowboard competition–when no one else had even tried. I suspect it will appear as a bullet point in Denver’s Olympic resume, but I’m a poor judge of those sorts of subjective things.

I know better the economics of the situation, and I know when things ought to be free. Denver’s Big Air didn’t qualify. Consider the essential argument these folks employed in advocating for a free event: public spaces should be available for free to all, parks are public spaces, and therefore the event should be open to the public, free of charge. But why should we agree with the first premise? In fact, in all fairness to Denver taxpayers, events in the city’s parks should not necessarily be free, especially when they draw visitors from other towns as this one almost assuredly did.

Consider what’s fair in this situation. While Denver residents do indeed support city parks and common spaces with their tax dollars, the money needed to host the Big Air comp went above and beyond that level support–the level generally agreeable to voters. To raise the additional money, Denver sold sponsorships and tickets to willing participants, leaving taxpayers (mostly) off the hook for the production’s expense. That is, the people and businesses who wanted to be a part of the event were the ones asked to pay for it. Sound fair? If you think not, then consider the alternative: Denver’s half-million taxpayers supporting an event that the vast majority of them would never see. That’s the alternative.

There are, of course, situations in which it makes sense for governments to provide services for their citizens without making direct charges. In economic parlance, those are called “public goods.” To qualify, the good must be non-excludable and non-rival. But that likely means nothing to you. In real english, we’re saying that the government ought to provide a good where there’s no reasonable way of excluding people from consuming the it and that when one person does consume the good, it doesn’t harm another person’s ability to do so.

Take the example of a fireworks show. You can’t really stop people from seeing fireworks, unless maybe you’re Ted Turner and you set them off in the middle of your 10,000-acre ranch. And when one person sees the show, it doesn’t really take away from another person’s experience. For a private company, those two facts equate to a certain conclusion: no way to make money. How can you charge for an event that people will still see for free anyway? Without governments, resorts and theme parks, there would be no fireworks. The world would be a sadder, though nicer-smelling, place. For the exact opposite, consider a Snickers bar: you can keep people from buying by sticking it inside a vending machine, and when I eat, there’s not a Snickers bar left for you. Too bad for you, but good for the economy.

So back to Big Air. In an economically perfect world, the government would have left the event up to a private company. It would have taken place at Ilitch’s or Mile High or some other private venue. But for the reasons discussed earlier, our civic ego demanded government, not private, action. And from there on out, Denver handled the event as the private sector would have. They sought sponsorships. They charged for tickets to provide the service, using market tools to best allocate resources. They went to Groupon. And though you may not believe me, those solutions work. They provide the greatest total benefit to the consumers and producers, in this case the city and the attendees.

So “public” is not synonymous with “free,” nor should it be. Denver’s Big Air was worth the price.

Deconstructing Over-Consumption 5 August 2010

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As a college-educated twenty-something it is your duty to hate consumerism, corporations and the hard-working American way of life that engineered the $.99 hamburger. It’s a hatred that evidently grows out of a critical blend of sociology courses and casual screenings of Supersize Me and Food Inc. Just as moderately bright high school students discover (and then hopefully ditch) Ayn Rand, wantonly idealistic college grads latch on to the notion that if only Americans could tear apart Western acquisitiveness, they’d find true happiness–empiricism be damned.

The whole of human history says otherwise: money has allowed us to satisfy preferences and to demonstrate status. Not perfectly, of course, and even very very badly at times, but overall it’s performed better than anything else we’ve imagined. The anti-consumerist sentiment on the other hand has found success only in religion where it accompanies a promise of Heaven. It’s nearly impossible to argue against a guarantee of infinite bliss, but undermining idea that going Thoreau forever will ensure worldly satisfaction requires substantially less effort. And it’s more fun.

Anymore, American “over-consumption” has become axiomatic in this sort of conversation, yet because of that, the term rarely receives definition. What constitutes over-consumption? Following the meme far enough seems to indicate that Americans have been over-consuming since about the beginning of the twentieth century—when this country began to speed ahead (imagine ahead in scare quotes if you like) of its peers. Recognize the sliding scale: if Americans consumed at 1940 levels now, it would no longer count as over-consumption. But the world economy is growing. With that in mind, over-consumption appears to mean “to consume more than most everyone else.”

Just defining the term reveals the argument’s core. All this turning American consumerism on its head stuff distills to a desire for a more egalitarian society. It’s about baselines. The average world citizen consumes at, say, C, a level most I imagine most anti-consumption apologists will say is okay. After all, at issue is over-consumption not consumption itself. But American s consume at XC where X is some multiplier. Ignoring the fact that relationship between the two is more technical than that, the point of contention remains: Americans consume more than the average world citizen.

That seems to raise another problem, however, namely that only a small percentage of the world’s population can consume at an American level–the Earth’s resources will stretch only so far. On the surface, that concern appears trickier, but in reality it’s the same Malthusian bunkum as always. When humans deplete the Earth’s resources, well, there’s a whole universe out there. And that will continue until the species destroys itself or runs out of universe to mine. (Downside: as I wrote a while back, we’ll be forced to kill every non essential living thing on the planet first. Sorry, giant pandas.)

The key point, then, is that it doesn’t matter what Americans consume, just how much they consume relative to everyone else. No one would be in a tizzy if everyone on earth lived in a Malibu mansion. In fact, if consumption is simply the satisfaction of preferences through purchases, then it seems even the anti-consumerist crowd would support spending at any level so long as it remained equal.

Money doesn’t buy happiness, though. Okay. If that’s then case, then consider two scenarios with the assumption that watching the sun set over the beach makes a person happy. In scenario A, he has the money to purchase a plane ticket to the beach. In scenario B, he’s broke and stuck in Decatur. Logic dictates that he’s less happy in Decatur. Funny how, if money doesn’t buy happiness, nearly everything folks enjoy doing requires it. And, please, don’t argue that socialization produces all of that. Skiing is fun. Cycling is fun. Watching a movie is fun. Given the choice between any of those things and picking berries for survival, I’ll go for bike ride, thanks.

To get around that point, you might argue that if we simply didn’t know about iPods and motorcycles and what have you, then we we’d never know what were missing. True, but not a case for anti-consumerism. If you can’t even conceive of the alternative to your present situation, you’re not in a position to state a preference either way.

If you liked listening to music on the go in the 80s, you would probably say you were happy. But you didn’t even know that you could be happier with an iPod. Ethically, this gets a bit complex, but if we know that American-style consumption drives innovation, and that innovation leads to products that create new forms of happiness, then we are denying ourselves potential happiness if we stamp out consumer culture.

If you tired of theory, try this:

Here’s global happiness.

Here’s purchasing-power-adjusted per-capita GDP.

I’d written another 350 words on status, but this is all that’s getting published for now. If you were looking for the smackdown finale, come back later and maybe I’ll have have an appropriately witty conclusion.

Coming “Home” 9 May 2010

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It snowed a week an a half straight in the run-up to my departure from Summit County. All that after two and a half weeks of sunny skies and greening grass. I’d even tried finding a disc to get some ultimate games together before winter returned in a way that no one in the mountains had really desired but that everyone had anticipated. Just the same, my own mountain life has ended, and this will no longer continue as a blog written 9300′ above mean sea level. Today Google Earth says it’s–let me check–a hair under 500′. And a few weeks from now, it’ll split the difference, settling for six months at least in the Mile-High City.

For the time being, though, it’s enough to have come home after this longest span spent away–six months, longer than any other single period outside the St. Louis metro area. Yet since I first left for college five years ago, coming home has meant less and less with each go around, I imagine following a pattern set eons ago with the first crop of students to leave crying mothers behind. This time, with the house prepared for sale, my room stripped and re-painted and all the effects removed to meet realtors’ requirements for sterility, it has transformed into nothing more than a familiar floor plan with a dog I’ve known for 13 years. And a mother. It’s Mother’s Day after all.

House or no house, crossing all those cornfields brings back the supersaturated memories of growing up Midwestern, the Steak ‘n Shakes and riverfront fireworks. Humid afternoons and snows days for six inches the night before. Counting silos out the car windows. If the East Coast has forgotten the Midwest, it has just as much forgotten a suburban sensibility born of hard, tangible work and big family reunions.

Have you ever looked at a map of Illinois? Traced its rail lines and highways to discover the towns built for the sole purpose of supplying grain to a hungry nation? The main street parallels the tracks; the elevator rises higher than the church steeple, yet you watch the Tour de France rapt. What curious towns! What culture! Oh, Languedoc! Ici, je suis ailleurs.

I’m leaving the Midwest, of course, but I want so badly to stand up for it in its fight against irrelevance, its perceived stagnation. But by every objective measure, I can’t. In 2008, St. Louis finally staunched an exodus over half a century old while Phoenix continued to balloon and New York set more population records. The coasts are better educated, per capita incomes higher. I’m left with this vague emotional appeal and the waning grandeur of a city that hosted the first Olympic Games seen in the New World, then looked inward and set about its own destruction. See: Pruitt-Igoe. And for a counterpoint: Peter Cooper Village.

There is hope yet, but yes, for now this is coming home.

The statistical value of your life 21 April 2010

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I tend to forget that not everyone went through economics courses in college and that of those who did, a scant few came away actually liking the subject. So on Monday when I asked you whether the death and suffering in Haiti hurt the world economy more than did the enormous and widespread annoyance following the unpronounceable volcano’s eruption, I assumed an economic response. And failing that, I assumed a utilitarian response based on the total amount of good/bad brought into the world. I am bad at assumptions, evidently. Only an economist would place a value on human life, right?

Well, no.  Everyone does every day. If you’re alive, it comes with the territory, so let’s take a moment to explore the value you place on your own life. The concepts involved are relatively simple ones, and they’re more broadly applicable, too, so in addition to learning about the value of a human life, it should become clear why gambling is such a tremendously bad idea as well. Tremendously bad. Hooray for teachable moments.

The concept is expected value, an outgrowth of probability. Multiply each possible outcome for an event by its probability and sum the products. Voila: expected value. But maybe that’s too abstract. Examples typically help. Consider the outcomes from a coin flip: heads or tails. Now, say I give you $1 if when you flip the coin it lands on heads. If it lands on tails, however, I give you nothing. What’s the value of the coin toss? The probability of heads is 1/2 (or .5) so you can multiply .5 * $1.00. So, $0.50.  Now take the other outcome, tails. This time you’ll get nothing, so the equation (the probability’s the same of course) is .5 * $0.00. So, $0.00. Add $0.00 to $0.50, and the expected value of the coin toss is $0.50.

Admittedly, it grows more difficult when the the number of outcomes grows. You’ll find it harder to, say, judge the expected value of a dating situation when the possibilities include 1)Acceptance, 2)Rejection or 3)Rejection and gossip to all her friends that you’re sketchy. Or you can pick a happier example. Regardless, that’s about it for the textbook talk. Let’s get on with life.

Consider a crazy world in which your commute to work is an expected value scenario consisting of two possible outcomes (like a coin toss). Outcome one: you drive to work on the highway, arrive safely, make $600 for the day, and drive home to your wife/concubine/television and cats. Outcome two: you die in a fiery wreck on the interstate. Boom goes the dynamite. On any given day, the probability breaks down to a .99991 chance of outcome one and a .00009 chance of option two.

You can see where this is going: if you believe life cannot be valued or has infinite value you will not go to work. If you believe the former, then you’ll flop to the garage floor in a paroxysm of indecision, and if you believe the latter, you’ll stay at home because the result of your calculations will be infinitely negative. In fact, unless you consider your life worth less than about $6.7 million, you’ll ask for a raise or become a perpetual shut-in. Best to stay with the mistress.

Now, granted, most folks aren’t the rational calculators that my example assumes, but plenty of careers in the real world test the same idea. Why else would the show Deadliest Catch exist? Commercial fishing is the most dangerous industry in the US. It involves a very real risk of dying. And because of that, it necessarily commands higher wages. Is the work that much more difficult than that of any other physically strenuous position? Probably not. But you aren’t likely to die while splitting rocks or digging a ditch.

Interestingly enough, it’s that kind of trade-off the government uses to determine the statistical value of a life. Its auditors look at the premiums workers in dangerous industries request to compensate for higher risks of death or injury. And then policymakers (not politicians) use that information to determine whether the number of lives saved by a new measure or construction project will make up for the costs. It’s cold, but then again, Americans like to drive 70mph even if it costs scads of lives.

Talking about value 19 April 2010

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Questions to ponder–Accounting for the statistical value of a human life (in the US ~ $6 million) which has cost the world economy more: the Haitian earthquake or the Icelandic eruption?