I think, for example, that the idea of ranking draft picks in reverse order of finish — as much as it sounds “fair” — does untold damage to the game. You simply cannot have a system that rewards anyone, ever, for losing. Economists worry about this all the time, when they talk about “moral hazard.” Moral hazard is the idea that if you insure someone against risk, you will make risky behavior more likely. So if you always bail out the banks when they take absurd risks and do stupid things, they are going to keep on taking absurd risks and doing stupid things. Bailouts create moral hazard. Moral hazard is also why your health insurance has a co-pay. If your insurer paid for everything, the theory goes, it would encourage you to go to the doctor when you really don’t need to. No economist in his right mind would ever endorse the football and basketball drafts the way they are structured now. They are a moral hazard in spades. If you give me a lottery pick for being an atrocious GM, where’s my incentive not to be an atrocious GM? (Malcolm Gladwell, referenced on Truehoop )
When designing a welfare program, the desire to redistribute money always has to be balanced against the incentive effects it creates for those receiving help. The big problem is usually with how aid is phased out. For instance, if there is a sharp cutoff — say, everyone who earns under $15K gets benefits but if you earn over $15k, you get nothing — then policy has effectively created a really high marginal tax rate at $15K, giving people who earn below that amount little incentive to engage in extra work. (That’s a made-up example, but effective can exceed 100% due to cut-off benefits.) The desire to redistribute ends up messing up the incentives of those to whom you want to redistribute. Which is effectively the problem in the NBA with tanking. The league wants to redistribute talent to the worst teams, but the existence of the draft messes up their incentives, harming everyone. (David Schleicher)
We understand neoliberalism not simply as the extension of the rule of the market and the limitation of the state, but rather as a radical reconfiguration of the relationship between the state and the market. In stark contrast to the social-democratic project that uses the state apparatus to limit the excesses of the price mechanism and protect the social body from the turbulence of capitalism, neoliberalism aims to transform the state and its mode of exercising sovereignty by modelling it on the logic of ‘economic incentives’ (Madra and Adaman, link to ungated article with similar idea)
Truehoop is probably the best part of ESPN. It is a glowing example of a (once) maligned new media (a blog) saving a slightly older media (a standard sports journalism website featuring content from “real” journalists) from becoming purely rumor, gossip, and half-baked moralizing. There is, however, a neoliberal tendency in Truehoop that irks me. Part of this is the nature of blogging. A certain neoliberal seriousness, a championing of the cruelty of the bottom line in the guise of wonkery, is the default tone of smart blogs. The hoopidea project has made it all the more apparent and irksome.
The philosophy behind hoopidea is: “Basketball is the best game ever. Now let’s make it better.” Sounds good. Aside from flopping, tanking for draft picks is the biggest topic. Unfortunately, I don’t like any of the solutions! Presumably hoopidea is about brainstorming and I can support that. It is great for people to cook up flawed, but interested, schemes for solving problems, and then have a forum sharing, improving, synthesizing, or whatever. That these ideas have flaws is part of the project. Ok.
But the flaws tend to be biased, in a way that is best described as neoliberal. Neoliberal is not a word I use often. I think it is overused and abused, but it can be handy. The quote from Madra and Adaman illustrates what I think is handy about neoliberalism as a concept. If neoliberalism is just deregulation or privatization, well we can call it deregulation or privitization. But neoliberalism is really something different, not the liberalization of the market (“limitation of the state”) from the state, but an extension of a particular market logic.
Malcolm Gladwell’s quote at the beginning of this post is starkly neoliberal. “No economist in his right mind would ever endorse the football and basketball drafts the way they are structured now.” I doubt this is true, but even if it were, who cares? Why should the logic of textbook economics dictate the way we organized athletics? I’m not saying we shouldn’t use what we learn, from various disciplines and traditions, but this is not what Gladwell is suggesting. He is taking a logic, based on particular assumptions, and imposing it on something that is quite foreign. Indeed, his argument is probably not true. Even if there were a consensus economic model the only honest response to the structure of the NBA or NFL draft would be, “It may or may not be a good idea depending on a bunch of things economists are not unique authorities on.” How much do we value league revenue? How much do we value competitive balance? How much do we value insuring against bad luck and competitive balance?
Gladwell’s argument is neoliberal in another sense. “You simply cannot have a system that rewards anyone, ever, for losing.” We have found the ultimate motto for neoliberalism. The motivating fear behind this maxim is the threat of losers screwing everything up because the costs of losing are too low. The homeless are homeless because homelessness doesn’t hurt enough. If only food stamps were mailed to rich people, then poor people would have sufficient incentives to become rich! Of course, because it is cruel it is considered a serious idea even if it is insane. Note that the rest of Gladwell’s point is based on insurance and the dangers of moral hazard. However, if we took Gladwell’s maxim seriously, why even have insurance in the first place? The point of insurance, in Gladwell’s language, is that it is actually nice to have a system that rewards some people, some of the time, for losing. Even if we accept the problem of moral hazard, as a potential cost to keep in mind, it is misguided or cyncial to represent its take-away message as – “More punishment for the punished!”
Hoopidea has all but confessed their ideological leaning with this link to Does the NBA Draft Lottery Need Welfare Reform? And you thought I was crazy using the term neoliberalism. I’m not saying that ending welfare and ending worst-to-first draft ordering (or the current lottery system) are the same. But they are clearly, at least in the cases made through hoopidea, motivated by a similar economic model and worldview (that we are all threatened by insufficiently punished losers).
To be clear, I’m not annoyed by attempts to get rid of tanking. My issue is that when this problem is framed in a neoliberal way there are two counterproductive effects on our thinking. First, we radically underestimate the benefits of rewarding losers. (I hate that language but I’m just going to keep using it.) Second, we think in a sloppy fashion because we assume the harshness of textbook economics provides all the rigor we need. There is a bias in which “nice” ideas are subjected to scrutiny, but “cruel” ideas are presumed rigorous. The fact is that most of these solutions are just bad in their own terms.
Some of these ideas are just silly. Here is the genuinely thoughtful and intelligent Henry Abbott, quoting Jeff Van Gundy:
Van Gundy’s preferred solution is as follows:
I would either have an inverse lottery, like the best record gets the most chances — so trying becomes of paramount importance. Or at the very least, everybody has an equal chance, so there is absolutely no benefit to trying to be bad.
Now, before you get all excited about how Van Gundy’s solution would create a few super teams and leave everybody else in the cold, let me remind you:
In the real world, whether at school or work, the people who do the best get the most rewards, and that seems to generally work out OK.
Economists insist this would make not just a few teams but the whole league stronger.
Van Gundy’s solution is terrible. It “solves” the problem of tanking by ignoring the legitimate reasons worst-to-first type drafts exists. So instead of a system that provides some perverse incentive to lose, we get a miserable system where the strong get stronger. Anticipating this response, Abbott dismisses these concerns as mere “excitement.” Don’t get excited, economists – real scientists of the social universe – tell us this will all work out fine. Here is Abbott making a similar argument elsewhere:
Those kids with the 4.0s, they’ll be fine no matter what you do. But if you give some of those nice A’s to those struggling kids … well, that might really change their lives. You might get someone into a college they wouldn’t otherwise get into. You might get someone into college who was thinking about not going at all. You might help somebody get financial aid.
The merciful thing is to give the best grades to those who need them the most, right?
Wrong, say a choir of economists and more than century of research. If you give the good grades, the best prizes you have to hand out, to the worst students, then you might help a kid here or there, but over time you’d create a messed-up environment that would hurt all kinds of students.
The rhetorical strategy is blunt. The seemingly nice, but ultimately misguided, will for leniancy is opposed to the harsh, but objective and fact-based, final word of the economist. Unfortunately, while the Abbott’s sadistic economic choir is indeed harsh, it is not based on sound reason.
The problem with Van Gundy’s solution is that it introduces increasing returns. Abbott thinks invoking unnamed economists and dismissing our excitement solves that problem. It doesn’t. Games with increasing returns are neither fun, fair, nor necessarily efficient. They amplify the consequences of luck. Having an injury decreases your chances of winning this year, which decreases your chances of getting a good draft pick next year, which decreases your chances, etc. It is not impossible for a team to recover from bad luck, or for a team to squander good fortune, but who the designs a game in such a fashion? Who would want to play such a game?
Abbott is wrong about the economics in two respects. The grade analogy confuses distributions/benefits to losers with declaring the losers winners. Surely, we shouldn’t give A’s to someone with failing grades. Even though it sounds nice, it is stupid, according to Abbott. Ok, but what should be done with them? Should we arrange school such that people with difficulty learning are put into classes with worse teachers. That will teach them not to be bad students! Well that is just silly. If the goal of education is to educate people, of course we should think hard about ways to improve every student’s ability to learn. Who would design a school where the best students were rewarded with things that made learning easier, and the worst were punished with late draft picks?! It is absurd, but because it is cruel, it passes as serious economics.
If we are competing in a race for a slice of cake, there is a big difference between (1) giving the winner the slice of cake and (2) giving the winner the slice of cake and a headstart in the next race for cake.
Abbott is also completely backwards when it comes textbook economics’ lack of concern about increasing returns. Increasing returns (the rich get richer problem in popular terms) is “nothing to worry about” because economists usually assume it doesn’t exist. Whenever you introduce increasing returns, we give up the wonderful world of perfect efficiency and fairness (of a sort). Economists, speaking of an imagined group of people who more or less buy into the basic textbook view, are fine with case (1). They are not defending case (2).
Another hoopidea that invokes the market is “grading on a curve,” although, this one recognizes the legitimate desire for some insurance to bad teams. It does so by evaluating a team according to its expected performance. It is unreasonable to assume that the Bobcats could have competed with Miami this year, so they just tanked. Having to compete with Miami or Chicago for the top draft pick provides no incentives because it would be a lost cause anyhow. But what if they competed against themselves? If they exceed expectations they are rewarded with a better draft pick. Ok, sure, but where do we get these expectations?
there is another set of widely available crowd sourced goals for each team before the season begins: Vegas over/unders.
Perfect! We’ll rely on betting markets. Markets are efficient! Unfortunately, efficiency, in this case, is a bad thing. The more efficient Vegas is, the more their over/unders accurately reflect a team’s true potential, the more the difference between a teams actual record and their benchmark (which we are using to allocate draft picks) will be random. Why not just randomize draft order in the first place? (Of course, you could argue these gambling markets are not efficient, but that is just as bad. Now we are allocating draft picks based on bad data.) In fact, randomizing draft order might be preferable (assuming you value competition, but also competitive balance and some insurance for bad teams) because the curve system would be biased in favor of teams with good luck.
Ok, let me try to conclude. There are two types of problems I have with this neoliberal orientation. In general, I think it is theoretically flawed. It underappreciates intrinsic motivations relative to external ones. It applies a market logic with carelessness: Treat free throw shooting like a standard textbook economics problem! If free throw shooting doesn’t fit, we will make it fit! It is biased towards crude economic outcomes and concerns, ignoring or dismissing other aspects of life. This is all external critique. There is, however, a somewhat internal criticism that I’ve tried to make here. These are the two “counterproductive effects” I discussed. They are internal in the sense that they should be problematic even to someone who buys into the rational core of neoliberal theory.
edit (050712): grammar/typos