luck

Babe Ruth and the Hot-Hand Hypothesis

According to Wikipedia, the so-called hot-hand fallacy is that “a person who has experienced success with a seemingly random event has a greater chance of further success in additional attempts.” The article continues:

[R]esearchers for many years did not find evidence for a “hot hand” in practice. However, later research has questioned whether the belief is indeed a fallacy. More recent studies using modern statistical analysis have shown that there is evidence for the “hot hand” in some sporting activities.

I won’t repeat the evidence cited in the Wikipedia article, nor will I link to the many studies about the hot-hand effect. You can follow the link and read it all for yourself.

What I will do here is offer an analysis that supports the hot-hand hypothesis, taking Babe Ruth as a case in point. Ruth was a regular position player (non-pitcher) from 1919 through 1934. In that span of 16 seasons he compiled 688 home runs (HR) in 7,649 at-bats (AB) for an overall record of 0.0900 HR/AB. Here are the HR/AB tallies for each of the 16 seasons:

Year HR/AB
1919 0.067
1920 0.118
1921 0.109
1922 0.086
1923 0.079
1924 0.087
1925 0.070
1926 0.095
1927 0.111
1928 0.101
1929 0.092
1930 0.095
1931 0.086
1932 0.090
1933 0.074
1934 0.060

Despite the fame that accrues to Ruth’s 1927 season, when he hit 60 home runs, his best season for HR/AB came in 1920. In 1919, Ruth set a new single-season record with 29 HR. He almost doubled that number in 1920, getting 54 HR in 458 AB for 0.118 HR/AB.

Here’s what that season looks like, in graphical form:

The word for it is “streaky”, which isn’t surprising. That’s the way of most sports. Streaks include not only cold spells but also hot spells. Look at the relatively brief stretches in which Ruth was shut out in the HR department. And look at the relatively long stretches in which he readily exceeded his HR/AB for the season. (For more about the hot and and streakiness, see Brett Green and Jeffrey Zwiebel, “The Hot-Hand Fallacy: Cognitive Mistakes or Equilibrium Adjustments? Evidence from Major League Baseball“, Stanford Graduate School of Business, Working Paper No. 3101, November 2013.)

The same pattern can be inferred from this composite picture of Ruth’s 1919-1934 seasons:

Here’s another way to look at it:

If hitting home runs were a random thing — which they would be if the hot hand were a fallacy — the distribution would be tightly clustered around the mean of 0.0900 HR/AB. Nor would there be a gap between 0 HR/AB and the 0.03 to 0.06 bin. In fact, the gap is wider than that; it goes from 0 to 0.042 HR/AB. When Ruth broke out of a home-run slump, he broke out with a vengeance, because he had the ability to do so.

In other words, Ruth’s hot streaks weren’t luck. They were the sum of his ability and focus (or “flow“); he was “putting it all together”. The flow was broken at times — by a bit of bad luck, a bout of indigestion, a lack of sleep, a hangover, an opponent who “had his number”, etc. But a great athlete like Ruth bounces back and put it all together again and again, until his skills fade to the point that he can’t overcome his infirmities by waiting for his opponents to make mistakes.

The hot hand is the default condition for a great player like a Ruth or a Cobb. The cold hand is the exception until the great player’s skills finally wither. And there’s no sharp dividing line between the likes of Cobb and Ruth and lesser mortals. Anyone who has the ability to play a sport at a professional level (and many an amateur, too) will play with a hot hand from time to time.

The hot hand isn’t a fallacy or a matter of pure luck (or randomness). It’s an artifact of skill.


Related posts:
Flow
Fooled by Non-Randomness
Randomness Is Over-Rated
Luck and Baseball, One More Time
Pseudoscience, “Moneyball,” and Luck
Ty Cobb and the State of Science
The American League’s Greatest Hitters: III

Pseudoscience, “Moneyball,” and Luck

Orin Kerr of The Volokh Conspiracy endorses the following clap-trap, uttered by Michael Lewis (author of Liar’s Poker and Moneyball) in the course of a commencement speech at Princeton University:

A few years ago, just a few blocks from my home, a pair of researchers in the Cal psychology department staged an experiment. They began by grabbing students, as lab rats. Then they broke the students into teams, segregated by sex. Three men, or three women, per team. Then they put these teams of three into a room, and arbitrarily assigned one of the three to act as leader. Then they gave them some complicated moral problem to solve: say what should be done about academic cheating, or how to regulate drinking on campus.

Exactly 30 minutes into the problem-solving the researchers interrupted each group. They entered the room bearing a plate of cookies. Four cookies. The team consisted of three people, but there were these four cookies. Every team member obviously got one cookie, but that left a fourth cookie, just sitting there. It should have been awkward. But it wasn’t. With incredible consistency the person arbitrarily appointed leader of the group grabbed the fourth cookie, and ate it. Not only ate it, but ate it with gusto: lips smacking, mouth open, drool at the corners of their mouths. In the end all that was left of the extra cookie were crumbs on the leader’s shirt.

This leader had performed no special task. He had no special virtue. He’d been chosen at random, 30 minutes earlier. His status was nothing but luck. But it still left him with the sense that the cookie should be his.

So far, sort of okay. But then:

This experiment helps to explain Wall Street bonuses and CEO pay, and I’m sure lots of other human behavior. But it also is relevant to new graduates of Princeton University. In a general sort of way you have been appointed the leader of the group. Your appointment may not be entirely arbitrary. But you must sense its arbitrary aspect: you are the lucky few. Lucky in your parents, lucky in your country, lucky that a place like Princeton exists that can take in lucky people, introduce them to other lucky people, and increase their chances of becoming even luckier. Lucky that you live in the richest society the world has ever seen, in a time when no one actually expects you to sacrifice your interests to anything.

All of you have been faced with the extra cookie. All of you will be faced with many more of them. In time you will find it easy to assume that you deserve the extra cookie. For all I know, you may. But you’ll be happier, and the world will be better off, if you at least pretend that you don’t.

Never forget: In the nation’s service. In the service of all nations.

Thank you.

And good luck.

I am unsurprised by Kerr’s endorsement of Lewis’s loose logic, given Kerr’s rather lackadaisical attitude toward the Constitution (e.g., this post).

Well, what could be wrong with the experiment or Lewis’s interpretation of it? The cookie experiment does not mean what Lewis thinks it means. It is like the Candle Problem in that Lewis  draws conclusions that are unwarranted by the particular conditions of the experiment. And those conditions are so artificial as to be inapplicable to real situations. Thus:

1. The  teams and their leaders were chosen randomly. Businesses, governments, universities, and other voluntary organizations do not operate that way. Members choose themselves. Leaders (in business, at least) are either self-chosen (if they are owners) or chosen by higher-ups on the basis of past performance and what it says (imperfectly) about future performance.

2. Because managers of businesses are not arbitrarily chosen, there is no analogy to the team leaders in the experiment, who were arbitrarily chosen and who arbitrarily consumed the fourth cookie. For one thing, if a manager reaps a greater reward than his employees, that is because the higher-ups value the manager’s contributions more than those of his employees. That is an unsurprising relationship, when you think about it, but it bears no resemblance to the case of a randomly chosen team with a randomly chosen leader.

3. Being the beneficiary of some amount of luck in one’s genetic and environmental inheritance does not negate the fact that one must do something with that luck to reap material rewards. The “extra cookie,” as I have said, is generally produced and earned, not simply put on a plate to be gobbled. If a person earns more cookies because he is more productive, and if he is more productive (in part) because of his genetic and environmental inheritance, that person’s great earning power (over the long haul) is based on the value of what he produces. He does not take from others (as Lewis implies), nor does he owe to others a share of what he earns (as Lewis implies).

Just to drive home the point about Lewis’s cluelessness, I will address his book Moneyball, from which a popular film of the same name was derived. This is Amazon.com‘s review of the book:

Billy Beane, general manager of MLB’s Oakland A’s and protagonist of Michael Lewis’s Moneyball, had a problem: how to win in the Major Leagues with a budget that’s smaller than that of nearly every other team. Conventional wisdom long held that big name, highly athletic hitters and young pitchers with rocket arms were the ticket to success. But Beane and his staff, buoyed by massive amounts of carefully interpreted statistical data, believed that wins could be had by more affordable methods such as hitters with high on-base percentage and pitchers who get lots of ground outs. Given this information and a tight budget, Beane defied tradition and his own scouting department to build winning teams of young affordable players and inexpensive castoff veterans.

Lewis was in the room with the A’s top management as they spent the summer of 2002 adding and subtracting players and he provides outstanding play-by-play…. Lewis, one of the top nonfiction writers of his era (Liar’s Poker, The New New Thing), offers highly accessible explanations of baseball stats and his roadmap of Beane’s economic approach makes Moneyball an appealing reading experience for business people and sports fans alike.

The only problems with Moneyball are (a) its essential inaccuracy and (b) its incompleteness as an analysis of success in baseball.

On the first point, “moneyball” did not start with Billy Beane and the Oakland A’s, and it is not what it is made out to be. Enter Eric Walker, the subject and author of “The Forgotten Man of Moneyball, Part 1,” and “The Forgotten Man of Moneyball, Part 2,” published October 7, 2009, on a site at deadspin.com. (On the site’s home page, the title bar displays the following: Deadspin, Sports News without Access, Favor, or Discretion.) Walker’s recollections merit extensive quotation:

…[W]ho am I, and why would I be considered some sort of expert on moneyball? Perhaps you recognized my name; more likely, though, you didn’t. Though it is hard to say this without an appearance of personal petulance, I find it sad that the popular history of what can only be called a revolution in the game leaves out quite a few of the people, the outsiders, who actually drove that revolution.

Anyway, the short-form answer to the question is that I am the fellow who first taught Billy Beane the principles that Lewis later dubbed “moneyball.” For the long-form answer, we ripple-dissolve back in time …

. . . to San Francisco in 1975, where the news media are reporting, often and at length, on the supposed near-certainty that the Giants will be sold and moved. There sit I, a man no longer young but not yet middle-aged, a man who has not been to a baseball game — or followed the sport — for probably over two decades….

With my lady, also a baseball fan of old, I go to a game. We have a great time; we go to more games, have more great times. I am becoming enthused. But I am considering and wondering — wondering about the mechanisms of run scoring, things like the relative value of average versus power…. I go to the San Francisco main library, looking for books that in some way actually analyze baseball. I find one. One. But what a one.

If this were instead Reader’s Digest, my opening of that book would be “The Moment That Changed My Life!” The book was Percentage Baseball, by one Earnshaw Cook, a Johns Hopkins professor who had consulted on the development of the atomic bomb….

…Bill James and some others, who were in high school when Cook was conceiving the many sorts of formulae they would later get famous publicizing in their own works, have had harsh things to say about Cook and his work. James, for example, wrote in 1981, “Cook knew everything about statistics and nothing at all about baseball — and for that reason, all of his answers are wrong, all of his methods useless.” That is breathtakingly wrong, and arrogant. Bill James has done an awful lot for analysis, both in promoting the concepts and in original work (most notably a methodology for converting minor-league stats to major-league equivalents). But, as Chili Davis once remarked about Nolan Ryan, “He ain’t God, man.” A modicum of humility and respect is in order…. Cook’s further work, using computer simulations of games to test theory (recorded in his second book, Percentage Baseball and the Computer), was ground-breaking, and it came long before anyone thought to describe what Cook was up to as “sabermetrics” and longer still before anyone emulated it.

…I wanted to get a lot closer to the game than box seats. I had, some years before, been a radio newscaster and telephone-talk host, and I decided to trade on that background. But in a market like the Bay Area, one does not just walk into a major radio station and ask for a job if it has been years since one’s last position; so, I walked into a minor radio station, a little off-the-wall FM outfit, and instantly became their “sports reporter”; unsalaried, but eligible for press credentials from the Giants….

Meanwhile, however, I was constantly working on expanding Cook’s work in various ways, trying to develop more-practical methods of applying his, and in time my, ideas….

When I felt I had my principles in a practical, usable condition, I started nagging the Giants about their using the techniques. At first, it was a very tough slog; in those days — this would be 1979 or so, well before Bill James’ Abstracts were more than a few hundred mimeographed copies -– even the basic concepts were unknown, and, to old baseball men, they were very, very weird ideas….

In early 1981, as a demonstration, I gave the Giants an extensive analysis of their organization; taking a great risk, I included predictions for the coming season. I have that very document beside me now as I type…. I was, despite the relative crudeness of the methodology in those days, a winner: 440 runs projected, 427 scored; ERA projected, 3.35, ERA achieved, 3.28; errors projected, 103, actual errors committed, 102; and, bottom line, projected wins, 57, actual wins 56….

By this time, I had taken a big step up as a broadcaster, moving from that inconsequential little station to KQED, the NPR outlet in San Francisco, whence I would eventually be syndicated by satellite to 20 NPR affiliates across the country, about half in major markets.

As a first consequence of that move, a book editor who had heard the daily module while driving to work and thought it interesting approached me with a proposal that I write a book in the general style of my broadcasts. I began work in the fall of 1981, and the book, The Sinister First Baseman and Other Observations, was published in 1982, to excellent reviews and nearly no sales. Frank Robinson, then the Giants’ manager and a man I had come to know tolerably well, was kind enough to provide the Foreword for the book, which was a diverse collection of baseball essays….

At any rate, there I was, finally on contract with a major-league ball club, the Giants, but in a dubious situation…. I did persuade them to trade Gary Lavelle to the Blue Jays, but instead of names like John Cerutti and Jimmy Key, whom I had suggested, Haller got Jim Gott, who gave the Giants one good year as a starter and two forgettable years in the pen, plus two guys who never made the majors. But deals for Ken Oberkfell and especially for John Tudor, which I lobbied for intensely, didn’t get made (Haller called 20 minutes too late to get Oberkfell). I still remember then-Giants owner Bob Lurie, when I was actually admitted to the Brain Trust sanctum on trade-deadline day, saying around his cigar, “What’s all this about John Tudor?” (Tudor, then openly available, had a high AL ERA because he was a lefty in Fenway — this was well before “splits” and “park effects” were commonplace concepts — and I tried to explain all that, but no dice; Tudor went on to an NL ERA of 2.66 over seven seasons.)

When Robinson was fired by the Giants, I knew that owing to guilt by association (remember, Robby wrote the Foreword to my book) I would soon be gone, and so I was. My term as a consultant with the Giants was about half a season. In that brief term, I had had some input into a few decisions, but most of what I advocated, while listened to, was never acted on.

But having once crossed the major-league threshold, I was not about to sink back into oblivion. Across the Bay was an organization with a famously more forward-looking front office, with which I had already had contact. I asked, they answered, and so my career with the A’s began.

Modern analysis has shown a whole treasure chest of interesting and often useful performance metrics, but it remains so that the bedrock principle of classic analysis is simple: out-making controls scoring. What I call “classic” analysis is the principles that I presented to the Oakland Athletics in the early 1980s, which governed their thinking through 20 or so successful seasons, and which were dubbed “moneyball” by Michael Lewis in his book of that title. Because of that book, there has arisen a belief that whatever the A’s do is, by definition, “moneyball”; with the decline in their fortunes in recent years has come a corresponding belief that “moneyball” is in decline — dead, some would say [1] — because the A’s and moneyball are seen as essentially one thing.

That is simply wrong…. “Moneyball,” as the name says, is about seeking undervalued commodities [emphasis added]. In my day, what I regard as the crucial aspects of run-generation, notably on-base percentage, were seriously undervalued, so “moneyball” consisted in finding batters with those skills.

A team that today sustains one of the lowest on-base percentages in baseball, and actively acquires players with drastically low career on-base numbers, is very obviously practicing a different “moneyball” than that for which it became famed. Today’s A’s, it seems, see the undervalued commodities as “defense and athletic players drafted out of high school” (as a recent article on the organization put it). These are not your father’s A’s. What success their new tack will have remains to be seen (their present fortunes are a transition state); but “moneyball” as practiced today by the A’s seems no longer to have at its core the same analytic principles that then-GM Sandy Alderson and I worked with a quarter-century ago, and that I presented to Billy Beane in that now semi-famous paper [“Winning Baseball”]….

In 1994, Sandy promoted Billy Beane to assistant GM. At the same time, he asked me to prepare an overview of the general principles of analysis for Billy, so that Billy could get in one sitting an idea of the way the organization was looking at talent. In the end, I delivered a report titled “Winning Baseball,” with the subtitle: “An objective, numerical, analytic analysis of the principles and practices involved in the design of a winning baseball team.” The report was 66 pages long; I still grit my teeth whenever I remember that Michael Lewis described it as a “pamphlet [on page 58 of this edition of Moneyball].”…

My goal in that report, which I seem to have met, was to put the ideas — not the detailed principles, just the ideas — forward in simple, clear language and logical order, so that they would be comprehensible by and reasonable to a working front-office executive. Sandy Alderson didn’t need a document like this, then or at the outset, but he was a Harvard-trained attorney; I considered myself to be writing not just to Billy Beane but to any veteran baseball man (which, as it turned out, was just as well)….

Lewis not only demotes “Winning Baseball” to a pamphlet, but also demotes Walker to passing mention on three pages of Moneyball: 58, 62, and 63 (in the paperback edition linked above). Why would Lewis slight and distort Walker’s contributions to “moneyball”? Remember that Lewis is not a scientist, mathematician, or statistician. He is a journalist with a B.A. in art history who happened to work at Salomon Brothers for a few years. I have read his first book, Liar’s Poker. It is obviously the work of a young man with a grievance and a flair for dramatization. Moneyball is obviously the work of a somewhat older man who has honed his flair for dramatization. Do not mistake it for a rigorous analysis of the origins and effectiveness of “moneyball.”

Just how effective was “moneyball,” as it was practiced by the Oakland Athletics? There is evidence to suggest that it was quite effective. For example:


Sources and notes: Team won-lost records are from Baseball-Reference.com. Estimates of team payrolls are from USA Today’s database of salaries for professional sports teams, which begins in 1988 for major-league baseball (here). The payroll index measures the ratio of each team’s payroll in a given year to the major-league average for the same year.

The more that a team spends on player salaries, the better the team’s record. But payroll accounts for only about 18 percent of the variation in the records of major-league teams during the period 1988-2011. Which means that other factors, taken together, largely determine a team’s record. Among those factors is “moneyball” — the ability to identify, obtain, effectively use, and retain players who are “underpriced” relative to their potential. But the contribution of “moneyball” cannot be teased out of the data because, for one thing, it would be impossible to quantify the extent to which a team actually practices “moneyball.” That said, it is evident that during 1988-2011 the A’s did better than the average team, by the measure of wins per dollar of payroll: Compare the dark green regression line, representing the A’s, with the black regression line, representing all teams.

That is all well and good, but the purpose of a baseball team is not to win a high number of games per dollar of payroll; it is to win — period. By that measure, the A’s of the Alderson-Beane “moneyball” era have been successful, at times, but not uniquely so:


Source: Derived from Baseball-Reference.com.

The sometimes brilliant record of the Athletics franchise during 1901-1950 is owed to one man: Cornelius McGillicuddy (1862-1956). And the often dismal record of the franchise during 1901-1950 is owed to one man: the same Cornelius McGillicuddy. True fans of baseball (and collectors of trivia) know Cornelius McGillicuddy as Connie Mack, or more commonly as Mr. Mack. The latter is an honorific bestowed on Mack because of his dignified mien and distinguished career in baseball: catcher from 1886 to 1896; manager of the Pittsburgh Pirates from 1894 to 1896; manager of the Philadelphia Athletics from 1901 to 1950; part owner and then sole owner of the Athletics from 1901 to 1954.  (He is also an ancestor of two political figures who bear his real name and alias: Connie Mack III and Connie Mack IV.)

Mack’s long leadership and ownership of the A’s is important because it points to the reasons for the A’s successes and failures during the fifty years that he led the team from the bench. Here, from Wikipedia, is a story that is familiar to persons who know their baseball history:

[Mack] was widely praised in the newspapers for his intelligent and innovative managing, which earned him the nickname “the Tall Tactician”. He valued intelligence and “baseball smarts”, always looking for educated players. (He traded away Shoeless Joe Jackson despite his talent because of his bad attitude and unintelligent play.[9]) “Better than any other manager, Mack understood and promoted intelligence as an element of excellence.”[10] He wanted men who were self-directed, self-disciplined and self-motivated; his ideal player was Eddie Collins.[11]

“Mack looked for seven things in a young player: physical ability, intelligence, courage, disposition, will power, general alertness and personal habits.”[12]

He also looked for players with quiet and disciplined personal lives, having seen many players destroy themselves and their teams through heavy drinking in his playing days. Mack himself never drank; before the 1910 World Series he asked all his players to “take the pledge” not to drink during the Series. When Topsy Hartsel told Mack he needed a drink the night before the final game, Mack told him to do what he thought best, but in these circumstances “if it was me, I’d die before I took a drink.”[13]

In any event, his managerial style was not tyrannical but easygoing.[14] He never imposed curfews or bed checks, and made the best of what he had; Rube Waddell was the best pitcher and biggest gate attraction of his first decade as A’s manager, so he put up with his drinking and general unreliability for years until it began to bring the team down and the other players asked Mack to get rid of him.[15]

Mack’s strength as a manager was finding the best players, teaching them well and letting them play. “He did not believe that baseball revolved around managerial strategy.”[10] He was “one of the first managers to work on repositioning his fielders” during the game, often directing the outfielders to move left or right, play shallow or deep, by waving his rolled-up scorecard from the bench.[12] After he became well known for doing this, he often passed his instructions to the fielders by way of other players, and simply waved his scorecard as a feint.[16]

*   *   *

Mack saw baseball as a business, and recognized that economic necessity drove the game. He explained to his cousin, Art Dempsey, that “The best thing for a team financially is to be in the running and finish second. If you win, the players all expect raises.” This was one reason he was constantly collecting players, signing almost anyone to a ten-day contract to assess his talent; he was looking ahead to future seasons when his veterans would either retire or hold out for bigger salaries than Mack could give them.

Unlike most baseball owners, Mack had almost no income apart from the A’s, so he was often in financial difficulties. Money problems – the escalation of his best players’ salaries (due both to their success and to competition from the new, well-financed Federal League), combined with a steep drop in attendance due to World War I — led to the gradual dispersal of his second championship team, the 19101914 team, who [sic] he sold, traded, or released over the years 1915–1917. The war hurt the team badly, leaving Mack without the resources to sign valuable players….

All told, the A’s finished dead last in the AL seven years in a row from 1915 to 1921, and would not reach .500 again until 1926. The rebuilt team won back-to-back championships in 1929–1930 over the Cubs and Cardinals, and then lost a rematch with the latter in 1931. As it turned out, these were the last WS titles and pennants the Athletics would win in Philadelphia or for another four decades.

With the onset of the Great Depression, Mack struggled financially again, and was forced to sell the best players from his second great championship team, such as Lefty Grove and Jimmie Foxx, to stay in business. Although Mack wanted to rebuild again and win more championships, he was never able to do so owing to a lack of funds.

Had an earlier Michael Lewis written Moneyball in the 1950s, as a retrospective on Mack’s career as a manager-owner, that Lewis would have said (correctly) that the A’s successes and failures were directly related to (a) the amount of money spent on the team’s payroll, (b) Connie Mack’s character-based criteria for selecting players, and (c) his particular approach to managing players.  That is quite a different story than the one conveyed by the Moneyball written by the real Lewis.

Which version of Moneyball is correct? No one can say for sure. But the powerful evidence of Connie Mack’s long tenure suggests that it takes a combination of the two versions of Moneyball to be truly successful, that is, to post a winning record year after year. It seems that Lewis (inadvertently) jumped to a conclusion about what makes for a successful baseball team — probably because he was struck by the A’s then-recent success and did not look to the A’s history.

In any event, success through luck is not the moral of Moneyball; the moral is success through deliberate effort. But Michael Lewis ignored the moral of his own “masterwork” when he stood before an audience of Princeton graduates and told them that they are merely (or mainly) lucky. How does one graduate from Princeton merely (or mainly) by being lucky? Does it not require the application of one’s genetic talents? Did not most of the graduates of Princeton arrive there, in the first place, because they had applied their genetic talents well during their years in high school or prep school (and even before that)? Is one’s genetic inheritance merely a matter of luck, or is it the somewhat predictable result of the mating of two persons who were not thrown together randomly, but who had a lot in common — including (most likely) high intelligence?

Just as the cookie experiment invoked by Lewis is a load of pseudoscientific hogwash, the left-wing habit of finding luck at the bottom of every achievement is a load of politically correct hogwash. Worse, it is an excuse for punishing success.

Lewis’s peroration on luck is just a variation on a common left-wing theme: Success is merely a matter of luck, so it is the state’s right and duty to redistribute the spoils of luck.

Related posts:
Moral Luck
The Residue of Choice
Can Money Buy Excellence in Baseball?
Inventing “Liberalism”
Randomness Is Over-Rated
Fooled by Non-Randomness
Accountants of the Soul
Rawls Meets Bentham
Social Justice
Positive Liberty vs. Liberty
More Social Justice
Luck-Egalitarianism and Moral Luck
Nature Is Unfair
Elizabeth Warren Is All Wet
Luck and Baseball, One More Time
The Candle Problem: Balderdash Masquerading as Science
More about Luck and Baseball
Barack Channels Princess SummerFall WinterSpring
Obama’s Big Lie

More about Luck and Baseball

In “Luck and Baseball, One More Time,” I make the point that

it takes a lot more than luck to succeed at almost anything, from winning high office to making millions of dollars to painting a masterpiece to building a house to cutting hair properly. To denigrate the rich and famous by calling them lucky is to denigrate every person who strives, with some success, to overmaster whatever bad luck happens to come his way.

The backdrop for that claim is some statistical evidence from the history of major-league baseball:

In the 111-year history of the American League, 60 different players have led the league in batting. Those 60 players have recorded a total of 367 top-10 finishes in American League batting races over the years — an average of 6 top-10 finishes for each of the players. It is not surprising, therefore, that most of the 60 players also compiled excellent career batting averages. Specifically, through 2010, 57 of the 60 had made at least 5,000 plate appearance in the American League, and 43 of the 57 are among the top 120 hitters (for average) — out of the thousands of players with at least 5,000 plate appearances in the American League. Were those 43 players merely “lucky”? It takes a lot more than luck to hit so well, so consistently, and for so many years.

Here is more evidence to the same effect. Two days ago, a young pitcher for the Chicago White Sox named Philip Humber threw a perfect game against the Seattle Mariners. Humber’s was the 19th perfect game since 1893, when the distance from the pitcher’s plate (rubber) to the back point of home plate (where the foul lines intersect) was increased to 60 feet, 6 inches. The 19 perfect games were pitched by 19 different men. And the total number of major league games played from 1893 through today numbers well above 300,000, which means that the potential number of perfect games (if thrown by both teams’ pitchers) is well above 600,000.

Aha, you might say, a perfect game is a matter of luck. Well, it may be partly a matter of luck, but baseball (despite some elements of randomness) is a game of skill, applied intentionally. A perfect game, like many other aspects of baseball, is the residue of the applied skills of pitchers and fielders, just as (the prevalent) imperfect game is the residue of the applied skills of batters and base runners.

The element of skill involved in pitching a perfect game is evidenced by the fact that most of the players who have pitched perfect games are the holders of above-average to exceptional pitching records:

Career Record*
Year of perfect game Pitcher Seasons played Wins Losses W-L % ERA+** Hall of Fame?***
1904 Cy Young 1890-1911 511 316 .618 138 Yes
1908 Addie Joss 1902-1910 160 97 .623 142 Yes
1922 Charlie Robertson 1919-1928 49 80 .380 90 No
1956 Don Larsen 1953-1967 81 91 .471 99 No
1964 Jim Bunning 1955-1971 224 184 .549 114 Yes
1965 Sandy Koufax 1955-1966 165 87 .655 131 Yes
1968 Catfish Hunter 1965-1979 224 166 .574 105 Yes
1981 Len Barker 1976-1987 74 76 .493 94 No
1984 Mike Witt 1981-1993 117 116 .502 105 No
1988 Tom Browning 1984-1995 123 90 .577 98 No
1991 Dennis Martinez 1976-1998 245 193 .559 106 No
1994 Kenny Rogers 1989-2008 219 156 .584 108 Not yet eligible
1998 David Wells 1987-2007 239 157 .604 108 Not yet eligible
1999 David Cone 1986-2003 194 126 .606 121 No
2004 Randy Johnson 1988-2009 303 166 .646 136 Not yet eligible
2009 Mark Buehrle 2000- 162 121 .572 120 Active player
2010 Dallas Braden 2007- 26 36 .419 102 Active player
2010 Roy Halladay 1998- 191 93 .673 139 Active player
2012 Philip Humber 2006- 12 10 .545 110 Active player
Combined W-L 3319 2361 .584
* Through April 22, 2012.
** Earned run average adjusted for ballpark and the league’s mean ERA in each season. An ERA+ of 100 is therefore an average performance over a career; ERA+ >100 is above average; ERA+ <100 is below average. (Details here: http://en.wikipedia.org/wiki/ERA%2B.)
*** Membership in the Hall of Fame is noted for the sake of completeness, though it is not conclusive proof of greatness. (See: http://libertycorner.blogspot.com/2006/10/anti-hall-of-fame-and-baseball.html; http://libertycorner.blogspot.com/2007/12/hall-of-famers.html.)

The point of this excursion into baseball is stated in an old post of mine:

A bit of unpredictability (or “luck”) here and there does not make for a random universe, random lives, or random markets. If a bit of unpredictability here and there dominated our actions, we wouldn’t be here to talk about randomness….

Human beings are not “designed” for randomness. Human endeavors can yield unpredictable results, but those results do not arise from random processes, they derive from skill or the lack therof, knowledge or the lack thereof … , and conflicting objectives…

In baseball, as in life, “luck” is mainly an excuse and rarely an explanation….

Related posts:
Fooled by Non-Randomness
Randomness Is Over-Rated
Luck-Egalitarianism and Moral Luck
Luck and Baseball, One More Time

Luck and Baseball, One More Time

There is such a thing as “luck.” Bad and good luck happen to everyone, at one time or another. But everything that happens to everyone is not due to luck. I am convinced by what I have seen of life — up close and at a distance — that most of what happens to people happens to them because of their intentions, skills, and resources.

Yes, the skills that one possesses may be due in part to genetic luck, and the resources that one can marshal may be due in part to genetic and geographic luck. But if skills and resources were entirely beyond a person’s control, no one would ever climb from the proverbial gutter to attain fame and fortune. That is where intentions come in.

So, I am unimpressed (to say the least) by do-gooders and levelers, who want to take from the productive and give to the unproductive because the productive have had “all the luck,” or some such thing. Balderdash! First, it takes more than luck to be productive and to enjoy even a modest income. Second, taking from the productive to give to the unproductive is like blaming the blameless. It may come as a surprise to do-gooders and levelers (most of whom ought to know better), but a person who earns a high income earns it because that is what others are willing to pay for his efforts — not because he picks the pockets of the poor.

Speaking of high-income earners, I am always puzzled by the fact that income-envy is directed toward CEOs, investment bankers, and suchlike. Why is it not directed at super-star athletes, like Albert Pujols, who will earn $254 million over the next 10 years, just for playing baseball? Perhaps it is because almost everyone recognizes that Pujols is selling a skill that (a) is his (not stolen from someone else) and (b) would not be on display were it not for his assiduous development and application of the particular genetic advantages that enable him to hit a pitched baseball with above-average frequency and power.

Well, Nassim Nicholas Taleb to the contrary notwithstanding, the earning of large sums of money in any profession takes the same assiduous application of particular genetic advantages, or assiduous compensation for the lack thereof. I will not repeat my detailed criticisms of Taleb, which can be found “here” and “here.” Instead, I will return to the subject of baseball, some aspects of which I treated in those posts.

In the 111-year history of the American League, 60 different players have led the league in batting. Those 60 players have recorded a total of 367 top-10 finishes in American League batting races over the years — an average of 6 top-10 finishes for each of the players. It is not surprising, therefore, that most of the 60 players also compiled excellent career batting averages. Specifically, through 2010, 57 of the 60 had made at least 5,000 plate appearance in the American League, and 43 of the 57 are among the top 120 hitters (for average) — out of the thousands of players with at least 5,000 plate appearances in the American League. Were those 43 players merely “lucky”? It takes a lot more than luck to hit so well, so consistently, and for so many years.

And it takes a lot more than luck to succeed at almost anything, from winning high office to making millions of dollars to painting a masterpiece to building a house to cutting hair properly. To denigrate the rich and famous by calling them lucky is to denigrate every person who strives, with some success, to overmaster whatever bad luck happens to come his way.

Related posts:
The Residue of Choice
The American League’s Greatest Hitters
The American League’s Greatest Hitters:  Part II
Fooled by Non-Randomness
Randomness Is Over-Rated
Luck-Egalitarianism and Moral Luck

Luck-Egalitarianism and Moral Luck

Luck-egalitarianism and moral luck are egregious, moral-philosophical concepts. The purposes of this post are (a) to explain their relatedness and egregiousness and (b) to offer a valid moral precept in their stead.

LUCK EGALITARIANISM

This, according to the current entry in Wikipedia,

is a view about distributive justice espoused by a variety of egalitarian and other political philosophers. According to this view, justice demands that variations in how well off people are should be wholly attributable to the responsible choices people make and not to differences in their unchosen circumstances. This expresses the intuition that it is a bad thing for some people to be worse off than others through no fault of their own.

Luck egalitarians therefore distinguish between outcomes that are the result of brute luck (e.g. misfortunes in genetic makeup, or being struck by a bolt of lightning) and those that are the consequence of conscious options (such as career choice or fair gambles). Luck egalitarianism is intended as a fundamental normative idea that might guide our thinking about justice rather than as an immediate policy prescription. The idea has its origin in John Rawls‘s thought that distributive shares should not be influenced by arbitrary factors. Luck egalitarians disagree among themselves about the proper way to measure how well off people are (for instance, whether we should measure material wealth, psychological happiness or some other factor) and the related issue of how to assess the value of their resources.

Luck-egalitarians evidently hold a skewed view of luck. For if it is a bad thing for some persons to be worse off than others through no fault of their own, it should be good thing for some persons to be better off than others through no action of their own. In other words, if “bad luck” is bad, “good luck” should be good.

But that is not how a luck-egalitarian sees things. A luck-egalitarianian deplores all “luck” because he seeks to compensate those who have had “bad luck” by extracting “undeserved” gains from those who have had “good luck.” In practice, luck-egalitarians do not bother to investigate the degree to which “luck” leads to variations in life outcome. It is enough for them to note that some persons are well off relative to others (usually in health, wealth, and income), and that disparity — to a luck-egalitarian — is “bad” per se. In the vernacular: “It just shouldn’t be that way.”

Luck-egalitarianism is therefore of a piece with the moral accountancy that is practiced by “liberals” and “progressives.” As I say here, moral accountancy is

the three-fold habit of setting oneself up as an omniscient arbiter of economic and social outcomes, then castigating the motives and accomplishments of the financially successful and socially “well placed,” and finally penalizing financial and social success through taxation and other regulatory mechanisms (e.g., affirmative action, admission quotas, speech codes, “hate crime” legislation”).

The key to luck-egalitarianism is the idea “that it is a bad thing for some people to be worse off than others through no fault of their own,” which leads to the following (usually implicit and subconscious) set of specious assumptions and conclusions:

  • There is a “right” set of life outcomes (e.g., a certain standard of living, a certain degree of health), which luck-egalitarians are qualified to choose and evaluate because of their superior moral character.
  • Therefore, it is wrong if some persons are worse off than others in terms of the “right” set of outcomes. (Here, the luck-egalitarian usually abandons the qualification of faultlessness, for — in the luck-egalitarian’s view — a person who descends into, say, poverty has no one to blame but the “system” that allows him to do so.)
  • Those who are better off (by the selective standards of the luck-egalitarian) owe aid to those who are worse off, even if those who are better off did nothing that made others worse off. The better-off simply do not deserve all that they have because, surely, they must owe much of it to luck.
  • Taking from the better-off to help the worse-off is further justified (in the luck-egalitarian view) by (a mistaken reliance on) the theory of diminishing marginal utility. The implication of that theory (as applied by luck-egalitarians) is that there is a universal welfare function, and that making a worse-off person happier somehow cancels or justifies the disutility of the better-off person who is forced to part with something for the benefit of the worse-off.

Strong luck-egalitarianism would strive for equal happiness for everyone, for all time. The weaker — and more usual — luck-egalitarianism strives only to rectify the most glaring instances in which persons are worse off through no fault of their own. Of course, it is the prerogative of allied bands of luck-egalitarians (e.g., Democrats in Congress) to determine who is worse off, by what criteria they are worse off, who is undeservedly better off, and how much the better-off should be taxed (or otherwise burdened) to compensate the worse-off. The usual — and accurate — term for such doings is “cheap compassion”; “cheap” because it is “compassion” bought with other people’s money.

The  presumptuousness of the luck-egalitarian position can be appreciated by taking it to its logical extreme, which is that there is no such thing as an interpersonal difference based on choice because the ability to choose is ultimately based on luck, in the dominant secular view of existence. A high-IQ person, for example, is able to choose among ways of making a living that will yield more income and wealth than a low-IQ person can garner from the options that are realistically his. Isn’t IQ a matter of luck? Similarly, a person born to wealthy parents has a much higher chance of becoming wealthy, by some standard, than does the person born to poor parents, by the same standard. Isn’t being born to a certain set of parents a matter of luck? There are many other luck-dependent differences that strongly influence a person’s income and wealth: country and region of one’s birth, one’s congenital makeup (other than intelligence), and so on, almost endlessly. It follows that luck-egalitarianism, properly applied, would hold that no one deserves to have more than anyone else, and that everyone should therefore have the same things.

And yet, most of the luck-egalitarians whom I know personally, or by following politics, will not insist on trying to make every person in the world identical with respect to life outcomes. To put it baldly, the prevalence of weak luck-egalitarianism reflects a limit on how much a luck-egalitarian is prepared to sacrifice of his own health and wealth for the sake of improving the lot of others less fortunate than he. I have not noticed, for example, that affluent luck-egalitarians share their homes with the homeless, but they would do that (and more) if they really thought about the true extent of luck in shaping life outcomes — and acted according to their purported principles. Why do they not? Because luck-egalitarianism — at bottom — is usually a prettied-up way of assuaging one’s guilt about having more wealth and health than most other persons. Affluent luck-egalitarians are willing to pay a price for assuaging that guilt, but not too high a price. Thus they usually call on “the rich” (i.e., those richer than they) to bear most of the burden. There are, of course, some among the super-rich who do the same thing, but having become super-rich, they can afford to make such gestures and they do not care about and/or fail to understand the disincentivizing effects of their spurious generosity. (Luck-egalitarianism on the part of the diseased and impoverished and among “idealistic” youth  is a kind of special pleading that should be disregarded.)

At this point, I should offer an alternative way of viewing differences in life outcomes. But first, I want to drive home the point that luck-egalitarianism is nothing but an arrogant pretension to omniscience, usually disguised as compassion.

I begin with this (not far-fetched) hypothetical:

A tornado rips through a trailer park in a particular region of a particular State. At the time, 100 persons were in the trailer park. Every trailer is either demolished or damaged beyond repair. One result of the destruction and damage is that 10 persons are killed and 40 persons are seriously injured.

The following questions and observations are in order:

1. Do the uninjured denizens of the trailer park, who (in one respect, at least) had better luck than the injured and dead, owe something to the injured and the estates of the dead? Why should any of the uninjured owe anything to anyone; the uninjured also suffered losses that cannot be fully compensated by insurance (if they were insured)? I doubt that a luck-egalitarian would insist on taking from the uninjured to give to the injured and the survivors of the dead; the uninjured also suffered bad luck, just not as bad as it might have been. This suggests that someone’s (relative) good luck does not automatically oblige him to compensate someone else’s (relative) bad luck.

2. If the uninjured denizens owe nothing, perhaps others owe something to the injured and estates of the dead. But why? Persons not living in the trailer park had no more to do with the tornado than the lucky, uninjured residents of the trailer park. The lucky ones — both inside and outside the trailer park — had nothing to do with the injuries and deaths suffered by some residents of the trailer park. In other words, to repeat myself, someone’s (relative) good luck does not automatically oblige him to compensate someone else’s relative bad luck.

3. Further, persons living outside the trailer park — in the same region or State, elsewhere in the United States, or elsewhere in the world — have their own kinds of bad luck to contend with. It just happens to be bad luck that is not well known, if at all, to others. We know about the bad luck that befell the denizens of the trailer park, but the notoriety of their bad luck does not mean that they are the only persons in the world who have suffered or will suffer bad luck. By what calculus, then, is one supposed to weigh all the bad luck and good luck enjoyed by everyone in the world, through the eons, and arrive at a “just” and workable scheme of balancing things so that everyone is (in some immeasurable way) made equally happy?

4. Persons uninjured by the tornado — wherever they reside — did not cause the tornado and, therefore, did not cause the deaths and injuries in the trailer park. Deaths and injuries, though not the fault of the dead and injured, were not the fault of anyone else, either. But luck-egalitarians who wield power (e.g., members of Congress) insist on burdening the blameless for the bad luck (and bad choices) of others. That these burdens are imposed on the excuse that the city, State, or nation must “pull together” as a “family” to help those in need does not lessen them. “Pulling together” and “family” betoken voluntarism, not compulsion by the state; such words and phrases are entirely inapposite when they are used in an effort to justify compulsion.

5. It is not the business of politicians to assign blame where there is no blame to be assigned. Yet that is what politicians do, in effect, when they penalize certain classes of persons (e.g., “the rich”) for being blameless. Where there is blame to be assigned — when a person’s is deprived of health, income, or wealth by actions of another person or persons — remedies are available in civil and criminal law. Fault-finding should be left to the courts of the land, and if the courts do not do justice, they should be reformed by open political processes.

On the last point, I must note that failures of justice are not one-sided affairs in which “the rich and famous” invariably get away with things, while persons who are poor, ill-educated, or members of minority groups bear an undue burden of punishment. Decades of blaming “society” for the willing acts of criminals have made justice something less than the swift and certain process that it should be if harm is to be rectified and deterred. It is no coincidence that the usual suspects — “liberals” and “progressives” who are quick to penalize blameless persons for the bad luck of others are also loathe to punish the blameworthy if they are perceived as having suffered the bad luck of being poor or of the “wrong color.” That their victims had bad luck — the bad luck of being victims — is of no account to luck-egalitarians, who possess the uncanny ability to measure and calibrate the universal social-welfare function.

In sum, luck-egalitarianism is arrogant presumptuousness harnessed to a perverse social agenda.

MORAL LUCK

Moral luck is another empty philosophical contrivance for placing blame on the blameless. In this case, the blameless are persons whose actions might have caused harm to others but did not. Thus their moral luck.

Moral luck is illustrated by this example:

Suppose there are two truck drivers, Driver A, and Driver B. They are exactly alike in every single way, drive the same exact car, have the same driving schedule, have the same exact reaction time, and so forth. Let’s say that Driver A is driving down a road, following all legal driving requirements, when suddenly, a child runs out in the middle of the road to retrieve a lost ball. Driver A slams the brakes, swerves, in short, does everything to try to avoid hitting the child — alas, the inertia of the truck is too great, and the distance between the truck and the child is too short. Unfortunately, the child is killed as the result of the collision. Driver B, in the meantime, is following the exact same route, doing all the exact same things, and everything is quite exactly the same –– except for one important distinction. In his scenario, there is no child that appears on the road as if out of nowhere. He gets to his destination safely, and there no accident occurs.

If a bystander were asked to morally evaluate Drivers A and B, there is very good reason to expect him to say that Driver A is due more moral blame than Driver B. After all, his course of action resulted in the death of a child, whereas the course of action taken by Driver B was quite uneventful. However, there are absolutely no differences in the controllable actions performed by Drivers A and B. The only disparity is that in the case of Driver A, an external uncontrollable event occurred, whereas it did not in the case of Driver B. The external uncontrollable event, of course, is the child appearing on the road. In other words, there is no difference at all in what the two of them could have done –– however, one seems clearly more to blame than the other. How does this occur?

This is the problem of moral luck. If we agree that moral responsibility should only be relevant when the agent voluntarily performed or failed to perform some action, we should blame Drivers A and B equally, or praise them equally, as may be the case. At the same time, this seems to be at least intuitively problematic, as — whatever the external circumstances are –– one situation resulted in an unfortunate death, and the other did not. (From an article formerly at Wikipedia, now available here.)

My reaction: The example only shows that moral luck is an empty construct. Putting aside the fact that Driver A was blameless (given the “facts” of the example), Driver B’s experience is irrelevant. First, no two drivers and driving situations are identical. Second, even granting, for the sake of argument, that Drivers A and B are identical, Driver B does not face the same circumstances as Driver A. The example avoids the true moral issues, which are these:

  • Did Driver A in fact drive prudently? That is not the same thing as “following all legal driving requirements.” Driver A might have passed a breathalyzer test, but perhaps just barely. Or Driver A might have been talking on his cell phone in a jurisdiction that does not forbid doing so while driving. Or Driver A might not have been paying full attention to his surroundings (an undetectable lapse) because he was thinking about where to make his next turn.
  • More fundamentally, the example fails to mention the actions of the child and the child’s parents. Was the child of an age to have known better than to dart into the street without looking? Why was the child allowed to play with a ball near the street? Why did a parent (or someone) failed to watch the child closely enough to prevent it from darting into the street? Why had the child’s parents not fenced the front yard and seen to it that the child could not unlatch the gate?

If Driver A drove prudently — above and beyond “legal requirements” — no blame can attach to Driver A. The blame, if any, must attach to the child or the child’s parents, an option that the example omits.

The article continues:

Moral luck entails two extreme outcomes, both of which seem intuitively unacceptable.

If, [on the] one hand, we accept moral luck as a real phenomenon and accept it as a valid restriction on personal responsibility (and, consequently, the assign[ment] of moral blame or praise), it is difficult to identify a situation where moral luck does not affect an event or an individual. Many, if not all, of the moral judgments that we engage in daily seem to become problematic, since any single action can be defended as having been affected by moral luck. Constitutive moral luck [pertaining to the personal character of the moral agent] especially highlights this problem –– after all, it is perfectly valid to argue that every single thing that we do relates in some way to our personal character disposition, and is not one hundred percent voluntary. Thus, if we do stick by our requirement of moral responsibility as needing complete volition, we cannot validly morally assess any action performed by an individual. As Nagel himself points out, if moral luck is accepted as a valid premise, the area of individual moral responsibility seems to ““shrink . . . to an extensionless point.”

On the other hand, if we deny the influence of moral luck and refuse to accept that it has anything to do with moral evaluation (as Kant most certainly would, for example), we are left with a single unappealing option: we are responsible for everything that we do, whether voluntarily or not, and for all the consequences, no matter how unforeseen or unlikely, that our actions entail. By this logic, the unlucky Driver A from our earlier example can take no solace in the fact that there was nothing he could have done to prevent the death of the child as the result of the accident –– he deserves the full amount of moral blame that can be assigned for such an outcome.

That is, moral luck either (1) negates personal responsibility or (2) places all responsibility on the individual actor to whom things happen. I reject the first premise because we have free will or must act as if we have it. (See this post.) I reject the second premise because, as I argue above, it fails to account for the freely chosen actions of others.

The concept of moral luck strikes me as baseless philosophical casuistry — an occupation for misused minds. Like luck-egalitarianism, the concept of moral luck attempts to place blame where there is no need to place blame.

THE REASONABLE ALTERNATIVE TO LUCK-EGALITARIANISM AND MORAL LUCK

In the words of an unknown wise man: Stuff happens; get over it.

*   *   *

Related posts:
Religion and Personal Responsibility
Free Will: A Proof by Example?
Greed, Cosmic Justice, and Social Welfare
Positive Rights and Cosmic Justice
The Interest-Group Paradox
Parsing Political Philosophy
Is Statism Inevitable?
Inventing “Liberalism”
Freedom of Will and Political Action
Fooled by Non-Randomness
Law and Liberty
Rights, Liberty, the Golden Rule, and the Legitimate State
Randomness is Over-Rated
Beware the Rare Event
Line-Drawing and Liberty
What Is Truth?
The Divine Right of the Majority
Our Enemy, the State
The Golden Rule and the State
A Not-So-Fine Whine
Social Justice
The Meaning of Liberty
Taxing the Rich
More about Taxing the Rich
Peter Presumes to Preach
More Social Justice
Positive Liberty vs. Liberty
On Self-Ownership and Desert

Monopoly: Private Is Better than Public

In this discursive post, I use the economic concept of perfect competition as a starting point from which to defend monopoly and to expose the folly and futility of governmental intervention in markets.

PERFECT COMPETITION AS A BOGUS STANDARD

I learned, in the standard microeconomics of my college days, that perfect competition is preferred to these three alternatives:

  • imperfect competition, where there is some degree of product differentiation (real or perceived)
  • oligopoly, where a particular product or service is sold by only a few firms (“product or service” is hereafter called “good,” in keeping with economic jargon)
  • monopoly, where there is only one seller of a particular good.

The theoretical superiority of perfect competition rests on the belief that, compared with the alternatives, it yields the greatest output of goods and, therefore, the greatest degree of satisfaction to consumers; that is, perfect competition maximizes “social welfare.”

The standard analysis has many problems, the most fundamental of which is the observation selection effect. The observer, in this case, is the economist who views the world through the lenses of economic efficiency and “social welfare.”

The construct of economic efficiency involves gross generalizations about economic reality, which are based on ideal firms in an ideal world, not on the behavior of real firms in the messy world of reality. The construct, in other words, sets up an ideal world of perfect competition, divergences from which are judged less than optimal — as if unavoidable, real-world divergences are less valid than the perfections of an imaginary construct. (This is an instance of a Nirvana fallacy, “the logical error of comparing actual things with unrealistic, idealized alternatives.”)

Then there is “social welfare,” which perfect competition is purported to maximize. “Social welfare” is in fact a fictitious device whereby the person who invokes it assumes (implicitly if not explicitly) that the happiness of individuals can be summed, and that he knows just how to do it. The predictable result of “social arithmetic” is a call for some kind of governmental action that effectively redistributes income; for example:

  • Affirmative action, on balance, redistributes income from shareholders, consumers, and more-qualified workers to less-qualified workers.
  • Progressive taxation redistributes income from persons who earn a lot of money (the job-creators of the economy) to persons who earn less money. It also drives out high earners, to the detriment of the rest of us.
  • Trust-busting (which is of particular interest here) amounts to a redistribution of income from the owners of a oligopolistic or monopolistic firm to consumers.

“Social welfare,” in other words, is a phony excuse for playing God — a variant of the Nirvana fallacy. (For more, see this, this, and this.)

HOW GOVERNMENT INTERVENTION DOES MORE HARM THAN GOOD

Why is it not a good thing for government to act in ways that redistribute income from the owners of firms to consumers? There are several reasons, beginning with the artificiality of perfect competition (or something like it) as a model of how markets ought to be organized.

Then, there is the arrogance of a mindset that judges consumers to be more deserving that the owners of businesses — owners who staked a lot of money (and created jobs) on business ventures that might have gone sour (and often do). Is it possible that trust-busting discourages business (and job) formation? You can bet on it.

Related to that, it is necessary to remember that business owners are humans, too — 160 years of communist-populist-“progressive“-“liberal” rhetoric to the contrary notwithstanding. Business owners’ desire for profit is no less legitimate than consumers’ desire for low prices. Government is in the business of penalizing oligopolistic and monopolistic business owners not only because economists have set up a false standard (perfect competition or something like it), but also because the act of penalizing appeals to the envy of many voters and interest groups toward persons with legitimately high incomes. Trust-busting is neither logically nor morally admirable.

It is true that not all industries lend themselves to perfect competition or something like it, but it is neither necessary nor desirable to regulate firms in industries that are characterized by oligopoly and monopoly. (pace Paul Krugman). Oligopoly and monopoly are not iron-clad. Consumers have alternatives: If the price of X is “too high” they can (and will) buy more of Y and Z; if the price of X rises a lot, relative to the prices of Y and Z, the producer of X is likely to find himself with a direct competitor. In the alternative, more consumers will abandon X in favor of Y and Z.

TWO EMOTION-LADEN CASES

What about situations in which there seem to be no ready substitutes for a particular good? Lurking behind this question are fears of private monopolies controlling the supplis of water and medical goods. The case of medical goods is more straightforward, so I will deal with it before considering the supply of water.

Medicine

The supply of medical goods already is artificially low because of government, not in spite of it. Who licenses doctors and grants the A.M.A. a near-monopoly on the accreditation of medical schools? Who licenses and regulates hospitals? Who approves drugs and licenses pharmacists? The list of questions could go on and on, but the answer is always the same: government.

The average person will react along these lines: “Government has to be involved in the provision of medical goods, otherwise we would be taking our lives in our hands every time we go to a doctor or a hospital, and every time we use a drug.” I respond as follows:

The main effect of government regulation of certain goods (including medical ones) is to raise the cost of those goods by imposing costs on their providers and effectively barring additional providers from setting up shop. This unseen cost means that Americans consumer fewer medical goods than they would if government weren’t imposing costs on providers and barring prospective providers. (There is an argument that Americans, on balance, consume more medical goods than necessary because of Medicare, Medicaid, and tax-exempt, employer-subsidized health insurance. But given those distortions, it is true that regulation raises costs and restricts entry.) Is it possible that the net effect of regulations is to make Americans worse off rather than better off? A good case can be made for that proposition. (See this, this, and this.) The case of medical goods exemplifies Bastiat’s axiom that

a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them.

Water: The Hardest Case

No Inherent Need for Government Intervention

If the debate about government’s role in medicine evokes much emotion and little reason, any discussion of privatizing the water supply is certain to elicit the rawest of emotions: fear. A typical reaction goes like this: “If government doesn’t provide our water, greedy speculators will corner the market and we’ll all be at their mercy.” It is hard to imagine such a reaction in the 1800s, when a large fraction of the population lived in rural areas, where most water came from privately owned wells or was taken, by private means, from rivers and lakes. Government doesn’t have to provide water, and if it couldn’t stop a you from drilling a well in your backyard (which it can, thanks to its “police power”) many urbanites and suburbanites might be able to supply their own water.

In any event, there is no inherent reason for government to supply water. The simple fact is that “municipal water works” has acquired the totemic status of “public schools.” Both institutions have become so embedded that private alternatives (on a large scale) were unthinkable, until (in the case of public schools) failure became so obvious that it could no longer be ignored. (That the dominant solution to the failure of public schools is to throw more money at them is neither a negation of their failure nor of the widespread perception of failure.)

Scenario 1: “Accidental” Private Monopoly

Given that there is no inherent reason for government to provide water, I begin the analysis of water monopolies with the following hypothetical:

We have with a small, settled community of 25 homes, in which every home has a well (and has had one for generations). It is accepted by all members of the community that each homeowner is the owner of his well; that is, wells are not communal property. Further, every well provides an ample amount of water for such purposes as drinking, bathing, cooking, watering lawns and gardens, washing cars, etc.

Suddenly, because of some unforeseeable geological change, every well but one runs dry. And the owners of the  24 homes without functioning wells (the unlucky 24″) have no immediate or easy recourse to another source of water — a spring, stream, or lake — because there are none within a day’s drive of the community. The only convenient source of water is the 25th  home (“lucky 25”), whose well  seems to provide more than enough water for its owner — enough, in fact, to meet the drinking, bathing, and cooking needs of the “unlucky 24.”

Issues Arising from Scenario 1

How should the “unlucky 24” cope with the near-term problem of obtaining water for drinking, bathing, and cooking? Suppose that they have two practical options:

  • Appeal to “lucky 25” by offering him a price for water that would just cover the cost of providing it (electricity, pump repairs/replacements, etc.).
  • Buy water in large quantities from an out-of-area vendor — at a much higher price than they would offer “lucky 25.”

“Lucky 25,” the accidental water monopolist, has the following options:

  • Accept the offer made by the “unlucky 24.”
  • Make a counter-offer by setting a price that is somewhere between the offer made by the “unlucky 24” and the cost, to them, of buying water from an out-of-area vendor.
  • Refuse to sell water to the “unlucky 24,” for one of the following reasons: (1) It is his right to do so. (2) He doesn’t want to be in the water-selling business, with its attendant distractions. (3) He fears that drawing significantly greater amounts of water from his well will cause it to run dry.

(You should understand that this is a law-abiding community whose residents are respectful of  property rights — unlike the typical government — so that the water monopolist doesn’t have to worry about defending his well and himself against a mob.)

I daresay that the average reader would expect “lucky 25” to accept the offer made by the “unlucky 24.” But why should the accidental water monopolist accept the offer? He might, out of compassion, help the “unlucky 24” while they make other arrangements. But his help would be given out of compassion, not obligation.

The Permissibility of “Good Luck”

Yes, the water monopolist may have been “lucky” with respect to water, but perhaps he has been “unlucky” in other respects. Why, if “luck” determines one’s obligations to others, shouldn’t the water monopolist’s neighbors compensate him for his episodes of “bad luck” — the dog that was hit by a car, the underground stream which provides him ample water but threatens to undermine the foundation of his house, an errant wife, incorrigible children, etc.? Must “good luck” be penalized or paid for, as an act of “social justice”?

The answer is “no.” Anthony de Jasay explains, in “Economic Theories of Social Justice: Risk, Value, and Externality“:

Stripped of rhetoric, an act of social justice (a) deliberately increases the relative share … of the worse-off in total income, and (b) in achieving (a) it redresses part or all of an injustice…. This implies that some people being worse off than others is an injustice and that it must be redressed. However, redress can only be effected at the expense of the better-off; but it is not evident that they have committed the injustice in the first place. Consequently, nor is it clear why the better-off should be under an obligation to redress it….

Since Nature never stops throwing good luck at some and bad luck at others, no sooner are [social] injustices redressed than some people are again better off than others. An economy of voluntary exchanges is inherently inegalitarian…. Striving for social justice, then, turns out to be a ceaseless combat against luck, a striving for the unattainable, sterilized economy that has built-in mechanisms…for offsetting the misdeeds of Nature.

Scenario 2: Deliberate Water Monopoly

Suppose, now, that our water monopolist came by his monopoly in an entirely different way — a way that (to most of us) seems to draw on entrepreneurship, not “luck.” Suppose that he (and he alone) drilled a well for the purpose of selling water to his neighbors, whom (he knows and they know) cannot (and never could) find water under their properties. What should the water monopolist charge his neighbors for water? Just as much as they are willing to pay, of course. Is there anything immoral in that? If there is, why is it not immoral for an auto dealer to sell you a car for just as much as you are willing to pay, even if you need that car in order to earn a living?

Why should the water monopolist (or car dealer or anyone else) be forced by a legalized mob (i.e., government) to sell his product for a prescribed price, when he is the person who took the financial risk of drilling a well, not knowing for certain that he would strike water, at what rate it would flow, how long it would flow at that rate, and whether another source of water might materialize because of unforeseeable geological or climatological changes?

The answer to the question is found in emotion, not reason. Emotionally, we hold water to be more precious than, say, automobiles. Yet, many persons consume a lot of water for what might be called non-essential reasons (e.g., watering lawns, washing cars, filling swimming pools), and many persons need cars in order to earn a living. Water, stripped of its emotional baggage, isn’t a sacred commodity; it is merely a commodity that has different prices in different places.

Which brings us to the essential question: Who should supply water?

Why a Government Monopoly Is Worse

Perhaps government should be in the business of telling everyone what kind of cars they can have (or not have). (Not far-fetched, admittedly.) Well, then, perhaps government should be in the business of telling us whom to marry, how many children to have, where to live, etc., etc., etc. If that’s an unappealing prospect, why step down the slippery slope toward it by allowing government to dictate the price of water, as it does by controlling most of the nation’s water supply through municipal and regional water authorities?

What can government do that entrepreneurs cannot? The answer is nothing, except to set prices for water that are unlikely to correspond to the prices that would be set by voluntary transactions between private sellers and their customers. Government monopolies prohibit entry where entry would be possible, for example, along large rivers and around large lakes.

Government monopolies cannot respond quickly, if at all, to changes in costs and variations in demand. The prices set by government monopolies must therefore result in the subsidization of some consumers who would be willing to pay more for their water by taxpayers and/or other consumers who are paying more than they would pay if there were private, competing suppliers of water.

What about the poor persons who, without subsidization, could not afford water for drinking, bathing, and cooking, unless they were to forgo other necessities (e.g., medical care)? So, the market for water should be monopolized by government and the price of water should be distorted for the sake of a relatively small fraction of the population? It would be better to rely on (a) private charity and (if you insist) (b) tax-funded vouchers for the purchase of water.

Scenario 3: Government vs. Private Pricing

Which leads to the next objection to the privatization of the water supply (which was mostly private for a long time in the United States). It goes like this: “Water monopolists would bleed their customers dry; they would conspire to control the supply of water and charge whatever the market will bear.”

To test those assertions, let us consider the extreme case in which the residents of a mountainous area have only one potential source of water (other than rain), which is a river that flows through the area. Suppose “greedy speculator” buys the land surround the river’s source and dams the river, at a place on his land. (I am  ignoring, for purposes of this post, the state of the law regarding such a practice.) “Greedy speculator” then pays for the installation of water pipes to various of his customers, meters their use of water, and charges them (perhaps at different rates) in such a way as to maximize his profit.

If you have been following along, you will have realized that there’ is no difference between “greedy speculator” and government, where it declares a local monopoly on the supply of water. There is, of course, a degree of (misplaced) trust in government, that is, trust that will “do the right thing,” which means robbing Peter to pay Paul. That trust amounts to nothing more than wishful thinking about government and misconceptions about the benefits of private action, spurred by the prospects of profit.

In the case of water, for example, government may not build enough capacity (to the detriment of consumers), it may build too much capacity (at the expense of taxpayers), or it may fail to keep its system in good repair (to the detriment of consumers). Private, unregulated providers, in the more usual instances where some degree of competition is possible, can respond more quickly than government to rises in demand, are less likely than government to overbuild, and are more likely than government to keep their systems in good repair.

But the provision of water a natural monopoly, is it not? That question (with its the implied answer: “yes”) arises from the belief that there is no room in a market for more than one supplier where an extensive infrastructure must be duplicated (as in the case of water plants and supply pipes). There are market solutions to such seemingly insurmountable problems, although — in the cases of electricity, natural gas, and cable TV — their implementation generally has been botched by regulatory incompetence and intent.

How could there be competition in a market for water? Consider the extreme case of “greedy speculator” who buy the land from which a river rises, and dams the river. If he sets the price of water too high, three things could happen:

  • Some residents self-ration, reducing or eliminating the use of water for such things as watering lawns, washing cars, and filling swimming pools. (Remember, my example involves a “speculator” who is interested in making a reasonable return on a large investment, which requires that he set up shop in place that isn’t destitute.)
  • Some residents leave the area for places where their total cost of living, relative to income, is lower than it becomes after “greedy speculator” sets up shop.
  • Competition arrives in the form of a supplier who hauls water in large tank trucks and installs a water storage tank for each of the homes and businesses that subscribe to his service.

Lo and behold, “greedy speculator” forestalls competition, and perhaps some departures from the area, by setting his price “just high enough.” Is that fair?

Still No Role for Government

Well, ask yourself if it’s fair of government to keep a private individual from earning a profit by providing a product of value to consumers, or to restrict that profit in the “public interest.” Ask yourself if it is fair that such practices on the part of government lead to a general reduction in the willingness of entrepreneurs to establish and expand job- and growth-producing businesses of all kinds. (Remember “that which is not seen.”) Ask yourself if it is fair of government to circumvent the private sector and provide taxpayer-subsidized goods and services to the residents of an area, just because it lacks “good” supplies of water or electricity, or just because it is frequently and predictably devastated by fires, floods, hurricanes, or tornadoes. Ask yourself if it is fair of government to provide taxpayer-funded insurance against predictable natural disasters when private insurers won’t do so — with the result that the areas prone to natural disasters remain heavily inhabited, at taxpayers’ expense.

In other words, private action — however competitive or uncompetitive — alleviates a host of problems. Government action tends to exacerbate those problems, and to create unforeseen (and unseen) ones.

CONCLUSION

It is written nowhere (but in the imaginations of statists) that government owes us a green lawn, a residence on a flood plain, or anything else but protection from predators, foreign and domestic. As soon as government strays beyond its proper role, it begins to corrupt civil society and its essential mechanisms, which include free markets.

One of the ways in which government strays is to interfere in markets and to provide services that can be and should be provided through markets. Government — at the behest of politicians, bureaucrats, academicians, and meddlers-at-large — interferes in markets and sometimes becomes a provider on the pretext that certain markets (most of them, it seems) are insufficiently competitive or otherwise have “failed” because they fall short of measures of perfection devised by — you guessed it — politicians, bureaucrats, academicians, and meddlers-at-large.

Government intervention in markets exacts a very high price, in liberty and material goods. It strips us of the ability to do for ourselves what we think needs to be done — as opposed to what some politician, other meddler, or “aggrieved” group believes we ought to do or have done to us. It strips us — even the poorest among us — of the means to do for ourselves that which we need to do. It strips us — even the poorest among us — of the fruits of those labors which are permitted to us.  The degree of theft is so vast as to be unimaginable, but unseen and therefore (mostly) unlamented.

The bottom line: Private monopolies are superior to public ones, and should not be persecuted or prosecuted. Government monopolies are for the benefit of politicians, bureaucrats, academicians, meddlers-at-large, and the the majority of citizens who have been conned into believing that government action is preferable to private action.