There’s a meme floating around that the storyline of Breaking Bad constitutes a scathing indictment of the U.S. healthcare system. The latest entry is this comic strip, which says that if Breaking Bad had been set in the U.K., it would be an “entirely different story” – one that ends in just 5 panels. But it’s not just comic strips. Daily Kos says that Breaking Bad “Displays [the] Brutality of American Private Health Insurance Non-System,” while Tricia Romano at the Daily Beast says the show “Is Fully Dependent on Our Broken Health-Care System.” There are probably other examples.
The problem with this claim isn’t that the U.S. healthcare system is actually wonderful. It’s not. The problem is that it’s just not consistent with the actual TV show. I can verify this because I’ve rewatched the whole first season (and much of the second) over the last couple of weeks.
Walter White makes his first foray into the meth business before health expenditures are even mentioned. Walter does have insurance coverage, and his HMO will cover his cancer treatment. It’s true that Walter mentions that his HMO isn’t very good at some point, but that’s as far as it goes. As it turns out, Walter doesn’t even intend to endure the treatment (as revealed a few episodes later in “Cancer Man”). It’s very clear that Walter’s overriding goal is to leave a nest egg for his wife, disabled son, and unborn baby.
Eventually, health costs do become an issue when Skyler pressures Walter to undergo treatment after all. But it’s not because his HMO won’t pay. It’s because Skyler finds an oncologist who is not just one of the best in Albuquerque, but one of the top 10 oncologists in the nation. It turns out this super-doctor with his fancy cancer treatment is not covered by the HMO, and the out-of-pocket price is $90,000. Some will say that’s the smoking gun that indicts the U.S. healthcare system. But there is no system in the world that offers high-end care to everyone. The vaunted U.K. and Canadian systems offer care to every citizen, but they don’t offer the best care to every citizen. That’s just not possible. A single-payer system is essentially a giant public HMO, and just like private HMOs, they sometimes deny treatment or (more relevant here) deny the highest-quality treatments. Citizens who aren’t happy with the coverage provided by the government system have to pay for it themselves, either through supplementary private insurance or out of pocket. Sometimes they even travel to foreign countries, like the U.S., for that care.
To reiterate: Walter White has health insurance, and it would have covered his cancer treatment. The only reason Walter needs so much money for medical bills is because he opts out of his insurance coverage in favor of higher-quality, more expensive treatment. And even then, it’s clear this isn’t Walter’s only motivation. In the episode “Seven Thirty-Seven,” Walter calculates how much he needs to sock away, and he comes up with $737,000, not just the $90,000 for the cancer treatment. This is a story that could have been told in many countries, including both the U.K. and Canada.
I’m not saying we can’t imagine a version of Breaking Bad that does condemn the U.S. healthcare system. For instance, they could have had Walter lose his job, and his health insurance with it, right before getting his cancer diagnosis. Less plausibly, they could’ve had his deductible and copayments be so large that he has to cook meth to pay them. (I say “less plausibly” because while those sums can be large, they’re probably not large enough to explain Walter White’s extreme actions.)
But Breaking Bad did not choose either of these routes. In fact, the show often goes out of its way to show that ultimately it’s not really about money at all for Walter; it’s about pride. Pride is why he didn’t want to have treatment in the first place. When his former colleague Elliot Schwartz offers to pay for Walter’s non-covered cancer treatment, it’s pride that makes Walter say no. And pride is why Walter continues to cook meth long after he’s achieved his monetary goals. Blaming the events of Walter White’s life on the U.S. healthcare system isn’t just wrong; it’s missing the entire point of the show.
Friday, September 13, 2013
Breaking Bad and the Healthcare System
Tuesday, October 11, 2011
Pan Am and the Economics of Hot Flight Attendants
A quick break from the economics of Aesop, so I can talk about the economics of ABC’s Pan Am before it gets canceled. Not that I want it to get canceled; I watched the pilot and liked it. But the Nielsen numbers say I should speak now while it’s still topical...
For an economist, the most fascinating aspect of Pan Am is the highly attractive flight attendants -- or rather, stewardesses, since the show is set in the early 1960s. If you’re young enough, you might think that’s just TV. But I’m just old enough to remember flying in the 1970s, and I recall stewardesses who really were, in fact, hot. Okay, I was too young to understand the concept of “hot” -- but I was definitely aware that I was being attended by some very pretty young women.
Not so anymore. Flight attendants aren’t necessarily unattractive now, but they’re no more fetching than people in any other service profession that doesn’t get tips. And what’s changed? In a word, deregulation.
Prior to airline deregulation, which was passed in 1978 and completed over the next few years, airfares had been set by the Civil Aeronautics Board (CAB). For many routes, those airfares were simply too high. As predicted by a simple supply-and-demand model, airlines were willing to offer more flights at these high prices than customers were willing to buy. Under normal market conditions, that would lead to falling prices. But since the airlines legally could not compete on price, they competed on quality instead. They offered better service, better food, and... wait for it... more attractive stewardesses.
When deregulation came along, however, it became apparent that as much as male customers might have enjoyed the eye candy, they weren’t willing to pay for it. Higher quality might seem like a good thing, but it’s really only good if the benefit exceeds the cost. More attractive staff can command higher wages. The airlines could have continued to pay them, if the higher quality had attracted more customers. But as it turns out, most people just wanted to get where they were going, fast and cheap. Deregulation fueled a democratization of air travel, making what once was a luxury item available to nearly everyone. The number of people who fly at least once a year has more than doubled since 1978, while the population has grown by about 40%. These new customers have flocked to the airlines with no-frills or low-frills service, a trend that continues to this day (JetBlue, anyone?).
And y’know what? That’s a good thing, yet another efficiency gain from deregulation. There are plenty of other ways to see attractive women.
Monday, June 28, 2010
Barbie, Political Philosopher
Toy Story 3 offers many pleasures and not a little wisdom. I absorbed them with a shocking output of tears, both the laughing kind and otherwise. At one point, too, I raised my fist in solidarity, moved by the political philosophy voiced by Barbie (brilliantly played by Barbie). I liked Barbie's quote so much that I put it on a t-shirt:
Nice, huh? Click on the picture to customize the shirt for your build and style.
Fellow Bluebook geeks will notice that, despite its graphic fripperies, the shirt sports a proper legal citation. Scholars might take comfort in the fact that I crosschecked the quote against the junior novel version of Toy Story 3. Lawyers for Disney/Pixar must admit that my usage falls within the traditional bounds of the fair use defense to copyright infringement, and Hasbro cannot justly complain that the shirt's use of "Barbie" violates that trademark.
Tyrants might not like the shirt, granted. But Barbie showed us what happens to tyrants. I won't say more about that, here; just go see the movie!
UPDATE: Notwithstanding law and logic, Zazzle.com pulled the shirt almost immediately after I posted it for sale. I'm currently trying to correct the matter. Sorry for the inconvenience.
[Crossposted at Agoraphilia and The Technology Liberation Front.]
Monday, June 14, 2010
You Might Do Not Have to Use Files
The grandly-named Public Domain Archive, evidently a production of Osaka-based Digirock, Inc., offers a few MP3s of classical music and historical speeches. Thanks to a suggestion from Tyler Cowen, I'm enjoying a 1942 recording of Beethoven's 9th even as I type. Am I breaking the law in so doing? The copyright notice posted on the Public Domain Archive, while quite charming, hardly reassures:
To the People
In japan, All files open to the public on this site are certainly lawful.
But, if you do not live in Japan, You might do not have to use files.
You should check the law of your country.
As proves too often true for works, like this 1942 recording, that fall under the aegis of the 1909 Copyright Act, it is not easy to figure out if the underylying work enjoys any claim to protection under U.S. law. Perhaps, after all, it was not published with the proper formalities, here, and thus fell into the public domain.
In this case, though, it looks like we can dodge those complications. U.S. copyright law affords exclusive rights only to copying, creation of derivative works, public distribution, public performance, and public display. See 17 USC § 106. So long as I listen to a MP3 solely via streaming, without saving a copy, it is hard to see how I've violated any of those rights. Perhaps Digirock, Inc. has violated U.S. law by offering me the MP3, but that is no concern of mine (and probably not much of a concern to Digirock, Inc.).
That legal scenario suggests an interesting conclusion: an offshore copyright-free zone—one set up by intellectual pirates or in a stubbornly independent country—might give U.S. residents ample, free, and legal access to all sorts of copyrighted works—even ones protected under U.S. law.
[Crossposted at Agoraphilia and The Technology Liberation Front.]
Tuesday, April 27, 2010
The Hand Rule
Judge Learned Hand famously opined that if the burdens of preventing an accident outweigh its cost multiplied by its probability, it does not constitute carelessness to avoid those burdens. Doesn't that little gem make you want to break out in song? I've got just the thing: The Hand Rule, a little ditty I recently composed and played for some students at Chapman Law School.
Though I've yet to record The Hand Rule, I can offer you a .pdf of the lyrics and chords as well as a PowerPoint, complete with pictures of Learned Hand, to accompany the performance (both uncopyrighted). Here's a sample of a verse and the refrain:
In the case of Carrol Towing Co., Learned Hand set forth to showSilly? Yes, but it gets students to pay attention and remember what they learn. So goes the modus operandi of the Law and Fun school.
The meaning of "reasonability."
Defendant failed to leave in charge, a man to watch its unmoored barge.
And plaintiff's cargo met calamity.
"Negligence!" plaintiff complained and on appeal, Judge Hand explained,
The proper scope of liability.
Learned, learned, Learned. Learned in the law was he.
Learned Judge Hand, Learned, he judged so learnedly!
So learn what the Hand Rule teaches: "There's no liability,
If the burden of the cost exceeds the loss times the probability."
[Crossposted at Agoraphilia and MoneyLaw.]
Wednesday, July 01, 2009
Recipe for a Force Field
We don't yet have flying cars, much less jet packs. I like our Roomba, but domestic robots still have far to go before they can whip up an omelet, set the table, and pour the coffee. In these and many other areas, technology continues to lag behind the rosy sci-fi scenarios of my youth. Allow me, then, to give the future a little kick in the pants by describing how to build a long anticipated and long overdue technology: The force field.
Start with a phase conjugate mirror. A conventional mirror simply reflects light, bouncing it off at an angle in the same way that the bumper on a pool table redirects the motion of a ball. A phase conjugate mirror, in contrast, reflects light in exactly the reverse direction and form as the light comes in. Banking shots would be impossible on a pool table with "phase conjugate" bumpers, as balls would always bounce back in exactly the same direction whence they came.
Add to the phase conjugate mirror this additional ingredient: pumping beams that create a amplified reflection of the incoming wave front. (Read the bit under "phase conjugate mirror" at this source for more details.) To recur to the pool table example, it would be as if you gently tapped a ball at a bumper and it came speeding straight back at you.
Lastly, top off the amplified phase conjugate mirror with an illumination beam—a laser that rapidly scans the protected area, say. This illuminating beam can operate at relatively low power levels, given that it serves only to bounce a few photons off of the target. When some of those illuminating photons find their way from the target to the amplified conjugate phase mirror . . . BAM! Out flashes a blast of electromagnetic energy, automatically aimed on-target.
To better understand how the force field works, consider a ready application: Protecting spacecraft from orbiting debris. A scanning laser would rapidly sweep the area from which space junk would most likely approach the protected craft. Most of the time, of course, that beam would dissipate into empty space and the force field would remain quiet. When the scanning laser illuminated an approaching threat, however, the phase conjugate mirror would bounce a beam of electromagnetic energy right back at the debris (or, what would in practice amount to the same thing, given the speed of light, at the location the debris occupied an flash earlier). With enough amplification, the phase conjugate mirror could alter the trajectory of the approaching junk, directing it away from the spacecraft. With more amplification, the force field could simply vaporize the threat.
I could say more, but readers who have read this far can probably work out other interesting applications of the force field, as well as the problems introduced by non-reflective or highly reflective targets and the remedies afforded by using different frequencies for the scanning and amplified beams. Some readers might quibble that, regardless of its merits, I've not really described a force field, but rather only something that appears to function like one. Given that sci-fi authors don't typically explain how force fields work, though, I don't feel too bad about borrowing the label.
I don't claim this recipe for a force field as any sort of breathtaking innovation, granted. Once you get your head around phase conjugate mirrors, the rest of what I've suggested falls into place pretty quickly. I guess you could call it obvious to one reasonably skilled in the relevant arts—dynamic holography—and, thus, unpatentable. Still, though, I've yet to find any references on the 'net about this method of creating a force field.
Given that I make my living as a law prof, rather than a non-linear optical scientist, you might wonder why I dabble in these topics. It turns out that I've long had an interest in holograms. I set up a home lab to make them when I was in high school, and later developed a holographic information processing system that, in theory at least, answered a challenge that a hero of my youth, Douglas Hofstadter, put to me personally. His response left me so disillusioned that I abandoned my plans to pursue a degree in AI, but that is another, much longer story.
Monday, December 01, 2008
Hello, Jonah
Like it or not, we live in the belly of Leviathan. Friends of liberty tend not to like it. Rather than giving in to death-by-digestion, or the dreaded Lower Intestines of Statism, they struggle to escape. Hello, Jonah, describes that plight, prescribes a cure, and wryly notes the outcome:
As with Nice to Be Wanted, Sensible Khakis and Take Up the Flame, a Creative Commons license allows pretty free non-commercial use of Hello, Jonah. You can find the words and chords here.
As for (admittedly unlikely) commercial licensees, Hello, Jonah asks that they tithe 10% of revenues to the Cato Institute. I worked at Cato some years ago, and continue to support its good works. Like Jonah, Geppetto, and Pinnochio, Cato works from within the belly of the Beast, helping us all of us who "struggle to get out."
[Crossposted at Agoraphilia and Technology Liberation Front.]
Friday, November 14, 2008
Sensible Khakis: An Entrepreneurial Anthem
Entrepreneurs rock! You wouldn't guess it, though, to listen to rock music. (Marc Knopfler's, Boom, Like That, says something about the founding and rise of McDonald's, granted, but it hardly casts the enterprise in a very flattering light.) So in honor of entrepreneurs everywhere—but especially those in the board sports industries, whom I thank for making some very fun toys—I offer Sensible Khakis:
Like Take Up the Flame, which I coughed up on YouTube last week, Sensible Khakis' license leaves you free to play it just for fun. You can find the chords and lyrics—including the law-geek verse, not included in the video above, about the choices entrepreneurs face between sole proprietorships, corporations, LLPs, and LLCs—here. Like the terms attached to Take Up the Flame, any commercial licensees of Sensible Khakis will have to pay a tithe to one of my favorite causes—this time, Surfrider Foundation. That is not a likely scenario, admittedly, but I figure that the thought counts for something.
[Crossposted at Agoraphilia and Technology Liberation Front.]
Saturday, November 08, 2008
"Take Up the Flame"
The fight for freedom has seen brighter days, I grant. I think it will see still brighter days yet, though, if we can encourage another generation to join the cause. Towards that end, I wrote a song, "Take Up the Flame":
As the song's credits indicate, I've dedicated the song to my old friend and mentor, Walter E. Grinder—one of the many people who inspired me to take up "the flame." I originally planned to debut the song at a conference planned by the West Coast chapter of the Students for Liberty, to be held at Stanford University in mid-November. I figured that Walter, who lives nearby, could hear the tune in person. That meeting got cancelled, alas. Not to be deterred, though, I'm now distributing the song virtually.
The song's credits also indicate that I've released it under a Creative Commons Attribution-Noncommercial 3.0 Unported License, and made the lyrics and chords freely available for downloading. It would delight me if somewhere, someday, "Take Up the Flame" helped to raise the spirits of young folks rallying for the Good Fight. (Although I don't imagine anyone will find much reason to license the song commercially, I've also stipulated that any such licensee must agree to tithe a portion of the proceeds—10% of income, traditionally—to the Institute for Humane Studies, an organization that has long taught students about liberty.) Sing it loudly and proudly, friends of freedom!
[Crossposted at Agoraphilia and Technology Liberation Front.]
Thursday, September 18, 2008
Burn After Reading
I saw it Saturday. Highly recommended. It’s like Fargo set in the halls of power, or at least sort of near them. If you have a black sense of humor (and if you don’t, what’s up with that?), then go see it. What the Coen brothers do best is comedy, and they’re back in familiar territory.
I admire George Clooney and Brad Pitt because they could play hunky leading roles in every movie, but instead they occasionally choose to make asses of themselves in a goofball movie like this. Both are hilarious. But I think what I enjoyed most about the movie was its depiction of political/bureaucratic decision-making…
Okay, a short digression. I think libertarians as a group gravitate toward two different, and somewhat inconsistent, attitudes toward government: government is bad because it’s evil, and government is bad because it’s incompetent. Those libertarians who fall in the former group are mostly concerned with deliberate misuse and abuse of power for personal gain. They often end up being conspiracy theorists. Those in the latter group are concerned with the poor incentives in government to do anything right. They rely a lot on public choice theory.
As readers of this blog can probably guess, I fall mostly in the latter category, though I’ll admit the former is sometimes right. But whichever attitude is more accurate, they lend themselves to different forms of entertainment. The government-is-evil attitude can make for great drama, but the government-is-incompetent attitude goes down best with comedy. Burn After Reading is amusing because the government agents in the movie are not highly motivated, hyper-competent experts; they are lazy, clueless, and kind of sad – like everyone else in a Coen brothers comedy, perhaps more so. In this regard, pay special attention to the minimal but brilliant supporting role of J.K. Simmons.
Sunday, September 07, 2008
Watch FRINGE, Tuesday on Fox
This is old news to most of my friends and family, but some of you might not have heard yet: I am currently taking a leave of absence from the university, because I’ve taken a position on the writing staff of a new television show, FRINGE, which debuts on Fox this Tuesday (8/7c). Please watch! (But don't expect to see my name in the credits anytime soon. My writing partner and I are very low on the totem pole.)
When we took the job back in May, I wondered if it would provide more inspiration for blogging. I can now say the answer is “yes.” I constantly have these fleeting out-of-body-ish moments where I see how something I’m doing – from helping shape a story to witnessing the internal politics of show biz – also offers a fantastic example of this-or-that economic concept.
So where are all the fresh blog posts? Well, sadly, most of those great stories are things I can’t talk about! Posting spoilers about upcoming episodes on the internet could get me in a heap of trouble. Or at least I assume it could, as no one has specifically told me what I can and can’t reveal to the outside world.
But there are at least some things I can speak freely about, and hopefully I’ll blog them soon. You know, when I have the time. But my time, I’ve found, has become a lot more scarce lately. I’m often reminded of a favorite scene from Ghostbusters, in which the just-fired academics consider starting their own business. Dan Aykroyd objects, “I’ve worked in the private sector. They expect results.”
Monday, July 28, 2008
Nice to Be Wanted
Rather than blogging, I've been spending my summer attending conferences, hanging out with my family and friends, surfing, working on a paper about consent theory, and indulging in a new hobby: composing and performing songs at open mikes. I've set a goal of performing three new songs each time I play at my favorite local open mike, held the first Monday of every month. Much of what I've written doesn't concern legal or economics topics, though of course I invite interested readers to check out the songs I've written about romance, drinking, taoism, and so forth.
My most recent song, Nice to Be Wanted, offers a message that will surely resonate with friends of markets, however. Follow that link if you want the chords and other tips on how to play it. (Be forewarned: To nail the song's Country and Western style, you'll need to get your twang on.) Here are the lyrics:
Nice to Be Wanted
Verse 1:
You prob'ly think I live a boring life.
I pay my bills. I love my kids and wife.
But you can bet I've got an outlaw side.
Listen up! I'll tell ya' how I ride.
Verse 2:
For example, just the other day,
I turned right on a red—without stoppin' all the way!
Then I hit 38, drivin' back home,
Through a 35 miles-per-hour zone!
Refrain:
It's real nice to be wanted, by a purty little lady.
It's real nice to be wanted, by your lovin' ma and pa.
It's real nice to be wanted, by the folks who sign your paycheck.
But it's not nice to be wanted, when you're wanted by the law.
Verse 3:
But you know, I'm not the only one.
Some folks smoke and drink, before 21!
'N I heard tell, some guy in Oregon,
Pumped his own gas, at the fillin' station.
Verse 4:
A charmin' lady down New Orleans' way,
Dared to sell an unlicensed bouquet.
Her local florists don't like competi-shun.
They play monopoly—but not for fun!
Refrain
Verse 5:
We can't help it if we break some rules.
Politicians, and their fools,
Have rolled out red tape by the ton,
So they can keep us on the run!
Refrain
Coda:
The doggonned law.
The confounded law.
The nit-pickin', lousy, frickin, 'noveau-Prussian, freedom-crushin', law.
Fin.
As always, I've taken care to nail down the legal citations. The reference to Oregon concerns a statute (O.R.S. section 480.330) that forbids retail gasoline customers from pumping their own fuel. (New Jersey imposes a similar restriction, but does not admit the same easy rhyme.) The Louisiana florist's sad tale also proves all too true, as the Institute for Justice, champions for the would-be florist's rights, can tell you.
[Crossposted at Agoraphilia and Technology Liberation Front.]
Tuesday, November 27, 2007
Writer-Producers and the Writers' Strike
In a previous post on the writers’ strike, I observed that writer-producers, such as show runners, were in the best position to represent the interests of both sides. Quoting myself: “Since writer-producers share in both the gains and losses from giving writers higher compensation, they seem relatively well-positioned to know what level of compensation would maximize the joint gains from trade.” Since writing that, I’ve seen a number of articles supportive of that claim. First, despite the attention given to the show runners who refused to cross the picket lines, it turns out that many show runners have not completely abandoned their posts:
The majority agreed to stop work completely, hoping that by shutting down production of popular shows, studios would become crippled and would capitulate, thus bringing the strike to a quick end. [Neal] Baer and other show runners vowed not to fulfill their producing obligations until serious negotiations resumed.Second, show runners apparently were instrumental in getting both sides to resume negotiations this week:
But a contingent of more than two dozen have quietly returned to work, editing episodes written before the strike began, according to talent agents and writers.
Their actions have stoked worries among writers about a repeat outcome of the last major Hollywood strike in 1988, when show runners went back to work after five months, undercutting the bargaining power of the guild, which ultimately agreed to terms that it had earlier rejected. [emphasis added]
But the strike is proving that show runners are beginning to call the industry's shots in ways that other traditional power sources -- trade unions, studio bosses, network executives, agents -- either cannot or will not do. Indeed, The Times and other outlets have reported that TV writer-producers, along with agents and a few influential screenwriters, played a crucial back-channel role in pressuring the studios and the guild to come back to the bargaining table.And the show runners are motivated to broker an agreement exactly because they have a foot in both camps and are losing in two different ways:
A powerful group of top writer-producers, who dominate television's prime-time schedule, also are highly motivated to stem the bleeding, both to save their shows from cancellation and to keep their staffs employed.I don’t know how long the strike will last, but I take the increasing involvement of writer-producers as a sign of hope.
Wednesday, November 21, 2007
Residual Thoughts on the Writers' Strike
The big elephant in the writers’ strike is the issue of residuals for “new media,” such as online sales and (at least until they were taken off the table) DVDs. Now, it’s completely understandable that writers would want a share of the new revenue streams. If the new revenue sources constitute an increasingly large slice of total revenues, then an old contract based on residuals from sources that are drying up (like VHS sales) will give writers a diminishing share of the gains from trade.
But there is more than one way to give writers a share of a revenue stream. Residuals are one way. Alternatively, we could calculate the expected present value of a stream of residuals, and then tack that amount onto the up-front payment for a writing job. Put simply, the choice is between (a) a smaller up-front payment plus residuals, or (b) a larger up-front without residuals. In expected value terms, the two are equivalent if the calculations are done right.
The equivalence between (a) and (b) doesn’t mean it’s a matter of indifference which is chosen. Arguably, method (b) is superior. It would allow better compensation for both writers and producers, for at least two reasons:
1. After a project is in the can, the writer has little or no further input. Producers, on the other hand, still have considerably input: they can set the price for sales of the product, decide the appropriate amount of marketing, and so on. So the important thing is to get the producers’ incentives right. Residuals paid to writers are like a tax; they reduce the producers’ benefit from pushing the product. They will thus invest less effort in promotion than they otherwise would. Get rid of the residuals, and the producers will market and price the product so as to maximize its net value. That means a bigger pie, a portion of which can be paid to writers in the form of even larger up-front payments.
2. Residuals, being dependent on future sales, are inherently more risky than up-front payments. Writers, like most people, are probably risk averse. Producers, on the other hand, get their funds from investors with diversified portfolios (of entertainment products and other investments), and they are thus closer to risk neutral. Moving from the residuals (a) to the higher up-front payments (b) would shift risky assets – uncertain future revenue streams – onto the more efficient bearers of risk. Meanwhile, the writers would get the equivalent of an insurance policy.
I’m hesitant to conclude that the residuals system is definitely inefficient, because its longevity in the entertainment business provides some evidence of its utility. Maybe there’s some other factor at work I’m missing that would make residuals desirable. In talking to writers and others in the industry, though, I haven’t found a convincing argument yet.
One friend pointed out, correctly I think, that residuals have a historical legacy that goes back to an era when writers had more control over the distribution of the product. For instance, Shakespeare wrote plays and directed the Globe Theater. This history has contributed to a notion that writers should get a share of all future revenue from their creations. But while this story may help explain where the residual system came from, it doesn’t show that it’s efficient now. Shakespeare was both a writer and a producer. We have now progressed to a system of greater division of labor, in which some people do the creative work while others provide the financial backing, distribution, etc. The real issue for writers should be whether they are compensated in a manner that induces them to do good work; if an up-front payment does that while providing better incentives to producers, that’s the way to go.
The best argument for residuals I’ve found so far is this: Writers are trying to guarantee themselves a certain share of the gains from trade. Because residuals are defined as a percentage, their size will rise and fall with the total revenue generated by the product, and thus writers will still have about the same (percentage) share regardless of what happens to the industry. If overall revenues rise, writers’ compensation will also rise; if overall revenues fall, writers’ compensation will, too. This is more difficult to guarantee with fixed up-front payments, although I’m guessing someone could devise a contractual formula for up-front payments that achieved the same effect. In any case, residuals serve this function effectively only if the contract specifies the right revenue sources. If the sources change, as happened after the last contract, then the writers’ share dwindles. What happens if the new contract specifies generous residuals for online downloads, and it turns out the next big thing is wireless direct streaming to the cerebral cortex, or some other delivery method we can’t even imagine? Remember, nobody foresaw online downloads, either. Up-front payments, on the other hand, have to be paid regardless of the eventual revenue sources.
I have one other possible justification for residuals in mind, but I haven’t fully worked it out yet. In the meantime, I invite readers to suggest other arguments for residuals – or further support for my suspicion that higher up-front payments would be superior – in the comments section.
Sunday, November 11, 2007
Before She Goes Batshit Crazy
Going by how often I hear it sung at karaoke bars or played on (someone else’s) radio, Carrie Underwood’s song “Before He Cheats” remains popular a year after its release.
… I dug my key into the sideWhenever I hear those lyrics, the same sequence of thoughts goes through my mind:
of his pretty little souped-up 4-wheel drive,
carved my name into his leather seats.
I took a Louisville slugger to both headlights,
slashed a hole in all 4 tires...
Maybe next time he'll think before he cheats.
1. This girl’s a psycho.
2. And not very smart, either. She carved her own name into his leather seats? That’s like signing the crime scene. She might as well just turn herself in to the police.
3. Wait a minute… maybe there’s some kind of signaling game going on here. By signing her name, she publicly declares her willingness to face criminal charges just for the sake imposing revenge on a cheater. She thereby signals that she’s the type of woman who really intensely dislikes cheating, as opposed to all those women who dislike cheating but still tolerate it. Someone who didn't care as much wouldn’t be willing to incur the legal cost of sending the same signal.
4. Notwithstanding the singer’s veneer of altruism for other women (“I might’ve saved a little trouble for the next girl…”), the same signal might serve as a warning to other women to back off her man. The deliberate act of property destruction is thus a species of strategic tort. Still, whenever I start thinking about the signals sent by this act, I can’t help but return to the one signal that drowns out all the others…
5. This girl’s a psycho.
Friday, November 09, 2007
More on the Writers’ Strike
Most of these points will be familiar to economists, but I hope my reiterating them is useful to others.
1. Like any strike, this is a classic case of people fighting over the division of a pie while the pie shrinks. The pie is the huge gains from trade that result from writers and producers working together, and every day that passes without a contract represents more unrealized gains from trade. Both sides lose as a result.
2. That does not mean it’s irrational or wrong for the writers’ union to strike. The gain they get from a larger slice of the pie could outweigh their losses during the strike period; clearly, the union leaders think so. Moreover, the situation is symmetrical; either side could end the strike by acceding to the other side’s demands. A strike occurs when both sides play hardball.
3. In general, unions drive wages above the competitive (market) rate, and this is why economists often don’t like them. A union is like a cartel, with many of the same ill effects, including underproduction. However, in this case, the producers are also negotiating as a bloc. I’m not sure what loophole in antitrust or labor law allows them to do so, but it’s common knowledge that they do. So what we’re looking at here is essentially a bilateral monopoly: one bloc of buyers, one bloc of sellers.
4. The bilateral monopoly emphasizes, again, the symmetry of the situation. Both sides have each the other over a barrel. A clear victory by either side would likely be inefficient. Set writers’ compensation too low, and writers will write too little; but set writers’ compensation too high, and producers will produce too little (and hire too few writers). Either way, we don’t get as much entertainment output as we should. Some writers on the margin could be shooting themselves in the foot by demanding too much, inasmuch as they won’t share in the higher compensation if they are not employed.
5. The efficient level of compensation for writers is far from obvious to me. This is why I find the ideological rhetoric employed by both sides, but mostly by the writers’ union, frustrating. Maybe the writers are getting paid too little, but I haven’t seen especially compelling evidence one way or the other. I’ll grant that insiders might have such evidence, but I doubt the rank-and-file know much more than I do.
6. Probably the best evidence I’ve seen that writers’ compensation should be higher than producers will agree to is the actions of writer-producers like show runners. Given their dual role, writer-producers were forced to decide which side of the picket line to stand on; on Wednesday, about 100 of them sided with the writers. Since writer-producers share in both the gains and losses from giving writers higher compensation, they seem relatively well-positioned to know what level of compensation would maximize the joint gains from trade. On the other hand, the article doesn’t state how many writer-producers did not side with the writers. Also, I wonder about the extent to which ideology and a sense of solidarity, rather than a concern with their own total compensation, contributed to their decision.
UPDATE: More here.
Thursday, November 08, 2007
Unions in Hollywood
The big news in my corner of the world is the writers’ strike. And I do mean my corner; CBS Studio Center is located just one-half mile down the road from my home, and I walked past the picket line yesterday on my way to get a sandwich at Subway.
So it seems only right that I should comment on the strike, and I do have some thoughts – but most of them aren’t conclusions. What makes it difficult to analyze the situation is my confusion about a more basic question: why are unions so powerful in the entertainment industry, when unions are generally weak and in decline in most other sectors of the economy? If you’re familiar at all with the entertainment industry, you’ll have realized that virtually every profession in it, from the actors to the writers to the directors, is unionized.
When I’ve posed this question to non-economist friends (including some in the industry), they have often pointed to various unusual or unique features of entertainment, such as its heavy reliance on creativity or its tendency to create superstars. But these features don’t really explain anything for me. Yes, the industry does rely on creativity; yes, it creates superstars; but why would these things make unions more powerful? There are missing links in the economic argument.
I have a hypothesis, though I’m not terribly confident about it. The entertainment industry is characterized by projects – films and TV shows – that require shifting constellations of players (studio, actors, director, writers, etc.). This is what makes the Kevin Bacon game fun – you can connect any actor to any other actor via a sequence of projects. I think this structure might enable a union-based equilibrium that would not be sustainable in industries with a more traditional structure. Imagine a studio trying to run a non-union production. Unless it’s doing a low-budget independent film, chances are it will want to employ at least some union members – if not now, then in some future project. But those players won’t participate in this project if it’s non-union. Why not? An actor – just like the studio – might want to do one non-union project, but he also wants to take part in future union projects. If you’re a union member, you can get kicked out for taking non-union jobs. The same goes writers and directors. While any given player – studio, director, writer, actor – might be willing to go non-union for a single project, they avoid doing so because they could get blackballed on future projects that require union participants.
Thus: Lots of people stay in their unions (by avoiding non-union projects) so they’ll be able to work in future projects that require union players; and future projects will indeed require union players because so many people are staying in their unions. Yes, it’s circular, but circularity is the essence of many an equilibrium: you drive on the right because everyone else drives on the right, and they drive on the right because you, among other people, are also driving on the right....
Anyway, that’s just my best guess. As I said, it’s really a mystery to me. It makes me feel better that Tyler Cowen is also perplexed by the power of unions in Hollywood. Feel free to offer alternative hypotheses in the comments... but if you do, be specific about the mechanism. I'll offer more thoughts on the strike in future posts.
Sunday, October 14, 2007
On Reaping What You Sow
The new CW television show “Reaper,” in addition to being relatively funny, also raises an intriguing theological question. The premise of the show is that a 21-year-old slacker is the Devil’s bounty hunter. Apparently souls escape from Hell from time to time, and our hero’s job is to capture them.
Now, what makes it possible for the audience to root for a guy who works for the forces of darkness? I love anti-hero shows, but they don’t seem to find success on any channel besides FX and HBO. (Seriously, try to think of any successful anti-hero show on a broadcast network.) What makes Reaper's protagonist sympathetic is that what he’s doing isn’t really wrong. Evil people deserve to go to Hell, so putting them there is ultimately a respectable calling.
And thus the theological question: In what sense is the Devil evil? After all, he provides punishments for dead sinners, as well as strong incentives for the living to be good. Despite the alleged enmity between God and Satan, it seems an awful lot like God has simply kept the carrot in-house while outsourcing the stick.
Wednesday, July 04, 2007
Hello, Jonah
As I mentioned earlier, I plan to perform a song with each of the lectures that I give at the upcoming IHS Liberty & Society Seminar. You might call it a silly indulgence, but I peg it as simply good, clean fun. Done right, songs constitute good pedagogy, too. I've tried to write mine so that they reinforce the themes of my lectures.
I've already blogged about two of the songs that I plan to perform, Monster, and The Interstate Commerce Blues. I wrote a third song, Hello, Jonah, to accompany my last lecture, Living a Life of Liberty. Both the song and the lecture offer a particularly apt message for the 4th of July: Friends of liberty find it difficult, but rewarding, to both live in this imperfect world and live up to their principles.
Verse 1:
Well, hello, Jonah! And—whaddya' know?—
I see Geppetto and Pinnochio!
It's gettin' crowded, from head to tail.
Guess we're all livin' in the belly of the whale.
At least it's cozy, and nice and warm,
And it gives us shelter from the ragin' storm,
N' though I smell trouble, I can say at least,
I'm not deeper in the belly of the beast.
Refrain 1:
We stumble through this world of darkness, pain, and doubt.
We suffer in this prison, we struggle to get out.
With strivin', strength, and study, we might finally find a way.
To flee the night and finally see the day.
Verse 2:
Hey, now, Geppetto, what's that you've got?
As ideas go—hah!—I'd say that's hot.
Count me in! I like your plan,
To burn the belly of leviathan.
Thank you, Jonah, I liked your prayer.
But will you now please get over here.
You've got to labor, and not just wish,
To get out of the belly of the fish.
Refrain 2 (same as refrain 1 but for last line):
. . .
To join the fight to win the light of day.
Verse 3:
Hurray, brothers! We're finally out!
Hallelujah sisters! Raise a joyful shout!
From hell below we've now been hurled.
But we're still livin' in the belly of the world.
Refrain 3 (same as refrain 1 but for last line):
. . .
To seize the light and make a brighter day.
Tuesday, July 03, 2007
A Shout-Out to Bryan Caplan
I recently enjoyed catching up with Bryan Caplan, as we were both teaching at the Institute for Humane Studies' Wake Forest Liberty and Society seminar. I've known Bryan for years, but not seen him for quite a long while. You have probably heard of him thanks to his prominent new book, The Myth of the Rational Voter, or via his posts on the widely read EconLog.
I owe Bryan a "thank you" because he suggested a helpful edit to the supply/demand charts that I used to explain the origin and development of government services. I should also note, both as good scholarship and because it proves an interesting coincidence, that some years ago Bryan wrote a blog post explaining the origins of statism in a manner congruent with my own. He there said, in relevant part:
[S]cale economies are weak now, but things used to be very different. States emerged at a time when markets were too small to sustain more firms. Over time, the economic rationale for monopoly has grown weaker and weaker. Competition could work now, if you gave it a chance. But the state doesn't care about economic rationales. As long as it can credibly threaten to put new entrants in jail, its monopoly endures.
Another interesting co-incidence between Bryan and me: He's written a graphic novel, Amore Infernale, about (inter alia) the transformative power of music, whereas at the same IHS seminar where we both recently taught, I performed a couple of libertarian-themed tunes. Granted, Bryan has written about how a song can literally raise hell, whereas I've at best managed only to figuratively raise a little of it. But, still, we both evidently enjoy mixing art and ideas.
I've got another IHS seminar coming up next week—this time at Bryn Mawr. I'm looking forward to hanging with my co-blogger, Glen Whitman, and other old friends who'll be serving on the faculty. I believe that Glen plans to have us blog the seminar, as we did back in 2005. If so, you might get live reports about the three musical performances I've got planned: The Interstate Commerce Blues, (with the EU verse, optional), Monster, (which I didn't perform at Wake Forest), and "Hello, Jonah," (a song I've yet to blog about).
