2019 Women’s World Cup

The USA has won the 2019 Women’s World Cup (WWC) for the second consecutive time and the fourth time over all.  The have been eight WWC and the USA has four golds, a silver, and three bronzes.  We have team to be proud of.

There has been much talk about equal pay for the US national teams.  Here is a story from Business Insider (BI) published a few years ago with some details.  It appears that a chant for equal pay broke out after the USA won the WWC final against the Dutch.  What is the rationale for such a recommendation?  Is it equal pay for equal work?  No, none of the women would make the men’s team.  Is it revenue generation?  Perhaps. The WWC does get high TV ratings in the US.

As of 2017, the 2015 FIFA Women’s World Cup Final was the most watched football  [soccer] match in American history with nearly 23 million viewers,[25] more than the 2015 NBA Finals and Stanley Cup.[26] It was also the most watched Spanish-language broadcast in tournament history.[25] More than 750 million viewers were reported to have watched the tournament worldwide.

The total revenue, however, generated by the WWC is minuscule compared to the World Cup.  The same Wikipedia item tells us:

The 2015 Women’s World Cup generated almost $73 million, the 2018 men’s tournament generated an estimated $6.1 billion in revenue. [Emphasis added]

We could find similar numbers for club soccer.  It doesn’t seem that you would get far towards equal pay using revenue generated as a rationale.  As a related issue, the national team can outbid clubs for women but not men.

The success of the women’s team is more reasonable argument for equal pay.  It appears from the BI story (we expect all the prices have gone up) that the US men’s and women’s teams do earn about the same.  The US women win almost all of their matches.  The US men do not.  The US women win the WWC.  The men didn’t even qualify to the last one and have won eight of their 32 matches in the World Cup.  So, using the BI chart, and saying that the women win 20 and the WWC and the men go ten and ten and miss the WC then the men get $182 K and the women get $174 K.  We could argue about the exact details and they are different than they were in 2016 but the structure looks close to right to us.



TV Pricing And Structural Problems

We went to check out the Women’s World Cup third place and championship game because some the previous games have been on FS1 and others on Fox.  When we turned on the local Fox station DirecTV directed us to this.  It says in part:

We [DirecTV and ATT]  had hoped to prevent Nexstar from removing its stations from your TV channel lineup. We even offered Nexstar more money to keep their stations available. However, Nexstar simply said no and chose to remove them instead. By doing so, Nexstar has put you in the center of its negotiations.

Nexstar is

Nexstar Media Group is one of the largest local TV station operators in the country. With the reach of 174 full power television stations in 100 markets addressing nearly 38.7% of US television households, and a diversified, growing digital media operation, Nexstar Media Group offers superior audience engagement across all media devices and local broadcast television’s unrivalled influence on consumers’ purchasing and political decisions.

Nexstar has a different story on the negotiations:

Nexstar has been negotiating in good faith to establish a mutually agreeable contract with AT&T/DIRECTV and has offered AT&T/DIRECTV the same rates it offered to other large distribution partners with whom it completed successful negotiations with in 2019 to date.  Over the past 20 months alone, Nexstar has successfully renewed more than 390 distribution agreements with cable providers for the carriage of Nexstar’s stations.  Nexstar would like to continue to try to reach a fair agreement with AT&T/DIRECTV and allow its viewers to receive their local stations again.

Well, it is obvious to us that both DirecTV and Nexstar have put us at the center of their negotiations.  They have done it during one of the time sensitive shows that we don’t want to miss.  We feel like it is The Donald and China again.  It both cases we are human shields.  We don’t like it.

One thing we do like is the story.  It tells us that Nexstar and DirecTV are under great economic pressure from other sources.  Everyone knows they are losing viewer and/or subscribers who are cutting the cable.  Good!  Markets do run at the margin.

TV has serious economic problems because the markets have structural problems.  We have free TV that sells ads to make a profit.  Of course, many of us (most would be our guess) pay to get it over cable and satellite for a fee.  Those providers have strange pricing systems that bundle stations and strongly advantage new subscribers while disadvantaging folks like us that don’t like to change.  Then there are a bunch of Internet services that don’t tell you much about the service. You need to ask a user or sign up and figure it out.  For those of us that don’t like to leave it is a big turn-off.  Consumers are getting more savvy (even us, a little) and the markets will shake out but it will take time.   We will see more transparent pricing soon but we will be stuck with low entry prices.

Not A Surprise

We saw a link to this on Facebook.  We don’t know if the study is bona fide or not but the analysis is another one of those surprises that does not surprise anyone that actually thinks about the question.  Perhaps the 44th president was surprised.  The study was comparing the longevity of women that owned horses to those who didn’t.  It doesn’t mention men.

By the end of the study, they found surprising results. Women who owned a horse lived for 15 years longer. This result was true for women of different ages and nationalities. The scientists even looked at data from 50 countries to see if the results were accurate. It turns out that owning a horse is extremely good for your health. [Emphasis added]

Well, we are pretty sure that owning a horse implies wealth and exercise.  Both of those things are good for your health.  Charles Murray has shown the connection between wealth and health and Coming Apart.  The connection between excise and health seems obvious.  It is not the horse.  It is the horse that is a proxy for other things.  For example, we predict that almost all horse owners have a dog.  The dog is equally unlikely to be the cause of longevity.  If you want to live longer walk up the stairs instead of buying a horse.

Postal Service Allocations II

Recently we wrote that the arguments put forth by The Donald and others that the US Postal Service (USPS) was giving Amazon a subsidy were unconvincing because fixed cost allocations are arbitrary.

Sidebar One: We use first person plural, Sidebars and don’t cite ourselves.  We don’t have that many posts that you can’t look and check.  That is how we roll.  End Sidebar One.

We have changed our mind and concluded that The Donald and others are not just unconvincing but they are wrong.  In looking at the evidence we see that the USPS has excess capacity because there is less first class mail.  The USPS has capacity and Amazon has packages.  The USPS is using Amazon to support first class mail rather than the other way around.  We should salute a not-for-profit organization for making such astute business decisions.

Sidebar Two: An interesting question is what is the extent of the USPS’s fixed costs.  Do they, or realistically, to what extent should labor costs be included.  There is a nice research opportunity there.  End Sidebar Two.

There are reasons to be upset with the USPS.  The Amazon deal is not one of them.

Postal Service Allocations

Allocating fixed costs is a really, really tricky thing.  Arthur Thomas first identified the problem of arbitrary allocations back in the seventies.  To our knowledge his conclusion that the allocation of fixed costs must be arbitrary has not been gainsaid in forty plus years.  The allocation problem leads to lots of controversies about prices in areas with high fixed costs like drugs and airlines.

The latest example of the allocation problem is Amazon and the US Postal Service.  Josh Sandbulte, writing in the WSJ says:

In my neighborhood, I frequently walk past “shop local” signs in the windows of struggling stores. Yet I don’t feel guilty ordering most of my family’s household goods on Amazon. In a world of fair competition, there will be winners and losers.

But when a mail truck pulls up filled to the top with Amazon boxes for my neighbors and me, I do feel some guilt. Like many close observers of the shipping business, I know a secret about the federal government’s relationship with Amazon: The U.S. Postal Service delivers the company’s boxes well below its own costs. Like an accelerant added to a fire, this subsidy is speeding up the collapse of traditional retailers in the U.S. and providing an unfair advantage for Amazon.

Later he partially admits to the allocation problem:

But with a networked business using shared buildings and employees, calculating cost can be devilishly subjective. When our postal worker delivers 10 letters and one box to our home, how should we allocate the cost of her time, her truck, and the sorting network and systems that support her? What if the letter-to-box ratio changes?  [Emphasis added]

Now if Josh changed the bold selection to is arbitrary we would have nothing to talk about.  But he didn’t so Josh appeals to authority:

In 2007 the Postal Service and its regulator determined that, at a minimum, 5.5% of the agency’s fixed costs must be allocated to packages and similar products. A decade later, around 25% of its revenue comes from packages, but their share of fixed costs has not kept pace.

So Josh seems to think that fixed costs should be allocated based on revenue.  It is one of many arbitrary choices.  Then he cites Citigroup (the link connects to the company rather the report) as concluding it should be $1.46 more for each package.  Since Josh didn’t connect to the report we can’t say anything other than there are lots of ways to allocate fixed costs and Arthur would say it is impossible to prove any of them right.  We side with Arthur rather than Josh on this one.


New York Tuition

This is going to take several posts.  Governor Cuomo announced (h/t Instapundit):

New York will be the only state in the country to cover four-year public college tuition for residents after the program was included in the budget package approved Sunday night.

The state’s Excelsior Scholarship program will be rolled out in tiers over the next three years, starting with full coverage of four-year college tuition this fall for students whose families make less than $100,000.

The income cap will increase to $110,000 in 2018 and $125,000 in 2019.

It will cover 80 percent of NY residents.  We are trying to find out more information as the details always matter.  For now let’s consider demand and pricing.

Yes, demand curves slope downward to the right so at a price of zero demand will be higher than it currently is.  The current price is $6,470 so this will have a big impact on demand and the NY budget.  If all of the out-of-state and international enrollment is undergraduate then NY undergraduate headcount enrollment is about 360,000.  Taking 80% and making a big adjustment for part-timers, let’s say there are 200,000 undergraduate full-time students in the system. This would cost 50,000 * $6,470 in the first year or $323 million.  That would explain the entire 6.3 percent increase and then some.  Of course, people don’t complete in four years so our estimate might be high but it seems reasonable to us.

So there will be much greater demand for SUNY from NY residents.  That means more rejections by admissions.  High demand schools will be able to raise admission standards.  Those schools will be happy but the rejected folks will not.  There will also be the within school demand to consider.  Will these financially motivated folks be interested in financially rewarding majors?  That seems likely.  That means that places like the business schools are likely to see increasing demand.  Unless they get resources they will find ways to turn away students.  We know at least one business school that uses a sliding admission standard to admit the number of students they want as juniors.

Pricing is another way that business schools and other in demand programs use to control demand and provide resources because most in demand programs are high cost.  They are, in part, high cost because the faculty are in demand and, consequently, high priced.  Business schools have surcharges to pay the cost of the programs and discourage less motivated students.  We wonder how the NY scholarships will deal with such surcharges.  It is like insurance.  If the students don’t pay they they won’t care.  If the state pays then there will be a great incentive for programs to add surcharges.

In short, making college free is going to put incredible stress on the SUNY System.  There will be more rejections in admissions.  There will be stress on programs to get resources or control numbers.  Given that the state budget increase seems insufficient to pay for the “scholarships,” it is going to be a hard year at SUNY schools.  We are glad we are retired.  We can tell recruiters for any SUNY program in advance that we are not interested at any price.

Henke’s Idea

Steve Hanke at Cato has a good idea:

To stop Venezuela’s death spiral, it must dump the bolivar and adopt the greenback. This is called “dollarization.” It is a proven elixir. I know because I operated as a State Counselor in Montenegrowhen it dumped the worthless Yugoslav dinar in 1999 and replaced it with the Deutsche mark. I also watched the successful dollarization of Ecuador in 2001, when I was operating as an adviser to the Minister of Economy and Finance.

It is a good idea but monetary policy is not the only lever available and inflation is not the only problem in Venezuela.  Dropping Chavismo,

Sidebar: WordPress really wants to convert Chavismo into Charisma.  We hope that it stays as we wrote it.  End Sidebar.

Venezuelan socialism, would be a great idea.  The advantage of Hanke’s idea is that it is easy to implement but a real blow to the current Yankee hating administration in Venezuela.  Renouncing Chavismo would be more important but way more difficult.  The current state of affairs may lead to both.