Americanly Yours

Promoting Free Markets, Free Trade, and Freedom!

A Goal for Failure – Why Everybody Loses When The Losers Win

June 04, 2010 By: Phred Category: Uncategorized

My friend Ben sent me an article about this story.

The article is about a new rule for an Ottawa youth soccer league which stipulates that if a team leads by five goals, they automatically lose!  The league previously had a “mercy rule” which sought to prevent humiliation by calling the game when a team led by 5 and awarding that team with the victory.  There is at least some sense in this type of rule–there is definitely an argument against making kids feeling bad about themselves by allowing a team to lose by 10, 20, or 30 goals.

When I played baseball, there was a sort of mercy rule: no team could score more than 10 runs in an inning.  But even so, scoring a lot of runs didnt cause a team to lose–it didnt even cause the game to be called (I remember beating the Spartans 28-3).

But, this new rule is just plain wrong.  It uses perverse incentives to send children the wrong message, punishing good teams and rewarding bad teams.

Under this rule, a team that is winning 4-0 is in the lead, but if they score one more goal, they are losers.  But, what about that poor child who excitedly charges down the field and scores the fifth goal for the team.  By doing what he has been taught by his coach, he has just cost his team their victory.  Surely, his friends will give him hell after the game and make him feel bad for scoring.

Even worse: under this rule, a team that was down by 4 goals could easily kick the ball into their OWN goal–AND GIVE THEIR TEAM AN EASY WIN!

This isnt what youth sports are about.  Youth sports are about teaching children to work with others, as a team towards a common goal. What kind of message does it send to children to award the team with the fewest points the victory and turn the team with the most points into losers?

We can compare sports to economics in one important regard.  Wins and losses are little different from profits and losses.  Just as a profit is a signal to a company that it is succeeding and doing things right, a win is a signal to a team that it is succeeding and doing things right.  The opposite is true for losses.  People take actions that tend to offer them the most rewards; a profitable company will repeat the actions that brought it these profits, and similarly, a victorious team will repeat the actions that made it victorious.  I repeat:  What kind of message does it send to children to award the team with the fewest points the victory and turn the team with the most points into losers?

Dubbs Galt commented to me about this issue: “Today, the message from the youth sports egalitarians is that winning and losing is everything – only that any drive for winning should be replaced with a feeling of shame for making someone else lose. These bastardizers of morals want everyone to feel the benefits of an unearned effect while completely dismissing its relationship to any real cause.

As a both a former player and coach of youth baseball, I can promise that a day later kids don’t remember that they lost 11-5. But, the lessons you learn from preparing for competition, laying it on the line during the game, and even the lessons you learn from losing badly…..these lessons last a lifetime.”

This rule sends the wrong message.  It turns losers into winners and makes winners into losers.

Imagine if a similar rule was used in other sports.  A similar rule in baseball might cause a child to get booed by his own teammates after he hit a grand slam (which cost the team the game).  A similar rule in basketball could cause a child who mistakenly stepped behind the 3 point to cost his team the game.  This is insanity.

I am glad to report that the entire world hasnt gone completely stupid, however.  When I spoke with former New Mexico State QB, Carl Scaffidi about this rule, he told me “if I was a coach, I would strive to go 0-20 with 100 goals.”

Americanly Yours,

Phred Barnet

Please help me promote my site:

Share on Facebook

Become a fan on Facebook

Bookmark and Share

Our Perverse Government’s Perverse Actions Lead To Perverse Incentives

October 27, 2009 By: Phred Category: Uncategorized

How exactly did we get to the point where government owned banks started charging credit card holders fees for paying off their balances every month?

The government passed laws like the Community Reinvestment Act which essentially mandated banks to loan to people who would not have been able to obtain loans otherwise.  Then, the government and the Federal Reserve created money out of thin air and lent it to banks at absurdly low rates.  Flush with new and cheap money, these banks massively increased their lending to “sub-prime” borrowers (begin bubble).  With the money supply growing at unprecedented rates in the 1990’s and this decade, there was always enough money for banks to make loans.  Borrowers were able to take out second mortgages at very low rates.  Home builders rapidly built houses to meet soaring (bubble-induced) demand.

As with all bubbles, this one burst, leaving home builders unable to sell newly built houses and borrowers unable to meet their obligations.  Banks had sold off the rights to their lender’s payments so they would have more money to make new loans.  This left the banks in the same boat as homeowners who could not make their payments.  But, while homeowners and home builders had to file for bankruptcy and sell off their assets to pay their debts, the banks used their lobbyists, fear, and their ownership of the Federal Reserve to convince our government to bal them out.

The government and the Federal Reserve then printed up a bunch of money–they simply created it out of thin air–and gave it to the banks in exchange for ownership.

This happened on October 3rd, 2008.  I can understand the government’s perverse rationale that led it to bail out these banks.  What I can not understand is why, over a year later, the government continues to own large stakes in these banks.

The government has now taken to regulating the salaries of banking officials, as well as the actions and practices of these banks.

So, it comes as no surprise to the observant that the government would use its power and control to create perverse incentives.

Bank of America and Citigroup–two firms now under the ownership of the federal government have begun implementing new fees.  These fees are not on late payments, gong over one’s credit limit, or cash advances.  Instead, these government owned banks have announced fees for customers who regularly pay off their balances.  Customers who leave monthly balances on their cards will not be charged the fees.

A fee is similar to a tax (especially if t is levied by a government owned entity).  Both taxes and fees use pricing to create incentives to change behavior.

Because Bank of America and Citigroup are owned by the government, a fee on those who pay off their balances regularly can be viewed as a tax on them.  Because those who leave monthly balances on their cards are exempt from these fees, this can be viewed as a subsidy for those who leave balances.

Our government is creating perverse and dangerous incentives: they are incentivizing debt and discouraging good and proper financial habits.

But, you cant hardly be surprised by this.  After all:  our perverse government’s perverse actions do tend to lead to perverse incentives.

Americanly Yours,

Phred Barnet

Please help me promote my site:

Share on Facebook

Become a fan on Facebook

Bookmark and Share