Tuesday, July 15, 2014
Sports, Music & Life On The Margin
As published in The County Times (http://countytimes.somd.com) in June 2014
When navigating the precarious and powerful margin, I suppose the trick is to keep your marginal utility in the black and your externalities positive. Or, for this article, be like the rock star, not the billionaire owner.
By Ronald N. Guy Jr.
In economics, the margin is magic. It’s Disney World, the Super Bowl, a Rolling Stones concert, Mardi Gras, a golf major with Tiger Woods in contention (remember those?) and, closer to home, the Tiki Bar opening. The margin is where the action is and where the cool people hang. Be there or be square. If you’re not there, you’re not anywhere. The margin – it’s all that. Who knew?
Without getting too technical (hopefully) and gouge-your-eyes-out boring, the margin is about real-time decision-making by producers and consumers and the value – measurable or estimated – of those decisions. Marginal cost, a good’s variance in total cost for changes in quantity, determines if, for example, a producer should allocate an additional shift to a manufacturing line. For consumers, marginal utility measures the benefit – joy, fun, practical usage, etc - derived from a good. When Mick Jaggar wails through the Stones’ classic “Satisfaction”, he’s a man desperate marginal utility via sex, less commercialism, etc.
Complicating producer and consumer margin-thinking is the law of diminishing returns/utility. It says that if Ford blindly adds labor to manufacturing, the labor will gradually lose efficiency and eventually be completely counter-productive. Speaking more plainly, a beer on a warm summer’s day is a no-brainer - tremendous marginal utility/satisfaction; the eighth, though, may be less “refreshing.” Alas, more is not always better.
And then there are the externalities realized from margin decisions. The Nats’ move to D.C. was an economic boon for MLB and the town, but the team’s presence has created an enormous social benefit – a positive externality – for the community. Conversely, our beer drinker’s decision to consume to excess will likely have an adverse impact – a negative externality – on anyone in his sloppy, drunken presence.
That’s a bunch of dribble for saying that decisions to do stuff - buy, sell, produce, consume, play, work, etc – or to not do stuff – remain idle, pass, forfeit, etc – have tremendous influence (marginal utility) on our lives and the lives of those around us (externalities). At this point I assume the power of the margin has you researching economic theory – provided you’re still awake. Anyway…
Margin-based activity does not normally consume my thoughts (and so what if it does?). However, recent considerations of a margin-frequenting musician and a billionaire owner had me dusting off old economic lessons (for good or ill).
The guitar-harmonica-bass wielding rock star is Sheryl Crow, an artist who didn’t achieve mainstream fame until her early thirties (a late bloomer in her field), overcame breast cancer in 2006 and a scary bout with a benign brain tumor in 2011. Crow certainly faced moments on the margin where she questioned her professional future and the value (or wisdom) of continuing her career. But Crow never let her guitar rest, a decision that indicates music retained a marginal utility too great to abandon. For local fans, the positive externalities from her determination reached an apex during a recent concert at the St. Leonard Fire Department. Had Crow chose differently at the margin, there would have been no benefit for a worthy local cause, no dancing, no smiles and no memories. There would have only been silence.
On the other hand, Daniel Snyder, billionaire owner of D.C.’s professional football team, isn’t navigating the margin with Crow’s skill. The name of Snyder’s beloved team is under assault - the result of rightful social progression, evolution of language and careful consideration of our nation’s sometimes troubling history. To date, Snyder has consistently chosen defiant opposition and refused meaningful discord. It is an unfortunate position steeped in misguided nostalgia and emotion, a flawed formula for the margin, a place committed to unemotional, unbiased analysis and identifying a moment’s optimal alternative. The team’s name will change - eventually. In the meantime, Snyder’s clenched fist of skewed pride will create increasingly greater negative externalities for his organization, its players and fans of professional football.