Thursday, September 24, 2009

Non-Sports Post

Non-Sports posts should be sparse on this site and I plan to follow that rule. However, today I read one of the more articulate explanations I've heard on incentives and investment. I'm generally not a fan huge bailouts of the auto industry or investment firms that take bad risks. What does this really do for us? Responsibility is simply shifted away from those firms and no one learns their lesson. While the bank failings are bad, bailing them out doesn't make us better off in the future, and that's what we should be focusing on now. That is the general idea behind Harvard Professor Jeffrey Miron's Testimony before the House Financial Services Committee. While it's not sports, I think it's an important lesson that can be broadened to numerous places not only in society and democracy, but also the incentives in sports and sports business. Dr. Miron also has a great blog called Libertarianism, from A to Z.

2 comments:

  1. However, the incentives are only altered if the current bailouts increase the likelihood of future bailouts. One could argue that the negative public reaction to the current round actually makes future bailouts less likely than they were 18 months ago. I'm not sure I would make that argument, but I also wouldn't make the argument that bailouts are more likely than they were in the past.

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  2. I wouldn't disagree with you there. But I'm not sure I should be subsidizing other people's bad investments. The money comes from somewhere, and that usually means tax dollars. I don't necessarily think bailouts are more likely, but I don't find them to be particularly productive.

    In the auto industry, bailouts essentially prolong bad business. Back in the 70's, American companies were bailed out and in return continued to produce crappy cars. While it may save jobs in the short run, it reduces competition in the long run similarly to what a subsidized healthcare plan would do. I really hope the government keeps an eye on the workings of auto companies to ensure innovation and competition is healthy.

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