Coyote Blog

Who says that professional sports have nothing to teach businesses?  Pro sports team owners have perfected the art of promising the world to local citizens to get taxpayers to pay for their billion dollar stadiums (which in the case of NFL teams are used approximately 30 hours a year).  The Miami Marlins in particular have perfected the art of building a good team, leveraging its success to get a new stadium deal, and then immediately dismantling the team and buying cheap replacement players.

In the business world many corporations have taken the Miami Marlins strategy.  Tesla took $3/4 of a billion dollars form NY taxpayers to build a factory in Western New York, only to employ a tiny fraction of the promised employees.  In fact, one academic studied all the relocation subsidies NY has made in the recent past and found none of the gifted companies fulfilled their employment promises.  In Mesa, AZ there is a factory that I call the graveyard of cronyism where not one but two sexy high-profile companies have gotten subsidies to move in (FirstSolar and Apple) only to both bail on their promises after banking the money.

So it should come as zero surprise that the Trump-facilitated crony Foxconn deal in Wisconsin is following the same path.

Foxconn Technology Group, a major supplier to Apple Inc., is backing down on plans to build a liquid-crystal display factory in Wisconsin, a major change to a deal that the state promised billions to secure.

Louis Woo, special assistant to Foxconn Chairman Terry Gou, said high costs in the U.S. would make it difficult for Foxconn to compete with rivals if it manufactured LCD displays in Wisconsin. In the future, around three-quarters of Foxconn’s Wisconsin jobs would be in research, development and design, he said.

They added this:

The company remains committed to its plan to create 13,000 jobs in Wisconsin, the company said in a statement.

Yeah, sure.  Anyone want to establish a prop bet on this one?  I will take the under.

The other day Megan McArdle wrote an article entitled "The CFPB Fight Is Completely Pointless...Why is either side spending political capital for brief control over this agency?"  In short, the the folks on the Left who mostly populate the Elizabeth Warren / Barrack Obama created agency argue that deputy director Leandra English should become acting director after the current director stepped down.  President Trump argues he should be able to appoint the acting director (as the President would for any other agency) and appointed CFPB critic Mick Mulvaney.

My heart thrills as readily as anyone’s to the sight of a doomed soldier playing Horatius at the Bridge. But at least Horatius Cocles had a purpose: He secured an orderly retreat, allowing the army to live to fight another day. What, exactly, do [Leandra] English and her supporters hope to achieve, other than a spectacle for wonky Washingtonians?

The most they can get is a brief period of business as usual, during which it will be hard to enact binding decisions because the legitimacy of her leadership will be in doubt. At worst, they get a humiliating smackdown from the courts, cementing their place in history as elitists who thought they were above petty restraints like elections or the Constitution.

And in the broader political picture, if you think Mulvaney is a bad, dangerous man who will privilege the interests of rich bankers over those of ordinary Americans, you’d probably rather have him running the CFPB than in his current job -- overseeing the entire federal budget. Even if English wins and sends him back to OMB, this seems like a Pyrrhic victory for the left.

While most everyone else on the Internet seems to be able to automatically intuit everyone else's internal motivations, I don't claim to have that ability.  So I will offer one possible motive why Leandra English might see personal benefit from this otherwise pointless struggle.

It is no news to say that the US has arrayed itself into multiple tribes that hate each other.  The election of President Trump has only accelerated this.  Trump is so disliked by those on the Left that folks on the Left can score major points with their tribe by publicly opposing him, even when their effort is doomed and ultimately pointless.   Wendy Davis is a good example of a politician who greatly increased her status in the Left-tribe with an ultimately doomed filibuster of an abortion bill in Texas (so much so that a hagiographic movie is being made about her).  I have wondered whether several of the judges who have temporarily halted controversial but probably legal executive actions by Trump were not motivated as much by playing to the audience in their tribe as they were by making a thoughtful legal decision.

Which brings me to the agency problem, which Wikipedia defines thus:

The principal–agent problem, in political science and economics, (also known as agency dilemma or the agency problem) occurs when one person or entity (the "agent") is able to make decisions on behalf of, or that impact, another person or entity: the "principal".^[1] This dilemma exists in circumstances where agents are motivated to act in their own best interests, which are contrary to those of their principals, and is an example of moral hazard.

Common examples of this relationship include corporate management (agent) and shareholders (principal), politicians (agent) and voters (principal), or brokers (agent) and markets (buyers and sellers, principals).^[2] Consider a legal client (the principal) wondering whether their lawyer (the agent) is recommending protracted legal proceedings because it is truly necessary for the client's well being, or because it will generate income for the lawyer. In fact the problem can arise in almost any context where one party is being paid by another to do something where the agent has a small or nonexistent share in the outcome, whether in formal employment or a negotiated deal such as paying for household jobs or car repairs

I think too often people define the agency problem only about economic incentives, e.g. my broker only recommends the stocks that pay him the highest commission.  But most of us are motivated by many things in addition to money.

Consider the example of a media conglomerate with multiple cable channels.  The managers of this media conglomerate are mostly of the Left.  One of their channels is called the shooting channel and focuses on gun reviews and the shooting sports.  The channel needs a new president, and it hires Hannah Progressive, either internally or from another successful media company.  Hannah is a talented media person with a proven track record of building cable channels and a perfect fit in every way except that she is disdainful of the shooting sports and groups like the NRA.  But let's say that Hannah is a true professional and can put that aside.  But what may be harder to put aside is the reaction of her peers.  She is going to get teased, maybe even bullied, by folks in her social circles.  Her peers are going to look down on her, even if she is successful (maybe especially if she is successful).  There is going to be tremendous pressure on her, both from her social circle as well as well as when she thinks about future job prospects an the industry dominated by the Left, to virtue-signal to others on the Left.  She could be tempted to shift content, alliances, advertisers,etc. in ways that signal virtue to her tribe but might alienate her current viewers and actually hurt the financial results of her company.

I frequently think about this in the context of how university presidents respond to protests, or how the NFL does so, or when seeing ESPN programming changes.  I have even seen it with programmers, working harder to impress their peers with the elegance of their code than to try to actually write things that serve the company and the customer.

From today's WSJ:

The race to woo companies has intensified as state and local governments struggle with a slow economic recovery, sluggish new business formation and job losses resulting from automation. Many older industrial cities see tax incentives as one of the few levers they can pull.

The fight to attract and retain companies “is probably as competitive as it has ever been in the 30 years I have been doing this type of work,” said Lawrence Kramer, managing partner with Incentis Group, the consulting firm that helped Riddell with incentive negotiations.

Economic-development tax incentives more than tripled over the past 25 years, offsetting about 30% of the taxes the companies receiving incentives would have otherwise paid in 2015, compared with about 9% offset in 1990, according to an analysis of incentives covering more than 90% of the U.S. economy.

By 2015, the total annual cost of these incentives was $45 billion, according to the analysis, by Timothy Bartik, a senior economist at the W.E. Upjohn Institute for Employment Research in Kalamazoo, Mich. The study looked at 47 cities in 32 states plus the District of Columbia.

Total incentives are likely higher because the analysis didn’t include some used by cities, including Elyria, such as city income tax rebates for companies.

Seriously, how absolutely pointless is this:

When Elyria Mayor Holly Brinda learned that Riddell Inc. was looking to leave this small city in northeast Ohio, she came up with a $14 million package of tax incentives and offered to lease land to the company for $1 a year.

It wasn’t enough. Riddell, which makes the football helmets used by many NFL and college players, decided to move its roughly 320 employees just over 2 miles down the road to a neighboring town, which offered its own bundle of incentives and lower corporate and individual income-tax rates.

You can't even argue you are trying to save jobs for local people, because the same people are working, just with a 2 mile delta in their commute.

One of the very earliest posts on this blog, waaaay back in 2005, was to compare local economic development spending to a prisoner's dilemma game:

politicians who are approached by a company looking for a handout for business relocation face what is called the prisoner's dilemma.  Many of you may know what that is, but for those who don't, here is a quick explanation, via the Stanford Encyclopedia of Philosophy:

Tanya and Cinque have been arrested for robbing the Hibernia Savings Bank and placed in separate isolation cells. Both care much more about their personal freedom than about the welfare of their accomplice. A clever prosecutor makes the following offer to each. "You may choose to confess or remain silent. If you confess and your accomplice remains silent I will drop all charges against you and use your testimony to ensure that your accomplice does serious time. Likewise, if your accomplice confesses while you remain silent, they will go free while you do the time. If you both confess I get two convictions, but I'll see to it that you both get early parole.  If you both remain silent, I'll have to settle for token sentences on firearms possession charges. If you wish to confess, you must leave a note with the jailer before my return tomorrow morning."

The "dilemma" faced by the prisoners here is that, whatever the other does, each is better off confessing than remaining silent. But the outcome obtained when both confess is worse for each than the outcome they would have obtained had both remained silent.

I hope you can see the parallel to subsidizing business relocations (replace prisoner with "governor" and confess with "subsidize").  In a libertarian world where politicians all just say no to subsidizing businesses, then businesses would end up reasonably evenly distributed across the country (due to labor markets, distribution requirements, etc.) and taxpayers would not be paying any subsidies.  However, because politicians fear that their community will lose if they don't play the subsidy game like everyone else (the equivalent of staying silent while your partner is ratting you out in prison) what we end up with is still having businesses reasonably evenly distributed across the country, but with massive subsidies in place.

Of course, garnering positive press releases for politicians' re-election campaigns is part of the equation as well.  Actually, the game is worse than a prisoner's dilemma game because politicians playing it enjoy all the positive benefits while the price is paid by others (taxpayers).

It would be great to ban this stuff entirely.  But you know what, Arizona already did!  In its Constitution no less.  And we still can't stop this BS.  Our Constitution reads that neither the state nor any municipality in it may “give or loan its credit in the aid of, or make any donation or grant, by subsidy or otherwise, to any individual, association, or corporation.”  This seems pretty definitive, but as I wrote here

This has been interpreted by the courts as meaning that if a state or municipal government gives money to a private company, it must get something of value back - ie it pays money to GM and gets a work truck back.  But politicians will be politicians and have stretched this rule in the past out of all meaning, by saying that they are getting "soft" benefits back.  In other words, they could subsidize the rent of a bookstore because reading is important to the community.

The Goldwater Institute in AZ keeps filing suit and has been pretty successful in blocking some of the most egregious subsidies, but it takes constant vigilance, and at the end of the day, if politicians want to throw money at private companies in order to help their re-election chances, they are going to do it.

...Is that Julio Jones's catch may be forgotten.  Best reception I have ever seen in a lot of years of watching football.  Video here at NFL site

PS-  Run the ball three times after that catch, kick a field goal, and the Falcons would be your Superbowl champions.

Tired of politics?  Want to escape for a while?  Maybe talk sports, take in a movie, play a computer game, or go to a show.  Well good luck.

Over the last year, I have turned off ESPN Radio, which I used to listen to all the time, because I got bored with all the discussion of politics and social justice.  It wasn't even that I necessarily disagreed with the content, it is just that I was tuning in to listen to discussion about the merits of various NFL defenses and not some ex-jock's views on politics.  If I want politics and social justice, I have other sources for those (I actually think there are some fascinating race and gender issues in sports, I just don't need to hear about them in every damn show).  The same thing is happening in almost all entertainment fields.  Over the last month at least a third of Engadget.com's blog posts have been purely about politics with no technology hook at all.  If you go to a Broadway show, there is a chance you will get lectured on social justice by the actors.  And God forbid one tunes into a music or movie awards show and expects to, naively, see non-political content about music and movies.  You can't pay me enough to watch the Oscars any more.

I am embarrassed to admit that I initially supported the war in Iraq (though at least I admit that rather than try to rewrite history as do many public figures).   I got swept up in the post 9/11 nationalism and wasn't very sophisticated in my thinking about such interventions.  But I also think part of the  reason for my support was because the opposition was often so irrational and, well, loony.   At least subconsciously, I must have been thinking, "I can't be on the same side with these idiots."

This was a useful experience, though, because in the years since I have frequently found myself allied with the Left on certain issues where I have been appalled by their opposition tactics.  Black Lives Matter is a great case in point.  I absolutely agree with the premise that police forces need more accountability and that the costs of the current lack of accountability fall disproportionately on African Americans.  I thought this initial BLM 10-point plan was really very good.  But ugh, their tactics.  Blocking highways and threatening drivers, where does that get us?   Or the whole tactic of forcing someone to choose between "Black Lives Matter" and "All Lives Matter" -- I mean seriously, WTF?  How is this kind of social justice rhetorical trap at all useful?  And now the movement has so much cred that it has been hijacked by the Left to support climate change legislation and all sorts of unrelated matters, so it likely will never make any actual progress on police accountability.  It would be easy to recoil from all this and shy away from my passion for increasing police accountability because my allies are so off-putting in their tactics, but my Iraq War experience has taught me that this would be a mistake.

And now, we have the opposition to Trump, and all the same loony Left tactics are emerging.  We get lectured by celebrities, and discover that the deepest threat of Trump may be the marginalization of actresses who make $20 million a picture.  We get roads blocked and public violence.    I wonder if all this is driving folks who originally found Trump distasteful into his arms?

I fear that all the oxygen is getting sucked out of the room with protests of crazy hypothetical scenarios while ignoring the real problems that are occurring already.  So everyone is focusing on women marching on Washington, despite the fact that Trump is almost certainly no worse in his personal behavior towards women than Bill Clinton and is likely, on women's issues, the furthest to the Left of all of the 16 original GOP presidential candidates.    We focus on some hypothetical future slight to women while ignoring his economic nationalism, economic interventionism, corporatism, and cronyism that is already on display with Carrier and the auto makers.

As I wrote here, the ability to criticize public figures has limited bandwidth.  Sure, an infinite number of things can be discussed on the Internet, but only a few reach a general consciousness across society.  One way to look at it is to compare it to an NFL game.  In an NFL game, coaches only have two challenge flags they can throw to challenge a bad call by the referees -- after their challenge flags are used, they are out of luck.  The Left is using up all our challenge flags on their own social justice bogeymen, and causing everyone to miss the opportunity to challenge Trump on more relevant faults (of which there are many).

The other problem with the Left's tactics is that they are not well-matched to Trump and likely will be counter-productive.  All this crazy protest is more likely to cause Trump to petulantly lash back.  This one of his worst qualities as a leader, but it is a fact all the same.  Take abortion, for example.  My gut feel is that Trump has never had any problem with abortion, and likely has supported it in the past.  Hell, he's probably secretly paid for a few.  If women's groups had gone and sat down with him quietly and said, "hey, we are worried about creeping restrictions on abortion in many states", Trump probably would have been sympathetic.  This is the Trump, after all, who mythologizes himself as a deal-maker.  But groups on the Left can't seem to do this, in part because of tribal virtue-signalling on the Left.  The Left has decided that their tactic will be to treat Trump as illegitimate, so any group that goes to talk to him is marginalized and excoriated by the rest of the Left.  So rather than sit down and work with a likely-sympathetic Trump, they head out into the streets to denounce him in the craziest possible terms, tactics that may well drive him into exactly the actions that women fear.  If abortion was a big issue for me, I would be pissed at women's groups for their bone-headed tactics.

A while back, I implied that Colin Kaepernick's refusing to stand for the National Anthem may have been in part a strategy to avoid being cut from the 49ers.

I apologize.  Even if that were true -- and it was pure speculation on my part -- he has done everyone in this country a favor.  Until a month ago, there was no ceremony much more empty than the pro forma singing of the National Anthem at sporting events.  As I wrote before,

I am not a big fan of enforced loyalty oaths and patriotic rituals, finding these to historically be markers of unfree societies.  For these sorts of rituals to have any meaning at all, they have to be voluntary, which means that Kaepernick has every right to not participate, and everyone else has every right to criticize him for doing so, and I have the right to ignore it all as tedious virtue-signalling.

In the past, people stood for the national anthem because that is what you do.  Mindlessly.  It was, for many, a brief ritual before you got to the good stuff.  It was singing happy birthday before you got the cake. (I am speaking for the majority of us, I know there are folks who have always approached the anthem as a deep and solemn rite).

But this weekend, suddenly, and perhaps for the first time at a ball game, everybody who stood up for the National Anthem at an NFL game likely thought about it for a second.  They were not standing just because that was what everyone else was doing, they were standing (or sitting) to make some sort of statement, and what exactly that statement was took a bit of thought.  Standing for a ceremony that has 100% dutiful participation means zero.  Standing for a ceremony with even a small number of folks who refuse has a lot more meaning.

So thanks, Colin.

Years ago, in Ventura County California (where I am thankfully no longer doing business), a loyal employee approached our manager and told her of a meeting that had been held the night before for our employees at a local attorney's office.  The attorney was holding the meeting mainly because he was trying to drum up business, brainstorming with my employees how they might sue the company for a variety of fanciful wage and hour violations.  Fortunately, we tend to be squeaky clean on labor compliance, and the only vulnerable spot they found was on California break law, where shifting court decisions gave them an opening to extract a bit of money from the company over how we were managing lunch breaks.

Anyway, in the course of the meeting, the attorney apparently advised our employees that if they ever thought they were about to get fired, they should quickly accuse someone in the company of harassment or discrimination or some other form of law-breaking.  By doing so, they made themselves suddenly much more difficult to fire, and left the company open to charges of retaliation if the company did indeed fire them.   In later years, we saw at least two employees at this location file discrimination or harassment claims literally hours before they were to be terminated for cause.   Since then, I have seen this behavior enough, all over the country, to believe that this is a strategy that is frequently taught to employees.

This terrible advice is obviously frustrating not only because it makes the firing process harder, but also because these charges all still have to be investigated seriously, a time-consuming process that has to involve me personally by our rules.   On at least two occasions that I can remember, we delayed a firing for cause by several weeks to complete investigations into what turned out to be bogus charges, only to have the employee do something really stupid in a customer reaction during these extra weeks that had substantial costs for the company.

Anyway, I was thinking about this in the case of Colin Kaepernick, the NFL quarterback currently employed by the 49ers but expected by many to be released (ie fired) in the coming weeks.  Last weekend he stirred up controversy when he refused to stand for the national anthem to protest treatment of blacks in America.   Personally, I barely noticed, as I am not a big fan of enforced loyalty oaths and patriotic rituals, finding these to historically be markers of unfree societies.  For these sorts of rituals to have any meaning at all, they have to be voluntary, which means that Kaepernick has every right to not participate, and everyone else has every right to criticize him for doing so, and I have the right to ignore it all as tedious virtue-signalling.

I mostly yawn and change the channel over all this, but it did make me wonder -- Kaepernick has to know that he is potentially on the chopping block.   Many folks believe that his performance last year was not good enough to earn a job on the 49ers this year.  It has been discussed on national TV for weeks, and probably for months in the local San Francisco market.  If he were to be cut, it would likely be in the next 7 days or so by the schedule the NFL sets for finalizing rosters.   So I wonder if part of Kaepernick's action the other day was to make it harder to fire him.   He and his supporters can now portray his firing as retaliation for his support of Black Lives Matters, something that would be an uncomfortable perception for any high profile organization in America but particularly in San Francisco.

The media does not like people spending money to elect non-Democrats.   That is the only conclusion I can draw from the fact that all of their articles on "dark money" seem to focus almost exclusively on the Koch brothers (who to my eye are more libertarian than Republican).  One would get the impression that the Koch's are the #1 giver of money to election campaigns, but in fact according to OpenSecrets.org they were #14 in 2014 and #49 in all elections since 2002.  Why wouldn't the media illustrate election-spending articles with someone in the top 10?  It's as if the sports media spent all its time talking exclusively about quarterback Ryan Tannehill (14th in 2015 in NFL passing yards per game) without ever mentioning Tom Brady or Drew Brees.

If the Koch brothers deserve to be excoriated for their election spending, then the organizations that give more than they must really be evil, right?  If one were cynical, one might think that the media ignores the top 8 or 10 because they mostly all give to Democrats.   Well, here is the list from 2014 via OpenSecrets.org.

Update, from a reader and via Instapundit:

Consider this: in 2013, the left wing Center for Public Integrity reported that “Four foundations run by [the Koch brothers] hold a combined $310 million in assets…” By contrast, the Ford Foundation’s endowment is more than $12 billion — about 38x larger than the Koch Foundations.

On a list of the top 100 US Foundations (by asset size), the Ford Foundation is #2. The various Koch Foundations don’t make the list, nor do they make the list of top 100 Foundations by annual giving.

Yet, the news media and transparency groups constantly harp on the Koch’s massive organization and its “insidious,” “dark money” influence on American politics, while almost completely ignoring the far larger left-wing political Foundations.

In part, this is due to the perception in the media that money from conservative/libertarian/free market leaning organizations must be tainted, while funding from left-wing Foundations is free of such bias. It may also be due to the fact that the left wing Foundations fund many media organizations — I’m looking at you, NPR, PBS, Washington Post, LA Times and others — sometimes even funding them to cover “[other people's] money in politics.”

Postscript:  If you really want dark, check out the website for hedge fund Elliott Management.   There is not a single byte of information in the publicly accessible pages, only links to contact forms.

General Electric (GE) has complained for years about Connecticut's (its current corporate home) taxation and regulatory policies.  Recently, it said it was moving for greener pastures, and was leaving for... Massachusetts?

Seriously?  This is like moving from North Korea to China to get more freedom of speech.  Boston's top state income tax bracket is perhaps a point lower than CT's but Florida or Texas have rates of zero, and a much lower cost of living and real estate.

Granted that Boston has its attractions for a company trying to change its public perception to being a technology company.  But I can't shake the suspicion this has something to do with a relocation giveaway to GE from the city and state.  GE has become one of the biggest supporters and beneficiaries of crony capitalism in the country.   I have to believe they cut some sweetheart deal that will eventually funnel a bunch of Massachusetts taxpayer money into GE coffers.  After all, if cities will throw away a half billion dollars in taxpayer money to attract an NFL team that does business for just 24 hours a year in the city (8 games x 3 hours per game), how much will politicians pay of their citizens' money to be able to list "attracting GE" as a lead bullet in their re-election talking points?

Roger Goodell is the President of the NFL, and despite huge love for the NFL itself, Goodell is hated by many, even most, fans.  At the NFL draft, which attacts arguably the biggest fans of the NFL, Goodell gets booed every time he walks on stage.  One reason for this is the decision Goodell made a number of years ago to "police" player behavior.  Tired of bad headlines about this or that player being involved in some sort of (alleged) criminal activity, Goodell decided to crack down.  No longer was it enough that the criminal justice system had a process for punishing people who break the law, Goodell wanted the NFL to be seen to be layering on extra punishment.

I said from the very beginning that this policy was fraught with problems.  If the NFL wanted a conduct policy, it should establish simple mechanical rules tied to outcomes in the justice system.  For example, a rule that says that if convicted of a misdemeanor a player would get a standard X game suspension.   Goodell's role should be limited to correcting the inevitable unfair situation where mechanical rules lead to poor outcomes.

But no, Goodell, like many smart people, fell into the trap of thinking he was smart enough to mete out punishments himself.  This has led to a real mess.  The public compares each punishment (and non-punishment) to all other such decisions and immediately get upset about perceived inconsistencies.  Worse, having established the precedent of policing conduct, he is being pushed by various vocal constituencies to police even non-crimes, like  unwelcome speech.  On average day in sports talk radio, you are as likely to hear a discussion of Goodell's conduct rulings as you are about anything on the field.

In taking over Reddit, Ellen Pao is heading into the same technocratic trap.  She has begun to ban certain forums and types of speech on the platform, but she has not established any consistent public rules for doing so other than her own judgement.  She appears to be deleting things that offend her personally (and early mass deletions of content critical of herself personally seems a really bad way to start).  And as with Goodell, two bad things are already happening (even beyond the more fundamental Reddit user issue that she is violating a core ethic of Reddit by censoring).  First, she is being called out for lack of consistency with folks saying "how can you ban X and not Y."  And second, she is apparently already getting pushed by various constituencies to be more and more aggressive at censoring certain classes of speech.   Once she established herself as censor in chief, she became an immediate lobbying target for many, many groups, and that is going to just get worse.  Just look at how much of Goodell's time is now sucked up into personal conduct issues.

I am always amazed that the media will credulously run stories against "corporate welfare" for oil companies (which usually mostly includes things like LIFO accounting and investment tax credits that are not oil industry specific) but then beg and plead for us taxpayers to subsidize movie producers.

I wish I understood the reason for the proliferation of government subsidies for film production.  Is it as simple as politicians wanting to hobnob with Hollywood types?  Our local papers often go into full sales mode for sports team subsidies, but that is understandable from a bottom-line perspective -- sports are about the only thing that sells dead-tree papers any more, and so more local sports has a direct benefit on local newspapers.  Is it the same reasoning for proposed subsidies for Hollywood moguls?

Whatever the reason, our local paper made yet another pitch for throwing tax dollars at movie producers

Notwithstanding a recent flurry of Super Bowl-related documentaries and commercials that got 2015 off to a good start, Arizona appears to be falling behind in a competitive and lucrative business. The entertainment industry pays well, supports considerable indirect employment and offers the chance for cities and states to shine on a global stage.

Seriously?  I am sure setting up the craft table pays better than catering a party at my home, but it is a job that lasts 2 months and is then gone.  Ditto everything else on the production.   And I am sick of the "shines on the world stage thing."  Who cares?  And is this really even true?  The movie Chicago was filmed in Toronto -- did everyone who watched Chicago suddenly want to go to Toronto?  The TV animated series Archer gets a big subsidy from the state of Georgia.  Have they even mentioned Georgia in the series?  Given the tone of the show, would they even want to be mentioned?

When government subsidizes an industry, it is explicitly saying that resources are better and more productively invested in the subsidized industry than in other industries in which the money would have been spent in a free market.  Does the author really have evidence that the money I would have spent to improve the campgrounds we operate in Arizona is better taken from me and spent to get a Hollywood movie shot here instead?  Which investment will still be here 6 months from now?

Arizona is one of 11 states that don't offer tax incentives, primarily in the form of income-tax credits, and that's the core of the problem. There's also no state film office to help out-of-state crews obtain filming permits, locate vendors, hire temporary staff and so on.

Arizona's tax incentives expired after 2010 and the film office closed in the wake of a recession that hit the state especially hard and necessitated tough spending choices. Although bills to revive those programs have been introduced, they're not given high odds of success in the current session as the governor and lawmakers struggle to close $1.5 billion in deficits over this year and next.

"Right now, there's nobody to call, the phone isn't being answered and nobody responds to e-mails," said Mike Kucharo, a local producer and director who serves as the state-government liaison for the Arizona Production Association, an entertainment trade and networking group. "We need a film office."

Yeah for us!  While all the lemmings in other states bid up the price of a few politicians being able to get their picture with Hollywood types on a production set, we have chosen not to play.  Good for us.  Only an industry insider clown with a straight face could say that we need a taxpayer-funded film office.  Really?  Do we need a taxpayer-funded florist office to attract flower sales?

Years ago I wrote an article calling sports team subsidies a prisoners dilemma game, where the only winning move was not to play.  The NFL has 32 teams, mostly in the largest cities.  Without subsidies the NFL would have ... 32 teams, mostly in the largest cities, and taxpayers would have saved billions of dollars.  The same is true for film:

Indeed, the number and size of incentives escalated from just two states offering $2 million in combined incentives in 2003 to 40 states offering $1.2 billion just six years later, according to the Tax Foundation.

So subsidies have gone up by over a billion dollars a year, and yet roughly the same films are being made.  This is one of the best examples I can think of where politicians are using taxpayer money to increase their personal prestige.  The AZ Republic should be embarrassed they are out front actively encouraging this behavior.

Postscript:  For all of its flaws in teaching real-world relevant business topics, the Harvard Business School was very good, at least when I was attending it, at teaching business strategy.  My memory may be fuzzy here, but I am pretty sure that "40 other groups have all jumped into this activity and have ramped up their spending by a factor of 50 in just six years and all 40 competitors are really focused on winning almost irregardless of the price they pay" is not a very good pitch for investing money in a new field.

Postscript #2:  All of this is a wonton violation of the AZ state Constitution, though of course big government advocates are really good at totally ignoring Constitutional limits on government power.  Here is what our Constitution says:

Section 7. Neither the state, nor any county, city, town, municipality, or other subdivision of the state shall ever give or loan its credit in the aid of, or make any donation or grant, by subsidy or otherwise, to any individual, association, or corporation, or become a subscriber to, or a shareholder in, any company or corporation, or become a joint owner with any person, company, or corporation, except as to such ownerships as may accrue to the state by operation or provision of law or as authorized by law solely for investment of the monies in the various funds of the state.

Update:  From the Manhattan Institute, film tax breaks return 30 cents for every dollar spent

Similar to most targeted tax breaks, movie production incentives routinely fail to deliver on the economic promises made by their proponents. Supporters frequently claim movie incentives create jobs and lead to net gains in tax revenue. However, data from several states find movie production incentives generate less than 30 cents for every lost dollar in tax revenue.

Providing tax breaks specifically to the film industry is an example of government working to choose winners and losers in the marketplace. States could attract almost any industry if they paid for a quarter to a third of its expenditures, but such a policy would be fiscally unsustainable. A better system would be to lower state tax rates for everyone, encouraging economic growth.

Film is a particularly poor industry to subsidize because it does not create long-term employment and other lasting economic benefits for states. Even though a well-made film might boost tourism, productions only offer short-term employment and the workers are highly specialized. Production and workers can easily move from one location to wherever better deals are offered.

Update #2:  The AZ Free Enterprise Club was on this last month

A while back I (for a short time) chaired an effort to get a ballot initiative in Arizona to change to Constitution to allow gay marriage.  In the process, gay rights advocates approached me for support of another law to add LGBT persons to the list of protected classes that are covered by workplace discrimination laws.

I refused to help, and these folks immediately labeled me a hypocrite.  To be fair to them, they honestly thought that workplace discrimination laws did exactly what they intended to do - ban workplace discrimination of an overt sort (e.g., "what, you're gay?  Well, you can't work around here any more").  But anti-discrimination law has a lot of other unintended consequences that are all bad for even the most fair-minded business owner.

Because most of the actual stories I have been through are (and should be) confidential, I will illustrate the problem from a story out of the national news.

Debbie Wasserman Schultz is Chair of the Democratic Party.  Several years ago various party members became dissatisfied with her leadership, a pretty normal occurrence for such a position, particularly after Congressional losses in several elections.  I compare the job to that of an NFL coach, who has job security only as long as he is winning (see: Jim Harbaugh in San Francisco).

Wasserman Schultz’s position as the head of the DNC has long been a source of contention among Democrats, and Politico has previously documented the issue. In September 2014, Wasserman Schultz’s gaffes caught up to her when a string of Democrats voiced their distaste for the way the Florida congresswoman had led the party.

That report found tension between Wasserman Schultz and Obama dating back to 2011 .... At the time, Wasserman Schultz had allegedly complained to Obama about not being able to hire a donor’s daughter to work for her at the DNC.

“Obama summed up his reaction to staff afterward: ‘Really?’ ” according to a source that was present.

So maybe Obama didn’t like Wasserman Schultz’s brashness or her propensity to spout gaffe after gaffe.

So, faced with threats of losing her position based on poor job performance, her response was this:

Democratic National Committee Chairwoman Debbie Wasserman Schultz was prepared to go full force against President Obama if he tried to replace her in 2013.

Wasserman Schultz, according to Politico, was going to accuse Obama of being anti-woman and anti-Semitic — apparently to cover all the bases — if he dared consider replacing her as chairwoman.

There is absolutely no rational reason to believe President Obama wanted to fire her because she was a woman.  Seriously, Valerie Jarrett practically runs the country but Obama doesn't like Shultz because she is a woman?  I would bet that in fact she was hired for the position in large part because she was a woman.  But she was perfectly willing to use the fact that she happened to be in some protected employment classes to try to head off a merit-based firing.

For businesses, this means two things

1. It typically takes much longer to terminate someone in a protected class, because businesses want to make sure they have an absolutely iron-clad case if the termination is later challenged.  For a service business like ours, this sometimes means tolerating dangerous behavior or really bad customer service longer (with all the risks that entails) from someone in a protected group rather than from, say, a white male.
2. A large number of employees in protected groups will file grievances to the state, or even sue, over even the most well-documented and justified termination.  Even when employers win such cases, each one take tens of thousands of dollars in legal fees to win.  As interpreted by courts and state civil rights agencies, anti-discrimination law seems to create burden of proof on the part of employers to prove they did nothing wrong, rather than the other way around.

I love to watch the NFL but that organization and its team owners are some of the worst cronies in the country.  A huge portion of their teams' increase in net worth over the last 30 years has come from public funding of its stadiums.  These NFL stadiums are used by their teams for 8 regular season games and at most 2 pre-season games a year, or for a total of about 30 hours a year.  Taxpayers are being forced to buy buildings with a 0.3% occupancy.

St. Louis is the next to propose a taxpayer fleecing, proposing to spend $400 million before they have even paid off the enclosed stadium they built 20 years ago.  What a farce.

Years and years ago I described this as an awful sort of prisoner's dilemma game.  If governments colluded in a promise not to subsidize teams, we would still have NFL teams in roughly the same cities but without the billions of dollars in taxpayer money having been passed on to 32 billionaires.

Kevin Drum has some sensible thoughts on Ray Rice, discipline and the NFL -- "Sensible" defined in this case as largely mirroring my own:

Ray Rice committed a crime. We have a system for dealing with crimes: the criminal justice system. Employers are not good candidates to be extrajudicial arms for punishing criminal offenders, and I would be very, very careful about thinking that they should be.

Now, I'll grant up front that the NFL is a special case. It operates on a far, far more public level than most employers. It's a testosterone-filled institution, and stricter rules are often appropriate in environments like that. Kids take cues from what they see their favorite players doing. TV networks and sponsors understandably demand a higher level of good behavior than they do from most employers.

Nevertheless, do we really want employers—even the NFL—reacting in a panic to transient public outrage by essentially barring someone for life from ever practicing their craft? Should FedEx do that? Should IBM do that? Google? Mother Jones? Perhaps for the most serious offenses they should, and it's certainly common to refuse to hire job candidates with felony records of any kind. (Though I'll note that a good many liberals think this is a misguided and unfair policy.) But for what Ray Rice did?

I just don't know about that. Generally speaking, I think we're better off handling crimes through the criminal justice system, not through the capricious judgments of employers—most of whom don't have unions to worry about and can fire employees at a whim. I might be overreacting, but that seems like it could become a dangerous precedent that hurts a lot more people than it helps.

I agree 100%.  The NFL  was simply insane to venture into the role as a shadow legal system to apply punishments based on their investigation and judgement in parallel with those of the legal system.  They would have been much better off simply establishing a schedule of internal penalties that were based on the outcomes of the legal system.

That being said, I wish other writers on the Left would read Drum's column and ask themselves why this same logic wouldn't apply to colleges as well. It is unbelievable to me that Liberals of all people -- who have largely defended due process rights in the legal system for years against Conservative attempts to trim them -- would suddenly wage a campaign to substitute kangaroo courts run by university administrators in the place of normal police and judicial procedures for crimes as serious as rape.  I am historically skeptical of the legal system and the people in it, but all of these problems would only be worse trying to have a bunch of amateurs at universities setting up a parallel system.

There is certainly a problem to be solved -- though the 1 in 5 statistic is completely bogus and exaggerated -- but the diagnosis of the problem has been all wrong.  The problem is that Universities have historically created internal police forces and disciplinary processes for the express purpose of protecting their students from the normal legal system.  This is a practice and tradition that goes all the way back to the Middle Ages.  And it worked fine, at least as far as I am concerned, when the University was protecting students from marijuana or underage drinking busts by town police.

But institutions develop a culture, and the culture of university disciplinary processes has been to 1.  keep the student out of the legal system and 2.  get the student to graduation.  I have friends who have been kicked out of top universities a few times, but the University in the end bent over backwards to take them back and get them over the finish line.

So it is disappointing, but not surprising, that universities approached more heinous crimes with this same culture and mindset.  And some egregious sexual assaults got swept under the rug.  Again, I think some folks are exaggerating these numbers by assuming there are tens or hundreds of these cases for every one we hear about.  But we can agree on the core fact, I think, that the typical college disciplinary culture of protecting students from the legal system has failed some victims of sexual assault.

But this is where everyone seems to be going off track.  The Obama Administration solution for this problem is to demand that universities develop more robust fact-finding and disciplinary processes for such felonies, and remove procedural protections for the accused as a way to offset the historic university culture to go to far in protecting wrongdoers.

This is nuts.  Seriously.  Given the set of facts, a far simpler solution, fairer to both accused and victims, would have been for the Obama Administration simply to demand that Universities hand over evidence of crimes to police and prosecutors trained to know what to do with it.  If the University wants to take special steps to get victims help coping with their recovery using University resources, or help victims and the accused who are University students cope with the rough edges of the legal process, great.

Postscript:  Another problem is that punishments meted out by universities are going to always be wrong, by definition.  Let's say a student is accused of rape and kicked out.  Two possibilities.  If he is innocent of the charge, then he was punished way too much.  If he was guilty, if he really raped someone, he was punished way too little -- and by the University screwing around with it and messing up the chain of evidence and taking statements without following the correct process, they may have killed any chance of a conviction in the legal system.    The current process the Obama Administration is forcing punishes the innocent and protects the truly guilty.

In the 1970's, Hollywood produced a number of movies that drew from a frustration that the criminal justice system was broken.   Specifically, a surprisingly large number of people felt that due process protections of accused criminals had gone too far, and were causing police and prosecutors to lose the war on crime.  In the Dirty Harry movies, Clint Eastwood is constantly fighting against what are portrayed as soft-hearted Liberal protections of criminals.  In the Death Wish movies, Charles Bronson's character goes further, acting as a private vigilante meeting out well-deserved justice on criminals the system can't seem to catch.

There are always folks who do not understand and accept the design of our criminal justice system.  Every system that makes judgments has type I and type II errors.  In the justice system, type I errors are those that decide an innocent person is guilty and type II errors are those that decide a guilty person is not guilty.  While there are reforms that reduce both types of errors, at the margin improvements that reduce type I errors tend to increase type II errors and vice versa.

Given this tradeoff, a system designer has to choose which type of error he or she is willing to live with.  And in criminal justice the rule has always been to reduce type I errors (conviction of the innocent) even if this increases type II errors (letting the guilty go free).

And this leads to the historic friction -- people see the type II errors, the guilty going free, and want to do something about it.  But they forget, or perhaps don't care, that for each change that puts more of the guilty in jail, more innocent people will go to jail too.  Movies cheat on this, by showing you the criminal committing the crimes, so you know without a doubt they are guilty.  But in the real world, no one has this certainty.  Even with supposed witnesses.  A lot of men, most of them black, in the south have been put to death with witness testimony and then later exonerated when it was too late.

This 1970's style desire for private justice to substitute for a justice system that was seen as too soft on crime was mainly a feature of the Right.  Today, however, calls for private justice seem to most often come from the Left.

It is amazing how much women's groups and the Left today remind me of the Dirty Harry Right of the 1970's.  They fear an epidemic of crime against women, egged on by a few prominent folks who exaggerate crime statistics to instill fear for political purposes.  In this environment of fear, they see the criminal justice system as failing women, doing little to bring rapist men to justice or change their behavior  (though today the supposed reason for this injustice is Right-wing patriarchy rather than Left-wing bleeding heartism).

Observe the controversies around prosecution of campus sexual assaults and the bruhaha around the video of Ray Rice hitting a woman in an elevator.  In both cases, these crimes are typically the purview of the criminal justice system.  However, it is clear that the Left has given up on the criminal justice system with all its "protections" of the accused.  Look at the Ray Rice case -- when outrage flared for not having a strong enough punishment, it was all aimed at the NFL.  There was a New Jersey state prosecutor that had allowed Rice into a pre-trial diversion program based on his lack of a criminal record, but no one on the Left even bothered with him.  They knew the prosecutor had to follow the law.   When it comes to campus sexual assault, no one on the Left seems to be calling for more police action.  They are demanding that college administrators with no background in criminal investigation or law create shadow judiciary systems instead.

The goal is to get out of the legally constrained criminal justice system and into a more lawless private environment. This allows:

• A complete rewrite in the rules of evidence and of guilt and innocence.  At the behest of Women's groups, the Department of Justice and the state of California have re-written criminal procedure and required preponderance of the evidence (rather than beyond a reasonable doubt) conviction standards for sexual assault on campus.   Defendants in sexual assault cases on campus are stripped of their traditional legal rights to a lawyer, to see all evidence in advance, to face their accuser, to cross-examine witnesses, etc. etc.  It is the exact same kind of rules of criminal procedure that Dirty Harry and Paul Kersey would have applauded.  Unacknowledged is the inevitable growth of Type I errors (punishing the innocent) that are sure to result.  Do the proponents not understand this tradeoff?  Or, just like the archetypal southern sheriff believed vis a vis blacks, do women's groups assume that the convicted male "must be guilty of something".
• Much harsher punishments.   As a first offender, even without pre-trial diversion, Ray Rice was unlikely to get much more than some probation and perhaps a few months of jail time.  But the NFL, as his employer (and a monopoly to boot) has a far higher ability to punish him.  By banning Ray Rice from the league, effectively for life, they have put a harsh life sentence on the man (and ironically on the victim, his wife).  They have imposed a fine on him of tens of millions of dollars.

Postscript:  For those who are younger and may not have experienced these movies, here is the IMDB summary of Death Wish

Open-minded architect Paul Kersey returns to New York City from vacationing with his wife, feeling on top of the world. At the office, his cynical coworker gives him the welcome-back with a warning on the rising crime rate. But Paul, a bleeding-heart liberal, thinks of crime as being caused by poverty. However his coworker's ranting proves to be more than true when Paul's wife is killed and his daughter is raped in his own apartment. The police have no reliable leads and his overly sensitive son-in-law only exacerbates Paul's feeling of hopelessness. He is now facing the reality that the police can't be everywhere at once. Out of sympathy his boss gives him an assignment in sunny Arizona where Paul gets a taste of the Old West ideals. He returns to New York with a compromised view on muggers...

I guess I was premature in portraying these movies as mainly a product of the 1970s, since this movie just came out.

Inevitably necessary note on private property rights:  The NFL and private colleges have every right to hire and fire and eject students for any reasons they want as long as those rules and conditions were clear when players and students joined those organizations.  Of course, they are subject to mockery if we think the rules or their execution deserve it.  Public colleges are a different matter, and mandates by Federal and State governments even more so.  Government institutions are supposed to follow the Constitution and the law, offering equal protection and due process.

This week, the NLRB agreed to allow the players on the Northwestern University football team to unionize.   This is one of those issues that is simple and straightforward in a free society and a total mess in our less-than-free society.  Here are a few thoughts:

1. In a free society, this is a no-brainer.  The Northwestern players are welcome to create an association among themselves and call it anything they like, including "union".  That association is free to try to negotiate with the university for better terms  (they are also free to fail at this and make no progress).
2. However, it is clear that we are not a free society because the players had to go to the government and ask permission to form this particular type of association.  The reason is that associations called "unions" have been granted special powers and privileges under the law not available to other associations.  There are also a large body of very particular rules for how such associations may conduct business and how other groups (in this case the University) can or cannot interact with it.  It is a very tricky legal and philosophical question whether this package of benefits and privileges should be accorded to a group of college football players
3. In a free society, the fact that the players don't get paid cash and that their universities make millions off the football program would be irrelevant.  The players freely agreed to the deal (in most cases, playing in exchange for free tuition and perhaps a chance to land an NFL job) so there is nothing inherently unfair about it.
4. However, in our society, we have all sorts of government interventions.  I consider many of these interventions to be counter-productive, even occasionally insane.  But if one is to navigate such a society (rather than, say, go off and live in Galt's Gulch), I think the principle of equal protection is critical.  Arbitrary government interventions in free exchange are FAR worse when applied unevenly.  From an equal protection standpoint, I think the players may have a good case.
   • The law generally does not allow profit-making businesses (and the NCAA and college footfall are certainly those) to accept unpaid labor.  Many folks who don't deal with the Fair Labor Standards Act every day will say: "players are paid, they get free tuition."  But this is not how the FLSA works.  It counts non-cash wages only in very specific circumstances that are enumerated in the law (e.g. lodging).  Think of it this way -- McDonald's could not legally just pay all its employees in french fries and claim to be compliant with the law.  Also, large numbers of Division 1 football and basketball players never graduate, which shows a fair amount of contempt by players for this supposedly valuable "free tuition" compensation.
   • On the other hand, most college athletics are not profit-making.  My son plays baseball at Amherst College -- it would be laughable to call this a profit center.  I am not sure there are but a handful of women's teams in any sport that generate profits for their school, and even on the men's side money-making is limited to a few score men's football and basketball teams.   But the few that do make money make a LOT.  University of Texas has its own TV network, as do most major conferences.
   • The law generally does not allow any group of enterprises to enter into agreements that restrict employment options.  Google et. al. are getting flamed right now, and likely face criminal anti-trust charges and lawsuits, for agreements to restrict hiring employees from each other's firms.  The NCAA cuts such deals all the time, both severely restricting moves between schools (transfer provisions in Division I are quite onerous) and preventing poaching at least of younger players by professional leagues like the NBA and NFL.   The notion that top players in the NCAA are playing for their education is a joke -- they are playing in college because that is what they have to do in order to eventually be allowed in a league where they can get paid for their skills.
   • Actually trying to pay players would be a real mess.  In a free society, one might just pay the ones who play the most profitable sports and contribute the most value.   But with Title IX, for example, that is impossible.  Paying only the most financially valuable players and teams would lead to 99% of the pay going to men, which would lead to Title IX gender discrimination suits before the first paycheck was even delivered.  And 99% of college athletes probably don't even want to be paid
   • Part of the pay problem is that the NCAA is so moronic in its rules.  Even if the university does not pay players, many outsider would if allowed.  Boosters love to pay football and basketball players under the table in cash and cars and such, and top athletes could easily get endorsement money or paid for autographs by third parties.  But NCAA rules are so strict that athletes can be in violation of the rules for accepting a free plane ticket from a friend to go to his mother's funeral.  When I interview students for Princeton admissions, I never buy them even a coffee in case they are a recruited athlete, because doing so would violate the rules.
   • Much of this is based on an outdated fetish for amateurism, that somehow money taints athletic achievement.  It is hilarious to see good progressive college presidents spout this kind of thing, because in fact this notion of amateurism was actually an aristocratic invention to keep the commoners out of sports (since commoners would not have the means to dedicate much of their life to training without a source of income).  The amateur ideal is actually an exclusionist aristocratic tool that has for some reason now been adopted as a progressive ideal.   Note that nowhere else in college do we require that students not earn money with their skills -- business majors can make money in business over the summer, artists can sell their art, musicians can be paid to perform.  When Brooke Shields was at Princeton, she appeared in the school amateur play despite making millions simultaneously as a professional actress.  Only athletes can't trade their skill for money in their free time.

I am not sure where this is all going, but as a minimum I think the NCAA is going to be forced to allow athletes to earn outside income and accept outside benefits without losing their eligibility.

Back in 2011 I wrote an article in Forbes on this topic

I friend sent me a note analyzing data on NFL quarterbacks past and present, and came up with this top five based on a points system that ranked the top 40 all time quarterbacks on a number of dimensions, such that the lowest score is the best:

1. Joe Montana - 54 Points

1. Tom Brady - 54 Points

3. John Elway - 68 Points

4. Terry Bradshaw - 84 Points

5. Peyton Manning - 86 Points

Peyton gets dinged for being a poor bad-weather quarterback.  I am not sure if the numbers support this hypothesis, but he would have to go a long way to being worse than Aikman was.  I was in Dallas during their three Aikman-era superbowls (actually I lived in Denver for their 2, and St Louis for theirs, and Arizona for theirs, all of which is payback for growing up an Oiler fan).   Aikman always disappointed in bad weather.  The one year of their four year run in the 90's that they did not go to the Superbowl, they lost to SF in the Conference championships.  That day, the moment I saw it was raining, I knew the Cowboys were doomed.

How is this a scandal?

While fans can also purchase pink [NFL Branded] clothing and accessories to support the cause, a shockingly small amount of the fans' money is actually going towards cancer research.

According to data obtained from the NFL by Darren Rovell of ESPN, the NFL "takes a 25% royalty from the wholesale price (1/2 retail), donates 90% of royalty to American Cancer Society."

In other words, for every $100 in pink merchandise sold, $12.50 goes to the NFL. Of that, $11.25 goes to the American Cancer Society (ACS) and the NFL keeps the rest. The remaining money is then divided up by the company that makes the merchandise (37.5%) and the company that sells the merchandise (50.0%), which is often the NFL and the individual teams.

How is this "shockingly small"?  A donation of 11.25% of the retail price, and 22.5% of the wholesale price,  of a piece of clothing is a pretty hefty.  What do they expect?  All the author is doing is demonstrating his (her?)  ignorance of retail and clothing net profit margins.  In particular, how can you try to make the NFL the bad guy for donating 90% of the money they actually get?  It's their program, they can't donate the clothing manufacturer's money.

And besides, the NFL should be congratulated for being open about the numbers -- there is often zero transparency in such charitable promotional programs.  How much of the money in the last charity gala you attended do you think actually made it to the charity rather than just help fund the self-aggrandizement of their socialite sponsors?

Death by tort lawyer in 3...2...1

A Colorado jury has awarded $11.5 million in a lawsuit originally brought against helmet maker Riddell and several high school administrators and football coaches over brain injuries suffered by a teenager in 2008.” While the jury rejected the plaintiff’s claim of design defect, it accepted the theory that the helmet maker should have done more to warn of concussions.

If the helmet makers are getting nailed, wait until every high school and college in the country is sued, not to mention the massive suit looming against the NFL.  Expect to see a debate soon, beginning in state legislatures, over tort protection for football.  Texas, for example, has several of the country's tort hellholes but if Friday night high school football is threatened, you can bet that the legislature will be moved to action.

I think Megan McArdle is being naive about the tort system in this country when she writes

So Junior Seau's family is suing the NFL over head injuries, which lead to chronic brain damage, and possibly his suicide.

...

I found this article in the Arizona Republic, our local rag, almost criminal.  As far as it goes, I think the facts are correct.  What is amazing is what it leaves out.  First, the article:

Glendale administrators propose cutting nearly a quarter of the city's employees, or 249 positions, if voters approve a ballot measure in November to repeal a sales-tax hike.

Repeal of the 0.7 percentage-point tax hike that took effect last month would mean the loss of $11 million this year and $25 million annually through 2017, according to city estimates.

The City Council had approved the temporary increase to shore up its deficit-ridden general fund after laying off 49 employees and cutting $10 million from departments at the start of this fiscal year....

Proposed cuts include shuttering two of the three city libraries, one of its two aquatic centers, the TV station and all city festivals, including Glendale Glitters.

The article continues with the usual panic about cuts in police and firefighters and libraries and parks,  etc. etc.  What the article does not mention except in passing in paragraph 12 is the reason for the tax increase and the budget problems in the first place.  Over heated opposition in the community, the City Council, which has enjoyed pretending to be big shot Donald Trumps over the last few years with taxpayer money, handed a private individual $25 million a year to keep the ice hockey team in town, an ice hockey team that has the lowest attendance in the league despite doing fairly well the last few years.  This is on top of years of other subsidies and the taxpayer-funded $300 million stadium.   The numbers line up exactly -- a new $25 million a year subsidy and a new $25 million a year tax, and the paper cannot even connect these dots, even when they were directly connected in real time (ie the tax was specifically justified to pay for the subsidy).

What the article entirely fails to mention is that, given no voice in these corporatist extravagances in Glendale (the tiny town of 250,000 has also subsidized an NFL franchise and a couple of MLB teams), the only way the citizens of this town have any way to exercise accountability is to vote down the tax that enables this corporate handout.  They were not allowed to vote on the deal itself.  This is not a bunch of wacky red-staters voting to decimate the parks departments, as the city and the paper would like you to believe, but a citizenship that is tired of the idiotic corporate cronyism in the Glendale city council and are looking for some way, any way, to enforce some accountability.

This is the media and the state in bed together promoting the larger state.  Glendale's problems are entirely self-imposed, spending huge amounts of tax money on subsidizing sports teams and real estate ventures.  When these all failed like so many Solyndras, they are trying to make this out to be a tax shortfall, when in fact it is spending idiocy.

The media always seems to participate as a cheerleader in this statism, but local papers have a special interest in promoting this sort of sports corporatism.  Just about the only thing that sells dead-tree newspapers any more is the sports section.  I would love to see what would happen to circulation rates if they cut the sports section.  So any state actions that add professional sports franchises or keeps them in town contribute directly to the newspapers' survival.

I think Walter Olson is dead on with this:

Steve Chapman at the Chicago Tribune looks at the cultural and legal responses to the mounting evidence that professional football inflicts brain damage on many of its players. He quotes my view that if the litigation system carries over to football the legal principles it applies to other industries, the game isn’t likely to survive in its current form.  [sorry for quoting the whole thing Walter, I just couldn't figure out how to excerpt it]

There is a very good chance that the NFL could go the way of Johns Manville or Dow Corning.  Those companies still exist after being sued into bankruptcy, but that is only because they had other businesses to shift into.  The NFL just has football.  And after reading the concussion stories recently, plaintiff's lawyers are going to have a hell of a lot better scientific case than they had with breast implants.    I honestly think it will take an act of Congress to keep the NFL alive, giving them some sort of liability exemption similar to what ski resorts got years ago.

And don't think the NFL does not know this.  If you are wondering why they handed out insanely over-the-top penalties for bounty-gate in New Orleans, this is why.  They are working to establish a paper trail of extreme diligence on player safety issues for future litigation.

As an aside, I find it frustrating that there is not a better helmet solution.

As a second aside, there is a guy here in Phoenix who was showing off an accelerometer for football helmets, with some kind of maximum single g-force or cumulative g-force trigger that would cause a player to be pulled from a game, sort of like how a radiation badge works.  Good idea.  Look for these to be mandatory equipment in high schools in colleges.    Takes the absurd guess work out of concussion diagnosis today, particularly since this diagnosis is done by people (the player and their team) who have strong incentives to decide that there was no concussion.

As a third aside, there are those who argue helmets are the problem.  Just as people drive less safely with seat belts and air bags in cars, helmets lead to less care on the field.  I will say I played rugby for years (without a helmet of course) and never had one concussion, or any head hit anywhere close to a concussion.  In amateur rugby in the leagues I played in, reckless behavior that might lead to injuries was strongly frowned upon and punished by the group.  Teams that played this way quickly found themselves without a game.  There were plenty of ways to demonstrate toughness without trying to injure people.

Well, it looks like the NHL may have a buyer for the Phoenix Coyotes.  I have not seen all the terms, but the problem in finding a buyer has been this:  based on comps from other recent sales (e.g. Atlanta) the price for sunbelt teams is something like $100 million max, but the NHL has promised its owners it would not sell it for less than $200 million.  The NHL has to find a sucker, and if billionaire buyers are not willing to be a sucker, then they have to find a third party sucker to just kick in $1oo million of present value to make the deal work.

Enter the city of Glendale.  It has tried very hard on multiple occasions to be that sucker, and only was stopped from doing so by efforts of the Goldwater Institute to enforce a state Constitutional injunction on corporate welfare.

Glendale has apparently found a new way to subsidize the transaction by promising to pay an above-market stadium management fee.  I have talked to some sports executives, including one very familiar with this stadium, and they have all said that in a free market, a third party might take the stadium management contract for free, because though it carries operational costs, it also yields offsetting revenues (like stadium rentals for concerts).

By paying an above-market rate for stadium management services, Glendale can provide a corporate subsidy but retain the fiction that this is a service contract rather than crony welfare.  Over the last two years, Glendale has paid the NHL $25 million a year in stadium management fees, a payment everyone understands to actually be a subsidy to keep the team in town.

I presume the new buyer has met the NHL's $200 million price tag.  But that is obvriously overpaying.  So Glendale is going to kick a bunch of money back to the buyer to make it work, in the form of $306 million in stadium management fees.  Via the Sporting News:

Longtime Glendale city councilor Phil Lieberman on Monday, in an interview with Sportsnet.ca, estimated that arena management fees paid by the city to Jamison under terms of the deal would total $306 million over the next 21 years, or an average of $14.6 million. A large chunk of that money, Lieberman says, is front-loaded, with Glendale on the hook for $92 million over the next five years. Nearby University of Phoenix Stadium, home to the Arizona Cardinals of the NFL, carries a $9.2-million management fee annually.

By the way, University of Phoenix Stadium is far larger and more expensive to operate, so one would expect the Coyotes arena management payment to be less than $9.2 million.   And the $9.2 million, since it comes from Glendale as well, likely has a subsidy built in.  But let's for a second assume something like $8 million a year is the high end for what a market rate for such a contract would be.  This would be $168 million over 21 years, implying $138 million minimum in subsidy built into the management contract.  There you go, there is the sucker payment to make up the difference between market value of the team and the NHL's price.

In fact, according to numbers at the WSJ, the city would have been better off leaving the stadium empty and just paying off the note  (and they certainly would have been better taking Jim Balsillie's offer to move the team but help them pay down their note).

The NHL has announced a tentative sale to a group headed by former San Jose Sharks executive Greg Jamison, under terms that would essentially institutionalize Glendale's commitments. Under the proposal that the NHL has laid out for city council members, the city would continue paying an arena-management fee that would average about $14.5 million a year.

On top of the city's average $12.6 million in debt service, that amounts to annual expenses of about $27.1 million—to be offset by anticipated Coyotes-related revenue of $14.2 million, according to projections by Glendale's city management department. That adds up to a projected annual loss for Glendale of $12.9 million.

Of course, Glendale wants to keep the team because it cut a crony deal with a few real estate developers to build a retail and condo complex around the stadium.  Of course, these ventures have also gone bankrupt.  So the city is trying to bail out and keep a bankrupt hockey team to sustain an already bankrupt retail developer.

The logic of course is that Glendale wants to attract retail businesses to Glendale from nearby Peoria and Phoenix.  But in the end, they are just messing up their own goal:

Some Glendale business owners may also oppose the deal, including David Kimmerle, owner of Sanderson Ford car dealership in Glendale. A longtime sponsor and fan of the Coyotes, Kimmerle felt betrayed when Glendale officials recently proposed raising the city's sale tax, in large part to support the cost of the team. The proposed increase would make a $30,000 car on Kimmerle's lot $330 more expensive than in the neighboring suburb of Peoria. "No one is going to pay a premium to shop in Glendale," Kimmerle said. "If it is choosing between the Coyotes or a business that is been in my family since 1955 and employs 500 people, I have to choose my business."

So, which would you bet on:  That retail buyers will choose a location based on prices and taxes, or based on its proximity to a hockey team?  Glendale is betting hundreds of millions of dollars its the latter.  Which is why they are idiots.

Oh, and those Goldwater folks.  Per the Sporting News article:

As for Goldwater Institution opposition to the deal, the league, Jamison and Glendale are aggressively striving to craft a sale that avoids Goldwater opposition and possible legal action.

And how are they doing this?

The NHL, city and Jamison are also not producing public documents on their deal so they can avoid records falling into Goldwater's hands.

Your transparent government at work.  Its not breaking the law if no one can prove it.

I almost hate beating on the silly folks who run the City of Glendale even further, but they keep screwing up.

One of the reasons I think that city officials like those in Glendale like to dabble in real estate and sports stadiums is what I call the "bigshot effect."  They don't have any capital of their own, and they don't have the skills such that anyone else would (voluntarily) trust them to invest other people's money, but with a poll of tax money they get to play Donald Trump and act like they are big wheels.  The Glendale city council did this for years, and when their incompetence inevitably led to things starting to fall apart, they have simply thrown more money at it to try to protect their personal prestige.

But unfortunately, incompetence generally is an infinite reservoir, and apparently the City has screwed up again.  Years ago, when the City promised the rich people who owned the AZ Cardinals a new half billion dollar stadium, they put a contract to that effect on paper.  Granted, this was a sorry giveaway, spending hundreds of millions of dollars for a stadium that would be used by the Cardinals for 30 hours a year, by the Fiesta Bowl for 3 hours a year, and by the NFL for a Superbowl for 3 hours every 6-7 years.  But, never-the-less, the City made a contractual agreement.

And then, in its rush to be real estate bigshots, the city turned about 3700 parking spaces promised contractually to the Cardinals over to a developer to create an outlet mall (of the sort that has been quietly going bankrupt all over the country over the last few years).  Incredibly, the city did this without any plan for how to replace the parking it owed the Cardinals.  To this day, it has no plan.

Apparently, there were also some shenanigans with $25 million that had been escrowed to build a parking garage.

The demand letter also blames the parking problem on the city's dealings with Steve Ellman, Westgate's former developer and a one-time co-owner of the Phoenix Coyotes. The letter states that Ellman's relationship with the city has been "characterized by a lack of transparency."

The letter raises questions about a January 2011 arrangement in which the city and Ellman equally split a $25million escrow fund that had been earmarked to build a parking garage in Westgate, the team said.

Ellman put that money in escrow in 2008 after failing to keep a promise to the city to provide a set amount of permanent parking in Westgate.

By early 2011, half of that money went back to Ellman's lenders as part of a deal to try to keep the Coyotes in Glendale, while the city received the other $12.5 million in the account.

What a mess.  This is what happens when politicians try to be bigshots with our money.