Category Archives: Institutions

World Baseball Classic: Perverse Incentive Alert

Apparently the World Baseball Classic will compensate Major League Baseball teams if an injured WBC player misses 30 days or more of the regular season. But if the player misses less than that? No compensation.

So. Imagine your $10 million player breaks a finger and is out for four weeks. He’s ready to come back on the 28th day. As a general manager, do you:

  1. Take him off the disabled list immediately and receive no compensation.
  2. Wait two days, take him off after the 30th day, and receive about $1.7 in compensation.

Option #2 looks very tempting.

Will the perverse incentives come into play this year? Unlikely, but it is possible. Mark Teixeira and Hanley Ramirez are both out for eight weeks, long enough to guarantee they will be compensated for. Brett Lawrie could push it, though. He’s on the DL with a cracked rib. However, his salary is a measly $500,000 this season, and last season’s production well exceeded a half million dollar contract. If Lawrie were ready to return after 28 days, the Blue Jays would essentially pay a $120,000 premium–$60,000 per game–to do so. This is roughly equivalent to a player worth $11 million. It would be a close call.

In any case, this system has perverse incentives.

Does the Vice President’s Vote Matter?

Growing up, I remember my parents telling me about the vice president’s role in the Senate. As president of the Senate, the VP only casts a vote in the event of a 50-50 tie among the senators. Thus, the VP rarely ever casts a vote.

But, as my parents explained, the VP’s vote only matters if there is a tie. If the Senate’s vote was 51-49, or 63-37, or 100-0, the VP’s vote will not change the outcome. So, functionally speaking, the VP has full voting power in the Senate.

Fast forward about fifteen years. Presh Talwalkar had a post on Mind Your Decisions this evening on the very same point. After reading the entry, it hit me there is a major caveat: the filibuster.

For quick review, the Senate only votes on a bill if 60 senators vote to close debate. (If not, someone can “filibuster,” or aimlessly continue creating fake debate, to prevent an actual binding vote.) Thus, despite only needing 51 votes to pass a bill, you really need the tacit approval of 60 senators.

And there’s the rub. The VP does not vote on ending debate. Thus, he is powerless to stop the filibuster. In turn, for the VP’s tie-breaking authority to matter, it must be the case that at least 60 senators tacitly approve of a bill but exactly 50 of them are actually willing to sign off on it.

That’s a big caveat. Essentially, the filibuster nerfs the VP’s voting power.

Fun with Institutions: Airport Subsidy Edition

Going back to Olympic badminton, Olympic swimming, and college football, recall the following:

Law: People will strategize according to the institutional features put in front of them.

Here’s the beautiful Lebanon Municipal Airport in New Hampshire:

lebanon airport

Lebanon Municipal Airport is one of those tiny airports that services a sparsely populated area. The federal government subsidies these airports so they stay afloat…but only if they have enough customers. In fact, it needs to have 10,000 passengers to qualify for a $1 million grant. Administrators want that grant but are about a thousand short for the year.

Their solution? Sell flights for $12 until they hit the threshold.

Whoever set up the grant system surely did not intend for this to happen. A customer should only count as a customer if he is willing to pay for the good at a price that the business can sustain. But the 10,000 passenger threshold was some arbitrary break point that “separates” worthless airports from airports worth subsidizing. This system is obviously prone to abuse. Credit the Lebanon Municipal Airport administrators for figuring it out.

How do you fix the system? Simple: create a formula to determine the maximum federal grant money as a function of number of passengers per year. An airport that flies 10,000 per year should not be worth $1,000,000 more than an airport that flies 9,999 per year. Offering $100 in subsidies per passenger, for example, would eliminate Lebanon Municipal Airport’s perverse incentives.

Unintended Consequences, Pt. 2: College Football Edition

Back during the Olympics, I wrote about badminton players intentionally playing to lose. Despite the absurdity of the situation, the Olympians were merely following one of political science’s most important laws:

Law: People will strategize according to the institutional features put in front of them.

We can now add college football players to the list of people who follow the rule. Over the off-season, the NCAA created a rule which forces a player whose helmet comes off during a play (incidental or otherwise) to sit out the following play. To the surprise of no one, defenders are now taking advantage of it. Here is the new game plan, in three simple steps:

  1. Get the opposing quarterback into a large pile.
  2. Take off his helmet.
  3. Profit.

The rule seems inherently bizarre. It’s understandable to force a player to sit out a play if his helmet explodes off of his head on a major hit; concussions are a major issue in football. But if the helmet just slides off (maliciously or otherwise) away from the action, there doesn’t seem to be much reason to force such a player out of the game temporarily.

Olympic Rules Shenanigans: Dolphin Kick Edition

Fresh off the silliness of the badminton play-to-lose scandal comes this lovely piece on dolphin kicks. Last weekend, South African Cameron van der Burgh won gold in the 100m breaststroke.

However, Australia’s Olympic committee is putting up a fuss, as video footage of van der Burgh clearly shows him executing three dolphin kicks after diving into the water. (An Australian swimmer finished in second.) Breaststroke competitions allow only one.

And van der Burgh does not give a damn. From the link:

If you’re not doing it, you’re falling behind. It’s not obviously–shall we say–the moral thing to do, but I’m not willing to sacrifice my personal performance and four years of hard work for someone that is willing to do it and get away with it.

You see, FINA (the governing body of swimming) does not use cameras underwater to check for illegal dolphin kicks. Moreover, Australia cannot formally appeal van der Burgh’s finish, as there is no formal appeal process.

Of course, an appeal probably wouldn’t do much good, considering the Australian swimmer did the exact same thing.

As with the badminton scandal, the real moral of the story is about institutional design. If you build a bad institution, it will lead to more bad things. Here, you should not create rules that you do not plan to enforce. The players who wish to abide by those rules face a stark choice: play “fair” or let the “unfair” win. So even those wishing to play fair break the rules, and we end up in a situation as though the rule does not exist.

Strangely, the dolphin kick rule could be enforced. FINA used underwater technology at the swimming World Cup in 2010. Everyone knew that dolphin kicks were prohibited and breaking the rules would not go unnoticed, so no one broke them.

Derp! Badminton Could Learn from Political Science (Or, Winning By Losing)

Political science doesn’t have many “laws” the way physics does. But here’s one of them:

Law: People will strategize according to the institutional features put in front of them.

Here’s a corollary that I think should follow from that:

Corollary: If one creates stupid institutional rules, one loses the right to object to people taking advantage of them.

Apparently the Olympic organizing group of badminton could learn from this law and its corollary. Yesterday, you see, eight players intentionally played to lose. Full story here.

The gist of it is this: Early in the day, the #2 team in the world lost their last group game, sending them to the bottom of the teams qualified for the quarterfinals. Later on, teams that were already qualified for the quarterfinals played to lose, concerned that a win would propel them to a high seed that force them to play the #2 team sooner in the elimination bracket. Oops.

Badminton officials were shocked–shocked!–that the players would resort to such a cunningly intelligent strategy. Furthermore, the officials complained that the players had violated a rule that protects against athletes “not using one’s best efforts to win a match”–as though one could reasonably discern what qualifies as “best effort” versus “a little bit less than best effort, but still enough effort to convince everyone that we actually care even though we don’t.”

Here are a couple of solutions for the Olympic badminton committee. First, you could schedule all of the final games group play simultaneously, to make it harder for teams to know to throw matches from the start. (Soccer pulls a similar trick in the Euro and World Cup, albeit for slightly different purposes.) Or you could have a single elimination tournament from the start.

Just don’t be surprised when players try to win…by losing.

Update: The players have been disqualified. Next time, I suggest feigning an injury.

The USA Today story also reports that the Japanese women’s soccer team intentionally sought to draw yesterday, as to avoid playing the United States in the quarterfinals.