Friday, January 29, 2010

Immortals and Social Security Part I: A Drain on the Economy?

See the bottom of this article for a question I pose to the readers!

Older superheroesKingdom Come by Mark Waid and Alex Ross

Comic book characters live forever. Sure, Captain America and Batman recently "died," but not really. They were actually just shot through time. The Martian Manhunter was recently killed off in DC's Final Crisis, but does anyone really expect him to stay dead?

Superheroes and villains who don't have an unnatural ability to cheat death also manage to live forever. Perhaps the main reason for this is the notorious retcon, which Mark discusses at greater length here. Despite these elements keeping characters alive, there are actually still some good old-fashioned immortals living in these universes. These are the heroes and villains who naturally age at a much slower pace than the rest of humanity, use magic, have healing factors, and have access to nanotechnology or to Lazarus Pits. Regardless, they all end up living to be hundreds or thousands of years old. These are people like Wolverine, Ra's Al Ghul, Deadpool, Vandal Savage, Nick Fury, Black Widow etc.

Take Superman. Although Superman technically ages and may one day die of natural causes, several comics have established the notion that his life span would extend considerably beyond that of the average human. In most elseworlds tales that depict the future of the DC Universe, Superman is still portrayed as being full of vitality and bearing the appearance of a much younger man than his cohorts in the Justice League. Superman, however, is actually Clark Kent, who works as an investigative journalist for the Daily Planet.

In fact, many of these immortals have day jobs. They earn disposable incomes, buys things, pay taxes, and have retirement accounts. And this is where the problem comes in from an economic standpoint.

Batman is rebornThe Dark Knight Returns by Frank Miller

The problem with having a population of these immortals running around is that they could actually be a drain on the U.S. economy. I'm not talking about the rampant destruction they cause either. Specifically, I'm referring to the expenditures of entitlement programs like Medicare and Social Security.

Medicare is simple enough. You hit age 65 and you are automatically enrolled in a social insurance programs that provides you with government-sponsored insurance for the rest of your life.

Social security, on the other hand, is a little more complicated. To receive retirement benefits, you need to have worked for at least 10 years. While you work, you pay what's known as the Federal Insurance Contributions Act (FICA) tax on your earnings (as does your employer), which goes directly towards funding retirees currently collecting on social security benefits. Once you hit retirement age (regular age for people born after 1960 is 67, or you can elect to retire at the early age of 62, but receive a smaller benefit), you become eligible to receive your annuity payment (a payment for the rest of your life). The benefit you receive is dependent income you've earned for the 35 years of work in which you earned the most. If you've worked for less than 35 years, the missing years are just filled in with 0s.

You can begin to see why this is problematic with a society populated by people who don't die for centuries or millennia. So what exactly happens when your life can extend many years beyond that of an ordinary human being or even indefinitely? Would social security and Medicare benefits still apply to you? Would you be allowed to work for 10 years, become a beneficiary at age 65, and then receive steady payments for the rest of your thousand-some-odd-year existence?

In actuality, the proportion of immortals to total citizens receiving social security and Medicare benefits is likely very small. As it stands, they're outliers and probably not really a significant cost for the government. However, it has the potential to become a real problem.

In fact, most of us are aware that social security is experiencing a major fiscal imbalance. According to Jon Gruber's wonderful textbook on public economics, over the next 70-75 years, the present discounted value of the program's obligations exceeds the present discounted value of the taxes it will collect by a considerable amount (something like $4.5 - $5 trillion). According to the 2009 Trustees report, the social security trust fund will be depleted by 2037, at which point payroll taxes will only be able to fund about 76% of expected payoffs to beneficiaries.

OOASDI Income and Cost Rates Under Intermediate Assumptions
(Reprinted from the 2009 Trustees Report)

There are many reasons for this. One is that that baby boomers are retiring. Another is that technology in the 20th century has improved life expectancy rates. Another is that birth rates have declined. Finally, the growth in wages has slowed in recent years. So, what we have is a new generation comprised of fewer workers paying taxes on earnings that have only marginally increased. And this is all to fund a population of elderly citizens that has grown considerably in recent years.

On top of this, consider how the population of mutants, aliens, sorcerers, demigods, and science-experiments-gone-wrong has increased in both the DC and Marvel universes in the past 20-25 years. If these groups continue to expand, then over time they may cease to be outliers and start posing a real cost burden for the United States.

Any government program is bound to run into the problem of moral hazard. Much like on real-Earth, I anticipate major reform social security financing reforms coming into play in comic book worlds. My question to you is: how can governments in DC and Marvel reform social security and Medicare to account for these immortal or long-living populations?

I'd like to hear from some of you and I'll make another post in the near future with some reform proposals!

Wednesday, January 27, 2010

Priorities, Lois Lane

Lois argues with Perry White about true news reportingSuperman: Secret Origin #3 by Geoff Johns and Gary Frank
Click to See The Rest of the Image

Poor Lois. She thinks that in times of economic trouble, particularly problematic for the newspaper industry, she can just continue to push the boundaries and report actual news stories about real issues. This just in, Lois: no one cares about the public transportation infrastructure or political corruption of frivolous waste of taxpayer money. Did you learn nothing in Econ 101? I think it was Adam Smith who said that the only way the newspaper industry can survive is by resorting to spectacle and sensationalizing stories.

Here are the kind of news stories you should be thinking about:

"Superman's Birth Certificate May Reveal Un-American Origins. Is He Fit to Save Our Country?"

"Experts Debate Whether Lex Luthor is Man or Alien Cyborg."

"Study reveals people are indeed better than fruit."

Priorities, Lois.

Tuesday, January 26, 2010

Ecocomics Explains: Preferences and Indifference

Ecocomics Explains is a new feature of this blog. Each episode, we will discuss a different economics concept--ranging from more basic ones to more advanced and mathematically involved ones--and highlight some examples from comic books that reflect the ideas.

In our last lesson, we discussed the concepts of opportunity cost and budget constraints. Namely, we analyzed a situation where our friendly, neighborhood Spider-Man was had choice between spending an hour of free time fighting criminals on the street or attending Aunt May's rehearsal dinner and earning some brownie points with the family. We learned in order to be efficient, Spider-Man should have chosen a combination of fighting criminals and earning brownie points that would have allowed him to spend all 60 minutes of the hour doing one of the two activities.

Unfortunately, this doesn't exactly tell us what combination Spider-Man should or would have picked. It merely gave us the range of possibilities that Spider-Man could pick from. The bundle he actually chooses depends on his preferences and utility. We'll focus on utility in another post, but for now let's talk about Spider-Man's preferences.

Note: when Spidey refers to taking photographs, he is talking about the photos he takes of Spider-Man fighting crime The Amazing Spider Man #600 by Dan Slott and John Romita Jr. (2009)

Recall that the situation we are analyzing, depicted in The Amazing Spider-Man #600, is just one of many examples of the sort of choices Spider-Man has to face as a masked vigilante. Either Spider-Man surrenders to his obligation to fight crime and sacrifice personal time with his family, or works on his family/personal life and runs the risk of keeping some criminals on the street for the time being. Unfortunately, Spider-Man never explicitly states that he has an hour and never discusses just how happy his family will be to see him, so those are numbers we made up for simplicity.

Basically what we're going to do from here on out is build a consumer choice problem for Spider-Man from the ground-up. The first thing we need to realize is that Spider-Man's preference fit certain axioms, or rules.

First, Spider-Man's preferences are complete. Basically this means that Spider-Man can rank his preferences over any goods or combination of goods. Given putting criminals in jail and brownie points, for instance, Spider-Man can say that he'd rather bag one criminal than earn one brownie point, vice versa, or even be indifferent between the two. There is no way that they are noncomprable, however. When given a choice, he cannot just shrug and say "I just don't know!"

Second, his preferences are transitive. Say a third good enters the mix: watching TV. Now say that Spidey would rather spend time with family than fight criminals, but would rather fight criminals than watch TV . Well, then Spidey obviously also prefers spending time with family to watching TV. So if:

brownie > criminal and
criminal > TV
==> brownie>TV.

Finally, there's non-satiation. This means that there is never a maximum amount of a particular good that will fully satisfy Spider-Man. That is, there is never a point where Spider-Man would cease to derive enjoyment from putting criminals in jail. The more criminals he bags, the more enjoyment he sees.

There are a few more axioms and some more mathematically rigorous ways that we can define these three (which we'll go over eventually), but for now this is all we need to know. Consider the following graph:

Suppose Spider-Man is at point A of the graph. That means that he chooses to spend his 48 minutes hunting down 2 criminals and spending enough time with Aunt May to earn 4 brownie points. We know from last time that this combination is in Spidey's feasible set (even though it's not efficient).

Now let's say that Mephisto shows up and decides to offer Spider-Man a deal. He says that in exchange for handing back one of the two criminals he just captured, Mephisto will use his magic to alter the Spider-Man timeline (again) and have it seem as though Peter had been spending time with his family instead. Obviously Spider-Man would not make the deal if he would rather be hunting criminals. So Mephisto says that he'll give Spider-Man just enough brownie ponits to make up for the lost criminal, but no more. Spider-Man tells Mephisto that he'd need 3 brownie points to make him equally satisfied. Deal done (but for some reason no one seems to remember Spider-Man's identity anymore).

Post-deal, Spider-Man is at point B of the graph. He has taken out only one criminal, but earned an incredible 7 brownie points with his family! And he is equally happy. This means that Spider-Man is indifferent between points A and B. He derives the same enjoyment out of both combinations of actions.

Looking at the graph, we can now map out Spider-Man's indifference curve (labeled L2). This curve marks all the points, or combinations of brownie points and criminals, that Spider-Man is indifferent between. As you can see, Spider-Man would get the same satisfaction whether he takes out one criminal and earns 7 brownie points (point A) or whether he takes out 3 criminals and only earns 2 brownie point (point C).

You might be wondering why the curve is not a line, similar to the budget constraint. Well, this is due to a phenomenon known as diminishing marginal rate of substitution. In microeconomics, dMRS is another axiom that defines the convex shape of the indifference curves.

The marginal rate of substitution is basically the slope of the curve at various points. It's tell you what individuals are willing to give up of one good to get another. Note that this is different from an opportunity cost, which tells you how much an individual would HAVE to give up of one good to obtain another. At point B for instance, Spider-Man is willing to give up around 3 brownie points to get 1 more criminal (to get from B to A). That's a slope of 3 so his MRS at point B is about 3. At point C, Spider-Man is willing to give up about 1 brownie point to get one more criminal. That's a slope of 1, so his MRS at point C is 1.

The intuition behind assuming a diminishing marginal rate of substitution is not very difficult to grasp. When Spider-Man is at point A, he has lots and lots of brownie points but very few criminals. Catching another criminal is looking very attractive to him at this point, so he'd be willing to give up a little more to get one. At point C, however, Spider-Man has used up more of his hour to catch more of criminals, but in doing so has sacrificed much needed time with his family and is dangerously close to alienating himself with only 2 brownie points. He would be willing to sacrifice less brownie points at point C for another criminal.

We'll continue with this next time on Ecocomics Explains!

Questions and comments are welcome. Also, if anyone has any suggestions of economics topics they would like covered, please feel free to drop us a comment.

Friday, January 22, 2010

No Government in My Medicare!

Tea bag the liberals? Really?Captain America #602 by Ed Brubaker and Luke Ross

Public opinion on economic policy seems to be the theme of this week's posts. Yesterday, we talked about the idea of offering more bailouts in New York City. In the latest issue of Captain America, we travel all the way out to Idaho only to find more riots and discontent.

Hey you, government! Yeah I'm talking to you! The people have spoken! "No government in my Medicare!" None! Divorce all federal interference from our federal programs.

I wonder if there's any way some nasty supervillain came take advantage of this sentiment. Someone evil 1950s Captain America clone-person.

Click to see moreClick on image to see more!

Thursday, January 21, 2010

Externalities: Angel Edition

Superheroes fight crime and save lives. But by doing so they impose certain costs on people not directly involved. These are superhero externalities.

Angel unwittingly causes the death of an innocentAngel #29 by Bill Willingham and Brian Denham

Since Los Angeles went to hell and back, Angel has become something of a celebrity. Now everywhere he goes, people are starstruck. Seems pretty simple and non-threatening. As in any transaction, Angel reaps the benefits of being famous (more casework, more money, etc.) but also pays a cost for it (less free time to brood, a sense of disillusion, etc.).

Unfortunately the people he is protecting are paying an unintended cost, as demonstrated when Angel walked into a local coffee shop for a cup and accidentally created a panic that the neighborhood was under attack by a vicious (and equally fictitious) demon. This seemingly innocuous event resulted in multiple injuries and death.

Angel himself goes on to comment on this predicament of unintended consequences:

The public pays for Angel's fame

Lessons Learned from the Bennett Bailout

Earlier, we posted an in-depth discussion of the Marvel Universe's Bennett Bailout. To refresh your memory: former construction tycoon, current newspaper owner, and just ludicrously wealthy entrepreneur Dexter Bennett had somehow managed to persuade the United States federal government to award The DB, perhaps New York City's most prominent newspaper, a financial bailout.

Now that the bailout debacle is behind us (or so I think), it is important to look back and reflect on the lessons learned.

1) The public is fickle and easily swayed, but largely against bailouts.

NYC stickin' it to the manAmazing Spider-Man #613 by Mark Waid and Paul Azaceta

Unlike the real world, the economy can be used to spread fear and paranoia in comic books. Not only that--it can be done by a supervillain.

Where's the actual public on this? Well in March 2009, a CBS News poll reported that 53% of the public were against giving more bailout to financial institutions, up from 44% only three months prior. I haven't seen any more recent polls about the bailouts, but it isn't a stretch to assume people have grown more disillusioned over the past year. A reaction such as the one in New York City is sudden, yet not really shocking (pun intended).

However, the overwhelmingly harsh response from NYC is interesting here. For one thing, citizens seem to be confusing Dexter Bennett for a Wall Street guy and seem to be conflating financial institutions and banks with news organizations. It's one thing to be hesitant in providing more money to institutions that individuals believe were the primary source of the recession, but it's quite another to be upset with the The DB. It actually seems like the citizens are rallying not so much against Wall Street, but against all rich people in general.

Of course, it's probably that New Yorkers are upset to see their taxpayer money wasted frivolously on organizations that they don't believe need to be bailed out. But then their problem isn't exactly with Dexter Bennett, but with the Federal Government and its policies.

2) The public is largely uninformed about, well, everything.

Spidey be rollin'It's a sad day when people think that Spider-Man (who incidentally did not reveal his identity and is opposed to the Superhuman Registration Act of 2006) actually cuts a federal salary from the Avengers and pays no taxes on it. First of all, we know that Tony Stark pays a significant amount of taxes. Second, how would that even work? Would the Avengers hand him a check endorsed over to "Spider-Man," which he would then take and deposit into a Spider-Man bank account? And unless people actually think that Spider-Man is some sort of alien with no alter ego, he does pay taxes as Peter Parker.

3) Placing trust in Wall Street will only lead to destruction.

The DB is doneAmazing Spider-Man #614 by Mark Waid and Paul Azaceta

These are important life lessons. How many times have supervillains led the public against its superheroes using the prospect of a bleak political or economic future? I've said it before and I'll say it again. The best way to fight villainy is to educate citizens, especially in matters of the economy.

Oh yeah, and don't trust Wall Street.

Wednesday, January 20, 2010

Economics Themed Superheroes

Two weeks ago, we asked you all to submit your economics-themed superheroes/supervillains. Here are your submissions. Many of them were done using Marvel's Create Your Own Superhero function. Others were done using other software and one was hand-drawn! All of them are spectacular.

First, we have THE TOXIC ASSET, created by Tim. Too big to fail, just big enough to kill.

The Toxic Asset

Next, we have HELICOPTER BEN, created by E. Supplying justice, demanding vengeance...

Helicopter Ben

Next, we have CONFUSED EX-HIPPIE, created by Matt. "Whoa, my portfolio is, like, so diversified."

Confused Ex-Hippie

Next up is GOLDLINE by Baylee. He'll give you a gold rush!


Next we have three characters and descriptions created by Paul Richard Gerome Wojtkiewicz.

The first is GOLD STANDARD, a powerful cyborg who vowed to protect the world from inflation.

Gold Standard

The second is TAXING COLOSSUS, a mysterious menace, which seeks funding for the diabolical skills of his master (yet unknown).

Taxing Colossus

The third is CLASSY, who in normal life is just an average billionaire, but when there is trouble, he speaks the phrase, "A Habitats System I Miss" that seems gibberish. Few know, however, that this is a magical anagram for the names of famous economists: Smith, Mises, Say and Bastiat.


Next up, we have HYPER INFLATION, created by Jeremy. The longer he stays in the fight, the more powerful he becomes! He'll burn through your strongest assets given the chance. The only way to bring him down is with 24 karat gold. Shadowbanker beware!

Hyper Inflation

Finally, we have HOMELESS SUPERHERO, created by D. He lost his job, but he is still a superhero!

Homeless Superhero
Again, all of these submissions were absolutely amazing and all deserve much praise. So praise them everyone!

Tuesday, January 19, 2010

Are Economists and Merchants Cowardly Scum? Annihilation Says So

This weekend while I was re-reading Keith Giffen's cosmic epic Annihilation, I noticed some interesting social and economic commentary.

Cover to Annihilation #5, art by Gabriele Dell'Otto

For those of you who haven't read it, Annihilation is the story of the Negative Zone tyrant Annihilus and his genocidal campaign to exterminate all life in the universe. Standing in his way is an army composed of the several cosmic heroes and the military might of the Kree, a militaristic race often featured in Marvel comics. Naturally, a grand battle ensues where the fate of the entire universe is at stake.

But there's only one problem. The Kree are controlled by House Fiyero, a clan within the Kree empire composed of merchants and commerce analysts. Traditionally, this clan controls the Kree economy but because of trying times, they control the doings of the entire empire. This includes all military operations and the war against Annihilus.

But the hero of the Kree people, Ronan the Accuser, doubts the ability and the fortitude of House Fiyero's leadership. He believes that people concerned with the economy are not suitable to lead his people, especially in times of war. He thinks the economically focused House Fiyero will lead the Kree people to disaster. Eventually, he's proven right when House Fiyero chooses to ally themselves with Annihilus for personal and economic gain. Ronan then does what he does best (accusing, that is) and promptly sentences the traitorous members of House Fiyero to a crispy death. Ronan then seizes control of the Kree empire for himself and mounts a glorious attack against Annihilus.

Annihilation depicts House Fiyero (the group in Kree society concerned with all things related to economy and commerce) as a clan of traitorous, cowardly, incompetent, and petty individuals. Is that how economists should be portrayed in comics?

I ask you, good readers. What better symbolizes the economist?


Cover to Annihilation: Ronan #1, art by Gabriele Dell'Otto

or this?

This is the Cowardly Lion

Please let me know what you think.

Friday, January 15, 2010

If Hulk Expands his Brand, Shouldn't You?

Expanding your brand is important. You can't rely on a single idea to carry you through. Coca-Cola needs Diet Coke, Coke Zero, Caffeine Free, and (of course) Caffeine Free Diet Coke in order to cover all their bases.

Thats why the Hulk expands his brand. Why settle for regular green Hulk when you can also get Red Hulk, Grey Hulk, Smart Hulk, Rampaging Hulk, Future Hulk, etc? And then you have She-Hulk, Red She Hulk, Savage She-Hulk, A-Bomb, ad nauseum.

The Hulk knows that once you identified something that consumers like, its important to build off of that preference. Tweak your brand a little here, a little there and you can ram different variations down the consumers' throats for all eternity.

I mean, you can never have too much of a good thing. Right?
Variant Cover to "Prelude to Deadpool Corps #1" by Ed McGuinness

... I think I smell "Ecocomics X-Treme" on the horizon...

Thursday, January 14, 2010

Casinos and Education

Dex is in debt to the Confederated Tribes of the Wind Coast.Stumptown #1 by Greg Rucka and Matthew Southworth (2009)

Interesting thing about Native American gambling enterprises: they may decrease demand for education.

This doesn't really have anything to do with the comic that I clipped above, but Stumptown did remind me of a fascinating paper I read by Will Evans about the impact of local labor market conditions on education enrollment:

Using restricted-use data from the 1990 and 2000 Census long-form, we analyze the impact of local labor market conditions on the demand for education using the economic shock produced by the opening of casinos on an Indian reservation as the identifying event. Federal legislation in 1988 allowed Indian tribes to open casinos in many states and since then, nearly 400 casinos have opened. We demonstrate that the opening of a casino increased the employment and wages of low-skilled workers. Young adults responded by dropping out of high school and reducing college enrollment rates, even though many tribes have generous college tuition subsidy programs.

Essentially, it seems that the opening of casinos has the negative unintended consequence of increasing the opportunity cost of education, particularly for low-skilled workers. This seems to outweigh any potential increase in educational attainment due to wealth effects (i.e. casinos increase family incomes, which should increase educational attainment) or due to the generous subsidies for college tuition that these casinos provide for tribe members.

It's an interesting read if you folks are into this sort of thing.

Wednesday, January 13, 2010

Supervillain Engineers

The Wizard:  Genius Inventor/Lame Supervillain

Salon points us to this study/ sociological working paper entitled "Engineers of Jihad," which looks at the prevalence of science professionals and engineers among radical Islamist movements. Here is an excerpt from the abstract:

We find that graduates from subjects such as science, engineering, and medicine are strongly overrepresented among Islamist movements in the Muslim world, though not among the extremist Islamic groups which have emerged in Western countries more recently. We also find that engineers alone are strongly over-represented among graduates in violent groups in both realms. This is all the more puzzling for engineers are virtually absent from left-wing violent extremists and only present rather than over-represented among right-wing extremists. We consider four hypotheses that could explain this pattern. Is the engineers’ prominence among violent Islamists an accident of history amplified through network links, or do their technical skills make them attractive recruits? Do engineers have a ‘mindset’ that makes them a particularly good match for Islamism, or is their vigorous radicalization explained by the social conditions they endured in Islamic countries?

Can this logic be applied to supervillains? Indeed, there seems to be something unique about Islamist extremism, as the authors note that engineers were "virtually absent from left-wing violent extremists and only present rather than over-represented among right-wing extremists." However, most supervillains are not motivated by politics, but rather by pathology.

The authors also note that the interaction between the latter two hypotheses proposed (in bold) is a more plausible explanation for the phenomenon. Social conditions is an unlikely explanation in the case of supervillains, since engineers in Western countries who later turn to villainy are likely to experience the same, non-radicalizing conditions as those who don't. But, do engineers (and scientists in this case) have a mindset that would make them a good match for supervillainy?

When you think about it, this seems pretty reasonable. The most successful supervillains, after all, are the ones who wield creative scientific powers and are able to build massive doomsday devices, teleporters, or mind-control machines. There are also plenty of engineer/scientist supervillains in the lot: Dr. Doom, The Leader, The Mad Hatter, The Fixer, The Wizard, and so on. Even guys like the Joker are known to have aptitudes in physics and chemistry; in fact, if your interpretation is the Alan Moore one, then the Joker was formerly an engineer!

Let's take a sample of notable Batman villains, as provided by Wikipedia, and check out their professions. Out of the list, the following were formerly scientists and engineers:

Mark Desmond (Blockbuster)
Preston Payne (Clayface)
Hugo Strange
The Joker (Moore's interpretation)
The Mad Hatter
The Man-Bat
Mr. Freeze
Poison Ivy
The Scarecrow
Ra's al Ghul

This is 10 out of 39 villains, or about 26% who were professional scientists of some kind. This does not include the foes of lesser renown, in which I'm sure there are plenty of engineers/scientists. Of course, most from the list above are not actually engineers and many (Poision Ivy, the Scarecrow, etc.) are trained in biological and social sciences (psychology, neuroscience, etc.), rather than the physical sciences (chemistry, physics). So it actually looks like the presence of engineer-type science professionals, at least in this sample, is smaller than I had initially thought.

I would also like to point out that Ra's al Ghul is a particularly interesting case since he is, in addition to being a supervillain, an international terrorist. Furthermore, although not having roots in the physical sciences (chemistry, physics and engineering), he was a professional physician with a deep passion for conducting scientific research. This training eventually helped him develop his biologically engineered weapons that he would often use in his schemes against the world.

What do you all think? Can you think of any other samples of villains (as specific or broad as you want--specific superhero titles, for instance, or even entire universes) that would likely have more scientists/engineers among their ranks? Can the conclusions drawn from the paper be applied to supervillainy or does the logic fall apart when you stop outside of Islamist extremism?

Thursday, January 7, 2010

The Gardner-Kvashennaya International Telescope

That team looks so happy to be doing this.Chew #4 by John Layman and Rob Guillory (2009)

There's some kind of something going on in Chew. Top Russian and American scientists have built an incredibly sophisticated and high-tech telescope--and the governments have apparently sponsored a covert research team to observe the planet Altilis-738 and search for alien life. This is very expensive. It costs the U.S. $34 million a year.

And it is a lot of money. Apparently, the job was only supposed to cost $3 million, but thanks to the machinations of a certain Senator, the funds were bumped up. Suspicious, I'd say.

Yet, I'm not surprised this funding went through. Here's the thing. $34 million per year for a telescope might seem like a lot of money in an absolute sense. But take a look at the US outlays for space flight, research and supporting activities. The total budget allocated for 2009 was $18.1 billion. Of that, about $12 billion was devoted to science, exploration, and NASA-supported activities. About $5.7 billion was assigned to space operations. And about $200 million was given to the NASA Office of the Inspector General (OIG), education programs and "other."

The OIG is responsible for oversight of NASA--preventing crime and abuse, reducing waste, maximizing efficiency, and those kind of things. That combined with education takes $200 million to operate.

Next to this, $34 million (about 0.18% of the total space budget) to fund a team of geniuses gathered together under the guise of finding alien life actually seems kind of modest.

OK, so it turns out the operation was a fraud and the scientists had some...strange habits. And it should have only cost $3 million. But the public doesn't know that, so it's OK.

Wednesday, January 6, 2010

Externalities: Captain America Edition

Superheroes fight crime and save lives. But by doing so they impose certain costs on people not directly involved. These are superhero externalities.

Those poor peopleCaptain America Reborn #5 by Ed Brubaker, Bryan Hitch and Butch Guice (2009)
Click to See What Happens Next

You can't make an omelet without breaking some eggs. Similarly, The Avengers can't rescue Captain America without breaking some...Lincoln Memorial reflecting pools.

Behold...The Shadowbanker!

Look out Toxic Assets and Zombie Banks.  It's the Shadowbanker!
I decided to have some fun with Marvel's "Create Your Own Superhero" feature and crafted a prototype Shadowbanker. What do you think? Pretty menacing, isn't he?

Can anyone make a cool economics-themed character? If so, send to us at ecocomics dot blog at gmail dot com and we'll post them! You can use Marvel's feature, or just draw, doodle, use MS Paint, whatever! Bonus points if you can create a Shadowbanker and Mark superhero (or villain) team!

Spread the word!

A STRANGE Deal with the Devil

Doctor Strange tries to save a baseball team from eternal doomStrange #1 by Mark Waid and Emma Rios (2009)

Here's a piece of advice that might help you in the future: do not, under any circumstances, make deals with the devil. It is always either a trick, an information paradox, or just not worth it. The devil always has something up his sleeve to make sure that the benefits of the transaction are skewed towards his side. That's why he's the devil.

Of course, if you're dealing with one of the devil's lackeys, you might find it beneficial. Such is the case with Strange #1.

The Pitch

In this issue, the Portland Loggers, a crummy baseball team always at the bottom of the League, are offered a chance at success by a demon named Tul'uth:

The terms of the dealThe terms are as follows: the Loggers are guaranteed to win 66.6% of their home games for the span of 30 years. After this time, all team members must then surrender their souls for all eternity (this part is non-specific, but I think this is what is meant by giving up souls).

Let us now make the following assumptions:

1) Each player is rational. He only cares about his own utility and not that of the others (making him a poor team player!).
2) Without less of generality, we can assume that at any given time the Loggers have a roster of 25 players and that Tul'uth offered 25 years of success instead of 30.
3) Each player values his soul at 10 years of success.*

*Note that we really have no way of knowing how each player equates souls and baseball victories. Yet, I don't think it's a stretch to assume that a soul is worth more than 1 championship. We also know that the value of a soul cannot exceed 30 championships (25 in our modified case), otherwise the team would not have taken the deal.

The interesting thing about this scenario is that Tul'uth is framing the deal in a way that incentivizes the Loggers to accept. What's more is that they would benefit by doing so. But it doesn't have to be this way. Suppose instead he offers an additional year of victory for every soul given to him.

Let's say that he offered this deal only to Player A. In other words, Player A could give up his soul for a division championship that year. Well, since Player A values his soul more than the utility of 1 championship, he would not take the deal. The other players on the team, however, would want Player A to take the deal, since then they would benefit from the victory without sacrificing any of their own souls (free riding). Unfortunately for them, Player A doesn't care about what they want. No deal.

In fact, if all the players were offered the deal in this way, it would pretty much be a standard prisoner's dilemma scenario. If each player took the deal, then the team would win 25 championships. Yet, each player would sacrifice the equivalent of 10 championships (1 soul), netting a total of 15 championships each.

Now let's say that Player A got wise and decided he would rather keep his soul and free ride on the others. If he defected from the group, then the entire team would be docked only 1 championship. However, Player A would get to keep his soul, which we know is worth 10 championships. For him, this would yield a net of 24, which is greater than 15 (the benefit of taking the deal).

So we see that under these assumptions, it is possible that no player takes the deal and the Portland Loggers continue on their losing streak. Tul'uth prepared for this, however, by offering a different deal. In effect, he dissolved this free rider problem by restricting the deal to either 25 years for 25 souls or nothing at all. By forcing each player to pay, he modified the choice to being between 15 championships per player or 0. Clearly, each team member would elect to take the deal.

The Catch

If you're wondering if there's a clever demon catch, there is. The catch is that these ball players have no arithmetic skills. In a baseball season, each team plays 162 regular season games. Half of them are home games. So, in one year, the Loggers would play at minimum 81 home games. If, through Tul'uth's deal, they were guaranteed to win 2/3 of these games, then they would win at least 54.

But this alone is not enough to qualify the Loggers for division championship. They'd need considerably more wins. Doctor Strange mentioned that the Loggers were consistently the worst team in the league. Let's assume that they typically lose around 100 games a year, which translates to 38% winning games. If we assume the Loggers win 66.6% of home games (54 games) and apply the 38% that they would win on their own to the remaining 108 games, then this would guarantee 95 wins. This would surely put the Loggers in good standing for division championship, but it would certainly not be a guarantee.

And this is being generous. It is entirely possible that the Loggers have a worse average annual record than 62-100. Further, this is assuming that we can even apply the 38% to the remaining games, which would not be the case if Tul'uth's 66.6% included some home games that the Loggers would have won on their own anyway.

The Out

At this point, you might say, "Aha! So the Loggers are screwed." But as it turns out, there is another caveat in the contract that makes the deal is more generous than it looks.

What???What a twist! The Portland Loggers don't even have to give up their own souls. The contract actually stipulates that the beneficiaries are defined as "the home team" and not the individual players who made the deal. Therefore any team, regardless of composition or name, is held accountable to meet it end of the bargain so long as it occupies the old Loggers stadium.

So, what we have here is a situation a demon has given some people the ability to sell other people's souls. They could each, theoretically, play baseball for 24 years, receive 24 championships, move or retire on the 25th year, keep their souls, and let some poor suckers pay the burden for all eternity with none of the reward! How horrible for those suckers, but how unbelievably awesome for the original beneficiaries.

This begs the question of what exactly Tul'uth's intent was here. If he was dead set on securing the souls of the original Portland Loggers (i.e. the team that made the deal), he sure picked a silly way to do it. It's true that this squad was not aware of his contractual nuance, so you might be inclined to think they just got lucky. However, it is very rare for a team to remain intact for 25 years. Even supposing that all of these players would still be playing baseball after 25 years, players get traded all the time beyond their control. Tul'uth HAD to have anticipated that he would not score this original team's souls.

In fact, Tul'uth is the one that got lucky. The Loggers went broke and the stadium shut down for many years. If not for the new team that began using the old stadium, he would have been left soul-less after the contract expired. So why did Tul'uth not simply make the deal for the players' souls?

It could just be that Tul'uth didn't particularly care which souls he got so long as he got some. But then wouldn't it have been simpler to ask the Logger to just, I don't know, pick some other souls?

All in all, an oddly generous deal coming from the "lord high incubus of games and chance." He offered them all the benefits of victory with the ability to void the contract after the fact. AND they didn't even have to know about it!

This is why the devil should do all his deal-making himself and not rely on some hack subordinate. Score one for the home team.

Monday, January 4, 2010

Priorities, Iron Man.

It's a new year and a new time, especially in the Ultimate Marvel universe. If you think our financial system is in ruin, at least real-New York City did not suffer a cataclysmic wave of mutant destruction ("Ultimatum"). That would really send your stocks down.

In light of recent events, you would think that the heroes and role models of Marvel would learn from past mistakes. They would set their priorities towards rebuilding the social and economic infrastructure and ease up on the frivolous spending that partly contributed to the turmoil in the first place.

Well, you'd be wrong...

Business as usual for Iron ManUltimate Armor Wars #2 by Warren Ellis and Steve Kurth (2009)

This is, by the way, right after Stark went on a long rant about how Ultimatum had left him with virtually no assets and how he began seeking alternate means of making money. Millions dead or hospitalized. New York in ruins. Desperate need of resources.

But, dammit, those bonuses need to be paid.

Priorities, Iron Man. Priorities.