{"id":10358,"date":"2019-12-29T22:28:56","date_gmt":"2019-12-30T03:28:56","guid":{"rendered":"http:\/\/chcollins.com\/100Billion\/?p=10358"},"modified":"2022-08-01T07:42:49","modified_gmt":"2022-08-01T11:42:49","slug":"baseball-tv-refrigerators-and-other-stories","status":"publish","type":"post","link":"https:\/\/chcollins.com\/100Billion\/2019\/12\/baseball-tv-refrigerators-and-other-stories\/","title":{"rendered":"Baseball, TV, Refrigerators and Other Stories"},"content":{"rendered":"

[From Baseball, TV, Refrigerators and Other Stories (with illustrations)<\/em> by Craig H. Collins, 2019]
\n<\/span><\/p>\n

\"clemente-arm\"<\/a>I grew up in Western Pennsylvania, which in the 1960s was all about high-school football and Pirates baseball. Back then, baseball stars like Willie Mays, Hank Aaron and Roberto Clemente not only played for but virtually belonged to<\/em> the same teams, year after year, until they were traded or released or retired.<\/p>\n

This began to unravel in 1976, the year owners and players agreed to terms on free agency. While I have fond memories of the practically cast-in-stone Pirates lineups of my youth (Clemente always<\/em> batted third), I must endorse in abstracto<\/em> the concept of free agency.\u00a0 Ballplayers — and all other employees — should be empowered to negotiate their salaries based on their talents and what the market can bear.\u00a0 You and I would demand no less for ourselves or our children.<\/p>\n

But free agency encourages players, and their agents, to seek the highest salaries; as such, only large-market, deep-pocket teams are able to sign the best players, which has forever changed the competitive balance of the major leagues.\u00a0 To cite only the latest example, the New York Yankees just signed pitcher Gerrit Cole, once a Pittsburgh Pirate, to a nine-year, $36 million-per-year contract.\u00a0 Cole’s new salary with the Yankees is nearly half the entire 2019 payroll of the Pirates.<\/p>\n

Competitive balance in sports is not, however, the point of this article.\u00a0 Rather, it is how free agency served to rouse a much larger giant: the now-relentless drive by all involved to inject more and more money into the system.\u00a0 The chart below shows how team payrolls, television revenue, ticket prices and average cable bills have skyrocketed since free agency began and cable was deregulated.\u00a0 Note that all figures in this chart are expressed in terms of 2019 dollars — inflation has already been accounted for!<\/p>\n

\"\"<\/a>As players became superstars and their salaries soared, teams raised their ticket prices and negotiated ever-larger local and national television deals.\u00a0 To pay for it, sports networks raised the price of carrying their basic cable channels, and cable\/satellite providers added those costs to the price of our packages, whether we watched sports channels or not.<\/p>\n

Weren’t these companies afraid of losing customers when they raised their prices?\u00a0 Well, not necessarily.\u00a0 The figure below sums up the economics of a hypothetical cable company:\"\"<\/a>The Customers curve (top left) shows the number of customers willing to pay a given price for monthly cable service.\u00a0 In this example, most people are willing to pay $50 a month but only half as many are willing to pay $100 and almost no one would be willing to pay $300, according to this company’s market research.<\/p>\n

The Revenue curve (bottom left) shows the income (price times customers) that would be generated at various prices, based on the data in the Customers curve.\u00a0 Note that revenue would be greatest if the company sets the monthly price to $80, despite the loss of some potential customers.<\/p>\n

Subtracting fixed costs and per-customer costs (top right) from the Revenue curve yields the Profit curve (bottom right).\u00a0 The Profit curve shows that the company will make money if the monthly price is anywhere between $60 and $170 (green area) but it will maximize its profit if it sets the price to $100 per customer.\u00a0 And so it will.<\/p>\n

\"\"<\/a>Sorry for the Economics 101 lesson, but my intent here is to show that businesses do not care<\/em> how many customers they have, and they specifically do not care if you are one of them.\u00a0 Businesses, if they are smart, set their prices to whatever yields the most profit — and if that price is too high for you, too bad.\u00a0 Capitalism may be prevalent in democracies, but democracy has no seat of honor in capitalism.\u00a0 As such, cable companies will never offer a la carte<\/em><\/a> (pay per channel) service, no matter how many of us may prefer it.<\/p>\n

At one time, the family-room TV was one of the “big purchases” a household would make and it was expected to last for years.\u00a0 But today, what most of us pay for one year of cable costs more than the set we watch it on.\u00a0 The media\/entertainment megaliths have got us right where they want us.\u00a0 How did we not see this coming?<\/p>\n

All Else Being Unequal…<\/em><\/strong><\/h3>\n

This brings us to income inequality.\u00a0 Businesses love it when more money sloshes around, especially when it sloshes toward the well-to-do.\u00a0 This is because it increases the pool of price-insensitive customers, whom every business covets.\u00a0 How does income inequality factor into the rise in ticket prices and cable bills?\u00a0 Let’s look.\u00a0 The graph below shows how income was distributed across U.S. households for the years we considered earlier.\u00a0 Again, amounts are stated in constant dollars — inflation has been taken into account.<\/p>\n

\"\"<\/a>Each point on a curve shows the percentage of U.S. households whose annual income was the given amount or less.\u00a0 For example, the proportion of households earning $100,000 or less was 82% in 1984 (green dot), 73% in 2001 (red dot) and 70% in 2018 (blue dot).<\/p>\n

If every household had the same income, the curve would be a vertical line — so a flatter curve on this graph indicates less equally-distributed income.\u00a0 We see that the cumulative income curve flattened markedly from 1984 to 2001 and has continued that trend since.<\/p>\n

Businesses look at this data and see something tantalizing, namely, that the percentage of households making more<\/em> than $100,000 (current dollars) has climbed 250% since 1984.\u00a0 This income group grew from 15 million households in 1984 to nearly 40 million today, recently surpassing the number of households making $50,000 to $100,000.\u00a0 (The latter group also grew in number, just not as rapidly.)\u00a0 Naturally, media giants prefer to target higher-income households because (a) these are the people willing to pay $120 – $150 a month for home entertainment and (b) they are now plentiful.\u00a0 As a result, those of more modest means feel increasingly ignored.<\/p>\n

Income inequality works out even better for enterprises that deal in limited-quantity goods like concert tickets, big-city apartments and private college degrees.\u00a0 All of these cost more (in real terms) than they once did, because more people can afford to pay the upscale price and they are lining up to do so.\u00a0 Middle-income folks are left to window-shop.<\/p>\n

Cold Reality<\/em><\/strong><\/h3>\n

\"\"<\/a>I promised you a refrigerator and now I’m going to deliver.\u00a0 I’ll be heading your way sometime between 8 AM<\/span> and 3 PM<\/span>, unless I run late, in which case I’ll call you about 6:30 or so to say I’ll be there in an hour, and then I’ll show up at 9:00.\u00a0 Hope you don’t have anything important to do tonight.<\/p>\n

But I digress.\u00a0 The refrigerator in this story was our own.\u00a0 Like most people, we called it The Fridge (to distinguish it from The Other Fridge).\u00a0 We bought The Fridge when we built our house — it was a white side-by-side, counter-depth Frigidaire Gallery with separate ice and water dispensers and nice produce bins.\u00a0 It was well lit inside.\u00a0 It didn’t have fancy electronics, and the freezer was a little cramped, and once in a while we would have to turn the breaker off and on to reset it, but all in all The Fridge served us well…<\/p>\n

…until one fateful day last year, when the freezer temperature began to rise, and it became evident that something important (and expensive) was wrong with The Fridge.\u00a0 Perhaps it was the thought of all our food spoiling that clouded my reasoning — because I decided the best solution was to buy a new refrigerator.\u00a0 “The Fridge is 13 years old!\u00a0 If we get it fixed today, some other part could fail tomorrow!\u00a0 Why throw good money after bad!<\/em>“<\/p>\n

And so I consulted Consumer Reports and shopped the online appliance stores and found, hmm, there’s not a lot of white, side-by-side, counter-depth refrigerators to choose from. Frigidaire offered plenty of models in stainless steel but no longer made any counter-depth refrigerator in white.\u00a0 Same deal with LG.\u00a0 Samsung had one but I crossed them off the list due to poor reliability and service reviews.\u00a0 That left Whirlpool and GE, each of which had exactly one model that checked all of our boxes.\u00a0 Based on ratings — never having seen the item in person, of course, because that’s the way people buy things these days — I selected the GE GZS22DGJWW<\/span><\/em> and ordered it from Home Depot.<\/p>\n

The GE seemed to cost enough that I figured it must be well-built.\u00a0 Hah!\u00a0 I began to have\u00a0 regrets the minute the delivery truck drove away.\u00a0 The light was dim, the produce drawers were flimsy and had no dividers, and freezer layout was a total afterthought.\u00a0 Bottles and jars in the door clunk around whenever you open or close it.\u00a0 The hyperactive ice dispenser likes to give you a little crushed<\/em> even if you selected cubed<\/em>, and we routinely have to collect ice cubes off the floor as if we had won a frozen jackpot.<\/p>\n

I dislike the GZS22DGJWW<\/span><\/em> so much that I have talked to my wife about donating it to Habitat for Humanity and switching to stainless steel appliances, just so that we can have a decently-made refrigerator.\u00a0 (This may be idle talk, but I haven’t dismissed it.)<\/p>\n

What if anything does this<\/em> have to do with income inequality?<\/p>\n

Many years ago, almost everyone had white (or perhaps almond) appliances, save for some unfortunate dalliances<\/a> with turquoise, avocado and harvest gold from the 50’s to the 70’s.\u00a0 For the most part, stainless steel appliances were reserved for upscale kitchens. But with the rise in high-end incomes, the demand for stainless steel surged due to its perception as a status good<\/a>, while white became associated with downscale.\u00a0 Appliance makers found it less profitable to make full-featured models in white, because people who could afford the premium models preferred stainless.<\/p>\n

All right, so what?\u00a0 Unpopular products are discontinued all the time — no one owes me the perfect refrigerator.\u00a0 But I see this as a specific case of how increasingly undemocratic American capitalism is.\u00a0 The widening income spread invites businesses to divide us into consumer classes, where quality and selection are found only in luxury goods, while the masses must put up with whatever transpacific mass-production produces.\u00a0 In white.<\/p>\n

For their tireless efforts to promote income disparity, we can raise our glass to Wall Street, Newt Gingrich<\/a> (1997), Dick Cheney<\/a> (2001), Mitch McConnell<\/a> (2012) and Donald J. Trump<\/a> (2017).\u00a0 They went to bat for their business friends — and all I got was this lousy ice maker.<\/p>\n

Shifting the Curve<\/strong><\/em><\/h3>\n

Some in the middle-class don’t believe, or can’t see, how income inequality affects them.\u00a0 Perhaps it is because the issue is too often conflated with wealth-resentment, which is a separate complaint and which isn’t helped by Bernie Sanders railing on about billionaires.\u00a0 While billionaire businessmen<\/a> did play a part in dismantling the middle-class and have reaped the spoils from the same, just clawing back those gains is not enough.\u00a0 We need to restore cultural and economic power to the middle class.<\/p>\n

Ninety percent of American workers are employees.\u00a0 I was an employee my entire earning lifetime and never seriously embraced the risk-reward world of entrepreneurs, creatives and solo practitioners.\u00a0 I somehow made a decent living through competency, reliability, diligence and luck, in contrast to the entrepreneur’s success formula of passion, vision, risk-taking, branding, marketing and luck.\u00a0 Relatively few of us are entrepreneurs at heart; most of us will remain employees, no matter how many Tony Robbins lectures we attend.\u00a0 Nonetheless, our culture enshrines self-made money-makers — and it often seems like the rest of us are just here to help them make it.<\/p>\n

It is time that we value everyday workers as highly as we do entrepreneurs and capitalists. That’s where the road to greater equality has to start.\u00a0 We will not automatically rebuild the middle class by tearing down billionaires — we need to take positive steps to shift the entire income distribution curve to the right and stop doing things that make it flatter.<\/p>\n

Donald Trump won several Rust Belt states with a lot of empty promises<\/a> to reopen mines and bring back auto and steel industry jobs.\u00a0 Clearly this never happened, and it was not a viable way to revitalize the middle class in any case.\u00a0 I largely agree with Andrew Yang<\/a> that automation<\/a> (plus globalization and digitalization) will continue to erode the traditional labor landscape and that there is not much we can do to stop that.\u00a0 So what do<\/em> we do?<\/p>\n

Identifying problems is not the same as solving them.\u00a0 Yang thinks that worker retraining programs are inefficient<\/a>, and he may be right, but his plan to hand out $1,000 a month to every adult citizen strikes me as unfocused and wasteful.\u00a0 Yang would have us believe that giving $12,000 a year to 225 million people will deliver a better result than if we directed that $2.7 trillion to large-scale endeavors.\u00a0 It might make an interesting social experiment but as a middle-class rescue mission I don’t buy it<\/a>.<\/p>\n

\"\"<\/a>If we go to all the trouble of collecting $2.7 trillion in taxes, we should use it to promote the general welfare, and the place we should start is education.\u00a0 I would provide subsidies to make community college or trade-school certificate programs free for all middle-income citizens.\u00a0 I would replace Yang’s Freedom Dividend with an Education Dividend, which would be paid on a per-student basis to every public school system to raise teacher salaries, bring tech up to date, and cover the school supplies that teachers pay for now.<\/p>\n

I would repeal Trump’s corporate welfare and replace it with an incentive more in the public interest: for every $1 that a corporation donates to nonprofit post-secondary and\/or vocational programs, it would receive $2 in tax credits.\u00a0 And I would impose a 20% tax on stock buybacks and earmark the proceeds for low-income vocational and STEM<\/a> education.<\/p>\n

To restore tax fairness, I would ensure that no corporation pays less tax than a household that has similar income.\u00a0 Executive pay in excess of 25 times the company’s median wage would not be deductible<\/a> as a business expense; and compensation in excess of 100 times the median wage would be subject to a non-deductible 40% luxury tax.\u00a0 On the other side of the ledger, I would broaden the definition of employee<\/em> so that fewer businesses can call their steady workers independent contractors<\/em> and thus avoid paying their Medicare and Social Security taxes along with other benefits.<\/p>\n

Instead of giving tax breaks to those who buy and sell stocks, I would tax capital gains at the same rate as other income.\u00a0 This is a fair and straightforward principle — and the way our tax law worked from 1986 to 1997.<\/p>\n

I would make the national minimum wage $15 per hour for all workers, including those in the restaurant and hospitality industries.\u00a0 Restaurants can simply print “service included” at the bottom of the tab as is done in Europe.\u00a0 We will all survive.<\/p>\n

The other major initiative I would pursue is rebuilding our long-neglected infrastructure. According to Brookings Institution<\/a>, “Infrastructure [jobs] often provide more competitive and equitable wages compared to all jobs nationally, consistently paying up to 30 percent more to low-income workers.”\u00a0 Even self-driving cars and trucks need roads and bridges to get to their destinations, and robots do not (yet<\/a>) repair roads.\u00a0 We can certainly afford to spend more on infrastructure once we abolish welfare for corporations.<\/p>\n

But our infrastructure needs go beyond transportation.\u00a0 Information goes hand-in-hand with education in terms of advancing the middle class, and information pipelines need to serve everyone.\u00a0 While 98% of urban residents have access to fixed-location high-speed internet service, only 76% of rural residents do<\/a> and their service can be much more costly<\/a>. I would do two things to address information inequality: I would make internet service a regulated low-profit utility; and I would form a public\/private entity to deliver affordable, fixed-location broadband service to all rural and tribal areas.\u00a0 Such steps would help create and sustain middle-class jobs in the face of increasing digitalization.<\/p>\n

I don’t know whether these proposals would do anything about cable bills or ticket prices or refrigerator colors, but they would do more for the middle class than anything that our current twit-in-chief has twittered about.<\/p>\n

The fact is, there is no easy way to reverse income inequality and restore economic power to our middle class, as we unwisely dismantled much of our manufacturing supply chain<\/a> over the last few decades.\u00a0 We certainly won’t rebuild the middle class by designating our dilapidated town squares “historic districts” and renting out rooms on Airbnb.\u00a0 Nor will we make the middle class stronger with middle-class welfare.\u00a0 Instead, we need leaders who will (a) correctly identify the causes and effects of income inequality, (b) articulate a clear vision of the future of our middle class, and (c) propose practical, structural remedies.<\/p>\n

I have read what the 2020 Democratic presidential contenders have to say<\/a> about the issue and frankly I am underwhelmed.\u00a0 Sanders, Warren and Yang seem to be preoccupied with redistribution.\u00a0 Biden and Buttigieg come closer to checking the boxes but their passion and energy leave something to be desired.\u00a0 One of the above had better quickly step up to the podium and paint a better picture than Trump does, or the Democrats will lose again and the income curve will continue to skew ever richward.<\/p>\n","protected":false},"excerpt":{"rendered":"

[From Baseball, TV, Refrigerators and Other Stories (with illustrations) by Craig H. Collins, 2019] I grew up in Western Pennsylvania, which in the 1960s was all about high-school football and Pirates baseball. Back then, baseball stars like Willie Mays, Hank … Continue reading →<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-10358","post","type-post","status-publish","format-standard","hentry","category-commentary"],"_links":{"self":[{"href":"https:\/\/chcollins.com\/100Billion\/wp-json\/wp\/v2\/posts\/10358","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/chcollins.com\/100Billion\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/chcollins.com\/100Billion\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/chcollins.com\/100Billion\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/chcollins.com\/100Billion\/wp-json\/wp\/v2\/comments?post=10358"}],"version-history":[{"count":193,"href":"https:\/\/chcollins.com\/100Billion\/wp-json\/wp\/v2\/posts\/10358\/revisions"}],"predecessor-version":[{"id":21495,"href":"https:\/\/chcollins.com\/100Billion\/wp-json\/wp\/v2\/posts\/10358\/revisions\/21495"}],"wp:attachment":[{"href":"https:\/\/chcollins.com\/100Billion\/wp-json\/wp\/v2\/media?parent=10358"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/chcollins.com\/100Billion\/wp-json\/wp\/v2\/categories?post=10358"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/chcollins.com\/100Billion\/wp-json\/wp\/v2\/tags?post=10358"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}