DRI-326 for week of 3-31-13: The Kansas City Star Meets Flexible Baseball-Ticket Pricing

An Access Advertising EconBrief:

The Kansas City Star Meets Flexible Baseball-Ticket Pricing

Economics is the formal logic of human choice. Newspapers report human affairs. Reporting the news affords endless scope for economics as a tool of explanation and analysis. Yet newspapers are notorious for their ignorance and mishandling of economics. Why?

One possible answer is deliberate misrepresentation and concealment of facts by the papers for ideological reasons. Another is simple error. The latter hearkens to the old maxim, “Never ascribe to venality that which can be explained by mere stupidity.”

Whatever the cause, examples of this phenomenon abound. A recent front page of the Kansas City Star offers fresh evidence of it. The subject is the pricing of baseball tickets by the Kansas City Royals.

Major-League Baseball Meets “Dynamic Pricing”

“Get Set for Big Swings,” shouted the front-page headline of the Star on Sunday, March 31, 2013. An overhead explained: “Royals Ticket Prices: Like airfares and hotel rates, they will fluctuate.” The subhead continued with: “Dynamic pricing, a fixture in the travel industry and growing more common in the entertainment world, has come to Kauffman Stadium. Below are prices for the same outfield seat to see the Royals in their first week at home – as of now.” The graphic chart showed a $54 price for the sold-out home opener on April 8, followed by prices ranging from $23 to $31 to the identical seat for subsequent games that week.

The article underneath, written by veteran staffer Mike Hendricks, contrasts the age-old procedure of fixed seasonal pricing for Kansas City Royals’ baseball games with its successor. So-called “dynamic pricing” is familiar to contemporary shoppers for airline and hotel reservations. Prices can fluctuate from day to day instead of from one season to another. Moreover, these daily fluctuations are not uni-directional; they will move up and down. That is something new for baseball fans – for decades, the only changes in official ticket prices have been upward ratchets from one season to the next.

Economists will immediately recognize that the term “dynamic pricing” is a misnomer – probably owing to (bad) advertising psychology. The precise descriptive term is “flexible pricing.” It implies the actual state of affairs, in which prices are responsive to changes in consumer demand. Failure to recognize and report this misnomer is the first of many depredations committed by the author of this piece.

The headline – “Get Set for Big Swings” – embodies a longtime Kansas City Star tradition: promising revelations that the accompanying article does not deliver. This constitutes lying to the reader. It is reasonable to suppose that Star readers resent being lied to and that this has contributed to the precipitous declines in the paper’s circulation and consequent ad revenue. The only “big swing” in price cited in the article occurs between opening day and succeeding games. One of the safest predictions about any Royals season is that the opening-day game will sell out and that attendance will immediately plummet thereafter. Given flexible pricing, it is therefore axiomatic that opening day will command a high price and that the price will thereupon fall. Maybe there will be “big swings” later in the season, maybe not. But the author doesn’t say that and offers no evidence that it will happen.

By any reasonable standard of journalism, this article is off to a miserable start.

Flexible Pricing of Baseball Tickets

The author’s vagueness on future price fluctuations is not surprising because his grasp of the basis for pricing is demonstrably shaky. Although the phrase “supply and demand” appears once in the article, its underlying logic is left to the reader’s imagination.

The importance of consumer demand to pricing is never mentioned, let alone explained. In this case, the supply of tickets is fixed – limited by the seating capacity of Kauffman Stadium. Thus, the economic logic of baseball ticket pricing comes straight out of the textbook diagram marked “Very Short Run,” in which the supply curve is a vertical line and price is completely determined by its intersection with the downward-sloping demand curve. In the very short run, economists teach, price is “demand-determined.”

Thus, price changes are caused by changes in demand. These are given very short shrift indeed by the author. His marquee explanation for the Royals’ new pricing strategy is that “the hotel and airline industries have used variable pricing strategies for years as a way to encourage customers to make their reservations early.” It is true that hotels and airlines do have one thing in common with baseball teams; namely, a fixed capacity (seating or lodging) that offers the constant incentive to keep capacity utilization as high as possible.

Hotels and airlines, though, commonly suffer the peak-load problem. Their capacity is insufficient to handle demand at its very highest point(s), but too great to utilize efficiently much – perhaps most – of the time. Since the late 1980s, the Royals have suffered from inadequate capacity about one day each season – opening day. In recent years, they have had a hard time giving away tickets to late-season games – and that is not hyperbole. In any case, baseball teams simply do not suffer the kind of scheduling problems endemic to the airline and hotel industries. Business travelers or vacationers on strict timetables are key components of airline and hotel demand, but much less important to baseball teams. Even allowing for the Royals’ atypical status as a regional franchise, buying weeks or months in advance usually provides little value to fans and little convenience to the team.

Why Now? The Timing of the Shift to Flexible Pricing

Mel Brooks’ famous protagonist Maxwell Smart on the classic TV series Get Smart once responded to a villain’s derisive defense “You’re not going to try to convict me on that flimsy evidence, are you?” with the rejoinder “No, I’ve got some more flimsy evidence.” Similarly, the author buttresses his non-explanation of Royals’ ticket pricing with more flimsy evidence. “Of all professional sports, major-league baseball teams have the greatest challenge in selling tickets, given the number of seats [and] games played,” gravely declares a “market analyst” employed by a ticket reseller.

But when baseball was truly America’s national pastime, its long season and big edge in games played was not viewed as a disadvantage. On the contrary, it was cited as a+ leading factor in the economic advantage enjoyed by baseball. Pro football, basketball and hockey were second- and third-string sports, miles behind baseball in income and prestige. Owners envied baseball its long season, which provided a tremendous opportunity to generate revenue. Baseball’s only rival as a leisure-time activity was the movies, which were probably the true national pastime.

No, the long baseball season is only a drawback when the team is a poor attraction. 1985 marked the Royals’ last post-season playoff appearance – they won the World Series by overcoming 3-1 deficits in both post-season playoffs – and they have threatened to return only in 1989, 1994 and 2003. They are the deadbeats of major-league baseball. Their 27-year absence from the playoffs is by far the longest of any team in North American professional sports.

Of course, this begs the question of why the Royals have chosen to introduce flexible pricing now, at this particular point in their history. As it turns out, it is not pure happenstance. Flexible pricing is one of various types of pricing alternatives to single pricing. The common feature behind all these is motivation – the seller’s desire to increase total revenue and profit by charging multiple prices rather than just one.

That motivation stems from more than merely the desire to profit from multipart pricing. Conditions have to be right in order for the alternative scheme to work. The different prices must be designed to gain from differing characteristics of different buyers or different conditions existing among the same buyers at different times. Either way, the firm must have the ability not only to identify the differences but to act upon them. When it does that, it is engaging in price discrimination.

Baseball teams already strive to segment different groups of buyers and charge them different prices to watch the same baseball game. That is the purpose behind different seat categories such as general admission, reserve seats, box seats, field level, upper level, stadium boxes and luxury suites. Each seat category is geared to a different category of buyer and priced accordingly. The general admission tickets are geared toward low-income fans and students. Outfield general admission is the farthest away from the action and is also geared toward the low-income fans who might otherwise not attend games if not for the affordability of a low price. Luxury suites are reserved for corporate clients and millionaires who can afford to plunk down five figures to reserve a season ticket in relative luxury. Box and reserve seats are targeted toward upper-middle-class fans that want a good seat and can afford to pay a price slightly above general admission.

This system has long been in effect in baseball and other sports. It is familiar throughout the entertainment industry. The Star article cites the symphony – an art form whose legendary disdain for solvency seemingly places it above the vulgar domain of commerce and profit. Yet the time-honored seating divisions separating dress circle, orchestra, ground floor, loge or mezzanine and balcony represent the same price-discrimination segmentation of demand practiced by sporting events.

Flexible pricing takes the idea of differential demand in a different direction. Rather than focusing on demand differences among consumers at the same point in time, it considers fluctuations in demand that affect all categories of buyers – but at different points in time. For example, instead of targeting different groups of buyers, segmented by income, it targets different games that support a higher price. These are late-season games when pennant races and individual honors such as batting championships and pitching titles are at stake. These games should command premium prices, as long as the team can stand up under pressure. For over two decades, the Royals did not play such games because they were never in contention that late in the season. Consequently, there was little purpose in setting up flexible pricing because the team would not benefit that much from flexibility. There was little additional pricing strategy the Royals could use to enhance their revenue; all they could do was get what little they could from the standard price-discrimination techniques. The introduction of inter-league play did briefly inject some novelty into the schedule, particularly by adding an interstate rivalry with the St. Louis Cardinals, the Royals’ 1985 World Series opponent. This allowed the team to give flexible pricing a tryout last year in Cardinals’ games.

But prior to the 2013 season, the Royals beefed up their pitching staff. They acquired ace starter James Shields and starter/reliever Wade Davis from the Toronto Blue Jays and starter Ervin Santana in another trade. This transformed the league’s worst pitching staff into a potentially serviceable one while retaining their current offensive strength, spearheaded by all-star Billy Butler and Alex Gordon. Shields is currently pictured on Sports Illustrated’s cover, highlighting the magazine’s baseball pre-season issue. For the first time in years, the team seems able to contend for a playoff berth.

At lastthere is a prospect that late-season games may be competitively meaningful. Opening day may not be the only sellout game on the schedule this year. Thus, an effort to milk more box-office revenue from those games makes sense, since there is more potential revenue to seek.

In theory, flexible pricing benefits teams whenever there are substantial fluctuations in demand from game to game. Various factors other than competitive performance might influence the amplitude of demand over the course of a season. Weather is the most obvious; Kansas City is subject to cool Springs, hot Summers and brisk Falls. A spate of unseasonably bad weather might give the team a chance to head off bad attendance by offering offsetting discounts to fans. Games for which announced starting pitchers are marquee players will generate stronger demand.

But these subsidiary factors will become more important when core demand for tickets is strong. The improvement in the Royals’ competitive position was clearly the driving factor in the team’s change in pricing policy.

Baseball, Politics and the Star

One would suppose that an above-the-fold, front-page article would command the full attention and premium resources of a metropolitan newspaper. Yet none of the real considerations found their way into the Star‘s story on the Royals’ ticket-pricing change. Aside from simple incompetence, how can we explain this?

The Star is a left-wing newspaper. That encompasses more than merely a capsule summary of its editorial stance. Ideology infects every aspect of the newspaper’s operations, from coverage to reporting to editorials to op-eds to advertising. It permeates not only the editorial page but the front page as well. It infiltrates the sports pages, the entertainment section and even the comics. It also affects how the paper treats the Royals.

Sports teams have grown accustomed to public subsidies. These take various forms. Most commonly, they include stadia built and maintained at taxpayer expense – including periodic repairs, refurbishment and reconstruction. That does not mean there are not quid pro quo, though. It is tacitly understood that the team and its employees are to back the multifarious public projects launched by the local political establishment with endorsements and campaign cash.

The newspaper, as the establishment’s informal public-relations and promotion agency, treats the Royals with due deference. The team is viewed as a kind of quasi-public utility – an economic and psychological necessity that is not so much too big to fail as too important to fail. The newspaper sees the team’s economic interactions as gifted with remarkable generative powers – multiplier effects and such – that are really beyond the reach of any mortal business firm. But the Royals have a tacit left-wing seal of approval, which means that they are assumed to be above such vulgar considerations as profit. That is why the economic rationale for flexible and multipart pricing never reaches the tender ears of Star readers.

To the Star, the Royals are not so much a sports franchise as a political franchise and ideological asset. No information potentially damaging or embarrassing to that franchise – no matter how newsworthy – will pass unfiltered through the Star to the general public.

How has the new pricing regime been received by fans? “So far there hasn’t been much of an outcry here or anywhere else.” (21 of the 30 major-league baseball teams have now adopted some form of flexible pricing, the article discloses.) Why not? Again, the article’s author’s lips are sealed on this matter. But the answer is clear. The rise of ticket brokers and a legal secondary market for tickets, cultivated by firms like Stub Hub, has prepared the ground for flexible pricing. In other words, the free market is way ahead of Royals’ management. The author, a faithful Star minion, holds no brief for freedom or free markets and saw no reason to enlighten readers on this point.

The Economics of Flexible Ticket Pricing

The point of the Star‘s story is obscure. The headline promises “big swings” in ticket prices, but the article doesn’t provide any, nor does it suggest any real basis for them. It seems clear that something pretty new and different has come to baseball ticket pricing in particular and to professional sports in general, but the author either doesn’t know what it is or doesn’t want to reveal it. At this point, it is necessary for economic logic to take the tiller of the story in order to bring us to a coherent destination.

Will flexible pricing produce higher or lower prices than the old seasonally fixed pricing method? The short answer is: Both. But that’s not a satisfactory answer. The precise answer is that price will be closely attuned to demand on a game-by-game basis, rather than a yearly basis. (We should bear in mind that there are as many separate “demands” as there are ticket categories – that was true under the old system and remains so under flexible pricing.) From a fundamental economic perspective, that is a good thing.

The article is woefully ambiguous on this point. It first informs us (correctly) that “the prices…will fluctuate day to day, and across all sections based on supply and demand.” (This is the article’s only reference to supply and demand.) It then continues by revealing that “fewer than half the seats in your average ballpark are occupied by fans who have bought season tickets,” thereby setting a “challenge for baseball clubs…to attract casual fans who want to see a game or two during the year.” And “free bobbleheads and ‘buck nights’ only go so far in building attendance numbers.” So far, so good – flexible pricing’s raison d’être is improving ballpark-capacity utilization.

Sure enough, a company called Qcue, headed by entrepreneur Barry Kahn, sold the San Francisco Giants on the concept of flexible pricing on a trial basis in 2009. It yielded a 20% increase in sales of the seats in sections picked for the trial. Today, the company works with two-thirds of major-league clubs and has achieved revenue increases of between 5% and 30%. “That’s ticket-revenue dollars, not an increase in the number of tickets sold. However, that tends to go up, too. Dynamic pricing doesn’t necessarily make it more affordable to attend a ball game than before, but it can.”

This burbling incoherence is typical Star analysis. If attendance is increasing across the board and the only thing that’s changed is prices charged, then the prices must be falling on net balance. That’s the Law of Demand at work. The questions are: What makes them fall? When do they fall? Do they ever rise? When is the best time to buy? And – the $64,000 question – is flexible pricing a good thing overall for baseball fans and for the rest of us?

The article implies that midweek games will carry a lower price tag. It is certainly true that, all other things equal, the demand is greater on weekends when kids and working parents are less encumbered by obligation. But that is a comparatively minor factor in segmenting demand.

High-demand games are special occasions – opening day, marquee players or teams appearing – and pennant-race games. A computer algorithm will alert team officials to opportunities for price increases, which will be implemented electively. It is these games in which Royals’ sales director Steve Shiffman’s advice to “buy early, save money” makes sense. Not only will buying early get the best price, it will also avert the possibility of a shutout; e.g., failure to “score” a ticket at all due to unavailability.

The rest of the time, buying early benefits the team, not the fan. A baseball ticket, like a stock option airline seat or radio advertising time, is a wasting asset whose value expires when the game’s first pitch is thrown. (More precisely, it plummets dramatically, expiring completely at about the fourth or fifth inning.) As game time nears, the holder will likely accept successively lower prices rather than see it expire unused. This is particularly true of sports teams, who have a vested interested in filling seats to increase the incomes of concessionaires. The rise of ticket brokers has complicated pricing for team management, who are extremely reluctant to stimulate price wars lowering seat prices too much. Thus, the Royals advertise the season-ticket-holder’s discounted single-game price as their rock-bottom price. But from the fan’s standpoint, there is no point in transacting before this price is offered and no reason to rush once it is in place – for garden-variety, low-demand games.

Thus, the brave new world of flexible baseball-ticket pricing does demand that fans distinguish between high-demand and low-demand games, in order to get the best price. But this should not tax the capabilities of any experienced fan or intelligent non-fan. As a practical matter, it will not severely disadvantage even the most incapable consumer until and unless the Royals become contenders.

Is flexible pricing economically efficient? Flexible pricing brings the number of tickets fans wish to purchase in each seat category closet to equality with the number available, using price as the coordinating mechanism. This is another way of saying that the amount of alternative consumption fans are willing to sacrifice to get a ticket (their demand for it) is closer to the amount they have to sacrifice (determined by the ticket price). Equality between those two things constitutes the famous economic condition called “equality at the margin.” It is one good way of defining economic efficiency. Thus, the verdict on flexible pricing and economic efficiency is favorable.

This is good for everybody because we all have a stake in using what we have to make each other as well off as possible. It’s good for taxpayers because baseball is publicly subsidized, but the presence of subsidies doesn’t make the case stronger. In fact, the subsidies themselves are inefficient and should be ended – that would make things even better. (Sports meet none of the textbook criteria for subsidy and none of the claims to economic exceptionalism advanced in their behalf.)

If prices sometimes go down but sometimes go up, how can we claim that fans, per se, are better off? Prices go up when people value a ticket than they value the alternative consumption that the ticket’s price embodies. Flexible pricing enables us to sort out the cases when this is true from the cases when it isn’t true. In the old days, we needed illegal ticket scalpers to do that. Now ticket brokers can do it, but not as well as when the team gets involved in the process, too.

If the Royals benefit from flexible pricing, doesn’t this mean that fans must lose? Both entities can’t benefit at the same time, can they? The left-wing, socialist concept of exchange as a power relation implies that trade is a zero-sum game in which the gains of one party are the losses of the other. Mutually beneficial voluntary exchange benefits both parties to the exchange, and when the gains from trade are increased the gain can be divided to benefit both traders. This needn’t be true in every transition from inefficient to efficient conditions, but there is no reason to doubt its occurrence here.

Perhaps the most concrete way to drive home the importance of this principle is by stressing the fact that the benefits of sports teams are heavily location-dependent. If the Royals move away from Kansas City and operate elsewhere, most of the benefits created by the team will flow to sports fans in that new location. Allowing the Royals to maximize the benefits they earn from the value the team itself actually creates will maximize the chances that the Royals continue to operate in Kansas City. The current system strives to keep the team in town by giving them subsidies extracted from non-fans based on phony economic value not really created. Baseball fans deserve to get the value they want and are willing to pay for – not value extorted from unwilling third parties who gain nothing from the team’s presence.

DRI-248 for week of 1-6-13: Rights vs. Power

An Access Advertising EconBrief: 

Rights vs. Power

Two recent examples of an endlessly recurring debate afford the opportunity to revive one of the most vital distinctions in political philosophy – between rights and power.

One example popped up at the Indiana University Health Goshen Hospital. Eight of its employees were fired for refusing to submit to flu vaccination via injection. Three of the eight were veteran nurses.

The hospital cited recommendations by the American Medical Association, the American Nurses’ Association and the Center for Disease Control that all Americans over 6 months of age undergo flu shots. One of the nurses, 61-year-old Ethel Hoover, insisted that “this is my body. I have a right to refuse the vaccine.” Website coverage of the incident by ABC News reporter Sydney Lupkin portrayed the dispute as a classic debate over “…which should come first: employee rights or patient safety.”

The other case occurred in Kansas City, MO, where Rockhurst High School, prestigious local Catholic high school, announced a policy of testing all students for the effects of drugs and binge drinking. A columnist for the Kansas City Star condemned the policy as “intrusive” and “unfair,” opining that experienced staff should be able to detect habitual users without the need for testing everybody.

The endless stream of back-and-forth debate over these cases suggests that the true governing principles have been long forgotten.

The Economic Implications of Political Rights

Few things arouse American ire as quickly as the subject of “rights.” The term is as old as the nation itself, appearing prominently in the Declaration of Independence and the Bill of Rights to the U.S. Constitution. And those references inform our understanding of the term.

Take the Declaration’s famous assertion that we possess the “right to life, liberty and the pursuit of happiness.” Why confer the right to pursue happiness – why not happiness itself? We sense the presence of a vital distinction. Our intuition tells us that government cannot very well grant a legal, constitutional right to happiness. Why not?

Of course, we realize that happiness is a subjective term and that it is impossible for one person to gauge whether another is happy or not. But we can make this point much more concrete by importing economic logic into the discussion. Economists gauge an individual’s happiness as a function of his or her real income or utility. This, in turn, depends on the consumption of life’s good things, both tangible and intangible.

Now we reach the nub of the problem. Goods are limited or finite in quantity while wants are infinite. Governments cannot promise happiness to everybody because governments cannot assure the supply of an unlimited volume of goods to satisfy wants. Again, this refers both to physical goods and services and to aesthetic wants such as beauty, truth and justice.

Although we may not realize it, we are all competing with each other for the limited supply of means with which to satisfy our unlimited wants. Naturally, we find it expedient to cooperate in order to serve our mutual interest in enlarging the volume of those means. Free markets and the price system are the evolutionary systems that have evolved for that purpose.

The Declaration of Independence enshrines the notion of the Rule of Law – or equality before the law – by granting to all alike the right to engage in the pursuit of happiness. But that does not imply that we all will achieve it. Indeed, stating the issue in this form makes it clear that we will not. Nonetheless, freedom allows everybody a shot at it and promotes cooperation not only in enlarging the size of the economic pie but in dividing it voluntarily through charity to help those who are least successful in fending for themselves.

The Economic Definition of Rights

A right is defined as something that can be enjoyed by one or more individuals without reducing the amount available for others to enjoy. This removes economic goods and services from the list of things to which a political right can be granted. Giving one person a guarantee of an economic good implies the necessity of denying a right to it (or, equivalently, to alternative goods) for others, since the good is not available in infinite quantities.

Guaranteeing a right to life means that others are not permitted to arbitrarily end your life unless you threaten theirs. Guaranteeing your liberty – and your right to pursue happiness – can be done without threatening the liberty of others. Indeed, the right to liberty must be guaranteed on equal terms for all law-abiding citizens in order to maintain the Rule of Law. That is why government exists in the first place.

The same reasoning applies to the other freedoms granted in the so-called Bill of Rights. It is vital to heed the Constitution’s explicit reminder that our rights are not limited to those explicitly listed in those first ten amendments. On the contrary, the Constitution limits the power of government by limiting it to its explicitly stated duties. (More than every, we are now coming to appreciate the wisdom of those who opposed ratification of the Constitution because they feared that the Bill of Rights would eventually come to be seen as limiting rather than reaffirming our rights.)

The Key Role Played by Competition

The case of nurses ordered by their employer to take flu shots is being treated by mainstream media as weighty and imponderable, a legal version of the clash between the irresistible force and the immovable object. But the principles outlined above – political and economic – provide the answer to this seeming quandary.

The nurses have committed no legal infraction and denied nobody their rights. Patients do not have an absolute right to good health any more than they have an absolute right to any other good or service. Ethel Hoover’s insistence that she owns her own body is impeccably correct. She has the right to refuse the flu vaccine. The government cannot force her to take it – not for the good of her patients or even for her own good.

But the government is not the entity requesting that she get a flu shot. Her employer is requesting that she do so as a condition of her employment. This request is perfectly valid and legitimate. The hospital chain serves customers. Those customers do not want to catch the flu while in hospital; they have just as much right to pursue happiness as nurses do. Hospitals compete with other hospitals. If some hospitals are forced to employ nurses who successfully resist flu shots, those hospitals may go out of business. Hospital owners have just as much right to pursue happiness as nurses do.

Are nurses being forced to take the flu shots by their private employer? No, because private employers cannot force employees to do anything. Employees can exercise the sovereign right of all employees – they can quit. Nurses are not guaranteed a particular job by law any more than they are guaranteed the right to a consumption good or service.

In this particular case, as it happens, the nurses in question apparently have lots of reasonable alternatives. They can pursue administrative jobs where their contact with patients is limited or nonexistent. They can pursue teaching opportunities within nursing. They can leave the profession and go elsewhere.

One other thing the nurses can do is pursue nursing employment elsewhere. Perhaps the fear of patient contamination is overblown, in which case competition between hospitals will provide an incentive for another hospital to exploit their veteran talents. Competition between hospitals works in their favor as well as working against them.

The pertinent distinction is between government action, which is coercive and allows no room for maneuver or escape, and marketplace action, which presents voluntary choices and alternative possibilities. When the government nails you, you either comply or go to jail. When an employer makes a request, you choose from a range of alternatives that normally offer much smaller decrements of loss.

By definition, competition means the presence of alternatives. By definition, government means their absence.

The All-Important Distinction: Rights vs. Power

Nurse Ethel Hoover wants to assert a “right” to refuse her employer’s request that she take a flu shot while at the same time retaining her job. In effect, she wants the right to hold her job in spite of her employer’s insistence that she is unsuitable to perform it.

This is not a right. The only way she can retain her job under these circumstances is by forcing the employer to give up his right to pursue happiness by producing health care profitably and safely and by forcing consumers to forego their rights to purchase good health. Nurse Hoover is demanding power – the power to force other people to forego their rights. Of course, she is cosmetically beautifying her claim by cloaking it in the faddish language of “rights.”

The debate over freedom vs. power goes back a long time. In the 20th century, it was wages between F.A. Hayek on the right wing and John Dewey on the left wing. Dewey defined freedom as the “power to do effective things” while Hayek defined it as “the absence of external constraint.” Hayek observed in his classic polemic The Road to Serfdom that Dewey confused freedom with power. Modern political philosophy has continued to observe the distinction with the dichotomy between “positive liberty” (Dewey’s version, which is really power, not liberty) and “negative liberty” (Hayek’s version).

The left wing has traditionally conflated power with freedom. It has tried to salvage its position by insisting that only government can solve cases like those of Nurse Hoover. Employers are unable and/or too venal to judge the safety of flu shots; consumers can’t choose safe health care for themselves. Thus, allowing markets to work will wrongly exile Nurse Hoover from her profession and stick us with inferior health care. Governments must objectively determine the safety of flu vaccines, once and for all and for everybody. Government must give Nurse Hoover her rights; otherwise, she won’t have any since markets always do the wrong thing.

The left’s position is untenable. It is logically absurd to contend that consumers not only make wrong choices about their own health but also continue to persist in those choices. It is absurd to maintain that bureaucrats somehow possess both the expertise and the wisdom to make life choices for people about whom they know nothing. It is absurd to suppose that bureaucrats – notoriously insulated from the consequences of their own mistakes – can judge safety better than doctors and managers whose livelihoods are on the line.

The Non-Sequitur of Childhood

The Rockhurst High School case is also being wrongly perceived. Here, the confounding factor is childhood, a factor that nowadays invariably puts the brain in neutral while shifting the emotions into forward gear.

Once again, the issue is being put as a conflict of “rights.” Does a high school have the “right” to “force” students to undergo drug tests? Do students have the “right” to refuse them? In this case, the presence of childhood in the equation turns some people into paternalists and others into public defenders.

The paternalists insist that kids cannot possibly perceive their own interests and that it is therefore up to us to step into the breach. Of course, this places overwhelming importance on the content of “us” – is that parents, teachers, administrators, judges, doctors or some artfully contrived mixture of the above? The public defender insist that children are helpless victims of the high school/teachers/administrators/judges/doctors (take your pick) and require the services of advocates provided by government or the press (to the extent that those two differ).

Economics has long realized that consumption decisions are made jointly within families and nominates “the household” as the family choice unit. As a practical matter, this means one or more parents with varying degrees of input from children. There is no reason to think that a system that makes choices on food, clothing, housing, entertainment, transportation and communications cannot also handle education and personal privacy.

Of course, households choose among competitive suppliers of food, clothing, housing, etc. And this particular situation actually deals with personal privacy rather than education, doesn’t it?

Yes and no. Large numbers of households are hamstrung by quasi-monopolies in secondary education; that is, they cannot afford to pay twice for the competitive alternative of private schools. In that sense, they are actually in the “government” case as outlined above. The law requires them to send their kids to school but doesn’t allow them the luxury of choosing alternative suppliers of public education if their school’s policy on personal privacy is obnoxious to them.

As it happens, Rockhurst High School is one of – perhaps the – most exclusive private high schools in the Kansas City metro area. There is little doubt that its families can afford to search out alternatives if necessary. Thus, Rockhurst should certainly have the alternative of offering drug testing to its students and parents. While the policy may well be unpopular with students, parents may just as well like it. Parents who don’t like it can enroll their children elsewhere.

If the policy proves unsuccessful, we all benefit from having learned this truth. Certainly it would have been better to have known it in the first place and avoided the hassle and unpleasantness of testing, but it isn’t always possible to know everything in advance. Sometimes we have to try things. That is one of the things that free markets are all about. If the policy proves successful, that will vindicate it in spite of initial objections – provided the objectors weren’t forced to undergo it.

But what about a policy of drug testing in the public schools? That’s a lab specimen of an entirely different color, to suit the metaphor to the occasion.

Time and again, this generic problem arises. Should public schools have a dress code? If so, which one? Should they teach evolution – or creation? And what does “teaching” either one of those mean, anyway? It turns out, then, that drug testing is not a unique issue at all. It is the same old issue in different guise.

There is no “solution” to questions like dress codes or religion in schools – no unique, one-size-fits-all solution, that is. The solution is competition. The solution is to allow different families to choose the alternatives they like best – and to change their minds when things don’t work out.

There is only one route to that solution. It lies through a free, privatized market in education. Mirabile dictu, this just happens to be the same economic solution to the decades-old problem of rising education spending and falling educational quality. Education reform dates back to the early 20th century, but results have been dismal. Economists know the source of the problem and they know that the answer is not more money spent on education. The bromide “you get what you pay for” is correct only when there is competition for the product being purchased.

Thus, a policy of drug testing in public schools should be rejected for the same reason that Nurse Hoover should be allowed to reject flu shots. Government has no right to force students to undergo drug testing against their will because public education is a quasi-monopoly provider. But the monopoly provision of public education should be ended, for this reason among a multitude of others.

Drug testing may be a good thing or a bad thing. Indeed, it may be a good thing for some people, in some environments or cultures, and bad for others. The only way to find out is to allow competition to prevail. And the only way to do that is to get government out of it.

The Politicization of Practically Everything

Today we face the Balkanization of American life, with interest groups facing off in the legislatures and courts. The executive branch of government (mayors, governors and the U.S. President) has come to view as a prerogative the ability to decide questions involving “rights.” In effect, this means deciding which people will have more goods and services and which people will have fewer. This is not the promotion of true rights. It is the exercise of power.

This abrogates the Rule of Law. It erodes respect for the law. It turns republican government into a form of totalitarianism called absolute democracy. Under that system, we vote to elect political representatives and they grant “rights,” or entitlements, to their supporters while depriving their opponents of true rights. This is what comes of elevating politics above all and ignoring economics.

The most recent manifestation of this aberrant democratic virus is the obsession to punish the rich. The party in power – the Democrats – has essentially unlimited power to write rules through legislation, regulation, executive order and judicial interpretation. That allows them the luxury of writing rules that reward their supporters and punish their opponents. Their supporters include plenty of rich people, but they are predominantly those who gain real income from foundations and carried interest. So Democrats write tax rules that favor those practices. Democrat rules define the “evil rich” as those who earn high annual incomes from entrepreneurship and salaries; i.e., Republicans. So Democrats raise taxes on “the rich” in the name of fairness by increasing marginal rates of taxation on high incomes. (Democrat entrepreneurs are granted waivers from Democrat rules and regulations such as ObamaCare legislation.)

Meanwhile, Republicans sit dazed and sullen. They await their return to power. At that point, they can implement their agenda by elevating the interests of their supporters and punishing the Republican analogues of the “evil rich,” such as immigrants and homosexuals.

George Orwell characterized a totalitarian society as one in which everything is politicized; everything is either mandatory or forbidden. The reflexive tendency to turn employment conditions and student privacy policies into political firefights is a symptom of neuropathy in the body politic. We have become insensitive to the freedoms of others.

The inherent purpose of government is to coerce, to promote conformity. Markets are not all-or-nothing propositions. They accommodate variety. They move incrementally. They promote diversity. By insisting that government do more and more, we are allowing markets to accomplish less and less. We are methodically chipping away at the zone of human freedom.