Lying in Ponds performs a useful and interesting service, and I have no trouble believing that Paul Krugman is the most partisan columnist around. But I can't help wondering what my partisanship rating would be were I commenting on a Virginia Postrel Administration with, say, Ralph Nadar as the leader of the opposition.

Paul Krugman is a poor, and purely partisan (honestly, did anyone expect Paul Krugman to choose to become a poor man's James Carville?), columnist because he goes out of his way to attack the Bush Administration for anything and everything, pretty much regardless of a) his professional competence in question at hand, and b) the Bush Administration's actual complicity in the matter. But I'm sure that I would have a similar Lying in Pond's partisanship rating during a Postrel Presidency, simply because I've yet to find any political issue on which Virginia and I differ by more than about three hairbreadths. The difference? In my hypothetical, I'm being intellectually honest. I don't think many people (at least in the corner of the blogosphere in which I hang out) think Krugman is.

Baseball is once again in its loud and obnoxious contract negotiation phase, complete with plaintive cries that if the players didn’t get so much money the owners wouldn’t have to charge so much for tickets. It’s not a particularly convincing argument.

Implicitly it’s using the perfectly competitive market story from Econ 101. That story runs as follows: Consider the bicycle industry, which uses steel as one of the inputs to produce bicycles. Suppose for now that the industry is selling 1000 bicycles a week at $100 per bicycle. Some of the bicycle purchasers would be willing to pay $200 for the bicycle, others wouldn’t even pay $101. Moreover, it costs the manufacturers $100 to manufacture each bicycle (factoring in a certain return on capital investment). We know that it costs $100 because if it cost them only $90, some other manufacturer would recognize a great profit opportunity and get into the market with a $95 bicycle. Eventually bicycle prices would drop to $90. And, of course, if it actually cost $110 per bicycle, the bicycle manufacturers would go broke, and there would be no bicycles manufactured all.

So, what happens when a steel tariff raises the price of making bicycles to $110? The manufacturers will no longer be willing to sell bicycles at $100. They will be willing to sell at $110, though. The folks who wouldn’t spend even $101 for a bicycle, well, won’t buy bicycles. So, fewer bicycles are made, at a higher price per bicycle.

This story comes close enough to reality to explain the most important aspects of most of the economy. As a country we would be in much better shape were we governed by people who knew only this story, rather than the people we have now who may or may not know this story, but “know” a lot of other things, too.

But it is not the only story. Not even the only Econ 101 story. Consider the market for bridges.

Suppose that a bridge costs a certain amount to build in the first place, and a certain amount to maintain (bridge painters and other maintenance people), but that the maintenance is not related to the extent of the use of the bridge. The maintenance activities are exclusively devoted to protecting the bridge against the ravages of the weather.

Further, suppose that it would be close to impossible to build a competing bridge, because there is only one feasible route across the river, and this bridge is serving it.

The owner of the bridge, like the bicycle manufacturer, wants to maximize profits. What does he do? In this case, he charges a toll that maximizes revenue. He still faces the same situation as the bicycle manufacturers: some people will be willing to pay almost anything (say, $500,000) to use his bridge, and other people will pay hardly anything at all. He doesn’t want to charge $0, because he will get no revenue. He doesn’t want to charge $1,000,000, because he will also get no revenue (because he will have no paying customers). Somewhere between $0 and $1,000,000 there is a price that will maximize his toll revenue. That’s what he wants to charge.

What happens to the profit maximizing toll if the painters go on strike for more money (or if the price of paint doubles)? Nothing! In this story, the cost of maintaining the bridge has (almost) no bearing on the profit maximizing toll that the bridge owner would want to charge. The “almost” part relates to the fact that he can eliminate the maintenance expense entirely by closing the bridge. He’d be willing to pay the painters up to the total amount he can get in tolls, but no more. (FWIW, this story is a big part, but not the only part, of the rationale for having the government provide bridges.)

To me, anyway, the facts of major league sports resemble the facts of the bridge story a lot more than they resemble the facts of the bicycle story. Thus, I doubt that player salaries really have much impact on ticket prices.

There is another twist: Bridge painters, it is assumed, can be replaced fairly easily if their demands become too onerous. Professional athletes, though, can’t be so easily replaced. So, in principle, professional athletes are a lot more likely to be able to extract all of the revenue from the owners. That’s what they’re trying to do (well, they’re trying to get as much of the revenue as they can.) Ultimately what they can get is determined by what the owners can charge for tickets. So, in this story, player salaries are determined by ticket prices, not the other way around.

From the "why I’m not an entrepreneur" file:

My new favorite blogger, Eugene Volokh (sorry Glenn, sorry Megan) sometimes OD’s on verbal precision, rarely letting anyone get away with even slightly inaccurate rhetoric (see his anti-“money is speech” post). Which is why I was doubly shocked to read this:

NO COKE, PEPSI: McCormick & Schmick's is a modestly upscale fish restaurant chain -- no fast-food joint, that's for sure. That's why I was very surprised when I asked for a Diet Coke with my lunch, and was told they only had Pepsi.

Now this is obviously not The End Of The Western World, much as I like my Coke; and I know some people prefer Pepsi. But some others prefer Coke -- so why not offer both? (When I called the manager later to complain, he told me that Coke was getting more expensive, but so what? Just charge a bit more for it than you would for Pepsi; very few people will complain.)

I suspect, though, that I know why they don't offer both: Unless I'm mistaken, Pepsi offers various food service establishments (restaurants, airlines, fast-food joints) exclusive deals, under which they presumably get a steep discount if they promise not to sell Coke.

Now being a good libertarian, I think they should have every legal right to do that. But not everything that may be done, as they to say, should be done.

What are restaurants selling? Not food, which I can buy cheaper at the supermarket, but the accommodation of the customer's desires. We pay extra money at restaurants so we can get what we want the way we want it, with a minimum of effort and a maximum of convenience.

McCormick & Schmick is essentially telling the customer: "We care so little about your preferences that we're willing to deny you the drink of your choice to save a very little bit of money" (and just consider how little it is, compared to the price that they charge the customer for each drink). That's not good business, I think. And I think that those of us who think so should tell managers our views. Sometimes, the invisible hand is us.

Shock One: Someone for whom I have the utmost respect and admiration is, shudder, a COKE PERSON.

Shock Two: Someone as economically savvy as Eugene ignores the glaringly obvious explanation that, despite our mutual tastes, the vast majority of consumers just don’t care enough to pay for the added expense of stocking and offering both drinks.

We can all speculate about why that might be the case, but all anyone really needs to know is that there are tens of thousands (hundreds of thousands?) of restaurants in the country, many of which barely scrape by and would do almost anything to build a customer base, almost none of which stock both Pepsi and Coke. If having a choice of colas really was valued by consumers more than it costs the restaurants, surely more of them would be doing it. The notion that the judgement of a law professor with no experience in the restaurant business (I assume) is actually better than collected judgement of the people who put their own livelihoods on the line by owning and running the things is really more George McGovernesque than Eugene Volokhesque.

Why is this in the “why I’m not an entrepreneur” file? Because an entrepreneur would a) be perfectly happy saying that the entire restaurant industry is wrong, and b) would start some restaurants to serve the currently unserved “give us Coke and Pepsi” market. And, incidentally, 999/1000 of them would lose their shirts. But that 1/1000 that prove right keep society moving.