The Baseball Economist: The Real Game Exposed Read Online Free PDF Page B

around” a dangerous hitter—even putting him on base by walking him—in order to pitch to a less threatening on-deck hitter. The logic behind this move is that this limits the runs scored by the opponent by limiting the opportunities for good batters to produce runs through hitting the ball. Pitching around a good batter is something that gets more costly for a pitcher to do the better the on-deck batter is. Putting one runner on base so that he can throw to another good batter is something a pitcher tries to avoid. Therefore, it is often assumed that hitters can “protect” one another in the lineup. A hitter who is good enough to help the preceding batter get better pitches to hit is said to offer protection .
    The concept of protection is so commonly thrown around between baseball commentators that it’s come to be accepted as fact. I often hear comments like “The Giants need to acquire a slugger to protect Bonds, or opposing teams are just going to pitch around him,” or “His numbers may look impressive, but that’s mostly a product of having a slugger hitting behind him in the batting order.” The impact of one person’s actions spilling over onto others is a phenomenon well known to economists. A discipline that assumes individuals always act according to their own self-interests ought to be concerned when the behavior of one individual has consequences for other individuals. Economists refer to any action that imposes costs or benefits on other parties as an externality .
    The externality is simply the amount of the cost or benefit that spills over onto a third party. Externalities can be both positive or negative. Actions that have good consequences for third parties generate a positive externality, and those that have bad consequences produce negative externalities. It’s not a hard concept to understand, because we experience externalities in everyday life. When someone cuts you off in traffic, that’s a negative externality. Your next-door neighbor who keeps a well-manicured lawn generates a positive externality.
    Whenever externalities are present, they generate problems for society. Negative externalities are overproduced, because individuals who engage in behavior that causes a negative spillover don’t always take into account the negative consequences of their action. For example, a woman who lights a cigarette in an elevator has the pleasure of the nicotine rush, but often doesn’t appreciate the irritation to the lungs of her fellow passengers. Positive externalities are underproduced. A man who paints his house will reap monetary benefits when he sells it, but he probably won’t factor in the benefit that his neighbors’ houses will sell for more because of the pleasant view he creates. Rather than paint it every year, he might do so every five years.
    Sure, most individuals do care about other people, but it would be a stretch to say individuals care as much about others as they do about themselves. After all, the Golden Rule doesn’t say “love your neighbor as you love your neighbor.” And even if you did care about others as much as you did yourself, you would lack the information to know how your decisions impact others . . . that is, unless you can read minds. The problem with externalities is that people make decisions that they would otherwise not make if they reaped the rewards or bore the costs of those decisions in accordance with their impact on other people. For example, let’s say we have an elevator with eleven passengers, one of whom wants to smoke a cigarette. If ten passengers in the elevator value having their lungs clear of smoke for the ride at ten cents a piece, and the smoker would prefer to be a dollar richer than enjoy the cigarette on her ride, the world would be a better place if this transaction took place. The smoker gets a dollar and the passengers get clean air, and all parties are happier than they would have been had the trade not occurred. In a