Why I hate the DH

This finally occurred to me on the road today, and I don't know why it didn't make sense earlier. Normally, in baseball, all nine players in the field have to take a turn hitting as well. The designated hitter (or "DH") rule allows a team to have an extra player hit for the pitcher - usually, pitchers are the weakest hitters on the team. The pitcher gets to pitch, but doesn't have to bat; the DH gets to hit, but doesn't have to play the field when the other team is batting.

When there is no DH rule, managers of baseball teams commonly encounter this dilemma: the game is close, the pitcher has pitched well but it's not clear how much longer he can pitch, and the pitcher's spot in the batting order comes up in a crucial situation. Do you let the offensive opportunity pass by to keep the good pitcher in the game? Or do you take the pitcher out for a pinch-hitter to improve the chances of scoring and then take your chances with a relief pitcher?

And here's the problem in a nutshell - the DH rules says "you don't have to choose". You can choose what to do with your pitcher without any consequence for your offence; you never need to worry about the pitcher's spot in the batting order coming up at a critical time.

What I hate about this is that it's a symptom of a serious problem, which is the belief that we never have to make choices between two good alternatives, or two bad alternatives, or that we can always avoid consequences from the decisions that we make.

Cases in point:

- we think it's important that city workers have the right to strike to support their negotiating position, but when they don't pick up the garbage we don't want it dumped in areas the public accesses;
- once there are dumps in public areas, we don't want rats and vermin, but we don't want chemicals sprayed that will keep them away either;
- we don't show any signs of using less electric power, but we sure don't want nuclear, either because (geez!) it's nuclear or because we can't afford it (even after three years of study and a lot of public subsidy to the only qualified bidder); and we don't want power stations based on any other kind of fuel either, because they'll add incrementally to air pollution even though they're radically more efficient than what they replace. Nonetheless, we'll all be surprised when, mysteriously, there isn't enough power.

Sometimes, you have to accept that letting that pitcher go to the seventh inning will mean you forego an offensive opportunity in the sixth. You can't always just change the rules of the game to avoid the choice, or its consequences.

Idle thought while vacuuming

OK all you finance and legal professionals who read this (you know who you are):

Listening to an interesting piece on credit derivatives from The Economist. The suggestion, which I think I agree with, is that there's nothing inherently wrong with credit default swaps and other forms of derivatives, but that people have radically underestimated the counterparty risk (a la AIG) and that causes the dangers that we're experiencing now. The fix is to require a central clearing house, similar to a stock market, which spreads that risk - this all makes sense to me.

But if that works, why do we not extend that concept to every form of contract? That is, if there's an inherent problem with bilateral or multilateral risks arising from contracts, then why don't we force all contracts to be pooled? Examples: if I'm afraid to buy a GM car because I don't think GM's going to be around to honour the warranty, isn't the answer that warranty contracts only be issued through a central clearing house of all automobile suppliers and spread that risk? Similar arguments could be made for things like multi-year cellphone contracts. Why do we think credit derivatives (or securities generally) are special in this regard?

Got a hoard of small change?

If so, you might want to check out this site. It's quite fascinating. (Note that the link is for Canadian coins, but the site covers coins of the United States too.)

** Disclaimer: I don't think it's legal to melt Her Majesty's coinage. Obtain competent legal advice before proceeding. **

Credit for the link to Francois Velde's page, which proves again that "economist" need not be a synonym for "boring". Another proof is here.

It's all about the beer, part II

In an update to a previous post, all US concerns about the purchase of Anheuser-Busch were washed away by enough money added to the deal. As is commonly the case, The Onion's editorial cartoon gets it right. [If you don't see the cartoon as satirical, please navigate away slowly and delete this blog from your bookmarks....]

It's all about the beer

This story is fun too. While neither Molson's nor Labatt's produced anything worth drinking for a few years before they were acquired, it's kind of fun to see the zombified corpse of Labatt's screwing up a deal for the maker of Bud. So let's recap - Anheuser-Busch says that the jolly Belgians and Brazilians shouldn't buy them because InBev acquired a Cuban distributor when they bought a Canadian brewer, and it's not clear how they'll be able to comply with the U.S.'s anti-Cuba laws?

Everything you need to know about derivatives, greed and human behaviour

Just read this article by John Lanchester in the London Review of Books from January. It's excellent reading, and has only gotten more relevant since. Without descending to cliches about hanging together or separately, we're all in deep trouble if the ends of the economic spectrum keep pulling apart - and also if we forget that the "free" in "free market" isn't synonymous with "unconstrained"!