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How Could We Have Missed These Uprisings?
by Jim Mulcahy
February 15, 2011

This is a question that has been asked numerous times over the past three weeks as, first, Tunisia, and, then, Egypt exploded in the streets with thousands demanding freedom. The US’s intelligence agencies were faulted for not anticipating these events. I think that this judgement is a bit unfair. To know something is going to eventually explode is not the same as knowing the precise time. Think of our ability to predict volcanoes. We know where they are, which ones are most likely to blow, but not when. Similarly, we know that societies that have large, young, educated, and unemployed populations with minimal political and economic freedoms are powder kegs. Depending upon the ruthlessness of the regime uprisings are more (Tunisia) or less (Iran) likely.

Professor Timor Kuran, currently at Duke University, wrote a book, “Private Truths, Public Lies: The Social Consequences of Preference Falsification (Harvard University Press: 1995)” that explains how this toppling of the regimes came so quickly and unexpectedly.

I want to quote from his book, p. 250-251.

Imagine a ten-person society featuring the threshold sequence

A: Individual a b c d e f g h i j
Threshold 0 20 20 30 40 50 60 70 80 100

Person a, whose threshold is 0, supports the opposition regardless of its size, just as person j always supports the government. The remaining eight people’s preferences are sensitive to the expected size of the public opposition. Depending on its level, they will opt for one camp or the other. Initially, as in the geometric illustration [p.249], the opposition consists of 10 percent of the population, so Y=10 [where Y is represents the size of the opposition to the government]. Specifically, person a supports the opposition, and persons b through j support the government. Because individuals other than a have thresholds above 10, a public opposition of 10 is self-sustaining [implying the regime maintains power].

Suppose now that person b has an unpleasant encounter at some government ministry [such as, for instance, the street vendor in Tunisia, or the person beat up by the cops in Egypt]. Her alienation from the regime deepens,pushing her threshold down from 20 to 10. The threshold sequence becomes

A’: Individual a b c d e f g h i j
Threshold 0 10 20 30 40 50 60 70 80 100

The new threshold of b happens to equal the existing Y of 10. So she switches sides, revealing her decision by tossing an egg at the country’s leader during an official rally [or self-immolating oneself as the Tunisian did]. Y thus becomes 20. The new Y is not self-sustaining but self-augmenting, as it drives into opposition. The higher Y of 30 then triggers a fourth defection, raising Y to 40. And the process continues until Y reaches 90 – a new equilibrium. Now the first nine individuals are in opposition, with only j supporting the government. A slight shift in one individual’s threshold has generated a revolutionary bandwagon.

I believe that this analysis succinctly captures exactly what has taken place in northern Africa. Once one individual shook his fist at the government other realized that they weren’t alone in their discontent.Gone are the days when opponents of a regime could be locked away and the only means of communication with the outside world was on purloined sheets of toilet paper. In the US, in the 1950s and early 1960s, the civil rights movement got started because decent-minded citizens saw on TV scenes that they never thought could happen in the US. In the 1980s, the VCR brought news of freedom to the communist bloc. Today, cell phones and the internet have all but eliminated a regime’s ability to suppress the news of their treatment of their citizenry.

The various intelligence agencies can only guess at the thresholds of the citizens of other countries. They could only engage in some scenario exercises of the “what-if” variety. It is doubtful that any of them would have been able to predict these topplings much less the speed, any more than they could have predicted the collapsing of the Soviet puppet states, one by one, in the late 1980s. We must learn that no one is omniscient and that not every event can be forecasted with precision. We shouldn’t look for a scapegoat. Instead, the lesson here is that the desire for freedom is innate in all human beings. America needs to give moral support to those who stand up and defy the regimes.

No Smoking Gun
by Jim Mulcahy
January 4, 2010

(note: This can also be seen on http://deepflies.wordpress.com/)

No Smoking Gun!

With these words, Mr. John Brennan, the White House's top counterterrorism official, sought to deflect criticism of the Administration’s performance surrounding the attempted bombing of Delta flight 253 on Christmas Day. This defense of their performance wasn’t in the same league as Janet Napolitano’s, “The System Worked” comment but, then again, it would be nigh on impossible to utter something as inane.

The fact is, except on TV or in the movies, it is rare to find a smoking gun before the event occurs. In a previous lifetime I was a credit officer in a large bank. We created reports that were formally produced quarterly but could be produced more often if so desired. These reports evaluated the credit portfolio in a variety of ways: loan size, type of loan, credit rating, industry, change in rating, etc. None of these measures, by themselves, would definitively predict that a loan was going to default. However, if a borrower showed up as an outlier in a number of these categories it was a safe bet that corrective action needed to be taken. By looking at a number of indicators we were able to be proactive in addressing potential problems.

Bank are able to process millions of transactions simultaneously to verify credit card transactions. Why can’t the U.S. government with all of the resources it can marshal do the same thing? One would think that, in this day and age of high-powered computers and sophisticated relational databases, it would be possible to aggregate information on these 500,000+ individuals and update it real-time, or close to it. By swiping a passport one should be able bring up enough information about an individual to determine if a more thorough inspection is required. If an individual shows up as one of the 500,000+ on the terrorist watch list that should result in special attention be given. This is when a full body scan would be called for, for instance.

Some ‘flags’, though, are so profoundly red that cross-checking a data base should be unnecessary. If he has had a visa revoked by another country that should increase the scrutiny he receives. If he wants to pay in cash, with no passport, comes from a failed state, has no luggage, and only wants a one-way ticket enough alarms should go off to refuse to board him without even checking a database. He should be interrogated by the police immediately.

Just as banks have all the information they need within their own four walls of to minimize losses, the U.S. government has the information to prevent potential catastrophes like almost occurred over Detroit. It requires doing the basic blocking and tackling to organize it, disseminate it, and act on it. This doesn’t require rocket scientists. It requires good old-fashioned common sense. If something looks amiss, it probably is and deserves a second look.

Americans assume that the government is taking the obvious precautions to protect us. The events on Christmas Day showed us that the system didn’t work; there were multiple failures. The Obama administration should give Jasper Schuringa, the man who prevented the explosion, the highest award he can. If it wasn’t for his heroism the Obama presidency would have been over. More importantly, our lives would have become less safe as the enemy was further emboldened.

Gerrymandering
by Jim Mulcahy
October 5, 2006

The Merriam-Webster dictionary defines it as follows:

Main Entry: 2gerrymander Function: transitive verb Inflected Form(s): -dered; ger·ry·man·der·ing /-d(&-)ri[ng]/

1 : to divide (a territorial unit) into election districts to give one political party an electoral majority in a large number of districts while concentrating the voting strength of the opposition in as few districts as possible 2 : to divide (an area) into political units to give special advantages to one group

The Free New York Blog has a study about this phenomenon in our fair state of NY. It can be found at http://blog.freeny.org/?p=680.

The great philosopher, Pogo, stated that “We have met the enemy, and it is us.” Any dispassionate look at the various electoral districts in NY (and elsewhere) should convince even the most rabid apologist for intrusive government that something is seriously wrong with our political system.

One of the most egregious is Louise Slaughter’s congressional district that extends from Grand Island north to Lake Ontario and then tiptoes along the waterfront until it gets to Rochester. One would think that she would be ashamed to run in such a district. One would be wrong, of course. It is impossible to embarrass a politician. Her fellow Democrats would that the Republicans are do the same thing. They are correct: just look at Dale Volker’s district. The sad truth is that both parties engage in this. It is designed to protect incumbents, no matter how inept they are.

If the public, who have much better things to do with their lives than analyze election districts, knew just how they were being used to coddle people, even those they voted for, that they would hold in contempt if they were in management at their places of work.

We need to have the public to become aware of the chicanery that has taken place and demand that districts are drawn rationally after the next census. If we don’t then we will have no one but ourselves to blame for the continuing - accelerating - decline of our communities. NYS is a lovely place. It is not that lovely that people are willing to continue to pay exorbitant taxes to live here. There are many other lovely places to live in this country, or world for that matter.

Please take the time to access the website referenced above. It will make your blood boil, initially. After you read the suggestions, you will become energized.

Remember it is our State; government exists to serve the people, not vice versa.

Egoism Run Amok.
by Jim Mulcahy
September 27, 2006

This year we, in WNY, are witnesses to the spectacle of a successful businessman running for political office. This phenomenon is not new by any stretch. Ross Perot thought that being a billionaire made him qualified to lead the free world. The examples can be multiplied manyfold.

This is not to say that business success automatically disqualifies one from consideration. Rather, it should be clear that success in one area of human endeavor does not guarantee expertise in another. There is nothing wrong or shameful about being skilled in only one or a few disciplines.

Jack Davis, as you may have surmised, is our local entrant into the pantheon of egoists: I’m rich, ergo I know everything. His campaign is based on helping the workingman. He is going to stop the flow of jobs out of the U.S. because he knows how to run a successful business. Really?

Let’s look at some of his statements.

He is opposed to imports that are taking away jobs from Americans. As Thomas Sowell points out in his book, Applied Economics: Thinking Beyond Stage One; it is important to examine the full impact of a policy not just its immediate effect. Yes, it is true that some people are out of certain jobs because of imports, but others have jobs because of them. Take autos, for instance. GM, Ford, and Chrysler workers have been laid off. People have been hired at Toyota dealerships, though. Longshoremen are employed off-loading vehicles at ports. Further, because people obviously think the are getting better value for their money, or the same value for less money, those who purchase foreign cars have a better standard of living. Mr. Davis is making an heroic value judgment that some individuals’ standard of living is more important than others. Simply put, who is he to decide how anyone should spend their hard-earned money?

One would think that he is against international trade, but one would be wrong. His firm has sales agents in thirty foreign countries. It is alright, I guess, for him to improve his lot in life by exporting to others, but not alright for others to improve theirs by exporting to us. Rather selfish I’d say.

He talks about the fact that his workers earn $25 per hour. Why doesn’t he pay $65 per hour like Delphi? To ask it, of course, is to answer it. Increasing his labor costs by 160% would put him out of business. Come to think of it, $65 per hour is what is putting Delphi out of business. One can’t assert that others should buy American irrespective of the price and not expect them to search for lower cost alternatives. This includes going without. I doubt if even Mr. Davis would propose that people should be required to buy a new car every three years, say. Mr. Davis seems to think that jobs get outsourced or that imports increase out of the blue. His own experience with his firm should make it clear that people want the best value for their dollar.

He makes the statement that tariffs are taxes on foreigners. Again, he needs to think past stage one. Does he think that the tariff gets paid completely by foreigners? (This gets into some technical economic issues. ) If so, he is assuming that the demand curve for their product is perfectly elastic (horizontal), in which case it would be a perfect substitute for domestic products. If the demand is not perfectly elastic, but has the more usual downward sloping shape, then the consumers bear part of the tariff in the form of higher prices. Also, is he naïve enough to believe that domestic producers won’t take advantage of the cover provided by the tariffs to raise their prices?

Mr. Davis ignores the history of the impact of tariffs. The Hawley-Smoot tariffs in the early 1930s helped exacerbate the Great Depression. (It didn’t cause it, Federal Reserve policy actions did.) Does he believe that other countries’ xenophobic types won’t be encouraged by our raising tariffs to retaliate? He’s an engineer; he should know that nature abhors a vacuum.

His comments that he knows about health care and pensions because he has been involved in providing these for forty years is irrelevant for policy purposes. Health care expenditures are going up because we are a rich country and we are aging. People in their sixties are engaging in physical activities that weren’t done years ago. They are able to because medical science can put them back together again. It isn’t cheap, but it is feasible. Is he going to ban skiing and ironmen competitions by retirees? Is he going to recommend eliminating the mind-numbing paperwork involved in paying for health care? If you think the answer is yes, keep in mind that this would eliminate hundred of thousands of jobs. I don’t think this will occur, do you?

The issue with pensions is simple: defined benefit plans have promised benefits in excess of what they can afford. The only solution is to eliminate the Pension Guaranty Corp., the federal agency, that is, the taxpayer, that bails out insolvent plans. Without this agency firms and their workers would have less incentive to agree on fiscally impossible plans. Is Mr. Davis proposing to eliminate this agency? Or is he proposing to require management and union officials to be realistic? Does anyone think he is proposing to do either? Does he even exhibit an understanding of the implications of his statements? Mr. Davis has been a very successful businessman. Clearly, his success is something to admire. This success in one area does not translate, in and of itself, into others.



Gasoline Prices: II
by Jim Mulcahy
May 21, 2006

If there is one thing that can be counted upon when energy prices rise, it is that every crackpot idea on how to reduce them will resurface, especially in the Congress.

In no particular order of insanity, we have: forcing oil companies to lower their prices; increased production of corn-based ethanol; and good old-fashioned price controls. Each of these will make things worse, not better. Do the government officials care? Not really. It is all about them getting to weep crocodile tears on TV and deflecting attention away from their disastrous policies of the past.

Let us look at the effect each will have on the market for energy. Many of us are old enough to remember both the 1973-1974 and the 1979-1980 episodes of price controls on gasoline. To put it bluntly, they were a disaster. They kept demand up, while they discouraged the increasing of supply: a surefire way to cause a shortage. In 1973, gasoline was allocated to gas stations according to the quantities they purchased in the prior year. In practice, this meant that gas stations on turnpikes had plenty of fuel because consumers were wary about going on long trips. In the cities, though, stations often ran out. Since people didn’t know which station would have fuel they had to cruise about town looking for an open one, typically during working hours. This wasted fuel, I might add. Further, consumers kept their tanks topped off, which meant that inventory estimates were skewed at the very time when accurate measures were needed. The whole exercise was designed to allocate scarce (at the going price) fuel and, at the same time, protect consumers from higher prices. Needless to say, these two goals were contradictory. Nothing showed how ridiculous this scheme was than the fact that people would hire “car sitters” at $1.50 or more per hour to sit in line waiting for stations to open. To make the arithmetic simple, say the car owner paid for one hour’s sitting and bought 15 gallons of gas. He would have been indifferent to paying $.10/gal more and being able to pull right up to the pump as one would do in normal times. As can be seen, the all-in cost of gas was much higher than the government controlled price. Again, keeping one component of the cost down, the government discouraged the increase in supply. Nice job, guys!

In the above situation, prices were regulated at the pump. It is also possible to require the producers and/or the refiners to charge lower prices. This controls prices at the wholesale level. It is easier to do because there are fewer wholesalers. Will this work? Of course, it won’t! In the early 1950s, President Truman got an injunction that prevented the steel producers from raising their prices. They wanted to because the demand was high and this was the most efficient and fairest way of allocating the limited supplies of steel. What happened? Steel companies had to sell their steel at less than market-clearing prices to the various steel service centers, basically the wholesalers. The service centers had no more steel to sell because of this and demand hadn’t changed. The obvious occurred: the service centers realized the extra profits that would have accrued, with the government intervention, to the producers. The steel consumers paid the same as they would have without the government edicts. However, the producers didn’t realize the income which could have been used to upgrade and modernize their facilities. Instead, the Europeans and the Japanese who were building modern facilities undercut our producers in the future. Another debacle brought to you by the economic troglodytes. The sad thing is that if asked, many Americans would say that these price controls were a good thing.

The same will happen in the gasoline market. If the refineries are compelled to sell their output at a below market price, the jobbers, gasoline wholesalers, will realize the profits. If they don’t the service station owners will. How can the latter do so? They could require buying a car wash or start offering only full service. Ultimately, the market will clear. The issue is to how the revenues will be distributed and the implications thereof.

We now come to corn-based ethanol. One would have thought that after the Great Plains coal-gasification fiasco we would keep the government out of the energy market. For those unaware of this monument to stupidity, the Carter administration got Congress to approve the development of a coal-gasification plant. Tens of billions of dollars later it was shut down. It produced nothing.

As George Santayana said, “Those who forget history are forced to repeat it.” We are about to do that on a large scale with corn-based ethanol. Donn Esmonde, a columnist for the Buffalo (NY) News gushed about the plans to build an $87 million ethanol plant in Albion, NY. What a waste. This is another government ditch digging boondoggle. The same day as Esmonde was gushing about it, there was an article in the Wall Street journal by John Deutch. Mr. Deutch, director of energy research and undersecretary of Energy in the Carter administration, and director of the CIA and deputy secretary of Defense in the first Clinton administration, is a professor of chemistry at MIT. Clearly, he isn’t a right-wing anti-government type. He pointed out what is well-known but ignored by special interests. Corn-based ethanol production uses so much energy that one gallon of it only eliminates the need for 1/3 of a gallon of oil. This measure excludes the cost of transporting it from the plant to the service stations. It can’t transported via pipeline. It must be trucked there. Guess how the trucks are fueled?

It will be said that Brazil uses ethanol. Yes, they do. However, their ethanol is sugar cane derived and the fermentation process in the tropics is different. NY state will subsidize this plant, and possibly others. It will take resources away from projects that would add value. At the end of the day, upstate NY will have an ugly white elephant plopped down in it. Needless to say, the state will be nowhere to be seen when it comes time to determine who should pay for the dismantling.

The laws of supply and demand can not be repealed. Wishful thinking won’t turn lead into gold. If we want more energy we need to increase production, construct new refineries, and let the market work.

Gasoline Prices
by Jim Mulcahy
Posted 4/3/06

Notice how “non-inflammatory” my headline is? This is in stark contrast to every other discussion of gasoline prices. The purpose of this column is to shed some light on the issue of price formation in this market. Let me be clear at the outset: 1) I don’t own any oil company securities; and 2) I love to drive, so I am impacted by the higher prices.

Let us start with some history of the crude oil market. In the late 1960s, early 1970s a number of tax breaks, particularly the oil depletion allowance, were removed from the U.S. tax code. This had the effect of making the after-tax return on investing in the U.S. lower than it had been. As one would expect, exploration efforts decreased. The U.S. started to import a large amount of oil to meet demand. OPEC I in 1973 was Saudi response to the Israeli army crushing the Arab armies massed against it. The price went from $2.50/bbl to over $12/bbl. Since it cost only $.50/bbl to pump crude in the Middle East, it wasn’t possible for non-OPEC producers to quickly fill the gap with lost-cost, or any cost, for that matter, oil.

Americans started shifting away from big cars to more fuel-efficient ones. This is when Toyota and Honda’s sales took off. Due to conservation and the end of Mid-East hostilities, prices declined and oil was plentiful. Unfortunately, Americans have a myopic habit of thinking that what is happening today will always happen. As such, starting in 1976, they started demanding bigger cars with the 350 cu. in. V-8 engines. The manufacturers couldn’t meet the demand. Remember the Chevymobile? GM was reduced to putting Chevy engines in Oldsmobiles to meet the demand for big engines. This caused the outcry about substituting parts, ultimately causing GM to call any engine they produced a GM engine. No longer could one buy an Olds Rocket or 327 Chevy or Pontiac 409. The auto makers scrambled to meet consumer demand over the next three years.

The Iran revolution came about in 1979 and, with it, OPEC II. Oil prices shot up again. By 1980, crude was selling for $34/bbl. Part of this was due to our ill-advised price controls on petroleum products during the last two years of the Carter administration. Regardless of the reason, sales of big cars fell, while those of small cars rose. In 1981, Ronald Reagan decontrolled all petroleum prices. They fell like a rock to under $20/bbl. Nonetheless, $20/bbl was still more expensive than $12/bbl. Conservation was still practiced. Cars kept getting smaller.

In 1986, crude fell to under $10/bbl. and gasoline fell below $1.00/gal. The expected happened. Myopia ruled! Cars started getting bigger. Oil prices rose and were at the stratospheric height of $25/bbl during the Gulf war. After the war, prices quickly declined. They continued to decline through December, 1998, when they hit $8.36/bbl. That is not a typo!

The horsepower race was on.

Not long after, the demand for oil started rising, big time. India and China got religion: Marx was a nut, long live Adam Smith. Their economies, with their huge potential, finally started to grow, adding to the growing thirst for petroleum. Unless you just arrived from Mars you are aware that prices have been rising for the past seven years. The question is, “is this going to be the future, continually rising prices?”

The crude oil market has experienced a boom-bust cycle over the past thirty-five years. No one producer was able to dictate high prices for long. New entrants would come into the market, old wells would be brought back into production, and consumers would adjust their consumption. Conversely, when prices declined, producers stopped searching for new wells, old wells were shut in, and consumption increased.

During the late 1990s, I worked in the Treasury Dept. of Consolidated Natural Gas, a large natural gas distribution company that also had a natural gas pipeline division, and an oil exploration & development (E&P) division. The E&P division operated in the Gulf of Mexico. You can’t make money searching for oil in the Gulf when oil is $8.36/bbl. It has to be above $12-15/bbl to make money on what has been discovered and being pumped. It isn’t worth searching for more at those prices. As such, more and more of our consumption was being provided by imports.

I’ve focused on the crude oil portion of the market, but that is only part of it. Crude has to be refined into gasoline, diesel, kerosene, etc. The U.S. has not built a new refinery in thirty years, while a number have been torn down. It is true that our refineries are more efficient today than thirty years ago, but not so efficient that they can always supply our wants. As we saw last fall, when natural disasters like Katrina and Rita knock out a portion of our capacity, demand outstrips supply of refined products, causing prices to rise. In the immediate term, they rose dramatically.

We may not like the higher prices, but they were the fairest way to allocate the gasoline available. For those of us not politically connected or owning a refinery, we were able to buy as much as we wanted or could afford. Nothing is more equal opportunity than the price system: green trumps race, color, or creed. Those who wanted gasoline the most got it. Those that decided other things were more important either took public transportation, carpooled, or drove slower.

Sen. Chuck (“is this a good pose’) Schumer is peddling his nonsense that the high prices are due to the fact that there are fewer oil firms. “Everyone knows that fewer firms means higher prices”) according to Schumer. Really? Economic research doesn’t support that and hasn’t since the late 1960s. Every analysis of collusive or other ant-competitive behavior in the energy industry has come up empty. If they were colluding why did they let crude prices decline so precipitously in both 1986 and 1998? These are uncomfortable facts for Schumer but he doesn’t care. In Schumer’s view his arrogance trumps anything.

If American oil firms were making outrageous profits, why haven’t the French and other non-American oil firms flooded the U.S. market with cheaper oil? It only costs ¼ cent per gallon to ship gasoline from Rotterdam to Bayonne, NJ. It would seem to be a great way to make a lot of money: undercut the U.S. firms. It hasn’t happened because the U.S. firms aren’t making outrageous profits. I know Exxon made $36B last year. I wished I owned some Exxon stock then. They also paid $36B in taxes. Their profit margin was about the same as in previous years.

Usually the biggest firm in an industry is not the best or most efficient: think of Sears, GM, or IBM before its revival. Exxon is an exception to this. They are a very well run firm. Their management skills made the Katrina impact much less than it could have been. No one is thanking them for a job well-done. We complain about them when oil prices go up. Why not complain about Home Depot or Wegman’s? Neither has supplied so much as one barrel of oil to the market.

One the way to work each day, I get passed by people in all makes and sizes of vehicles, accelerating to beat the band. Even if they went 100 mph, instead of the 55mph speed limit, at best they could save 7 ½ minutes on their commute. In practice, they might be able to save 4 minutes. Obviously, gasoline prices of $3/gal do not faze them. Reports from around the country suggest that WNY is not atypical. Commuter trains in the big cities have experienced some ridership increases but nothing to suggest a revolt against gas prices. It appears people would rather complain and feel put upon than alter their behavior.

We all have received, at least once, the email stating that we should boycott Exxon. That will show them, we are told. Well, it might make one feel morally superior, but it won’t hurt Exxon to the extent hoped for. Oil is a world-wide market. If people stop buying from Exxon in the U.S. they will have to buy from someone else. Where is the “someone else” going to get the gas that the former Exxon customers now want? Either they will stop selling to some of their current customers who will then turn to Exxon since Exxon now gas to sell; or they will buy directly from Exxon and resell to the former Exxon customers! All this ploy will do is increase the cost of supplying gas to the market. It won’t decrease the price, that is for sure.

Will prices come down? Based on history, energy prices have been declining for hundreds of years in real (inflation-adjusted) terms. There is no reason to think today is any different. The time frame, though, in which prices will decline is difficult, if not impossible, to predict. If the government tries to protect consumers from market prices, I can assure you it will take a long time for prices to decline: just think of Jimmy Carter vs. Ronald Reagan.

Prices are the result of demand influences and supply influences. We can affect both. Drive slower, make sure your tires are properly inflated, and think about the trips you make. On the supply side, we need to open up the AWNR in Alaska. Every time we get a run-up in prices we talk about doing it but those opposed say it won’t do anything to temper prices for ten years. They are right. Bill Clinton vetoed legislation to drill there in 1995 with just this argument. If he hadn’t AWNR would be producing today. Other off-shore areas need to be reconsidered. They are off-limits because of a 1969 spill near Santa Barbara. Today, the technology is far superior today, with the likelihood of a spill significantly lower than it was then.

The important points are that governments can’t repeal the laws of supply and demand and that conservation begins with each one of us.

Steroids: Baseball’s BIG LIE
By Jim Mulcahy
Posted 4/18/2006

By now, every serious baseball fan is aware of the mockery being made of the batting statistics due to players using illegal drugs, specifically steroids. Baseball is a timeless game. This is one of its enduring and endearing features. One can compare performance across eras. Today, though, we have the BIG LIE. A handful of players weren’t satisfied with their God-given talents, they had to go the Dr. Frankenstein/Dr. Jekyll route.

We now know that a number of players have admitted to using steroids, most notably Jason Giambi and Ken Caminiti, who died at age forty-one. Others have been caught via drug testing: Rafael Palmieri, for instance. Three who haven’t admitted anything are: Mark McGwire; Sammy Sosa; and Barry Bonds.

Mark McGwire retired after the 1999 season. He broke Roger Maris’ record of sixty-one home runs in 1998. He had had a number of injury-plagued years in the 1990s, particularly joint problems. These, especially knee problems, are symptomatic of steroid use. He refused to discuss anything about steroids during his sworn Congressional testimony. After the scandal broke, Sammy Sosa reverted to form, being an adequate player but not longer a power hitter. He hit only fourteen homers in 2005. Barry Bonds is the poster child for what steroids can do for you. A picture of Barry twelve years ago, at age twenty-eight, would show a lithe young man. Today, he looks like the incredible hulk.

Ray C. Fair, a Yale University economist, did an analysis of age effects on baseball players. His purpose was to determine the rate at which skills declined from their peak. He found that players’ peak was at age twenty-eight. He analyzed the performances of 441 players who had played at least ten years in the majors between 1921 and 2004. He found that only seventeen players had exceptionally better performances in four seasons after age twenty-eight than they did before age twenty-eight. Fourteen occurred after 1991: two, Larry Walker and Andres Galarraga, occurred while they played for Colorado. Mile-high stadium was a hitters’ paradise, so this is understandable.

As Professor Fair states, ”The most remarkable performance by far … is that of Barry Bonds.” Following Bonds are Sosa and McGwire. Surprise, Surprise. Now, Professor Fair’s purpose was to measure degradation of skills as players age, not test for steroid use. Nonetheless, his results are consistent with what every serious baseball fan knows: these guys cheated.

They and the players’ union can repeat all they want that steroid use wasn’t illegal in the majors. It is illegal in the U.S., that should suffice. MLB doesn’t reproduce all of the U.S. criminal code in its list of acceptable behaviors. Certain things are assumed to be understood. Bonds has consistently denied everything. A new book has shown that he is either lying or in a state of complete denial.

Today, we have specialty pitchers: Short-relief, long-relief, special situations, etc. It should be harder to get a hit, much less a home run. But it wasn’t, in fact, there was a veritable deluge of homers in the late 1990s, early 2000s. In the 1960s and 1970s, there were Mickey Mantle, Harmon Killebrew, Willie McCovey, and Orlando Cepeda, to name the most prominent (Hank Aaron was a model of consistency)power hitters. None of these guys came close to hitting seventy home runs in one season, even though they typically faced the same pitcher for three or more at-bats per game. Doesn’t that strike anybody in Bud Selig’s office as a bit odd? Apparently not. The silence is deafening. Selig is just hoping the whole thing will go away. He may think that the home run splurge saved baseball after the 1994 strike, but I can assure him that the steroid scandal will destroy baseball’s most sacred feature: performance across the years. Going to the ballpark will become like going to professional wrestling. It will be a joke.

Can anything be done? After all, statistics are statistics. Yes, I believe much can be done and should be done immediately. Just as the NCAA will revoke a team’s trophy and place if a player or coach is caught having violated the rules, MLB should do likewise. Every home run title, MVP award, slugging title, etc. should be stripped from these disgraceful individuals. The next in line should be awarded them as they accomplished their feats honestly. It doesn’t take an Act of Congress to do this, but it takes something quite rare in the commissioner’s office: strength of character.

If Mr. Selig doesn’t do this, he will be telling every aspiring ballplayer and fan alike that cheating is acceptable as long as you don’t get caught. How disgraceful. If Mr. Selig won’t/can’t do this, he should admit that he isn’t up to the job of commissioner and resign.