I’ve introduced a lot of terms that economists use. And I’ve referred to the different types of analysis used by economists. Static versus dynamic; microeconomic versus macroeconomic. (
Here,
here and
here.)
In talking about Carrots and Apples, so far we’ve limited the discussion of economic principles to microeconomic theory. Micro is nice, since it has so few players in the mix. We can limit, for the purpose of discussion, our market to two players; you with your carrots, me with my apples. Even so, we’ve been able to ask a lot of questions about price and equilibrium. That’s one of the reasons why most students begin their investigations into the science of economics with a study of microeconomics. We've also focused upon static analysis. What is meant by dynamic analysis?
When we look at markets and the economic systems employed to develop and support those markets, the bicycle at the top of the page should be your clue as to how markets operate. If you’ve ever ridden a bicycle you know that there are important points in riding a bike where catastrophe can occur. Getting on or off, if your legs aren’t long enough, can be challenging. If your seat is too high, you won’t be able to push your peddles well, just as if your seat is too short, you won’t be able to maximize your power or speed.
Your handlebars should be tight. Your chain should be in repair and your pants’ leg protected. And before you start up a hill, you should ask if you’re in the correct gear, just as you should have some idea of the dependability of your brakes before going down a steep hill.
When you look at a bicycle then, you can see that bikes really have two states; a state at rest, and a state in motion. And the only state that has true “equilibrium” is when the bike is at rest. Whenever your bicycle is in motion, it is not in equilibrium, but constantly seeking equilibrium. You can assume that your bike in motion is in equilibrium, but that denies that at the next “moment” in time, something can change.
It can be an endogenous change: something about the bicycle or the rider can in an instant be different. If my pants’ leg gets tangled in the chain, I have a problem. If a tire wears out, I have a problem. My favourite annoyances as a young bicyclist were with my seat and handlebars. Taking off on a trip and finding out that the nut and bolt compressing the seat stand are too loose…resulting in a shifting seat. Or, handlebars that slip up or down. Trust me, this is extremely dangerous. And how often, as a youngster, do you leave the yard with a couple of half-inch or 9/16ths inch wrenches in your pockets? In my experience, rarely, if ever.
But these aren’t the only pitfalls of bicycling. My favourite is taking my eye off my path to watch an attractive distraction cross the road. In this case, it is an exogenous variable acting upon an endogenous variable. Spend too much time watching an attractive distraction and you can run your bike into a ditch. Or worse. There are lots of other exogenous variables that can affect your ride. Neighborhood dogs, on-coming cars, fields that you thought were dry…and now you’re sinking into mud.
But the most important exogenous variable when it comes to riding your bike is the path or road you choose to travel on.
When I was younger I lived not far from
Alpenrose Dairy. If you’ve never gone, for us who grew up on the Westside, it was our Disneyland. With Rusty Nails instead of Mickey. But among its attractions was a velodrome.
Endogenous variables: bike and rider.
Exogenous variables: the track.
Living near Alpenrose meant a lot of solo time on the track. No distractions. Nothing but you and the track. As I grew older the bikes I owned changed. From clunky 20 inch frame, to a light-weight racer.
As you approach a bicycle that you have hundreds of dollars invested in, you become more aware of the endogenous events taking place within the system. I’m not going to boor you with too many stories, but let me assure you that there wasn’t a single part of my bike that hadn’t been disassembled and reassembled. Or the hours spent trying to find the correct dimensions for the ball bearings in your hubs or crank assembly. Always trying to find a way to decrease the coefficient of friction; allowing you to put more energy into moving forward, than simply turning the crank.
The structure of a bicycle is a lot like the structure of the Market. When people talk about regulation, it is this structure of the Market that we should keep in mind. There are changes that are possible in the way we structure transactions that can make the market work better, or simply work more.
But even with this regulation, inspection and maintenance of the bicycle, bad things can still happen.
If you ride on a velo track, the first thing you notice is the time spend running on the flat. When you run at slow speed, you spend most of your time running on the shortest possible path, where turns are executed with minimum radiuses. That is, when you are moving slowly, working toward equilibrium is easy. But speed itself is not a guarantor of stability. And the dumbest way to learn this is to have your toe-clips on tight, and move slowly at the highest part of the corners, or, the greatest maximum radius. Here’s what happens:
The tires you have on your bike are very different from the tires used on my bike.
My tires are designed to give as smooth a ride as is possible, with very little friction except for the linear plane. So when I approach the top of a curve on my bike at slow speed, with my toe-clips on, here’s what happens.
I crash.
Now I generally know within microseconds that I’m going to crash, and am wildly tugging on my feet, trying to clear my shoes. Bending over to release your toe-clips is a nice idea, but you’re better off trying to manage your crash as your bike slips down toward the center of the track. I have simple leaned over to accept the crash and lift the bike with my legs.
But crashes occur. They can occur when you’re moving too slowly on a track designed for high-speed. They can occur when you’re moving to fast on a track designed for low-speed. And at this point, I am the only person on the track.
Now your bike may have massively treaded tires. Your tires may allow you to perch high atop the bank. But two evenly matched bikes, one with my tires, one with yours; you would never be able to compete. Smart choices in endogenous structures give me an advantage over your choice.
But even with these smart endogenous choices, crashes can still occur. Even riding solo on a track. Because your bicycle is never in equilibrium unless it’s hanging on a rack, or setting on its kickstand. It’s at equilibrium at rest. At all other times you are leaving equilibrium, passing through equilibrium or moving toward equilibrium. And because you’re in a closed system, running on a clearly defined course, there are limits to the amount of outside—exogenous—influences that can affect your attempt to find equilibrium.
On your first attempt to ride on a velo track don’t be surprised if you crash. My advice is to take it easy, ride with authority, and don’t attempt to ride the entire track. You have two basic problems; one is how to get into a curve, the other is how to get out of a curve. You will spend most of your time thinking about how you’re going to attack a curve and the rest of your time figuring out how to attack the straight. This challenge is magnified when you consider racing in an event like the Tour de France, when your speeds exceed 70 miles per hour.
The problem with most politicians is they tend to think that barriers to success are the same thing as regulation of success. There are thousands of barriers and roadblocks proposed by politicians every day, every hour, every moment.
As bicyclists, we know that good regulation is like a well-built and maintained bike. Meaningful regulation means choosing the right tires, matching your crank to your stroke, adjusting the height of your handlebars and seat to maximize your strength and minimize your risks. When critics of government criticize government actions, chances are it’s because they see these actions as outside of what’s needed to build a high performance bike. Or, even worse, they see government as changing the design of the track itself, making the work we invested into our bikes meaningless.
Let’s assume that racing is risky. Like all things in life, racing is risky. We don’t need to assume it. Just talking about the crashes you can get into at low, or no, speed, when you take racing up to a competitive speed, the risk increases. No doubt that falls are dangerous (I have a friend who broke his arm from a simple fall); but falling at 30, 40, 50 miles per hour can really screw you up. Get tangled in your bike wrong, and you can be on your way to hospital with a perforated something-or-other.
Somehow, politicians have come into our lives with a mantra of reducing risk. Would I make my sons wear a helmet when they’re riding their bikes? No. Nor would I make them wear helmets when riding on a swing, or climbing the monkey bars. But politicians have passed laws mandating that we force helmets on our kids. And you’ve seen playgrounds across the country turning into flat fields with no amusement devices that threaten our children’s lives. Playgrounds where children can’t play “tag” because of the risk involved. (And what about climbing trees? Shouldn’t we tag trees as “off-limits” to kids? Wasn’t Pollyana nearly killed by a tree? Or require kids to wear safety equipment, perhaps require Swiss mountaineering courses before they begin their ascent?)
So why should we be surprised when politicians, who have enacted so many measures to reduce the risks of our lives, attempt to pass laws that affect how bicycles and tracks are built and maintained? (This was a rhetorical device, comparing bikes and tracks to rules which govern the marketplace. As an aside, if you want me on a skateboard, I want elbow and kneepads, a helmet and gloves. But that’s a personal assessment of risk. I won’t hold it to others.)
Why do velodrome racers wear a helmet? Why do Tour de France racers wear helmets? For an excellent essay on why people make the choices they do, I refer you to
Gary Becker’s “Crime and punishment: An economic approach” (
The Journal of Political Economy 76 (1968) 169—217.)
When you look at risk, you end up looking at the probability of an occurrence, and the probable outcome of an occurrence. When I rode a bike at high-speed, I took a look at the probability of crashing and determined that the risk was quite good that I would crash. (If you’ve ever met a guy who said he rides, or has ridden a horse and never fell, you’ve met a liar.) Not “if” I would crash, but “when” I would crash. Also, I could assess that the biggest “at risk” parts of my body were my hands and head. If you’ve dumped a bike, you know that whether or not you break a bone depends on how well you manage your fall. No amount of safety gear is going to save you from a broken arm or leg. You deal with it.
There is that class of people, however, who know better than you. As I mentioned in the
Levy article, these people are elitists. They have one defining characteristic: no matter what it is you’re doing, they can tell you how to do it, better. What is unfortunate is that they—the politicians and school administrators, elitists in general—are limiting play for children. Yes, there are real life experiences of risk, and dealing with risk, that are learned from rough games. If you were bad at dodgeball, you learned how to jump. Trust me. In grade school you wanted to be on Steve’s side. Steve could hurt you with those stupid rubber balls. If you got picked to play against his side, you better learn how to scamper.
This doesn’t really matter too much when conducting your business on a day-to-day basis. When we gave up distributing personal justice for state justice, the threat of being brutally beaten or killed, receded. If you get into an argument with a neighbor, or business competitor, chances are more likely that you’ll end up in court—or talking to a cop—than actually finding yourself needing to scamper. The question of “who are you to tell me how to do this?” can be asked and answered. No one can tell you how to do a thing. If it’s a neighbor or business competitor. Unless, you’ve gained attention from the elite class. Then things change.
Or, rather, “who elected you?”
Well, unfortunately kids, we elected them.
Enough of us have decided that we need babysitters, that we’ve elected a babysitting class called Democrats. Market moving too fast? Try adding weights to our wheels to create dynamic imbalances. Or, corrugating the track so we don't attempt higher speeds. Or, limit the crank length to shorten our stroke. Or, require body armour to add weight--and safety--to our laps.
Our markets are more dynamic than riding a bicycle. And they're always in the same three states: approaching equilibrium, passing through equilibrium, or leaving equilibrium. The goal of the rider, just as it is the goal of persons in the market, is to always approach equilibrium without over-shooting equilibrium. For the economist, this is refered to as "the margin". Whether it's bikes or NASCAR, racers understand intuitively what is meant by the margin. It is that little bit that stands between success and disaster.
