• The average American spends 396 hours driving per year.     
• An estimated 36,200 traffic fatalities occurred in the United States in 2012. 
• United States consumers burned an average of 367.1 million gallons of gasoline per day in 2011.  

These statistics are rather disheartening, yet are the byproduct of our vehicle-centric society. But now imagine a world where we no longer have to sit behind the driver’s seat of a car, where traffic fatalities become practically non-existent and fossil fuel consumption is drastically reduced. Seems pretty nice, right? Well buckle up, because this seemingly utopian future will become reality thanks to the driverless car (where, ironically, you actually won’t have to buckle up). 

Technology now allows computers, rather than human drivers, to maneuver a vehicle from Point A to Point B using GPS systems and road sensors. Google, a founding pioneer of the technology, designed a driverless fleet that has accumulated over 300,000 accident-free miles. This has spurred companies such as Toyota, GM, Lexus, Audi and Volvo to accelerate driverless technology research. First-generation autonomous technologies, such as automated parallel parking, accident avoidance systems and adaptive cruise control are already being incorporated into vehicles. Federal government agencies are also joining the research fray. The National Highway Traffic Safety Administration has been conducting vehicle-to-vehicle communication research and expects to issue an agency decision on connected vehicles by the end of 2013. Considering this rapid progression of driverless technology in the past several years, driverless vehicles are not a far off aspiration. They are the present. And they are undoubtedly the future.

Driverless benefits

From a pragmatic standpoint, driverless vehicles are beneficial on all levels. Traffic safety would no longer be a concern. Computers do not get tired, distracted or annoyed by other drivers. They eliminate the most dangerous element of driving—the human element. Commuting would no longer be a labor, rather it would be an extension of leisure time where one can eat, sleep, surf the internet, work or watch a movie. Consequently, society could see productivity increase and a more involved labor force as transportation limitations would be largely eliminated.

Furthermore, aspects of driving we consider social norms—stop signs, stop lights, general road signage, and overhead freeway lighting—would become obsolete. Vehicles’ ability to communicate and seamlessly weave between one another at intersections eliminates the necessity of traffic controls. Street lighting and signage will be a vestige of human-driving history: the car does not require lights or signs to know where it is going. Multiple vehicles for a family would no longer be needed: the car could continuously run and bring every individual to their required destination in a more efficient manner than multiple vehicles could. Even vehicle ownership is a concept that could become outdated. Many individuals will likely choose the convenient and relatively inexpensive option of driverless taxi services over vehicle ownership.

Driverless cars would also increase efficiency and reduce the amount of fossil fuels burned.  Volvo has researched driverless “road trains,” where driverless cars would group on the freeways to improve aerodynamics and reduce wind drag. This alone could improve fuel efficiency by 30%. Additionally, driverless cars could be built using lighter materials and smaller engines because of their improved safety compared with human-operated vehicles, further improving fuel efficiency. Enormous societal benefits, including lower levels of air pollution, a healthier population, and a significant reduction of the nation’s carbon footprint, would likely result.

Industry effects

For many, the real interest of driverless vehicles involves nascent economic markets. Technology to set up vehicle-to-vehicle and vehicle-to-infrastructure communication would need to be developed and built. Interaction between smart phone technologies and vehicles would be also inextricably linked. Mobile apps allowing driverless cars and users to interact (e.g. texting a vehicle you are ready to leave work in 10 minutes and the vehicle is waiting outside to pick you up) would need to be developed and operated. Transportation companies offering driverless trucking and taxi services will probably emerge. Hospitals nationwide would no longer annually treat millions of accident-related injuries. Companies greening urban landscapes of unneeded parking garages will find plenty of business. Urban designers will be in demand to find new and inventive ways to create urban environments that optimize the efficiency of driverless vehicles.

The possibilities offered by driverless cars are endless. Introduction of such technology would alter nearly every component of our lives: where we live, how we spend time while commuting, the design of cities and vehicle ownership, among others. This being said, mass production of driverless vehicles is still years away. Some automotive experts believe we could see driverless vehicles on the road in the next 10-15 years, while others believe it will be upwards of 50 years. Driverless cars would require extensive infrastructure investment and the estimated time of arrival of driverless vehicles depends on the cooperation between auto manufacturers and the government. Insurance and legal issues would also need to be clarified before driverless vehicles become commonplace. Moreover, consumers will have to buy-in to the technology to create sustainable demand. Although initial buy-in may be slow, once consumers recognize the safety of the technology and the utility gained, this blogger believes everyone will be jumping on the driverless train. So don’t buckle up and don’t get your hands on the wheel – just jump in the back, flip on your favorite TV show and enjoy the ride.

For just $99, we'll give you a Bernie's Terrace ticket to nine select Tuesday games at Miller Park. And, on Tuesday, April 30, you'll sit in Bernie's Terrace for the first game of the plan. When the Brewers win, you advance!

Every time the Brewers win, you exchange your Bernie's Terrace ticket for the next game in the plan for just $2 to the next best seating area (see list below). You remain in that seat location until the Brewers win the next game in the plan. If the Brewers don't win, you simply exchange your Bernie's Terrace ticket at no cost for a seat in the same section where you last advanced — no backsliding.

If the Brewers win the first eight games in the plan, the ninth game would enable you the opportunity to sit in the Field Diamond Box!

1. Bernie's Terrace

2. Terrace Reserved

3. Terrace Box

4. Loge Outfield Box

5. Loge Infield Box

6. Club Outfield Box

7. Field Outfield Box

8. Field Infield Box

9. Field Diamond Box

This sounds like an entertaining promotion and a great way to be even more interested (if that is even possible) in seeing the Crew win. But I couldn’t help wondering: Is this package a good value?

The short answer is yes. If you bought nine individual tickets for Bernie’s Terrace (the starting point of Chance 2 Advance) at $11 a ticket, you would pay $99, the exact same amount you would pay for the Chance 2 Advance package. So unless the Brewers lose all of their first eight games (keep in mind, we are talking about the Crew, not that poor excuse for a baseball team 90 miles south), you would end up with a better deal by purchasing the package because you will watch at least some of the games from a better seat.

But how much better? That depends on how many games the Brewers win and requires some probabilistic thinking.

Let’s start with the basics: They play eight games that give you an opportunity to advance to the next best seating area. That means there are 256 (or 2⁸) different combinations of winning/losing during this eight-game stretch. And let’s suppose for the sake of this analysis (and to make the math easy) that the Brewers have a 50% chance of winning each of these games. This means each of these 256 possible outcomes is equally likely to occur. For example, one possible combination could look like this:

Win, Win, Loss, Win, Loss, Loss, Win, Win

In this scenario you would watch the nine games in these seating locations:

If you bought the Chance 2 Advance package, you would have paid $109 for these tickets ($99 initial payment, plus $2 for each of the five times you advanced). If you decided not to buy the package, however, and bought these exact same tickets individually, you would have paid a whopping $261 (see table for assumed face value individual game ticket prices). That means for this possible outcome, you would have saved $152 for the exact same seats by purchasing the Chance 2 Advance package. Not bad!

But that’s just one scenario. What if we did this for all 256 possible scenarios? You would find that you could expect to pay $107 for tickets with the Chance 2 Advance package and $223 for the exact same tickets if you purchased them individually. That means you could expect to save, on average, $116 by going with the package instead of buying the tickets individually.

So we know the Chance 2 Advance is a great deal, but let’s add one caveat: If you are buying the tickets with an expectation of watching the ninth game in the luxurious Field Diamond Box, prepare to be disappointed. Once again assuming the Crew has a 50% chance of winning each of these games, there is only a 0.4% chance you will be watching the last game in the Field Diamond Box.

But on the flip side, it’s just as unlikely you will be stuck in Bernie’s Terrace all nine games, so you have a great Chance 2 Advance, if you will. In fact, you have a better than one-in-three shot of watching the final game in Club Outfield Box or better. So no matter what, it’s a great value and another reason to visit Miller Park this season—just in case the Sausage Race wasn’t reason enough.

If the dismal science teaches us only one thing, it’s that people respond to incentives when they make decisions. When I make the decision whether to work out today, I need to balance the long-term incentive of being healthier and looking buff with the short-term incentive of watching TV and avoiding sore muscles. My short-term incentives are well-defined: I don’t need to spend time punishing my biceps, and instead I get to watch the Situation punish his. My long-term incentives, however, are more abstract. If I workout today, it will only contribute sparingly to my future health. And how much does better health translate into better quality of life or increased life expectancy? I don’t really know; there’s no good way to compare it to the enjoyment of watching TV right now. So you can see the incentives are heavily stacked against working out. The same applies to saving for retirement: I know buying a 60-inch flat-screen television will make me happy now. Who knows if I will even be alive when I’m 65?

So the key to forcing yourself to work out (or save for retirement) is to change your incentives. Either make it more rewarding to work out now or make it more painful to not work out right now. That’s where strategic precommitment comes in. Before you attempt to change your workout habit, add a disincentive for failing to reach a workout goal. For example, you could commit to giving away $100 if you fail to lose 10 pounds in two months. Now your incentives have changed. Instead of weighing the pleasure of watching TV against the abstract benefit of better health, you’re weighing it against the possibility of losing $100, which is much more tangible. And to prevent you from reneging on your deal with yourself, it’s best to make the deal with a friend. Tell your friend you will pay them $100 if you don’t make your goal. Now you can’t back out when you don’t reach your goal and you added the social pressure of avoiding public failure—that’s an incentive double-whammy.

Keep in mind that strategic precommitment is not a fail-safe method for reaching your goals. Let’s not forget Congress tested the same tactic when trying to reach a deficit-reduction deal in August 2011. In an attempt to force itself to agree on plan, it decided to impose drastic cuts of $1.1 trillion to defense and civilian spending—known as the “sequester”—beginning March 1 if a plan wasn’t reached. You already know how this story ends. Like the resolver who doesn’t put a dear enough price on failing to meet his resolution, Congress was unsuccessful in reaching a deficit-reduction deal, instead allowing the sequester to take effect. As this post by The Economist argues, the reason the two parties didn’t reach an agreement was because the sequester wasn’t a legitimate disincentive for politicians who weren’t up for reelection for at least two years.

A more entertaining example of a precommitment strategy comes from an obscure U.K. game show called Golden Balls. The rules of the game are simple: Two players are awarded a sum of money based on their simultaneous decision of whether to split that money with the other player or steal it all for themselves. If both players choose to split the money, they do. If one chooses to steal and the other chooses to split, the stealer takes it all. If both choose steal, neither gets anything.

It’s a classic example of game theory (prisoner’s dilemma) in which the player has a dominant strategy to choose to steal from their opponent because:

• If their opponent chooses to split, the player will get all the money.
• If their opponent chooses to steal, the player will get nothing regardless of whether they choose steal or split.

Watch this clip to see how one player uses a strategic precommitment to his advantage in the game:

So keep this blog post in mind the next time you’re debating whether to work out. Because strategic precommitment might just be the thing you need to get back on the treadmill. Or ensure your friend doesn’t rob you blind on U.K. television.

A team in this position must be doing something much better than its opponents. At first glance, Williams is right: It’s not clear what Marquette does well:

Marquette’s highest conference rank in any efficiency stat is sixth, and its overall average efficiency rank is eighth. How could a team with middling stats such as these be fighting for the top spot in one of the nation’s toughest conferences?

It’s simple: free throws. The key is not just getting to the line, but rather how many a team makes relative to the possessions available in a game. This is where we can start to see how Marquette wins.

The table below shows the number of free throws each team in the Big East makes relative to a particular number of possessions. Marquette makes a little more than 25 free throws per 100 possessions, which is second only to Villanova’s 27.5 made per 100 possessions.

But this isn’t the full story. We need to consider how many more free throws a team makes per 100 possessions relative to its opponent. On average, Marquette makes 6.7 more than its opponents, which is tops in the Big East and good enough for 17th best in the nation (FYI: Green Bay, which defeated the Golden Eagles on Dec. 19, is currently 24th in the nation in this statistic).

That’s all well and good, but how does it translate to winning? If Marquette were to make the same number of free throws per 100 possessions as its opponents while keeping its other efficiencies the same, its winning percentage would decline 5.72%.[1] Through 27 games, that amounts to 1.54 games. That would put Marquette at roughly 18–9 overall and 9–6 in conference, or in seventh place—right in the middle.

Let’s look at it a different way. Marquette averages a turnover on 20.5% of its possessions thus far this season and averages 25.6 FTM/100. There have been 14 games in which it had a turnover rate higher than 20.5%. In nine of those 14 games, the Golden Eagles had a FTM/100 below 25.6. They lost six of those nine games (Green Bay was one of them). In the other five games, Marquette had a FTM/100 above 25.6 and won four of those games.

Williams says he’s not sure how this Marquette team wins, as he’s not sure what it’s good at—but don’t let him fool you. He emphasizes getting touches in the paint for a reason: They provide open shots on a collapsed defense and, maybe more importantly, a decided free-throw advantage.

[1] This calculation is derived from results of a previously run regression that looks at how each efficiency determines winning percentage. These results can be provided to the reader if desired.

Sony touted an x86 CPU with an enhanced PC GPU, something called a “stereo camera” and, of course, new social aspects that will allow gamers to share footage with friends. Because there’s nothing more fun than watching your friend play a video game, and why should that joy be limited to people who are physically in the room with you?

It showed off trailers and graphics engines and gameplay footage, and it did it with somewhat of a Quixotic outlook considering:

• A massive drop in sales from the PS2 (more than 150 million units as of January 2011) to the PS3 (77 million as of January 2013).

• A 22% decline in video game sales in 2012.

• The widely held belief that mobile gaming is poised to destroy the console system as we know it (although many disagree with that).

Let’s stick on that last point for a bit. The claim, at least by PricewaterhouseCoopers, is that despite mobile gaming’s rise, the console market in North America will jump from $9.6 billion in 2011 to $10.6 billion in 2016. That sounds wonderful—until you see that in 2008, overall revenue came within a whisker of $12 billion and has dropped every year since.

So why the optimism? Sony announcing its next-gen console is a big part of it, as is the expectation that Microsoft will do the same with its Xbox in the coming months. From the looks of it, analysts expect revenue to get a lift from the simple fact that there’s a bunch of new crap to buy. New, more expensive rigs mean people need to repopulate their gaming libraries, and thus more money rolls in.

That may be true for the first year or so after launch, but beyond that I’m not so sure (and neither is Nintendo). I didn’t own a system until I left for college and threw off the shackles of a household that last owned a console when the Intellivision II was all the rage. But my grade-school chums can vouch for my ability to finagle an invite to play Duck Hunt or Excitebike or Super Mario Bros. 3. And while I minored in Super Tecmo Bowl and Super Mario 64 and the multiplayer mode of 007: Agent Under Fire, since then my time spent with DualShock Controller in hand has dwindled considerably.

And so it goes for an entire generation of gamers who are getting older and spending more time watching HGTV because it’s totally their idea and not because their wife wants to watch it. But what’s happening with the next crop? They’re growing up with increasingly powerful smartphones capable of more and more sophisticated games. It’s to the point that I can take my phone out of my pocket and, in minutes, download and play a title that used to require a PS2 and a tube television (“A what?” asks everyone under 10).

Perhaps more important is the fact that sophistication really doesn’t matter anymore. A recent cyclone of terror my siblings call “their kids getting together” resulted in battery-drained tablets exhausted by Angry Birds and Temple Run and any number of other games that have a story line in the same way the latest Die Hard movie did (so there’s a bad guy, and he’s in Russia, and Bruce Willis goes there, and stuff blows up … the end).

Granted, a couple of my nephews have a Wii, and it does get used. But things have changed considerably since the days of coming home from school, tearing through the front door, throwing your crap in a heap and finding out your princess is in another castle. For this latest generation, the console is just another outlet rather than the centerpiece of their gaming universe. Kind of like how the big three networks used to dominate television until other rich people realized they could probably do better than this:

Eventually, the major networks realized they couldn’t just put anything on the air simply because they were the only option. Although as we’re subjected to not one but two celebrity diving competitions and MTV’s relentless search for the region of the country with the dumbest people, you could argue TV executives haven’t quite gotten the message yet. Hopefully, the gaming world will wise up before we’re subjected to more of this.

Before we go any further, let’s give everyone who hasn’t eaten in the last 30 minutes another opportunity to check out this year’s offering:

There’s a longer version that gets tongues involved, but just typing that brought bile into the back of my throat, so we’ll leave the gross factor where it is for the time being. Instead, let’s try to look at this situation from the perspective of a logical, rational human being:

1. Company makes commercial.
2. Company shows commercial to more than 100 million people.
3. People hate commercial.
4. People hate company.
5. Company goes bankrupt.
6. CEO goes to Africa and shoots an elephant.

OK, that last one wandered from the point a bit but, in the case of Go Daddy CEO Bob Parsons, actually happened:

Ignoring the pachydermicide, the logic is fairly sound, isn’t it? Except the exact opposite thing happened.

Sure, people hated the commercial. In the Super Bowl Advertising Review from Northwestern University’s Kellogg School of Management, Go Daddy earned a “D” and joined the likes of Century21, BlackBerry and Lincoln at the bottom of the rankings. Associate Professor of Marketing Derek D. Rucker, who leads the project, summarized it nicely: “We’ve come to expect Go Daddy to fare poorly in the annual review.”

The fact is, however, that the commercial worked. And not just that commercial. All of Go Daddy’s Super Bowl commercials. According to Go Daddy Senior Executive Vice President and Chief Marketing Officer Barb Rechterman—yes, the brains behind those mammary-centric commercials is a woman—the company’s market share prior to its first Super Bowl ad in 2004 was 16%. Today, it’s more than 50%. And the Monday following this year’s game was the biggest sales day in Go Daddy history.

It seems the only thing that can top creating a crass, unlikeable commercial aired during the Super Bowl is creating a commercial that doesn’t get aired at all. Such was the fate of SodaStream’s first attempt at forking over $4 million to CBS, which didn’t much care for the company’s shot at more traditional soft-drink providers Coke and Pepsi:

If you clicked over to YouTube to watch, you would have seen the clip’s viewership is north of 4.5 million, earning the elusive “viral” tag every marketer and parent with a kid coming off a Novocain high would lop off their pinky finger to achieve. To put that number in perspective, the banned SodaStream ad attracted more eyeballs on YouTube than commercials uploaded by Coke, Jeep and Tide.

Getting back to Go Daddy, I suppose we should congratulate the company for raising its awareness, increasing sales and securing a majority share of its market. But it should be noted, as our civilization struggles to avoid collapsing while attempting to crawl under its lowered standards, that these guys did the same thing.

First off, an explanation of fracking is in order. Fracking is a modified mining process that allows hard-to-get oil and natural gas embedded in layers of shale rock miles below the Earth’s surface to be extracted. The multi-step process begins by drilling an L-shaped borehole thousands of feet underground to reach the levels of shale rock. Concrete and steel are then used to reinforce and seal the borehole. Next, shockwaves from conductors and millions of gallons of water, sand and chemical mixture are used to fracture the shale rock in order to release the natural gas and oil. Extraction then occurs until the well runs dry, wherein the process begins anew. This cycle is repeated until the well can no longer be fracked to produce more fuels.

Fracking has proven to be highly efficient and successful. According to the New York Times, in 2011, the U.S. imported 45% of the liquid fuels it used, down from 60% in 2005, largely because of increased fossil fuel production resulting from fracking. Proliferation of fracking is expected to continue, boosting domestic fossil fuel supply and applying downward pressure on prices of natural gas, oil, and gasoline. The Energy Department estimates domestic oil production could increase over 20% to 7 million barrels a day by 2020, and more liberal estimates from The International Energy Agency predict the United States will overtake Russia as the leading producer of natural gas by 2015, outpace Saudi Arabia in oil production by 2017, will be a net exporter of oil by 2030 and energy “self-sufficient” in about two decades.

Such projections have profound effects on the economy, foreign policy and national security. Cheap energy means lower input costs for firms, which may drive profitability, job creation and a resurgent economy. Much like the economic boom of the 1990s, the U.S. economy could experience economic expansion partially as a result of inexpensive energy. Additionally, with energy security, U.S. foreign policy could abstain from geopolitical gamesmanship. Foreign policy could be direct, transparent and less involved, as energy needs are eliminated from political decision making. National security would benefit as a result of the reduced U.S. foreign footprint.

However, fracking does not come without costs. Fracking has been contested by many environmental groups as detrimental to local water, air, climate, communities and public health. The main contention is that the chemicals used during the fracking process can leach into aquifers, introducing carcinogens and pollutants into local water supplies. Environmental coalitions also cite negative externalities associated with fracking – air pollution, decreased land values, sustainability issues, and toxic waste – as reasons to oppose the process. Additionally, nations such as France and Bulgaria have already banned fracking, supporting environmentalists’ claims. Yet oil companies contend that the mining process is safe and water aquifers are protected from the pressurized water, sand, and chemical mixtures by steel and concrete barriers. The competing claims of environmentalists and industry proponents are currently being researched by the EPA, with an expected ruling due in 2014.

Forthcoming years will likely bring escalation of the fracking debate. Economic and environmental tradeoffs will be weighed, studied, researched and quantified by proponents and opponents. But fracking does not need to be dualistic. There are clear economic and political benefits to achieving energy independence, just as there are potential significant costs inherent to the mining process. In the coming years, hopefully we can find a middle path, allowing the U.S. to reap the rewards of fracking while minimizing costs.

Passion for a particular sport begins at a young age, and soccer organizations have excelled at exposing children and adolescents to soccer in order to maximize their future engagement with the sport. Growth in soccer’s youth development programs has been astounding. According to the United States Soccer Federation, involvement in youth soccer programs in the United States has doubled since 1990, growing to over 4 million youth soccer players. Participation in high school soccer programs has also shown outstanding promise. Using data from the National Federation of State High School Associations, from 2007-2012 the number of soccer participants grew by 7.2%, whereas football, basketball, and baseball/softball (combined participation), fell by 1.2%, 3.1%, and 1.2%, respectively. Soccer’s growth rate even exceeded the overall growth rate of all high school sport participation (3.5%). Not only is soccer growing faster than the mean growth of all high school sports participation, but it is doing so while other major sports are declining. Additionally, significant soccer program expansions have occurred at the collegiate level. The number of women’s collegiate teams has jumped 115 percent since the United States hosted the World Cup in 1994, and the number of men’s teams rose 27.6 percent over the same period, according to the NCAA.

Granted, participation in sports does not directly translate into the sport being commercially successful. For example, track and field is among the most prolific and participated-in high school sports but does not sustain its popularity at the collegiate or professional level. However, soccer appears to be bucking the trend of a sport children play and adults resent. Recent accomplishments of the U.S. Men’s and Women’s National teams (USWNT gold medal in London, USMNT World Cup 2010 run, ESPY Awards ) have skyrocketed the sport’s popularity and established the legitimacy of the sport in the American psyche.

With these accomplishments, Major League Soccer (MLS) has slowly been increasing its reputation as a genuine premier soccer league. The quality of play has been increasing, and with it, the fan base, match attendance, and TV viewership. Attendance to 2012 MLS matches reached a record high for the second consecutive year and boosted soccer ahead of basketball to become America’s third highest attended sport, with 17,872 average spectators per match. NBC recently dedicated a cable channel to soccer, and viewership has slowly risen as interest in the sport climbs. Sponsors have recognized the growing soccer consumer base and associated economic opportunity in America. Two World Cup sponsors — Castrol and Continental Tire — have signed multiyear, multimillion-dollar league sponsorships with MLS within the last two years. Ongoing growth and synergy with U.S. soccer has incentivized a push for further expansion of the league, and MLS has responded by indicating it will add three more teams in the next seven years.

As the MLS continues to expand, it is likely that soccer will continue its ascendancy in the United States. Perhaps it is a bold statement to suggest soccer could unseat American football or baseball in the future, and it may not happen in this author’s lifetime. But the gameplay, tactics, drama, and impassioned announcers  create a riveting sport dynamic which is hard to ignore. So give soccer a shot. And twenty years from now when you’re sitting down on Sunday at 12 p.m. to watch an enthralling soccer match, just remember, the whole world is watching. And now you are too.

You hear the same consolation after every natural disaster. The financial and emotional destruction of Hurricane Sandy was terrible. Thousands of homes and vehicles were destroyed, leaving many people out on the street. New York City ground to a halt and its infrastructure will require repairs. But if there is a silver lining in it all, it is that the destruction will provide a boost to the economy in the form of new construction and infrastructure spending that otherwise would have not taken place.

There is no shortage of people making this statement. But is it true? Will the hurricane be a net improvement to the economy?

Proponents of the argument say the cleanup and reconstruction spending will put a dent in or perhaps even exceed the estimated $50 billion of damages. This includes increased spending on construction, furniture, house wares and automobiles which would otherwise have not taken place. The bump in demand could even cause a short-term rise in employment in these industries. And higher employment means more people in the area have money to spend, which ripples through the local economy.

This sounds like all silver lining and no cloud. In fact, if you took this argument to its logical conclusion, you would say that natural disasters are actually good for the economy, boosting spending and circulating money. So why not go out and vandalize some cars to boost GDP? According to 19^th century political economist Frederic Bastiat the answer lies in opportunity cost.

In his 1850 essay “That Which is Seen and That Which is Unseen” Bastiat tells the story of a shopkeeper whose careless son accidentally breaks a window in his shop. The shopkeeper is furious with his son, but spectators to the incident try to console the shopkeeper by telling him to consider the glazier who makes his living repairing windows. Though the broken window is unfortunate, it encourages trade to the glazier for the amount of the broken window.

Bastiat goes on to say that before you arrive at the conclusion that breaking windows is a good thing, consider that which is unseen. The shopkeeper pays for the broken window, and thereby cannot use that money to pay for something else. Perhaps he was planning on replacing his shoes, but he no longer does so because he must pay for the broken window. The local economy is no better off: true, the glazier has benefited, but the shopkeeper is poorer by the amount he paid the glazier, and just to return to the state he was in before the window was broken. The shoe-maker is worse off because the shopkeeper doesn’t buy a new pair of shoes. And worst of all, a window is now broken.

At best, this scenario simply represents a shift of economic resources from one industry to another. Returning to the topic of Hurricane Sandy, the construction and automotive (and glass repair) industries will benefit as people repair and replace their homes and cars. But businesses, homeowners and insurance companies will still be losers. So will be the industries on which homeowners and businesses would have spent the money that is now appropriated to fixing damages. 

I can see the gears in your head spinning. What if the shopkeeper wasn’t going to spend that money on a new pair of shoes? What if he was going to keep it tucked under his mattress? Wouldn’t it be a net benefit for the economy if he was forced to spend it to replace a window? Similarly, if households and businesses were planning on hording their cash wouldn’t it encourage economic growth if they instead used it on repairs?

It may be true that this instigates consumers to start making purchases that they would not have otherwise. But that doesn’t mean that the hurricane was a net benefit to the economy; it was only the catalyst that spurred people to spend. It would have been much more beneficial for there to be no hurricane damage and people to spend their money on improvements instead of repairs. And remember that although increased spending on repairs might increase economic growth in the short term, it still leaves consumers and businesses less money to use in the future; they may not have been ready to spend it now, but that doesn’t mean they wouldn’t six months or a year from now.

And lastly, it is important to distinguish production from wealth. While production might rise due to the increase in spending, overall wealth is still lower (you have one less window than you did before). No matter which way you cut it, breaking a window doesn’t fix the economy. 

The man’s logic was straight-forward: if the grocery store installs more self-checkout lanes they don’t need as many clerks, who soon find themselves out of work. The same argument gets made by those favoring stricter immigration policy (more immigration leads to higher unemployment for domestic workers) and early-retirement policy (old people working later in life block the way for young people to enter the work force). The assumption for each of these arguments is that there is only so much work to go around, and a job filled by a machine/immigrant/retiree puts a hard-working American on the unemployment rolls. Despite having been disproved for decades, this assumption, known as the “lump of labor fallacy”, persists.  

The lump of labor fallacy is hard to contest because it seems so intuitive; it isn’t hard to think of an example of a person who lost their job due to a new autonomous technology or competition from immigrants. But this logic is incomplete. Think of the self-checkout machine that replaces the store clerk. Someone has to design, build, install and maintain that machine. That means jobs that would otherwise not exist if the store didn’t use the machines. Or consider immigrants who arrive in America. They use the money from their jobs to buy groceries, transportation, clothing and health care, which supports other jobs. The fact of the matter is that there aren’t a fixed number of jobs in the economy. Every new job means more people making money, which they spend on the goods and services produced by other people, which creates demand for more jobs.

Anyhow, the data don’t bear out an assumption of a fixed number of jobs. If old people really did block the way for young people to replace them at their jobs then we would expect the burgeoning baby boomer population to have negatively impacted the employment of young people. As the chart shows, that wasn’t the case; youth employment was relatively stable (until the recent recession) despite a dramatic increase in the silver-haired employed. The same thing happened when women began entering the labor force in greater numbers. It wasn’t a zero-sum game; women’s employment skyrocketed and didn’t adversely affect men’s employment.

This doesn’t mean that it isn’t painful for those whose jobs are replaced by a robot. On an aggregate level there might not be a decline in employment by installing a self-checkout machine (because it increases employment for the machine’s manufacturers), but that doesn’t change the fact that the store clerk is out of work. Ideally, shifts in demand for different types of labor can be combined with training programs to ease the transition of workers from one industry to another. But in the short-term, it can certainly feel like there is only so much work to go around.