Jay Leno foiled

by Russ Roberts on March 17, 2009

in Complexity & Emergence

Don't miss this great post by Greg Mankiw. It's so hard to stop market forces.

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{ 43 comments }

Daniel Kuehn March 17, 2009 at 3:37 pm

I wouldn't argue with Greg Mankiw's economics a single bit – I think the problem is that by viewing things only through his economics, he comes to the conclusion that Jay Leno is a self-serving jerk.

Think of it this way – let's say your grandmother knits you a sweater for Christmas. You turn around and sell it on e-bay for $25. Your grandmother is furious!

Would you say that your grandmother's objection is a an understandable but self-interested act because your sale of her gift kept her from appearing altruistic in front of all her nursing-home friends???

Of course you wouldn't say that! Your grandmother would be upset because she wanted to share something special with you – she wanted you to know she was aware of you and your problems and wanted to give you a token of that.

I don't know Jay Leno – maybe he is a selfish guy that just wants to promote an image of being big hearted. But let's not just ASSUME that.

Mankiw is so caught up in the efficient resource allocation of markets that he forgets that there are other methods of social exchange, including gift exchange. And while research suggests there are many similarities between gift-giving behavior and market behavior, sometimes the value of a gift is lost if it is monetized and resold.

I'm a card-carrying economist. I like Greg Mankiw, and he provides an interesting example to chew on here. But God I hope he's not serious about this one. Markets are fantastic tools – but not all social interactions can be reduced to markets or are amenable to markets.

DAVE March 17, 2009 at 3:54 pm

That exactly would be the point.
The best way to know what is best for the person you're doing the favor for is to go by what that person wants as opposed what you want them to want.

Also, I wouldn't compare it to a gift from grandma: Grandma wants you to have the sweater she bought you and selling it would be callous and insensitive and a lack of appreciation and conflicting with her objective.

Leno however, (ostensibly) wants to help poor people and the best way for this person to be helped, it would seem is to have 800 bucks in his pocket thus furthering Lenos (supposed) objective.

Daniel Kuehn March 17, 2009 at 3:57 pm

How do you know what Leno wants, Dave? And since when do we dictate what charity people provide.

When I see a homeless guy on the street he wants a couple dollars from me. I want to give him a sandwich and I prefer he not sell that sandwich for money. Maybe that's callous of me but it's my gift to give – not his to dictate, and I have my reasons for it.

I think Leno just wanted to bring some fun and bring what he does best to Detroit – he didn't want to hand out cash. If he did, I'm sure he would have.

Who are you or Greg Mankiw to tell him he can't give a free show??? He's a performer. He can give a free show if that's the gift he wants to give.

Kevin March 17, 2009 at 4:21 pm

Daniel you have to stop handing out these sandwiches. Due to the ease of sandwich substitution, the sandwich recipient will just spend the money he would have spent on a sandwich on whatever it is you'd prefer he didn't spend it on.

I don't think Mankiw has thought about this carefully. He says the only significant negative externality he sees is Lono's, but it seems obvious to me that the experience of a charity case Leno fan watching Leno in a crowd of charity case Leno fans is materially different from the same experience in a crowd of buyers of $800 seats. Mankiw makes a clever point, but as Daniel says he gets stuck on resource allocation and his prejudices about what constitutes "resources".

MnM March 17, 2009 at 4:24 pm

When I see a homeless guy on the street he wants a couple dollars from me. I want to give him a sandwich and I prefer he not sell that sandwich for money.

Then you'd rather feel good than do good. If the homeless person doesn't need the sandwich then your charity means precisely squat…unless he trades for it. Personally, I don't see what the problem is.

I think Leno just wanted to bring some fun and bring what he does best to Detroit – he didn't want to hand out cash.

He will and he isn't.

Who are you or Greg Mankiw to tell him he can't give a free show???

They haven't told him he couldn't. Leno is the only one dictating anything here. If he gives away tickets to a free show, what does he care if someone else profits monetarily from it?

The act of giving away such a show would be more charitable, rather than less, if he let the ticket owners sell those tickets on eBay.

mpkomara March 17, 2009 at 4:27 pm

If you are comparing one of your grandma's sweaters to Jay Leno's stand-up routine, I totally get what you're trying to say. If you are trying to tell me that you can't break down charitable gift-giving into its function within a market, then I'll happily sell your 'economist card' for 25 bucks on ebay.

Daniel Kuehn March 17, 2009 at 4:40 pm

MnM – you're missing my point entirely.

Maybe reselling the tickets would allocate ticket resources more efficiently to the people who want them most. I agree with that. That's why I say that "I wouldn't argue with Greg Mankiw's economics a single bit".

But the point is there is an inherent value in charity and gifts that is lost when property rights are applied to that charity or those gifts. There is value to that social interaction that can't really be evaluated using standard economic methods. And like I say – I'm an economist. I appreciate markets very much. But they are only tools and they can't do everything. They can't increase the value of a heartfelt gift and in all likelihood they could diminish the value of that gift.

Perhaps Leno could have given "more" charity by letting them be resold… but maybe he didn't want to give that kind of charity. And since it's his free show I don't see why anyone would begrudge them that or assume he has insiduous intentions. It's still a free show after all!

MnM March 17, 2009 at 5:20 pm

Daniel, I haven't missed your point at all, but you seem to missing mine.

But the point is there is an inherent value in charity and gifts that is lost when property rights are applied to that charity or those gifts.

Value for the giver or the receiver? How is the value lost when property rights are applied to them?

But they are only tools and they can't do everything.

I don't recall implying that they could.

They can't increase the value of a heartfelt gift and in all likelihood they could diminish the value of that gift.

Again, the value for the giver or the receiver? Is the value received increased or decreased if the gift is used in a manner that the giver did not intend? How?

And since it's his free show I don't see why anyone would begrudge them that or assume he has insiduous intentions.

I don't think that his intentions are bad and I don't begrudge him anything.

It's still a free show after all!

It's a free show regardless of whether or not the recipients of the tickets resell them. Leno isn't charging anyone anything. His act is still charitable regardless of how the tickets are handled after they've been given away.

Perhaps Leno could have given "more" charity by letting them be resold… but maybe he didn't want to give that kind of charity.

I suspect we have different ideas of what constitutes charity.

Charity is about helping those in need meet their needs. If the person in need believes that he or she is better off with $800.00 in his/her pocket rather a night with Leno, then by denying them the ability to resell the ticket Leno has failed to meet that need and his charity isn't worth the paper the ticket is printed on. (Aside: damn, that was a long sentence, sorry)

Methinks March 17, 2009 at 5:47 pm

How do you know what Leno wants, Dave?

Because Leno said he wanted to HELP the unemployed in Michigan. If we assume that Leno is not a liar, then we will take him at his word. He didn't say he wants to put on a free show. He said he wants to help.

I don't think you can compare grandma and Leno. A relationship with a close relative is entirely different from a non-relationship with a celebrity. Plus, I don't know a grandma who would object to you selling one of her gifts to put food on the table. That would be one callous grandma who put the value of her gift above your ability to eat and pay rent when you are unemployed.

I'm pretty sure that the value of the gift to the unemployed guy who was able to monetize it for $800 is only increased. If Leno wanted to "help" that guy, he did. If Leno objects, then he isn't honest about his motives and his utility from doing the show has decreased. Ostensibly, altruism is about increasing the receiver's utility, not the giver's. In fact, strictly speaking, altruism is always at the expense of the giver.

Bruce March 17, 2009 at 5:54 pm

Maybe its just me, but I don't see anywhere where Leno is saying he has concerns with 'the free market'.

I may have my definitions mixed up here, but 'the press', contract law, game theory, market feedback are all part of 'free market' mechanisms.

From what I can see, Leno made a trade with someone, that if the person agreed to 'come see the show' Leno would provide them with 'a ticket'. Basic contract law applies.

The person, is reselling the voucher, at which stage Leno has switched to classic tit-for-tat game theory explaining via 'the press' back to the market, that this was not his intended deal with the gentleman. Additionally implying that he may not make these types of handshake deals in the future.

I see no where in free market theory where the wealthy show host must think charitably about hardship found workers. Where they are required or even desired to put self interest aside. Where Leno would be considered a 'government' entity here, or where talking on TV is considered interventionist.

What exactly are the free market values that we are espousing? The one where sellers can attach no strings to trade outside transfer of the physical good itself? Sorry, I think I missed that version of 'free market' somewhere. Is there a wikipedia article somewhere explaining this?

Methinks March 17, 2009 at 6:27 pm

Leno made a trade with someone, that if the person agreed to 'come see the show' Leno would provide them with 'a ticket'. Basic contract law applies.

Hmmmm….I'm tempted to say that government is working overtime to make contract law irrelevant, but this is probably not the thread.

Leno didn't say that. He said he was putting on a show to help the unemployed of Michigan. I guess part of contract law is defining "help" and making sure both parties agree to the definition. The guy selling the ticket could have just as easily said that his interpretation of "help" is to allow him to sell the ticket.

If the guy were required to agree to NOT resell the ticket as a condition of receiving it, then I think there's a stronger case for breech of contract. Unless this is the case, I can't see where he violated a contract.

tbadmb March 17, 2009 at 6:40 pm

Reminds me of this article I read recently on the government's distribution of Obama's inauguration tickets:

http://mises.org/story/3351

DAVE March 17, 2009 at 6:57 pm

"How do you know what Leno wants, Dave? And since when do we dictate what charity people provide."

Daniel,

I don't know what Leno wants. It's Lenos show, so Leno gets to decide what he wants done with it.

The issue at hand is Mankiws assertion as to Leno's intentions, not his rights or obligations.

I can only go by the message he wants to bring across and that is helping poor people and to encourage others (government?) to do the same.

Therefore, it would seem wholly appropriate to conclude that Mr. Lenos stated intentions are at odds with his actions.

Doug March 17, 2009 at 6:58 pm

Jay added another show, thereby increasing ticket supply. Perhaps he knows a bit of economics, as well?

Bruce March 17, 2009 at 7:46 pm

He also didn't use the word 'help'.

What he said was:

———————–
http://www.tuned.com/2009/03/jay-leno-announces-free-show-for-detroit-autoworkers/

“I want to do a show for the, not just the auto workers, but anyone out of work in Detroit. But it’ll be free. It won’t cost you a dime. Not that I’m the greatest comic in the world, but it’s free. If you don’t like it, you get your money back!”
————————

———————–
http://www.people.com/people/article/0,,20264465,00.html?xid=rss-fullcontentcnn

They will be handed out on the honor system, meaning that anyone who says they are unemployed will receive a ticket.

"Who's got money for entertainment these days? But here, if you're a little down, you can bring the wife, bring a couple friends, we'll give you a Pepsi, and you'll have a good laugh," Leno says.
———————–

Again, I see nothing in 'free market' theory where we advocate for social engineering arbitrage.

The reason we have so much Government intervention, is that when a well meaning comic would like to throw a 'free' show, he can't just use 'an honor system' but he has to have the right lawyers write up the right contracts, and get the government involved in the enforcement of such.

The fact that some people deny others of property rights, is hardly a case against the proper use of property rights in a free market. Likewise, the fact that some people take advantage of another's 'honor system' is hardly a case against the place of honor systems in 'free market' economies. And even less of a case that those that use 'honor systems' without the right lawman-ship, do so with disdain for free markets.

Economists may observe that people still take advantage of the honor system, but Leno's response was to switch to tit-for-tat Game Theory, as well as increase supply to a point where the price drops below $800/pair, again hardly outside 'free market' principles.

Where exactly are the 'free market' principles being violated? Where exactly is Leno's proclaimed disdain for 'free market' mechanics?

If economists had half the marketing sense that Leno does, they would be cheering this as an example as to how 'free markets' keep things going even in hard times.

Methinks March 17, 2009 at 8:17 pm

If he didn't say that he did this to help the unemployed, then I'm wrong about his intentions. Personally, I think this has more to do with self-promotion than doing anything for the unemployed as Leno could have done things that are probably a lot more valuable if he seriously wanted to help the unemployed. Maybe I just spent too much time with performers in my life and I'm jaded.

The reason we have so much Government intervention, is that when a well meaning comic would like to throw a 'free' show, he can't just use 'an honor system' but he has to have the right lawyers write up the right contracts, and get the government involved in the enforcement of such.

That's not the reason we have government intervention. The reason we have government intervention is that government intervention increases the power of politicians which they then monetize by selling.

This is the reason we have such detailed and specific contract law and why we put everything in writing even though – officially – an oral contract is enforceable. Establishing the details of the contract and enforcing it is the appropriate job of the judiciary part of the government.

I don't know how this is an example of free markets keeping things going, but absent a contract, I guess the guy has the right to sell the ticket and Leno has the right to publicly object.

vidyohs March 17, 2009 at 8:19 pm

I am basically in agreement with Methinks (again), however I might even be more emphatic.

A gift is no longer the giver's when it leaves his/her hand. It becomes the property of the recipient.

The recipient may be insensitive or insulting in his/her disposal or use of the item, but that is his/her free choice. The giver, his intent or desire, is longer in the picture and ceased to be when his gift left his hand.

I raised my children to be free and independent in every respect and I expected that some day that would come back and bite me in the butt in ways I might not like. I have gone through a couple of situation similar to the Grandma/sweater thing personally and I wanted to say or do something but had to bite my tounge and hold it in because my kids were being the kids I wanted.

Leno gave away tickets with the motive of helping people. That at least one "people" chose a different avenue to be helped by his generosity he should have expected.

The ticket in the gentleman's hand that was offered for sale on e-bay was not Leno's. It ceased to be his when it left his hand.

Brickwall way to put it, but there it is.

Leno needs to suck it up and understand that individuals decide what is best for themselves, that is natural, moral, and should always be legal.

Daniel Kuehn March 17, 2009 at 9:39 pm

vidyohs -
I agree with you 100% – and maybe this will clear up MnM's confusion about what I was saying. Clearly the gift was the recpient's to dispose of. Leno has no right to insist that they don't sell it.

But, as MnM asked – there was value in the ticket for both the giver and the receiver when it was given as a gift and not exchanged as a good in a market. By selling it in the market that gift just became a commodity.

I'm really not that much of a senimentalist, but I'm human enough to say that if someone resold a gift I gave them – even if they more efficiently disposed of the resource that that gift represented – value, utility, etc. would be lost because of the breach of our relationship that that would entail.

Of course our understanding of markets doesn't account for that lost value and that breached relationship – because it is a value that is external to the market mechanism. And of course markets will make sure that Detroit residents get exactly what they want and the ticket purchasers get exactly what they want. I never denied that, in fact I started out by saying that I agree with Mankiw on that point.

But that is hardly the same thing as saying that nothing of value was destroyed when that free show was monetized and sold on e-bay.

It's not something you can prove or disprove precisely because it is not something that economists deal with. I'm asserting it. And you can denounce it, but just think about the grandmother's sweater example. Markets efficiently allocate a lot of things. They don't efficiently allocate heartfelt gifts because the price mechanism does not incentivize heartfelt gestures. Is Jay Leno truly altruistic? I have no idea. But I'm very confused at why Greg Mankiw seems to assume he can prove he doesn't.

vidyohs March 17, 2009 at 10:17 pm

My blessing, Daniel, is that I am a simple country boy still, so I don't get wrapped up in the complications of over thinking it.

I understand your point and we are in agreement. Sometimes I believe that folks like Mankiw write what they do because they don't have anything else to do.

To put my thoughts in perspective, I don't ask why the dog began sucking eggs, I just take him down to the back pasture where the dry ditch is and put a 22 between his eyes.

It is the only practical and pragmatic thing I know of to do.

A gift comes with no strings attached, if strings are attached then it is not a gift it can only be considered a loan, because there is that unspoken "if" that the conditions/strings apply.

Let others complicate things, unless we all just want to make conversation.

Of course this is all MHO.

Bruce March 17, 2009 at 10:18 pm

vidyohs>>"A gift is no longer the giver's when it leaves his/her hand. It becomes the property of the recipient."

Except when its not. Tickets have all kinda of verbage on them that state very clearly the restrictions on them, including transferability. Look on the NBC website, they retain the right to refuse entry to anyone they want for any and no reason. Part of the problem with people reselling 'free tickets' is the fact that often times the person selling the ticket misrepresents what the ticket actually is.

vidyohs>>"Personally, I think this has more to do with self-promotion than doing anything for the unemployed as Leno could have done things that are probably a lot more valuable if he seriously wanted to help the unemployed."

And this is against 'free market' principles how? (see Adam Smith) Are we to accuse the Baker and Butcher if they don't sell their meats at altruistic price points in low employment areas?

You may think a comic has the responsibility to provide free of charge re-sellable entertainment to communities with high jobless rates, personally I am at a loss to recall where in 'free market' economics this stems from.

Could we stick to the topic, that being, 'free market' principles, and how Leno is allegedly lashing out against them.

On the grandma issue, Leno is not anyones grandmother, and grandma's sweaters never came with the legalize that is on the back of a ticket.

MnM March 17, 2009 at 11:08 pm

Who's confused? You asserted that Mankiw and DAVE are dictating to Leno what kind of charity he can give. I objected to that assertion; you haven't done anything to address that objection.

Daniel Kuehn March 18, 2009 at 5:49 am

MnM, you said many things – I'm sorry I didn't get around to this particular point. You wrote:

"Charity is about helping those in need meet their needs. If the person in need believes that he or she is better off with $800.00 in his/her pocket rather a night with Leno, then by denying them the ability to resell the ticket Leno has failed to meet that need"

I'm saying that's an odd definition. Yes the goal of charity is to help people meet their needs, but charity is not a transaction, it's a gift. It may be more or less attuned to meeting the needs of the recipient – and obviously (as I've said several times here now), if trading of charity was allowed that charity would more efficiently meet the needs of the recipients. But if that charity isn't traded away, you can't say that the charity "failed". Perhaps it didn't maximize utility or efficiency, but nobody claimed that gift-giving maximizes utility and efficiency. You can't apply that metric to something like gift-giving or charity because (despite sociological discussions of obligations involved in reciprocal gift giving) charity is not transactional. Market efficiency emerges from transactions that orchestrate supply and demand. In charity or gifts, there is only supply. And presumably that supply meets someone's demand, but there is no real transaction that necessarily equates the two. So yes – I'm agreeing with you that it can be "inefficient" by market standards. But that's very different from saying that Leno has failed them or doesn't care about them.

And to say "by denying them the ability to resell the ticket Leno has failed to meet that need" you certainly SOUND like you're dictating what kind of charity he can give for it to REALLY be charity. And since this was Mankiw's basic position as well I think it's fair to say that he was dictating what charity Leno should give, and declaring anything besides Mankiw's dictate as "uncharitable".

vidyohs March 18, 2009 at 9:48 am

Bruce,

You posted two "quotes" and attributed both to me. The first one was mine, I don't claim to be the author of the second. While I may agree with it, I did not create it.

The issue of this thread is not economic theory or I would not be typing, the issue is the ethics of the man who was gifted with a ticket, and the reaction of Leno to that man's use of the ticket.

The ethics issue can be answered using no more than knowledge, experience, and logic.

A gift is an item, tangible or intangible, passed from one person to another free and clear with no strings attached. That the giver has expectations, hopes, intent, desires, etc. in relation to the gift he gave may, or may not, be relevant to the recipient. A gift carries no enforcement provisions. The anaolgy of Grandma and her knitted sweater is a very appropriate analogy.

A loan is an item passed to another that has strings attached. A loan carries an implicit "if" with it. The "if" is all those expectations, hopes, intent, desires, etc. that were attached to the gift, but only with real enforcement provisions as well.

In the case of the ticket, I believe that we all agree that Leno (maybe not personally) gifted the man with the ticket. When that ticket passed from Leno to the man, Leno gave up control of the ticket and retained no enforcement rights in regard to all future ownership of that ticket.

That single ticket could be passed from person to person any number of times, some of that passing for an ever increasing fee, some as gifts, Leno should never have expected to be able to dictate the tickets subsequent ownership or how that ownership came to be.

Now let's look at your point about provisions being printed on the back of the ticket.

Yes, typically all tickets have some sort of provisions printed on the ticket itself, back or front. We do not know what the Leno ticket had printed on it so we would have to speak in generalities about the possibility of what those provisions were, it they existed at all.

What those provision mean, or say, in relation to the eventual use of the ticket, aren't worth much unless one can accurately account for and control ownership of the ticket. If possession must be accepted as legal ownership then the ticket bearer must be admitted to the performance. How he received the ticket is not, and can not be, in most cases proven, and this is why scalpers or resalers can thrive.

In Leno's case, all he had left after giving the tickets away was control of the gate/door.

One person with a ticket goes in, no more, no less. Even if it could be proven the ticket was gained through the alleged unethical resale/purchase of the ticket, Leno still would likely have no legal basis for prohibiting use of the ticket by the owner to enter and enjoy (or not) the performance, unless the prohibition against using resold tickets was clearly written on the ticket somewhere; and, even then I would not want to be Leno and try and make that case in court.

The fact of the matter is, Bruce, that when you give something you must accept that it is no longer yours and your heart may be broken by what the recipient does with the gift after receiving it; but, upon the item leaving your hand, the decision(s) involving its subsequent disposal are no longer yours to make.

Leno's disappointment, real or feigned, just show that he has yet to gain the experience, knowledge, and rationale that he needs to operate in life, and deal with it on a reality basis.

DAVE March 18, 2009 at 10:10 am

Let's do this again for MnMs benefit this time:

The issue at hand is not Lenos rights or obligations. Leno can do whatever the hell he wants with his show. I cannot nor would ever try to tell him how to dispense with his property.

His message and actions are conflicting is all. It would seem that he is not really altruistic. That was Mankiws point.

We know this from a basic principle that people know what is best for themselves, so basic market activity would tell him how best to help this guy.

Daniel Kuehn March 18, 2009 at 10:20 am

DAVE -

"His message and actions are conflicting is all. It would seem that he is not really altruistic."

This is the part of what you say that doesn't make sense. I know nobody likes my grandmother example, but explain to me – if I resold the sweater she knit on e-Bay and she got mad at me, that wouldn't "prove" that she wasn't being altruistic would it? Why does it prove anything about Leno? The fact that he gave a specific kind of charity and that he felt betrayed when the concept of that charity was thrown by the wayside doesn't negate the fact that he gave the charity in the first place! You can't say his give away of free tickets is uncharitable because he didn't give away $800 per person!

Daniel Kuehn March 18, 2009 at 10:23 am

Mankiw brought up a really neat example of market efficiency where most people wouldn't think about it. I thought that was great!

Why can't he just leave it at that? Why does he have to chastize Leno for what I think any sane person would agree was probably a funny night of comedy!

Methinks March 18, 2009 at 12:01 pm

Of course our understanding of markets doesn't account for that lost value and that breached relationship – because it is a value that is external to the market mechanism.

Is that true? If the value of the money to the seller exceeds the value of having that guy in his audience, is value destroyed? I don't know about the breached relationship either because I don't think there is a relationship. If there is one and it is breached, the we can say that the relationship was worth less than the amount received for the ticket. That's how we can use the market mechanism to value the relationship. It's not a precise measure of value, but it's a ballpark.

MnM March 18, 2009 at 12:04 pm

But if that charity isn't traded away, you can't say that the charity "failed".

I'm not saying that if it isn't traded the charity failed. I'm saying that if you fail to meet a person's need (and that is your goal, ostensibly) then you've failed. This seems to be true by definition.

And to say "by denying them the ability to resell the ticket Leno has failed to meet that need" you certainly SOUND like you're dictating what kind of charity he can give for it to REALLY be charity.

Only if you pick the conclusion and jump to it (isn't that what Mankiw did when he accused Leno of being anti free market?). Leno is free to do as he pleases and as I've already said, I don't begrudge him that. I simply don't understand his objection (or your objection for that matter) to someone reselling the ticket. Regardless, Leno puts on a free show. He achieves what he aimed to do (assuming that all he wanted to do was put on a free show, rather putting on a free show and help the unemployed with a few laughs) and the seller of the ticket is better by $800.00. Everybody wins.

You're right, the market doesn't valuate sentiment. But the sweater you get from your grandmother is not analogous to Leno's tickets. You know your grandmother and she loves you. She made the sweater for you specifically because she loves you (well…maybe she made if it for you because you were cold ;o) ). The sweater has a value greater than market value because it reminds you of her. You don't know Jay Leno and the tickets are impersonal.

What you really object to (or what you seem to be objecting to) is how you feel when someone does something with a gift that you did not intend (or as Jay Leno might intend, as the case may be). Charity, or even gift giving (I disagree with your assertion that they are the same, but I don't feel it's productive to split hairs one the subject), isn't about the feelings of the giver, but rather the feelings, wants, or needs of the receiver.

DAVE March 18, 2009 at 12:19 pm

Daniel, selling grandmas birthday gift makes you a total jerk and so does selling Lenos gift (maybe).

The difference here is in the giver and his intention. Leno's intention was to help folks who lost their jobs. that was the whole idea. If we maintain that each party to a transaction is by definition better off, his actions to try prevent a sale contradict his original intention and it's fair to say that altruism is not his primary motivator if at all.

Whether or not he is within his rights is an entirely separate issue that is not discussed in the post. The context here is economics, not law.

Daniel Kuehn March 18, 2009 at 12:27 pm

Hmmm… not sure about that Dave. Grandma's gift was meant to make you happy. Maybe the $25 from e-Bay makes you happy.

Does her outrage at you selling it prove that she didn't really want to make you happy in the first place? No – she just wanted to make you happy in a specific way by giving you something she does well – knit sweaters. And it's her business if she wants to make you happy in that specific way. Leno wants to make them happy in a specific way. It may not be Pareto efficient, but it sure doesn't seem like something to criticize him for.

I'm not talking about his rights. In fact earlier I said that he has no right to deny the sale. But it's not law and it's not economics either.

We both agree selling the tickets is more efficient. That's not what this is about.

What it's about is Leno's intentions – and that's not about law or economics, and Greg Mankiw is never going to be able to prove that Leno was insincere just because he had a specific idea of what he wanted to give them.

Daniel Kuehn March 18, 2009 at 12:31 pm

MnM -
No, what I object to is the insistence that Leno is somehow insincere or not altruistic in his partial fulfillment of Detroits needs, just because his assumption that the tickets wouldn't be traded isn't Pareto optimal.

Since when has market efficiency been a measure of sincerity in your desire to fulfill someone's needs? Since when has partial fulfillment of a person's need made someone insincere in wanting to fulfill that need?

DAVE March 18, 2009 at 12:58 pm

Daniel,

The whole gist of the idea was to help poor people and preventing the sale flies squarely in the face of that.

Should your mother give you a gift and you went along and sold it, she would be justifiably upset because it never was about the sweater in the first place. The sweater was just a conveyance, an expression of her love to you. Because you exchanged it for 20 bucks, you demonstrated that Moms love does'nt mean all that much to you. So selling it goes against the whole purpose of her gift.

Lenos gift however, was an expression of helping unemployed people and an unemployed person was helped albeit differently than Leno envisioned, but his goal was accomplished with even greater precision than what he had initially planned. He should be happy that that person helped him accomplish his goal. The fact that he is upset is an indication that his goal was not what he said it was.

vidyohs March 18, 2009 at 2:34 pm

Did I hear someone say anything at all about Leno's uber-arrogance in believing that and hour and a helf or two hours of his performance would really help people? Help?

Maybe momentarily provide an escape into some laughter, but help. The stub of that ticket to his performance wasn't going to get anyone an egg McMuffin and OJ the next morning. No bank would take it on deposit as funds.

vidyohs March 18, 2009 at 2:35 pm

Oops, "that and hour and a helf" of course should have read "an hour and a half"

Daniel Kuehn March 18, 2009 at 2:54 pm

Dave – I think you have a really odd interpretation of Leno's intent which is driving your conclusions.

He just wanted to give them a free show. And why did he want to give them a free show? Because he thought they would enjoy it and it was something special that he could offer (anyone can hand out cash). He's not trying to start an anti-poverty program here.

It was a neat gift. It doesn't deserve to be maligned by Mankiw and others. Why exactly are we trashing this guy? He's doing more than I've ever done or (I assume) you've ever done for the people of Detroit.

Daniel Kuehn March 18, 2009 at 2:55 pm

Wait a minute!!!!

Is "Dave" really just Letterman posting on Cafe Hayek?

I figured it out! You're just trying to slander the competition.

That's crafty Letterman – REAL crafty.

DAVE March 18, 2009 at 5:19 pm

Busted!

There are two points here really:
A. that if he went by market principles he would have been happy if the guy sold it.
B. the altruism of it all.

Otherwise, Leno's an decent and generous guy (remember the doughnuts?) who worked his butt off to get to the top and I'm sure meant well.

Bruce March 18, 2009 at 6:01 pm

vidyohs>>"The fact of the matter is, Bruce, that when you give something you must accept that it is no longer yours and your heart may be broken by what the recipient does with the gift after receiving it; but, upon the item leaving your hand, the decision(s) involving its subsequent disposal are no longer yours to make."

Vidyohs, first, my apologies for the previous misquote.

Now to the topic at hand.

There are actually legal definitions as to what a gift is and what a gift is not. For a gift to be valid, 3 conditions must be present. Mainly Delivery, Intent, and Acceptance.

The law is very clear that possession alone does not constitute a gift. (google: legal gift) For example, when I lease a factory building, the fact that I now posses it does not constitute ownership.

In a similar way, one of the examples that Wikipedia uses on this topic is if I where to give someone a ring, and say this is yours in one year, a gift has not happened until the year has transpired. Likewise, if I give you a ticket, and say, 'you or a friend' can use this to come to my show tonight, the rights stop at the person that you give it to, and are not transferable outside you and your friends.

Again, I am well aware that people can give this ticket to whomever they want, this does not mean that this is legal. I can breakdown the walls of the factory I'm leasing, and that does not make it legal to do so.

Fraud is also another area where the law is very clear. If you come to me and say you are a local school teacher and need a truck to haul school supplies, and I give you a truck to do so, only to find that you are not a local school teacher, but resold the truck on ebay to go on vacation, the law is very clear that fraud took place, and the truck can be requested to be returned.

You may not like these laws, but they are part of the property laws of most countries including the US, and as far as I can tell these property laws are also part of 'free market' economics.

Again, the fact that someone was the victim of a crime is hardly a case against the role of law in a free market system.

vidyohs March 18, 2009 at 8:00 pm

Bruce,

Yawn.

vidyohs March 18, 2009 at 8:11 pm

Bruce,

What I meant by that was, RUSIRIUS? We are going to create trucking lending and stealing and selling on e-bay to develop the debate about whether a gift giver can rightfully expect to dictate how a gift is used?

How about some DNA sequencing from the giftee to exchange with the gift giver?

How deep does this have to be taken in order to understand a very simple concept?

Daniel Kuehn March 19, 2009 at 9:51 am

Bruce and vidyohs -
I don't think this has anything to do with Leno's right expect to dictate how his gift is used. He has no right to anything in my mind, but he obviously went into it with certain expectations.

And I think the point is (at least my point is) that those expectations don't make him insincere.

Methinks March 19, 2009 at 1:26 pm

And I think the point is (at least my point is) that those expectations don't make him insincere.

Doesn't make him sincere either. you labour under the assumption that he his intentions were altruistic.

Bruce: "He just wanted to give them a free show. And why did he want to give them a free show? Because he thought they would enjoy it"

How do you know that's why he wanted to give them a free show? On the other hand, we don't know that he didn't. I'm not sure we can know intent beyond his stated intent – to give them a free show. His reasons may be either selfish or altruistic.

vidyohs March 19, 2009 at 4:45 pm

Daniel,

I recognize that Leno had expectations and I believe I have acknowledged that at least more than once. We agree on that.

And, we also seem to agree that those expectations became irrelevant to anyone but himself once the ticket was given, they certainly had little relevance to the guy who sold the ticket on e-bay because he was interested in being really helped, not entertained. Leno he can watch on youtube.

As for Leno, I repeat, that he had expectations is quite normal. We all most likely would under the same circumstances. My point about that though is this: he was unrealistic to project his expectations onto the actions of someone not under his control regarding an item no longer in Leno's possession or control.

Like Methinks, I have no way of knowing Leno's sincereity or insincereity and I would never make a comment about that. To me that point is irrelevant.

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