A litigious society

Doping, Torts, and Monetary Damages

(A moment of full disclosure: I despise lawyers. Society would be a million times better if we just got rid of the lot of them. I lose respect for people who want to be lawyers or are lawyers. I can't stand them. I think the movie "The Devil's Advocate" was a pretty good representation of lawyers, except they didn't show as much greed or lying as would normally go on in the legal world. Other than that, I'm an unbiased observer.)

(More disclosure: We're linked on the sidebar of the aforementioned site. As far as I know, that's the only place where we are linked. So I really shouldn't be biting the hand that occasionally feeds us. Well, I'm more highminded than that. And my hatred for lawyers extends far beyond my desire for widespread recognition.)

Hold off a minute before tut-tutting about the litigious nature of society today, because this might be a solution to the problem of reducing the use of performance enhancing substances in sport. Would-be regulators of performance enhancing substances like steroids and EPO face a number of problems. One is monitoring. Monitoring athletes for doping is costly. Regulators use random testing to overcome the monitoring problem, but this approach has some limitations, including the small fraction of the sample that is actually tested; random testing also appears to be an ineffective deterrent of performance enhancing drug use. One group that might have an advantage in monitoring athletes for doping are other athletes. Competitors might be better able to tell the difference between improvements attributable to better or harder training and improvements attributable to doping than regulators. And competitors have stronger incentives to detect athletes who are breaking the rules than regulators.

Did someone forget to tell me that this is "Trial Laywers are Your Friends" Month? First, I read this article. Then I saw that The State published an op-ed by a judge that essentially said, "There are no such things as frivolous lawsuits." If there is demand for it, I'll tear this article a new one, otherwise, I'll leave it as an exercise to the reader (the Econ grad textbook cop-out) to figure out how many times he is just plain wrong.

But anyway, back to the sports post. The author makes the claim that instead of using investigation and regulation of steriods in sports, people can sue anyone who we think is using performance-enhancing drugs.

There is only one group of people who benefit from something like this. Trial Lawyers. Let's see why.

Humphreys writes that the possiblity of getting hit with a $10 million dollar decision would be much more of a deterrant than just a 10 day suspension. Of course, that assumes that such a decision would ever be handed down. In most class action suits, settlements occur prior to an actual trial because both sides like the idea of a guaranteed conclusion than handing everything over to a jury of their peers. And in most cases, the defendant never admits guilt, nor does the underlying behavior change. Most times, things are done to prevent another lawsuit, but not the actual decision process of the actors involved. And in the end, it's the lawyers on both sides who make money no matter what the outcome is, while either the plantiff or the defendant is guaranteed to lose out in the decision.

Now, let's pick apart Humphrey's argument:

One group that might have an advantage in monitoring athletes for doping are other athletes. Competitors might be better able to tell the difference between improvements attributable to better or harder training and improvements attributable to doping than regulators.

Now, all this does is shift montitoring costs from a regulator to the athletes/fans/opposing teams. You still have the problems of having to rely on intuition to determine if a player is doping. In fact, the monitoring costs would probably INCREASE. A non-regulator is going to have LESS access to an opponent's trainging regimen or locker room than a regulator. Simply because while the player simply has the indirect costs of a regulator's decision to deal with, the player directly competes against the opposing team, creating a direct cost (losing) along with the indirect cost of getting caught by the other team. Thus, a player is LESS likely to reveal anything to an opponent.

Then there's the "sour grapes" problem. How can an opponent or a fan of an opponent determine if increased performance is because of an illegal advantage or not. Say I'm a pitcher and I face Barry Bonds on a yearly basis. I'm able to strike him out as he enters the league, but as time goes on, Bonds starts to tattoo the ball off of me. Why does that happen? Is it because he gets better of his own accord? Or I get worse? Or is he cheating? Or is it just random blind luck? There's ways to tell between most of these (looking at my stats, his stats, trends). But how can you tell the difference between him getting better just because, or him getting better because of steriods. Without documented proof, you can't. So Brad's solution is for me to file a lawsuit against Bonds and thus go out through a long and drawn out process to recoup monetary damages. Without solid proof that he's doping. However, my incentive to file a lawsuit is great if Bonds wants to avoid the taint of a trial. If he's innocent, then does he want to go through the process, yes, but it'll be expensive. If he's guilty, then he'll want to settle out of court. So in the end, we both pay lawyers, but I only get paid if he's doping, and even then, the results never see the light of day. The true winners in all this, the lawyers representing us.

But what about fans? If Barry Bonds starts smacking home runs and leading the Giants to, let's say the World Series, then fans of every other NL team can have a case against Bonds, since THEIR team didn't make the World Series. Obviously, the cost is greater to the team the Giants beat in the NLCS than to the bottom-feeders of the NL, but the cost is just the same. According to Humphreys, the solution would be to get every fan or quasi-fan, or anyone who was affected by Bonds' homeruns and lump them together as a class-action. You could get bar-owners, memorabilia dealers, you name it. Anyone who was threated by Bonds would get in on the class-action.

But what is the end result? The same situation that occurs with the player suing Bonds. If Bonds is innocent, then we go to trial with lawyers making lots o' money on each side, but with an end result of nothing gained. If Bonds IS doping, then Bonds has a strong incentive to settle pre-trial and the plantiffs don't. But it all hinges on whether there is strong enough evidence to take Bonds to the conclusion of the trial.

In the case that Humphreys cites at the beginning of his post, the lawsuit occurs AFTER the boxer was tested and found positive. The threat of a possible lawsuit didn't discourage his use of the drug, nor did the other boxer act as a surrogate regulator. The same would occur in baseball or any other sport. Suits would appear only AFTER credible reports have surfaced. In which case, the threat of lawsuits didn't deter players from using because the lawsuit only occurs when they are caught. But Humphreys believes that lawsuits IN LIEU of regulation would stop doping, when in fact there is no such basis for this.

A second problem facing regulators is that many of the benefits of improved athletic performance have public good properties: they are non-rivalrous and non-excludable. Fans clearly derive satisfaction from watching sport played at the highest level. The public good nature of the benefits of improved athletic performance make it difficult to enforce doping regulations because it means that some of the costs associated with doping also have this property.

He's very, very wrong on the idea of performance-enhancing as a public good. It is excludable, as baseball or any sport isn't something that is provided free of charge to the public. You have to buy tickets, or watch the highlights, or read the paper to get the benefits of Bonds doping. The Lords of Baseball can make Bonds' juicing VERY excludable if they wanted to. They just choose not to.

However, you can get non-excludable benefits if you don't actually take costs out to see the performance, but that leads to how these performances are also rivalrous. Hillary Clinton can get satisfaction from the Yankees winning the World Series by riding the bandwagon without having ever watched a game. So to her, better performances by Jason Giambi are non-rivalrous because her becoming a Yankee fan doesn't increase the costs for anyone else. But let's say that you're not a fair-weather Cub/Yankee fan, but an actual fan who gets into the game because Giambi's performance makes the Yankees better. You're demand for all things Yankee increases the costs to other Yankee fans who were there before. You buy tickets (or attempt to buy tickets), you buy hats, shirts. You watch YES. By creating this shift in demand, the price for all of these things increase, thus increasing the costs to other Yankee fans, or other fans who watch other teams who are playing the Yankees.

Therefore, doping is your run of the mill private good. The costs of doping are very much internalized by both the player (loss of salary, loss of prestige) and the team (loss of prestige, revenues). The costs RIGHT NOW, are just very, very low because penalties are not steep enough. What if MLB creates gambling-like penalties for steriod use. The team loses any championships they win and players get kicked out of baseball and are ineligable for the Hall of Fame. Those costs would be internally borne by the players and teams, without the need for messy lawsuits and high legal fees.

The fact of the matter is that Brad Humphreys is making conclusions based on limited data. A good economist would know that you need more than just a sample size of one to make a policy conclusion. But Humphreys, who may very well be a good ecnonomist, does exactly that. Steriods became illegal under the scope of the Collective Bargaining Agreement just last year. Before then, the players and teams had very low costs in respect to steriods. This year, MLB ramps up the costs, but we have no idea what the effects on doping are (as far as I know). I'll agree with him that a 10-day slap on the wrist isn't enough of a cost for most players with guaranteed million dollar contracts. But is the stigma of being classified as a player busted for steriods a bigger cost than is anticipated? We don't know yet. So before we start breaking out the lawyer threat, let's see if actual punishment works.