• Cocktail and Dinner Party Economics
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  • Dinner Party Economics

Great Balls of Money

“I am not interested in what you think you know about baseball, or what you think I don’t know about it. I am not interested in guts or heart or determination or anything else the fans or what your mothers love about you. I’m interested in getting you on base. If you can do that, we win.” Taken from MONEYBALL (the movie pg 75 of script.) Economists  always teach how consumers maximize utility (happiness) subject to a budget constraint or how firms minimize costs subject to a production level.  These are known as optimization problems.   It seems to me that Moneyball is a combo of the two.  The Oakland A’s set out to maximize their wins subject to a salary cap much like a consumer going shopping except the Oakland A’s are a firm trying to make a profit–and wins help the bottom line. Moneyball also uses the concept of exchange or trades to solve this problem. Statistically overvalued players are traded for undervalued players much like overvalued currencies or stocks are bought with overvalued ones.  Players are traded to get the right mix that accomplishes the goal of maximizing wins. Furthermore,  these trades can include money but not necessarily.  In other words, the trades are partly barter.  The movie showed a multi-player trade which beautifully demonstrates the nail-biting  concept of arbitrage and coincidence of wants  which is the rationale for why money is the common medium of exchange in the wider economy. Who knew that baseball could teach us so much about Economics?

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