Do the Denver Nuggets refute the theory of comparative advantage?

I’m referring to the trade for Allen Iverson, of course, not the brawl.  For background Matt Yglesias is of course the go-to guy (it also turns out he is right about *The Wire*).  Some of us, like me, feel that Denver will be a worse team for the trade.  Not because of what they are giving up, but because of what they are getting.  The sports logic is straightforward, namely two shooting guys and only one ball, resulting in a discombobulated offense.  (You don’t have to agree in this particular case, the point is that this could be true.)  But how exactly, in the language of microeconomics, does this make Denver worse off?  Aren’t there gains from trade in all cases and thus also between AI and Carmelo Anthony? 

There are two partially unpriced resources, first the basketball and second the attention of the public (which produces endorsement income in the longer run).  Both induce excess and premature exhaustion of shooting opportunities.  (One correspondent tells me the two are each averaging about 24 shots a game, an NBA team averages maybe 80 shots a game, note that AI connects on 41 percent, below the league average, and plays no defense.)  The trade between the two players brings some benefits but also makes these "tragedy of the commons" problems worse.

The lesson for international trade?  The more impressively talented countries you have trading with each other, the greater the need for well-defined property rights in common pool resources such as clean air and ocean use.

Allen Iverson needs to join the Pigou Club.  The presence of Yao Ming in the league — as a force whose time has come — makes this all the more imperative.


Comments for this post are closed