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Solve for the Equilibrium: Marathon Lottery

When supply equals demand—in economic models, not Alchemy—the price is calculated, equilibrium is achieved, and angels sing. What economists do we aren’t sure. Rarely does this work because value is subjective. Our relativistic nature is seen when it’s less grating for a CEO to make 100 times their employees than for a peer to make double.

However solving for the equilibrium is a helpful. This Phantom Cowen would lead us to ask about how we might design a system people can’t buy, favor, or cheat their way into? How do we fix the game and avoid equilibirum? It’s been done with Jeopardy and horse racing.

Enter the NYC marathon.

The NYC marathon is super popular. The race welcomes 53,000 people, the most in the world, but demand is triple the supply. If this were a business, the organizers could raise prices. Pricing power! But profits aren’t the goal.

“At New York Road Runners, it is our goal to give everyone on the planet both a reason to run and the means and opportunity to keep running and never stop.”

NYRR Mission

Rather than raise prices, the NYRR had to solve for the equilibrium another way. In Planet Money episode #962, host Kenny Malone explains how the running club allocates their scarce resources. How they solved for the equilibrium.

What’s great about this example—beyond the process—is the creative ways NYRR solved their problem. They’ve added value without addressing the race.

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Solve for the Equilibrium: Facebook

One of Tyler Cowen’s most powerful ideas is to have a little person that sits on your shoulder. In one talk he explained it this way:

“Carrying around phantoms and daemons is advice I typically give to my students. When I teach them, I’m trying to teach them some content but most of all I’m trying to teach them to have a phantom Tyler Cowen on their shoulder so when they go through life they can consult with the phantom Tyler Cowen because the real Tyler Cowen won’t be there…It’s very useful to have a phantom of someone on your shoulder to respond to what ideas you might have.”

Tyler Cowen

One way we can all have a phantom Tyler with us is to solve for the equilibrium. This common prompt on his blog, Marginal Revolution, is a shorthand (as I read it) for asking and then what? Cowen is exceptional at this. When Brendan Wallace asks Tyler about Facebook addressing the misinformation problem, Cowens says that’s a very difficult question. Then he solves for the equilibrium:

“Here’s how I think of the world we live in. Due to the Internet every possible thing that can be said, will be said. Every video that can be made, whether it’s real or fake, will be made. Every charge that can be leveled. Every conspiracy theory that can be imagined. It will be out there.

“The question is, do you want to regulate Facebook heavily and push it into more obscure corners of the internet? I would say in the short run that decision will look pretty good, people will find it harder to get to, but over the medium term there will arise websites. One of them might be called ‘all the really good stuff you can’t get on Facebook’ and it will be very popular. So I actually favor some continued version of the status quo.”

Tyler Cowen

To solve for the equilibrium means to think like Hans Rosling, who reminded people the world can be not-great but also getting better. Too often we conserve mental energies. If X is bad then not-X is good. Well, maybe not.

Diet contrasts this clearly. If eating meat is bad, that means vegan foods like Oreos, Doritos, and Coca-Cola must be good. Well, maybe not.

Facebook clearly has a problem, but how to react isn’t. Instead of reacting, we can consult our phantom Tyler. What will happen immediately? What will happen in the mid-term? These questions may not have lead us to change our mind but we will be wiser for doing it.

Sometimes it’s difficult not to act. However there are many cases when we should don’t just do something, sit there. That and a few other helpful ideas are in my Idea Trails book.