Don’t just stand there, do something! (Provided there’s something useful to do.)

Of course my brilliant old friend and longtime UCLA colleague Eugene Volokh is right (and Jeb Bush was also right, though tin-eared and hard-hearted).  The impulse do “do something” in the face of a bad situation, and especially after a disaster, can lead to policies that make things worse instead of better (for example, invading Iraq), and it is wiser to resist that impulse than to do something foolish. The “Yes, Minister” syllogism – “We must do something; this is something; therefore we must do this” – is not a form of reasoning that leads to good results.

That’s especially true for gun policy, because the debate heats up after a mass shooting, and mass shootings are completely atypical of gun deaths overall. The question “What would have prevented this particular disaster?” is inevitably the wrong question.

And Eugene is also right – being right in the service of really bad policy choices is one of his annoying habits – to compare guns to alcohol as two commodities whose consumption in the United States leads to the deaths of tens of thousands of people other than consumers, in addition to deaths among the consumers themselves.

But that’s where Eugene stops being right and becomes ridiculously and disastrously wrong. He assumes, falsely, that just because we’re not currently doing much to stop the violence involving guns and alcohol it must be the case that nothing useful can be done.  In the case of guns, the cross-national statistics offer a strong hint that there’s something very wrong with policy in the United States, since no other developed country has anything like our rate of gun deaths. Our rate is three times that of Finland or Switzerland – our closest competitors among developed nations – four times that of Canada, and ten times that of Australia. That suggests we might have something to learn from their policies.

John Donohue’s recent work showing that adopting a “shall-issue” concealed-carry law correlates with future increases in homicide rates  suggests that state-level gun policies matter, though it’s hard to tell whether the results are due specifically “shall-issue” as opposed to “stand-your-ground” and other elements of the NRA policy agenda; states that loosen their gun laws are likely to do so along more than one dimension.  But even if there’s nothing positive to do, reining in the desire of Eugene’s gun-crazed allies to increase the prevalence of gun ownership and gun-carrying would be a good place to start.

One obvious positive thing to do about guns would be to tighten the rules about background checks. Right now, registered gun dealers (Federal Firearms Licensees, or FFLs) must verify that gun buyers are eligible to purchase; that’s the Brady Law background check. But about a third of all gun transfers don’t involve an FFL: they’re private sales, including sales at gun shows, or they’re gifts.

There’s no good reason not to require a check for every transfer; no doubt the gun stores would be happy to provide the service at a competitive price.  That simple change, supported by the vast majority of voters and proposed by the Obama Administration, fits perfectly the NRA slogan that what we need is better enforcement of the laws already on the books. But in fact the NRA opposes it, and if Eugene supports it he’s keeping that support a secret.  No one can estimate how many lives it would save, but surely that number isn’t zero.

If Eugene wants to say – as apparently Jeb wants to say – that protecting the convenience of gun owners and gun merchants is more important than saving lives, that’s his right. But to say that there are no lives to be saved,  at reasonable cost to other goals, is simply false.

That’s even more obviously true with respect to Eugene’s comparison case, alcohol. He writes as if the only alternative to our current insanely loose alcohol policies would be a return to Prohibition, and that what we can do  about controlling alcohol-related deaths is “not much, other than trying to catch and punish alcohol abuse.”

Nonsense. There are at least two options out there that would substantially reduce the number of people who die as a result of other people’s drinking (while also reducing the number who die, suddenly or slowly, as a result of their own drinking).

The first and most obvious (except to a libertarian) is raising alcohol taxes. When something costs more, people use less of it, especially people who use enough of it so its price matters in their personal budgets. Most of the damage from alcohol-related violence comes from heavy drinkers, not casual ones.  So higher alcohol prices will lead to less drinking by heavy drinkers and therefore fewer drunk-driving deaths and fewer drunken homicides.

Philip J. Cook’s Paying the Tab estimates that a 10% increase in the price of drink (which could be achieved by doubling the current federal alcohol tax) would reduce all violent crime – not just alcohol-related crime, but of course including a lot of gun crime – by about 3%.  The effects on traffic fatalities are of about the same magnitude. The effects seem to be roughly linear.

So tripling the alcohol tax – which would cost the median drinker less than 20 cents a day, and which wouldn’t be nearly high enough to create a black market – would eliminate about 6% of the 13,000 murders we suffer each year, saving about 800 lives. It would also eliminate about the same proportion of 32,000 traffic fatalities, saving something more than 2000 additional lives.  In other words, a simple change in the tax code could eliminate about one 9/11′s worth of sudden death per year.

The other straightforward approach to shrinking alcohol-related damage, including homicide, is to deter drinking by people who commit crimes under the influence. That’s the approach of South Dakota’s Sobriety 24/7, which requires people with prior DUI convictions arrested for a fresh DUI to come in twice a day for an alcohol-breath test, under the threat of a night in jail if the result isn’t 0.0.

The results are spectacular: being on the program (for an average of 90 days) reduces DUI recidivism by 50% over the next two years. Applying the program at a county level reduces auto fatalities by 12% and domestic-violence complaints by 9%. (Beau Kilmer and his colleagues at RAND are about to publish an estimate of the effect on all-cause mortality that will blow the top off everybody’s head, but that work is still under review so I can’t more than hint at the results.)

Here’s a more speculative idea, but one I’d like to see tried. A third activity that leads to lots of sudden deaths on the part of bystanders is driving. One thing we do to reduce the carnage is to forbid people to drive if they’re under the influence. Alcohol effects coordination, but it also influences anger management, impulse control, and judgment. So why do we let someome walk around armed when he’s drunk out of his gourd? The old-fashioned Western saloon had a “hang ‘em here” policy; customers were expected to disarm before getting loaded. Why not enact that as law, requiring that anyone possessing a gun in public either (1) remain sober or (2) lock it and unload it? You could think of that as either a modification of gun policy or a modification of alcohol policy.

So Eugene’s comparison case is almost uniquely poorly chosen. There are some things we could do today to reduce gun violence by changing gun policy, but those effects would mostly happen slowly and can’t be estimated with much confidence.  But there are things we could do about alcohol policy today that would reduce violent death, including violent death by firearm, predictably and measurably six months from now.

Yes, the activist impulse to “do something” can and does lead us astray. But so does the libertarian impulse to just sit there and watch people die, all in the name of limited government.











The Power of the Greek Example

Germany took a hard line with Greece this summer as much out of fear of political as economic contagion. Even if wiping out Greek debts were easily affordable, it would quickly have become prohibitively expensive when voters in Portugal, Italy and Spain demanded the same deal.

The Portuguese elections are tomorrow (Sunday), and will provide an indication of whether the German strategy worked. This has been a bad year for psephology, but that said the available poll data (courtesy of the Telegraph) suggests that the lesson of Greece has not been lost on Portuguese voters.

When the Greek drama began in June, Prime Minister Pedro Passos Coelho belt-tightening government was in parlous political shape. Only around 30% of the country supported the government, and the Socialists were drawing support by demanding a surge in government spending in defiance of the Lords of the Eurozone.

As the Greeks have been brought publicly to heel over the past few months, Portuguese voters have apparently taken notice. The Socialists have faded enough to give the government a reasonable shot at holding power.


Word of the Day for Americans: “Vacation”

I sent an email to a European colleague this summer and got the following automatic message in return:

Dr. So and So is on holiday for the month of July. Consistent with university policy, all email sent to her during this period is automatically deleted. If you wish to contact her, please do so next month.

Now there’s a place that understands what it means to be on vacation. Can you imagine coming back to no email? Not receiving email during your vacation? I can’t, because I work in America.

Throughout my brief vacation I got email after email from Americans that opened with some variant of the phrase “I know you are on vacation, but”, as if making this statement somehow changed the fact that I was supposed to be on vacation. The worst offender was a committee chair who was told repeatedly that I would not be attending a meeting during my family vacation, but the day before the meeting nonetheless emailed me a 300-page long document with a note that read “I know you can’t attend the meeting because of your vacation, so I am sending you the material that we will be discussing so that you can email in your analysis of it for us”. I think she believed this was unusually accommodating on her part.

A friend had an even worse experience. He went on a family vacation to a remote area where he had no email or cell phone signal. When he returned two weeks later he found out that he had been demoted. While he was on vacation, his company had announced a re-organization. His boss said “I expected you to be calling me and emailing me every day communicating your vision of how you fit in with the new structure. When you didn’t I knew you weren’t really committed to the company.” Never mind that he couldn’t even have known that the re-org had happened and never mind even more than he was on freaking vacation.

Employees of the U.S. unite. Do not email your co-workers on vacation, ever. Do not call them or fax them or text them either. And if your boss asks you to do so, state firmly that your hard-working colleague is on vacation, and ask your colleague to do the same for you when the situation is reversed.

Capitalism is a mighty thing that can produce much good. But if we don’t place limits on it, it will eat our bodies, our souls and our families alive. So American workers, look up “vacation” in the dictionary, commit the words to memory and live by them always.

The marijuana movement and the marijuana lobby

Reactions to the “Responsible Ohio” cannabis-legalization initiative have a lot to tell us about the changing politics of the marijuana question. No much of what they have to tell us is encouraging.

Cannabis policy change in the United States has been driven, until now, by people whose interest in the matter was primarily non-commercial: pot smokers yearning to toke free, culture warriors of the (cultural) left, libertarians, criminal justice reformers concerned about arrest and incarceration, and people who think that it’s bad policy to criminalize the behavior of tens of millions of people unless there’s a stronger reason to do so than the risks of cannabis create.

Not that economic interests have been entirely absent; Dennis Peron was in the business of selling “medical marijuana” when he spearheaded Proposition 215. But Peron was also a righteous stoner; there’s no reason to doubt the sincerity of his expressed opinion that “all marijuana use is medical.” But the main funders of the recent initiatives, and of the big marijuana-legalization groups, have been ideologically-driven billionaires such as George Soros and the late Peter Lewis.  (How old am I? Why, I’m s-o-o-o-o-o-o old that I remember when billionaires weren’t a branch of government.) And the people doing the work have been, for the most part, true believers rather than hired hacks.

That has begun to change. Americans for Safe Access has morphed from an advocacy group for medical-marijuana patients to, in effect, a trade association of medical-marijuana growers and sellers. The National Cannabis Industries Association has taken things even further, hiring a Washington lobbyist who might have been provided by Central Casting: about as far, culturally, from a typical NORML or MPP activist as it’s possible to imagine.

Inevitably, then, the marijuana movement has begun to give way to the marijuana lobby. To be sure, I’ve had my share of clashes with movement folks, and I haven’t always been impressed with their policy acumen or their standards of argument, but I’ve never seen any reason to doubt that they’re advocating the public interest as they perceive it. The people now being hired by the guys in suits doing cannabis-business stock promotions play by different rules. I expect them to have about the same ethical standards as lobbyists for the alcohol, tobacco, pharmaceutical, food, and fossil-fuels industries: that is, I expect them to be utterly willing to sacrifice human health and welfare on the altar of the operating statement, just like those folks at VW who decided it would be a cute idea to poison the air just a little bit to goose the performance of their diesel-driven cars. Continue Reading…

What is the Catalan for magic pony?

??Yesterday Catalonia held elections for the regional government. Since Madrid frustrated their hopes of an independence referendum, the tactic of the secessionists has been to try to turn every election from rat-catcher up into an independence plebiscite. From that perspective, yesterday was not a win. Pro-independence parties narrowly failed to get a majority of votes. They did together win a narrow majority of seats, and will continue to control the Generalitat. That does not look a basis for UDI.

The circumstances in the last few years could not have been more favourable to their cause: a disastrous boom-and-bust cycle in property, leading to bank rescues that doubled Spain’s national debt; mass unemployment from austerity dictated by Brussels and Berlin; and a governing party in Madrid mired in scandal. The economy has now started to improve, not dramatically but steadily, which should erode support.

The pedestrian Mariano Rajoy (no pigs, no bribes) has opposed the separatists by standing pat on the constitution. This has given him institutional wins through the Constitutional Court, but has done nothing to win Catalan hearts and minds. There has been no counterpart to Gordon Brown’s spirited defence of the Union in Scotland on emotional grounds: shared battlefields and war cemeteries, and the NHS. (Imagine an American politician defending US healthcare as a glorious achievement. On second thoughts …) Can you make such a case in Catalonia? Sure. Catalans died in 1714 and 1812 and 1936 in defence of a particular vision of Spain, not just Catalonia. Bringing up the Civil War is dangerous stuff of course, precisely because the memories are high voltage. If the stakes are the unity of your country, you have to take a few risks.

How serious is the independence project? I looked up the programme of Junts pel Si, the main separatist coalition in the election. Website, programme Continue Reading…

Gaming out the VW affair from the Oval Office

Imagine you were the President of the United States. (Sure, that’s daunting, but remember you’re more qualified for the job than about 90% of the people now running for it.)

You just found out that all the Volkswagen diesels sold in the U.S. over the past six years are in massive violation of pollution-control standards, and that the resulting excess emissions have caused, and will continued to cause, deaths and injuries. Apparently, in order to get those models past emissions certification without sacrificing mileage or performance, VW installed an elaborate software patch on the computer that runs the engine.

The program cleverly detects whether the car is being emissions-tested (apparently a testing machine isn’t much like an actual driver) and, if it is, turns on the emission controls. Once the test is done, the program notices that, too, and turns them back off. So the car-on-the-test-treadmill looks legal, but the car-on-the-road is grossly illegal.

GM, Ford, and Honda have all been caught before playing similar tricks; so had VW. There’s even a term of art for them: “defeat devices,” because they’re designed to defeat emissions tests. And Bosch - which supplied the code to VW, supposedly to be used only in testing rather than actual operations – also supplies several other automakers, so there may be other recent-model cars with the same problem.

Even after the cheating had been detected by some very clever engineers at West Virginia University, VW officials kept denying that there was anything amiss until the EPA threatened not to certify its 2016 models. Then the company changed its tune. (Note that if the people making those denials knew them to be false, they may have serious personal criminal liability; 18 U.S.C. 1001 (a) provides, in relevant part:

[W]hoever, in any matter within the jurisdiction of the executive, legislative, or judicial branch of the Government of the United States, knowingly and willfully (1) falsifies, conceals, or covers up by any trick, scheme, or device a material fact; (2) makes any materially false, fictitious, or fraudulent statement or representation; or (3) makes or uses any false writing or document knowing the same to contain any materially false, fictitious, or fraudulent statement or entry shall be fined under this title, imprisoned not more than 5 years …or both.

In that situation, Mr. (or Madam) President,what should you be trying to accomplish, and how should you go about it?

I submit that your goals should be:

1. Getting the cars off the road – or fixed, if that turns out to be possible – sooner rather than later. The death rate is unknown, but a month’s delay will, more likely than not, kill at least one person.
2. Identifying whether there are similarly gimmicked non-VW cars on the road, and deal with them as well. Again, time is of the essence.
3. Ensure that justice is done with respect to VW as an enterprise and the VW officials who engaged in this conspiracy. Of course legal guilt or innocence remains to be determined in each case, but there’s no doubt there was a conspiracy to cheat the testing process; VW has now admitted what was done, though of course the company is trying to blame a “small group” of engineers. Doing justice is not merely a matter of revenge; this is your best opportunity in years to establish the principle that deliberately planned regulatory violations that cost lives can have drastic consequences for firms and individuals.
4. The decision whether VW stays in business is now up to you and people who work for you. There’s a case for corporate capital punishment. But there’s also a case for using the leverage this case gives the government to force VW to spend company money on environmental improvement. That needn’t involve VW’s own operations. To choose an example not quite at random: pollution from new cars – even faux clean diesels – is trivial compared to pollution from old cars. The problem with a systematic “cash for clunkers” program is that it encourages people to keep their clunkers rolling until a buyback comes alone. It’s also hard to get Congress to come up with the money. But a buyback paid for by VW as part of a settlement of the criminal and civil cases against it would – precisely because it was unpredictable and unlikely to be repeated – pose no such problem. Buying and scrapping a million old cars at $1000 a copy might be an excellent way of spending $1 billion that the Congress never has to appropriate, and it would almost certainly turn the whole event into a net plus from the perspective of morbidity and mortality, even given the inevitable fact that some of those cars would have been headed for the scrapheap anyway.

All of those purposes are served by promptly gathering information about who did what at VW and elsewhere. No doubt folks at EPA and at various universities are feverishly inventing tests to detect defeat devices, so it’s likely we’ll eventually learn about most of the schemes that have been put into practice recently at any substantial scale. That still leaves the problem of detecting older or smaller schemes, and the further problem of determining which individuals at the offending firms were responsible.

You could speed that process enormously by instructing the Justice Department to open a criminal investigation into conspiracies to install defeat devices.  Again, you’d need to be careful to make it clear that you weren’t imputing criminal liability to any specific individual or firm, but it would be well within your legitimate function to say, or have your Attorney General say, something like this:

On the facts as reported, it seems more than likely that criminal laws have been violated, and at least possible that they have been violated by more than one manufacturer, with regard to “defeat devices” designed to evade pollution controls. People have gotten sick and died, and others are getting sick and dying right now, because of the excess pollution that was deliberately and illegally emitted. These are not “regulatory violations” in the sense that someone forgot to file the right paperwork; this was a deliberate scheme to put toxins into the air we breathe and to conceal that fact.

Starting this week, Federal agents will be asking automobile manufacturers and their employees for information about defeat devices and other attempts to cheat the emissions-testing process. For now, those requests for information will be voluntary; no one is obliged to answer. But everyone involved should also know that making a false statement to a federal official in such a situation is a felony.

It also seems very likely that eventually one or more grand juries will be empaneled and subpoenas issued. Again of course, everyone involved has the right to assert the Constitutional privilege against self-incrimination and refuse to answer questions that might lead to his own prosecution. As in any such investigation, those who come forward early and make a clean breast of things are likely to wind up facing less serious consequences than those who wait to be called.

To facilitate the process, we have established a hotline, 1-800-DEFEAT-D. People who call that number have the option of giving their own names or remaining anonymous. Of course, those who think they may be facing personal criminal liability should consult an attorney first.

We need to find any other cars that have similar gimmicks and get them fixed, or off the road, as soon as possible. Every mile driven by any of those cars makes this country just that much less healthy to live in.

The truth is going to come out eventually. I appeal to anyone who can help it come out faster to call that hotline.


So far as I can tell, of the eleventeen people currently running for President, only Hillary Clinton has made a statement on the issue; hers was forceful but brief. There’s no sign of any legislative action.  The contrast with the phony Planned Parenthood scandal couldn’t be stronger.


Cities of Refuge

When I first met Paul Roemer a few years ago a few years ago he was promoting an idea he called “Charter cities.”

The basic idea is that, under contemporary economic conditions – in particular the astonishingly low cost of transporting freight by water – economic activity doesn’t require much in the way of natural or even human resources: just a piece of land with access to ocean transportation, a little basic urban planning, the rule of law, and the absence of intrusive and kleptocratic government.

Alas, those last two are sufficiently rare in the worst-off countries that hundreds of millions of people, deprived of industrial opportunity where they are, want to leave and go somewhere else. The problem is that “somewhere else” mostly doesn’t want to take them in.

Romer’s proposed solution flows directly from this analysis: find an empty space with the requisite transportation access, get the national government out of the way, and build a new city, attracting economic migrants from around the world. At first the charter city would be governed by an international board, with housing and industrial plant built by private actors and infrastructure and public-services financed by ground leases: in effect a Henry George single tax.

Continue Reading…

The moral universe of the corporate killers

Daniel Fisher – not otherwise known to me – writes for Forbes, covering “finance, the law, and how the two interact.” Naturally, given where he works, he hates plaintiffs’ lawyers, which is his right and privilege in this great and free country of ours. So his first reaction to the VW emissions-cheating scandal was to criticize - not VW – but a class-action law firm threatening to sue VW on behalf of consumers.

His point is that the buyers of the supposedly-clean-but-actually-filthy-dirty VW diesels weren’t in any direct sense harmed by VW’s fraud. By disabling pollution controls except when the car was being tested, VW managed to pack more performance and fuel economy into a car than it could have done while also actually meeting the emissions targets. So when VW issues a recall notice it will in effect be asking consumers to trade their existing car for one that performs worse and gets lower miles-per-gallon. So, he says, except for a few Marin County cranks, they’re mostly going to ignore the recall.

Therefore, the plaintiffs’ lawyers are being silly again.

Tort reform, tort reform, sis, boom, bah!

Now, I don’t know what it is you need to know to be a Certified Financial Analyst - that’s the credential Fisher claims – but apparently it isn’t logic or economics.

Continue Reading…

Pure evil, VW edition

I don’t suppose we’ll never know how many people died – asthmatics, for example – because Volkswagen designed its “clean diesel” vehicles – all 482,000 of them sold in the U.S. since 2009 – to burn dirty except when they were being tested. The story reads like the most paranoid anti-corporate fantasy, until you get to the line where the firm admits what it did, and then discover that Honda and Ford got caught years ago doing the same thing in a less sophisticated way. There’s even a  term of art for such tricks: they’re called “defeat devices” because they’re designed to defeat emissions testing.

In the VW case, code was written into the engine-control software to detect the pattern of pedal and steering operations characteristic of an emissions test. Then, and only then, the car’s emissions-control machinery would kick in. Once the test was over, the software noticed that, too, and returned to normal – that is to say, illegally and dangerously dirty – operations. That meant emitting about 40x the permitted -and advertised – level of nitrous oxide, which makes smog.

Now just think about the depth of corporate depravity involved. This wasn’t one rogue engineer or engineering group at work. People up and down the chain had to be party to the crime.  And note that the conspiracy held together for six years, and was finally broken not by an internal leak but by the work of outside scientists at West Virginia University. Wasn’t there a single decent human being around when this was being planned and carried out?

Some quick comments:

1. The news stories discuss fines that might be levied against VW.  When people conspire to commit a crime that harms the health of untold numbers of people,  criminal charges are appropriate. And not only against the company, but against every official in it who can be shown to have known about the conspiracy.

2. At minimum, the civil penalties and civil-lawsuit damages should be sufficient to put VW out of business. That might make managers, and boards of directors, in other firms a little bit less casual about lawbreaking.

3. Keep this case in mind when evaluating the claim oft heard from Koch-funded “criminal justice reform” advocates that it’s wrong to “criminalize” regulatory violations. Of course no one should go to jail for paperwork errors. But deceiving the regulators is a fraud on the government, even when it isn’t – as it is in this case – a physical assault on the public.

4. Can we hear some more from the Republican Presidential candidates how business is Good and government is Evil? And is there any hope that a reporter will ask them whether they think the perpetrators of this appalling crime should face prison time for it? (Again, note that VW isn’t denying what was done, and can’t possibly deny that it was done deliberately.)

Footnote  I’ve quoted C.S. Lewis on this before, but his words bear repeating:

The greatest evil is not now done in those sordid “dens of crime” that Dickens loved to paint. It is not done even in concentration camps and labor camps. In those we see its final result. But it is conceived and ordered (moved, seconded, carried, and minuted) in clean, carpeted, warmed and well-lighted offices, by quiet men with white collars and cut fingernails and smooth-shaven cheeks who do not need to raise their voices.

The most horrible thing about this case is that very few if any of the people involved will have lost any sleep over their guilt in making sick people sicker (and killing some of them) and none will lose face among their friends and neighbors. Even if some are found guilty of felonies, life won’t be nearly as bad for them as it is for someone who gets caught committing burglary. And yet no burglar’s contribution to human suffering can hold a candle to what the VW conspirators managed to inflict.




Cable TV: Socialism that Works?

Screen Shot 2015-08-14 at 12.39.48 PM

We’re frequently told that if cable companies would allow us to buy channels à la carte, we could save lots of money by not having to pay for all those hundreds of channels we never watch. As the following numerical example illustrates, however, channel bundling may actually enable cable companies to provide offerings that many of us like better than what we’d get under an à-la-carte system.

The key feature of the example is one that also figures prominently in other digital content markets—namely, that the costs of production are mostly fixed: Once content is in hand, the marginal cost of serving additional consumers is essentially zero. Normal intuitions about pricing often break down under these conditions, and that’s what happens here.

For simplicity, suppose there is one premium channel that everyone would like to have (call it HBO) and 100 fringe channels, none of which is valued by more than a small proportion of potential viewers. Suppose there are 120 million potential subscribers in total, that their maximum monthly willingness to pay for access to HBO and the 100 fringe channels is as summarized in this table:

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If the cable company sold HBO separately, their best bet would be to gouge the rich TV fans, selling 10 million subscriptions at a price of $70 each, for $700 million in monthly revenue. They’d also sell 120 million subscriptions to the bundle of 100 fringe channels at a price of $5 each, for another $600 million in revenue. Total monthly revenue: $1,300 million.

Now suppose they can offer a premium bundle consisting of the 100 fringe channels plus HBO. Their best bet would then be to charge $20 a month for that package, at which price they’d sell 50 million units, for monthly revenue of $1,000 million. They’d also sell another 70 million monthly subscriptions to the 100 fringe channels at $5 each, for another $350 million in revenue. So total revenue would be $1,350 million, or $50 million more than before. Yet no subscriber would end up with a package that’s worse than before, and 10 million former HBO à-la-carte subscribers would be paying $55 a month less than before for the combination of HBO and the fringe channels.

This is obviously just a hypothetical example. But it captures the basic idea that when the marginal cost of serving additional subscribers is zero, the average cost of serving each one necessarily goes down whenever sellers can price their offerings in ways that result in increased numbers of units sold.

Tech industry analyst Ben Thompson has described the current cable bundling system as “socialism that works,” offering data suggesting that the implications of my numerical example are hardly farfetched. No one should be surprised, then, if prices for channels like HBO and ESPN go up sharply if cable providers are forced to offer them as stand-alones. That wouldn’t be a good thing for the people who now get those channels as part of a cheaper cable bundle, nor would it help those subscribers who don’t care about the channels.