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Friday, June 28, 2013

Lance Armstrong Inadvertently Explains Why We Need Well-Regulated Markets

Posted by on Fri, Jun 28, 2013 at 8:57 AM

Disgraced cycling idol Lance Armstrong says that—at least during his era—it was impossible to win the Tour de France without doping:

The Tour de France? No. Impossible to win without doping. Because the Tour is a test of endurance where oxygen is decisive,” Le Monde quoted Armstrong as saying.

Probably true. Unless, of course, nobody was doping. In which case somebody who wasn't doping ultimately would have won.

Armstrong hit his prime at a time when EPO—a hormone that produces red blood cells—was both widely used and undetectable in the blood. So while, sure, Armstrong remains an unrepentant cheater (he mostly seems sorry that he got caught), I do have a touch of sympathy for his logic. If he wanted to win the Tour, he had to cheat. Because most of the other top cyclists were cheating too. And it's not really cheating if everybody is doing it, right?

The problem was not that cycling was a sport that attracted cheaters, it's that it was very poorly regulated. And without a strong and effective regulatory system to level the playing field on those steep mountain roads, it was impossible to compete without cheating. And so professionals like Armstrong and Jan Ullrich were incentivized to cheat.

The same holds true for financial and other markets. It doesn't take a corrupt society in order to create a corrupt market, it takes one unethical individual who is willing to bend the rules for their own personal gain. Because markets are competitive, the ability and willingness of one participant to cheat with impunity creates an economic imperative for all participants to cheat. It's cheating that levels the playing field, not the rules. And since rational self-interest is what motivates capitalist markets, there will always be individuals looking to upset the ethical equilibrium by pursuing the opportunity to cheat.

The only alternative is strong and effective market regulation. And the only body remotely capable of regulating markets is government. Without strong government regulation, "free market" capitalism doesn't work.

So thanks, Lance, for giving us this basic lesson in economics.


Comments (33) RSS

Oldest First Unregistered On Registered On Add a comment
Interesting game theory.

He says "everyone" was cheating. Let's take him at his word, or at least that most of the most competitive players were cheating, or taking dope.

Then what about those other players?

So Armstrong is being penalized (in some sense like Barry Bonds), not just for doing drugs...but for being successful!

Losers who use drugs (like a guy who came in 13th place all the time) are ok. Winners who use drugs, are not ok.

But if Armstrong didn't use drugs -- according to him -- someone else who did use drugs would have won instead of him.

So this is the downside of bending the rules to win...your prize can be taken away, at any time.
Posted by Supreme Ruler Of The Universe http://_ on June 28, 2013 at 9:07 AM · Report this
MacCrocodile 2
Maybe each sport should have a separate league where doping is mandatory. That way, nobody gets bored.
Posted by MacCrocodile on June 28, 2013 at 9:08 AM · Report this
MacCrocodile 3
@1 - The guy who came in 13th on drugs already came in 13th. No need to pile on the poor schmuck.
Posted by MacCrocodile on June 28, 2013 at 9:10 AM · Report this
Pope Peabrain 4
What it really says to me is a loss of integrity. I remember in college somebody offered to sell me answers to a test. I thought maybe I'd pass the test with a better grade, but I would think less of myself. Naive? Maybe. I turned him down and told him to never speak to me again.
Posted by Pope Peabrain on June 28, 2013 at 9:13 AM · Report this


Right but at the same time, we're told that "tests" aren't real, and billionaires are made from high school dropouts.

Why support a system that no one else believes in any more?

I mean look at the Olympics.

One minute it was Jim Thorpe getting de-medalled for taking $100 to play "pro" for a season, and then next it's the NBA Dream Team claiming gold like it's their God given right!

What kind of morality changes gears every couple of decade?

I like #2's idea.
Posted by Supreme Ruler Of The Universe http://_ on June 28, 2013 at 9:21 AM · Report this
Posted by TheMisanthrope on June 28, 2013 at 9:26 AM · Report this
Once again, Goldy, you nail it in a crisp, economical manner Hemingway would appreciate. Well done!
Posted by Freiboth on June 28, 2013 at 9:34 AM · Report this
As a cycling fan gotta say I side with Armstrong on this one. He is an ass, obviously but "cheating" has ALWAYS been apart of the tour and pro cycling, Hell they were taking Cocaine and Amphetamines in the 20's. Not saying that this should be condoned, I would like to see a "drug" free tour this year, but to think that after 100 years of people riding dirty the UCI will automatically turn things around and everyone will be clean is a bit of a joke. The whole concept of riding 2400 miles in 24 days, only 3 days of and climbing over 75000 feet without assistance is daunting and I can feel for the riders who think they need the extra edge. LA dominance in the 90's could not be tolerated by those in Europe however me thinks that if it was a french or italian rider winning the scrutiny might not have been as strong. LA was just the best during this era, period. Its a tough pill for people to swallow because he is such a dick-head, but in an era when the #2-10 finishers of the tour ALL got caught doping it just goes to show how dominate LA reign was. I could give a fuck about LIVESTRONG or all that BS all I know is the LA was a machine, pure and simple.
Posted by g2000 on June 28, 2013 at 9:38 AM · Report this
Ban performance enhancers for any athlete college-level or lower. After that, let them do whatever the hell they want. Because right now it's just a morality play.
Posted by NateMan on June 28, 2013 at 9:41 AM · Report this
Most of the commenters so far seem to think Goldy's excellent post is about cycling, or athletics.
Posted by Eric from Boulder on June 28, 2013 at 9:51 AM · Report this
Meanwhile, the same Tour organizers who are 'shocked' to learn the riders are doping devise ever more difficult stages for the Tour that all but require riders to be on drugs just to complete, let alone be competitive.

Look at the route for this years TdF, which begins tomorrow: Stage 18 includes a double ascent of Alpe-d'Huez. There's no way the race organizers aren't thinking about performance-enhancing drugs when they decide to include something like that in the Tour.
Posted by SuperSteve on June 28, 2013 at 9:56 AM · Report this
ferret 12
It isn't that Cycling via UCI events and the TdF was poorly regulated, the problem was the cat and mouse back and forth between testers and cheaters.

Cyclists in the TdF were tested after every stage, the top finishers at every stage were tested. The problem was that the cycling teams had large entourages and a big medical staff to help evade positive drug tests. The EPO test wasn't implemented until 2001 or 2003 for the TdF, if I remember correctly. Blood passports, which probably is the main factor in tripping up Armstrong, was implemented after he left cycling in 2005, but were implemented when he came back a couple years later.

Drug testings can't catch cheaters, when they don't test what cheaters are using, like EPO or HGH, all the regulation and enforcement in the UCI and WADA won't stop this, unless they have the technology to detect the PEDs. Much like the 2002 Winter Olympics caught a huge amount of Cross Country Skiers using EPO, because they finesse the testing and were specifically looking for it.

Much like the East German Swimmers in the 1970s and 1980s, there were medical staffs on the cycling teams in the TdF constantly monitoring PEDs levels before the start of initial testing, so hormone levels would be at acceptable levels. Regulation means being effective, and there was an incredible amount of regulation for UCI (Professional Cycling) events.. It was just ineffective, because the cycling teams knew how to get around it.

If anything that blew the doors of the endemic use of PEDs at every level of professional cycling, it was the Operation Puerto Scandal in 2006, it was as close to a smoking gun for cheating by every top professional cyclist in the sport.
Posted by ferret http://!/okojo hide on June 28, 2013 at 9:56 AM · Report this
Smart, motivated hedge fund managers will always be one step ahead of regulators, and so I'd be cautious about putting too much faith in regulation. Bernie Maddoff evaded regulators for a long, long time before he got caught. It was only the crash in 2008 that revealed his scheme.
Posted by David from Chicago on June 28, 2013 at 10:00 AM · Report this
Matt from Denver 14
@ 8, you ARE saying cheating should be condoned. That's exactly what you're saying.
Posted by Matt from Denver on June 28, 2013 at 10:01 AM · Report this
ferret 15
On Financial Regulation, there is some strict financial regulation, from imprisonment for Insider Trading, (I am looking at you, Stephen Cohen) to Quarterly SEC filings. However, the regulations can be manipulated to no extreme. From keeping funding to the SEC low, which has been going on for years, to fighting for years to not include Hedge Funds as part of regulation.
Posted by ferret http://!/okojo hide on June 28, 2013 at 10:15 AM · Report this
Goldy, I appreciate the lack of the word "I" in this post. Your thoughts come across a lot clearer and sharper when they aren't couched "Goldy-this and Goldy-that." My two cents.
Posted by Jude Fawley on June 28, 2013 at 10:19 AM · Report this
@8 Agreed. And I believe it was the fact that he was such a dickhead that led to his exposure by so many teammates. He was the best of the dopers, that's for sure. Non-cycling fans have trouble understanding how and why doping is expected and/or tolerated by many cycling fans. Lance's achievements stand despite the fact that he got busted. (Looking forward to tomorrow. Should be a good TDF.)
Posted by David from Chicago on June 28, 2013 at 10:23 AM · Report this
mikethehammer 18
I appreciate the spirit of this post, but don't really like where my logical thought processes seem to take me by extension. To be realistic, and as has been proven time and again, the dopers and those looking to bend rules and exploit regulatory loopholes to their advantage are more likely to be much better funded, motivated, and innovative those charged with chasing them. Toward this end, I can't help but think the only way, or perhaps the most logical and simplest way, to achieve a truly "level" playing field would be some sort of radically deregulated libertarian free-market. And yeah, I feel pretty dirty for having just typed that.
Posted by mikethehammer on June 28, 2013 at 10:57 AM · Report this
Chris Govella 19
Punish the cheaters, incentivize actions in the public interest's benefit(the environment).
Posted by Chris Govella on June 28, 2013 at 11:06 AM · Report this
Will in Seattle 20
@19 yeah, like that works. Not.
Posted by Will in Seattle on June 28, 2013 at 11:13 AM · Report this
Unregistered User 21
Rationality is to economics what spherical cows are to physics.
Posted by Unregistered User on June 28, 2013 at 11:33 AM · Report this
Urgutha Forka 22
I noticed the same thing, which is why my comment is going to seem out of place...

It doesn't take a corrupt society in order to create a corrupt market, it takes one unethical individual who is willing to bend the rules for their own personal gain.
This is also the reason why true socialism and true communism cannot work. Those take self-sacrifice and unselfishness to succeed. One person deciding they're going to be dictator/emperor is all it takes for the collapse of the entire system.

It's too bad human beings are too primitive and unevolved to function in a selfless society. We're stuck with the best of the worst economic systems: free-market capitalism. And the most primitive of humans actually applaud that miserable "accomplishment" and feel like we're superior and noble. Fools.
Posted by Urgutha Forka on June 28, 2013 at 11:40 AM · Report this
Fnarf 23
But cycling is INCREDIBLY regulated. The athletes are tested CONSTANTLY, at random intervals. There's no way you can say that the regulatory regime in cycling is lax; it's the strictest regulatory atmosphere in the history of human civilization.

And yet every cyclist dopes. All of 'em, since forever. Armstrong is 100% correct; it's impossible to win without doping. It's impossible to compete without doping. And, in fact, we're seeing even amateur cyclists doping in races without any prize money or even recognition; I guarantee there are amateur cyclists who dope just riding solo against their own personal bests.

He's also completely right about what cycling is: it's not really a sport at all, it's a chemistry experiment to see who is most efficient at converting atmospheric oxygen into muscle energy. Being strong or determined etc. has nothing to do with it; it's all about squeezing tiny bits extra out of chemical reactions in the bloodstream and in the muscle fiber.
Posted by Fnarf on June 28, 2013 at 11:42 AM · Report this
treacle 24
Apropos to Lance Armstrong and the Tour, I think Tricky said it best.

But for the economics side of it, yeah, there's obviously been a constant press for less regulation and oversight, the creation of more loopholes, or new 'trading' instruments that can then be gamed. The revolving door of jobs between the regulators and the regulated doesn't help much.. .it's really a class thing. All those smug rich people helping each other out with tax evasion and profit maximization; while us "little people" work for wages to get by.

Apropos to Urgutha @22 there, yeah, fair point. In a mass society with lots of anonymity, it's quite easy to fuck over people unknown to you. Smaller societies have/had social repercussions for "bad actors": shame, humiliation, & eventually exile. But it's pretty hard to shame "the stockholders" of Exxon for wanting profits, which then causes Exxon's managers & leaders to skimp on safety and pump more oil. That game is rigged: the only morality is "the bottom line", profit.

This is the problem: Sure, personal self-interest motivates entrepreneurs and "markets", but when the rule-set insists that profit is the only game to play, unethical behavior makes sense.

If we had more personal accountability --very, very difficult in a mass society (Will loss of anonymity online help us in this way?)-- there could be more social "checks & balances" on bad actors.

How do we remove "profit" as the only goal of our economy/society? Create the situation where a fair day's work guarantee's food & shelter for everyone? How?
Posted by treacle on June 28, 2013 at 12:08 PM · Report this
stonato 25
It sounds like most everyone here, self-governance? I'm not comfortable typing "anarchy" because then I'll be on "the list." Oh, shit
Posted by stonato on June 28, 2013 at 12:23 PM · Report this
I love how the de-regulation crowd gets themselves to reductio ad absurdem without any help at all. There will always be murderers so let's not have any homicide laws!

At the end of the day, we're dealing with a system. It needs multiple management mechanisms. Will regulation solve every problem? Of course not. You need cultural and social pressures as well. Are cultural and social pressures influenced by regulation and vice versa? Probably.

At the end of the day, it all boils down to purpose. If your goal is to push your talents and abilities to their extreme, then why cheat? If your goal is to win a trophy/become wealthy, then why not cheat?
Posted by stating the obvious on June 28, 2013 at 12:42 PM · Report this
Hmmm. The "integrity" of an activity involving adults in tights riding bikes vs. 1/2 billion dollars in cancer funding. I'll go with cancer funding. I don't think LA could have raised anywhere close to that amount of money without those titles.
Posted by willieboy on June 28, 2013 at 1:28 PM · Report this
Goldy 29
@23 Banning a substance you can't test for (EPO for years), is not an example of effective regulation. I don't care how onerous the testing regime might be if it's ineffective.
Posted by Goldy on June 28, 2013 at 1:49 PM · Report this
keshmeshi 30
The idea that a private athletic organization overseeing athletes from dozens of countries can effectively "regulate" doping is ridiculous to me. What a flawed analogy.
Posted by keshmeshi on June 28, 2013 at 1:54 PM · Report this
Fnarf 31
@29, all PED testing regimens are ineffective. The dopers are always three steps ahead of the testers.

Likewise, if you're talking about regulating the abstruse corners of financial markets, you'll always be in a situation where the traders are ahead of the regulators. Hell, with today's products the traders themselves don't know what the fuck they're doing, they just push the buttons on the computers.

As for simple dishonesty, like insider trading, for instance, there's not a whole lot you can do -- just like doping. You make a newsworthy bust every once in a while, that's about all you can do.

But that's not the primary problem with financial regulation. Yes, there are crooks. But the real damage is done not by crooks but by perfectly legal techniques. But those are the equivalent not of doping but of obvious, above-board cheats -- as if Armstrong was winning all those Tours not with dope but with a gasoline motor.

What the financial markets need is a return to Glass-Steagall separation of commercial and investment banking, and a serious crackdown on derivatives and related mathematical instruments. Like a gas engine, you can't hide those products; it's patently obvious what they are. Ban them.

The other finance regulation I propose is more controversial: make all Wall Street traders wear a plastic produce bag over their face that they can only take off for one minute out of every ten while they are at the office.
Posted by Fnarf on June 28, 2013 at 2:14 PM · Report this
Matt from Denver 32
@ 31, I like that last idea.
Posted by Matt from Denver on June 28, 2013 at 2:39 PM · Report this
Ph'nglui mglw'nafh Cthulhu R'lyeh wgah'nagl fhtagn 33
I'm all in favor of big time sports everywhere admitting that they're corrupt to the core, and that no respectable company, organization or governemnt agency should associate with pro sports in any way. Let us tolerate pro sports, like the porn industry or the sex trade or gambling.

As a sleazy, dirty business that fans may have as a guilty pleasure, and something we ought not drive underground by criminalizing, but nothing you'd want your kids to see. Can you imagine if we told our kids to idolize porn actors, then acted shocked when we found out they were on drugs? Same thing.
Posted by Ph'nglui mglw'nafh Cthulhu R'lyeh wgah'nagl fhtagn on June 28, 2013 at 7:34 PM · Report this
And Lance Armstrong inadvertently explains why we need publicly, equally funded election campaigns.

An elective office of any consequence? No. Impossible to win without selling your ass and soul to special interests. Because American elections are advertising and propaganda contests where money is decisive,” Le Monde could have quoted any American politician as saying ... if they had a couple of drinks in them and were talking off the record

Most of the time the special interests are corporations, billionaires, and multi-millionaires, but there are at least some pols in the Congressional Progressive Caucus who apparently can't risk saying no to certain unions when they are being short-sightedly selfish.*

*The example that comes to mind is Raúl Grijalva, who signed on to a letter requesting that the FCC back off imposing Net Neutrality on mobile phone operators ... apparently at the behest of an AT&T union that had cut a side deal with AT&T. I generally admire the guy, from what I know of him, but no one is immune to the rules of a thoroughly corrupt game. Similarly, I like to muse that Bernie Sanders is deep in the pocket of Big Maqple Syrup. ;-)
Posted by PCM on June 28, 2013 at 8:51 PM · Report this

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