Efficient Golfing

Phil Mickelson gives interviews the way he plays golf: brilliantly, and recklessly. He’s in the “target zone” of federal and state tax collectors, he said the other week, and so he might have to move from California to Florida to protect his $50 million-plus annual income. Whap! Whoom! Care to hammer another last-hole drive into the hospitality tent? Miss a putt for 59?

Lost in the commotion over Lefty’s remarks (which, unlike his hair-raising from-behind-the-garbage-can shots, he could and did later retract) was a Notice of Proposed Rulemaking (“NPRM”) in the Federal Register that bears on Mr. Mickelson and his irrational behavior, as well as many other aspect of the game of golf. The NPRM was issued by the Department of the Interior (which is in charge of everything outdoors, including golf courses) and approved by the Office of Information and Regulatory Affairs (“OIRA”), then headed by Cass R. Sunstein. The full notice runs 195 pages; excerpts appear below.

DEPARTMENT OF THE INTERIOR
Office of the Secretary
98 CFR Parts 160 and 164
RIN: 109O1–AB47

Modifications to the Sports Competition and Fairness in Open Spaces Act.

AGENCY: Department of the Interior.

ACTION: Notice of proposed rulemaking.

SUMMARY: The Department of the Interior (DoI or ‘‘the Department’’) is issuing this notice of proposed rulemaking to modify the standards for the game of using sticks to propel round objects through space towards and into a hole (“golf”). 

DATES: Submit comments on or before February 15, 2013.

ADDRESSES: You may submit comments, identified by RIN 10901–AB47, by any of the following methods (please do not submit duplicate comments):

• Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments. Attachments should be in Microsoft Word, WordPerfect, or Excel. 

• Regular, Express, or Overnight Mail.

FOR FURTHER INFORMATION CONTACT: Michelle Wickelson, 202–2050–272.

SUPPLEMENTARY INFORMATION: The discussion below includes a description of the statutory and regulatory background of the proposed rules, a description of the proposed modifications, and the impact statement and other required regulatory analyses. We solicit public comment on the proposed rules. Persons interested in commenting on the provisions of the proposed rules can assist us by preceding discussion of any particular provision or topic with a citation to the section of the proposed rule being discussed.

I. Background

The game of golf is customarily conducted on private or public open (but confined) spaces.[1] It is governed, in its major aspects, by the rules of non-governmental associations: the United States Golf Association (“USGA”), and the Professional Golf Association (“PGA”). Members of both associations organize in, promote their purposes, and propel their objects through “clubs.”

For reasons not fully understood at the GS-13 level, golf holds great appeal to large segments of the American public and produces significant economic benefits. Moreover, it is perceived as a uniquely fairgame. However, even seemingly fair and well-working markets may suffer from pronounced inefficiencies and perceptions biases, due to the fact that everyone is human except OIRA. See, e.g., Richard Thaler & Cass R. Sunstein, Nudge (2008). Often, such inefficiencies can be redressed through small changes in the operative default rules. Ibid. For a discussion of biases and remedies in the golf market see Daniel Pichert & Konstantinos V. Katsikopoulos, “Green Defaults,“ 28 Journal of Environmental Psychology 63 (2008). The Department’s proposed nudges are consistent with the findings in the literature.

II. Proposed  Rules
A.     Professionals.

Studies have shown that successful professional golfers are highly sensitive to marginal tax rates. See, e.g., Alyssia Finley, “Mickelson and the Sports Star Tax Migration,” Wall Street Journal Jan. 28, 2013. (documenting migration of professional golfers to Florida, especially from California). A lower effective tax rate results in reduced effort. This helps to explain why European players, who are subject to higher marginal tax rates than Americans, have prevailed in a disproportionate number of tournaments around the world, including the U.S. Accordingly, the Department proposes a putt tax, which would equalize each U.S. player’s effective tax rate with that of the highest-taxed player in any given tournament.

Further, it has been shown conclusively that professional golfers are loss averse. See Devin G. Pope & Maurice E. Schweitzer, “Is Tiger Woods Loss Averse?” 101 American Economic Review 129 (Feb. 2011). They irrationally attribute a higher value to the loss of a stroke to par than to a proportionate gain (“birdie”). Consequently, they miss many more putts “for birdie” than “for par.” Among viewers, such events generate unwanted responses and adverse third-party effects. See David Card and Gordon B. Dahl, ”Family Violence and Golf: The Effect of Unexpected Emotional Cues on Violent Behavior,” 126 Quarterly Journal of Economics 103 (2011) (finding an increase in domestic violence after a favored player misses a makeable putt).

Accordingly, the Department proposes that a one-stroke penalty be added each time a player’s ball is placed “for birdie” on a green. A “for eagle” placement would trigger a two-stroke penalty. The default rule will prompt professional players to take the game seriously for a change.

Regulatory Impact:

Costs: $100,000

Benefits: priceless (enhanced viewer experience). For everything else, there’s Mastercard.

B.      Amateurs.

As noted, golf enjoys wide popularity. However, adverse outcomes (“losses”) have often induced amateur players to stay at home, despite their non-trivial membership fees. See Stefano DellaVigna and Ulrike Malmendier, “Paying Not to Go to the Gym,“ 96 American Economic Review 694 (2006). Such inefficient behavior can be reduced through minor adjustments of the so-called ”handicap system.”

Consistent with Executive Order 16224 (Eradication of Hateful Sports Speech, or “Redskins Order”), the Department proposes that the handicap system will be called the “benefit system.” In substance, the Department proposes the following:

Golfers with benefits of 10 or below will have their green fees increased by 35%. 
Golfers with benefits between 11 and 18 will see no increase in green fees. 
Golfers with benefits above 18 will receive a $20 check each time they play.

In addition, the Department proposes that heretofore discretionary “gimmies” will be made mandatory. The odious term—redolent of “A Nation of Takers”—will  be changed to “entitlement,” to be used as follows: 

Benefits of 10 or below: no entitlements. 
Benefits between 11 and 18: entitlements for putter length putts. 
Benefits above 18: if the ball is on the green, no need to putt; just pick it up. 
 
In addition, a player will be limited to a maximum of one birdie or six pars in any given 18-hole 
round. Any excess must be given to those fellow players who have not yet scored a birdie or par. After all players have received a birdie or par from the player actually making the birdie or par, that player may again count his pars and birdies. This default rule will elevate everyone’s game.
 
The current USGA benefit system will be used for the above purposes, but the term “net score” will be available only for scoring players with benefits of 18 and above. This will ensure that players with a benefit above 18 will post only “net score” against every other player’s “gross score.”
 
Costs: Free, like contraceptives.

Benefits: Unquantifiable, but with lots of zeros.

Dated: December 15, 2012

Kenneth Golftzar

Secretary

U.S. Department of Interior


[1] The activity occasionally generates externalities (i.e, golf balls landing without notice or consent in adjacent properties). The Department is examining the efficacy and efficiency effects of the current deterrent (a one-stroke penalty) in a separate “out of bounds” rulemaking.

Michael S. Greve is a professor at George Mason University School of Law. From 2000 to August, 2012, Professor Greve was the John G. Searle Scholar at the American Enterprise Institute, where he remains a visiting scholar. Before coming to AEI, Professor Greve cofounded and, from 1989 to 2000, directed the Center for Individual Rights, a public interest law firm. He holds a Ph.D. and M.A. in government from Cornell University, and completed his undergraduate studies at the University of Hamburg. Currently, Professor Greve also chairs the board of the Competitive Enterprise Institute and is a frequent contributor to the Liberty Law Blog. Professor Greve has written extensively on many aspects of the American legal system. His publications include numerous law review articles and books, including most recently The Upside-Down Constitution (Harvard University Press, 2012). He has also written The Demise of Environmentalism in American Law (1996); Real Federalism: Why It Matters, How It Could Happen (1999); and Harm-less Lawsuits? What's Wrong With Consumer Class Actions (2005). He is the coeditor, with Richard A. Epstein, of Competition Laws in Conflict: Antitrust Jurisdiction in the Global Economy (2004) and Federal Preemption: States' Powers, National Interests (2007); and, with Michael Zoeller, of Citizenship in America and Europe: Beyond the Nation-State? (2009).

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