Portland Home Values: Case-Shiller July Numbers

Heading off to the airport, so here is the picture: edging slightly higher in July. Would not be surprised to see it fall again slightly in the Fall.

Slow Blogging Ahead...

Slow blogging ahead, I am off tomorrow for Buenos Aires to attend the 2009 LACEA-LAMES conference. I am woefully unprepared, so lots of scrambling today. Sporadic blogging from BA if I have the time and inclination to follow.

New Poll: Oregon's New Taxes

Tell me how you intend to vote when the referendum to repeal the new tax increses shows up on the ballot in November. Poll closes at midnight on October 31 - Halloween - because taxes are scary after all...

Update: Sorry I had to redo it, Henry in the comments noted my language was a bit off and I agree that I should be consistent with the ballot. And yes, I do know that there are two seperate taxes that are being referred, but I figured I'd keep it simple, if you will be voting for one but not the other, tell me why in the comments.

North and South: The G20

[Photo: Jim Bourg/Reuters]

For decades development economists such as myself have been hoping for robust and sustained development from lower income countries. We have generally been disappointed. But the recent economic success of China, India and Brazil has been encouraging. In the political economy realm there has long been distrust of the countries of the 'north' a misnomer perhaps that came to symbolize the US and Western Europe dominance of the world economy, by countries of the 'south' (which would include China and India - thus the misnomer). The dependency school claimed that the rich countries tilted the playing field to their advantage and deliberately kept the rest poor so as to have access to cheap natural resources. So, for this reason the news that the major economic summit will permanently become the G20 is very welcome.

It is also true that the key to our future health and prosperity lies in being able to carefully assist poorer countries with their development in ways in which their needs are addressed but with greater reliance on renewable energy, sustainable agriculture and the like. It is hard to do this without these selfsame countries having a seat at the table.

This is a very good move.

Beeronomics: Ending Slavery

From an Advertising Age article on the National Beer Wholesaler's Association Show (read: beer distributors):

The convention's liveliest speech came from Boston Beer CEO Jim Koch, who employed the frankness of, as he described himself, a public company CEO "who owns all the voting shares and can say what I want." Mr. Koch's talk covered a range of industry topics. To point out how profitable the U.S. beer market is, he pointed to the $2 billion in cost cuts currently being inflicted upon A-B. "You can take $2 billion out of what everyone thought was a well-managed company," he said. "Imagine being able to piss away $1 million an hour and still being able to get what you need." He also implored wholesalers to abandon strict franchise agreements that make it difficult for small brewers to choose who distributes their beer, not a popular point in a room full of wholesalers. "I believe in the 21st amendment [abolishing prohibition], but I also believe in the 13th amendment [abolishing slavery]," he said.

On another note, as an addendum to my post on fresh hop ales, I found myself at the Rock Bottom recently and they have, on tap, a delightful wrinkle: a fresh hop lager. Very tasty and exceptionally quaffable.

And yes, this is a post of a man with no real time to blog - sorry. Enjoy the weekend!

Economies of Scope and Scale: Pearl Jam

In the heyday of the music business, record labels were important and successful because they could offer two advantages to musical acts: economies of scale and scope.

In the 'old' days getting potential consumers to know about you and your music was very difficult. Big record labels were able to offer a world wide distribution network that worked because the label was able to sign numerous acts and 'scale up' the operation, meaning that they were able to build a huge PR department because of the size of the artist roster and this allowed them to become very efficient at what they did. The also had economies of scope, meaning that they not only got records in stores, provided posters and promotional material, they got the music out to radio, helped artists book venues and TV appearances, and so on, and all of these different activities were mutually beneficial.

The thing is that all of these scale and scope efficiencies were a result of the difficulty of distributing and promoting music. These days the internet and digital music files have almost completely obliterated the source of these advantages and so it is no wonder that the old music industry is in trouble. New bands are using new media more often to reach out directly to fans and to establish an audience. It is still not and easy thing to do by any means, and thus the vast PR shops of the record labels still have a lot of power, but much less so than 20 years ago.

Now established acts are starting to think about whether they need labels at all. In perhaps the biggest move that highlights the shifting economics of the music business the band Pearl Jam has cut the middleman and is releasing an album by itself - in other words, not using a major label. It will be interesting to see if this path breaking approach catches on, for the other thing a multi-album deal on a major label does provide a bit of risk insurance. Consider R.E.M.s five record deal with Warner Brothers in 1996 that paid them $80 million. This was at the height of their popularity and subsequent sales have been disappointing. If Pearl Jam's sales fall short, they are the ones taking the hit, not a big record label.

By the way, the new album is fantastic, in case you were wondering. I even found my way to a Target so I could actually by the physical disk. Call me sentimental but iTunes joust doesn't produce that same level of excitement I remember from my adolescent years where going to the record store and actually holding the album was a source of rapture. Bringing home the album (yes, they were vinyl in my youth) and pouring over the art and liner notes while listening to it was sheer joy. I am also old enough to remember Mother Love Bone at the Satyricon, the Vedder-fronted Mookie Blaylock at the Melody Ballroom and then the overwhelming rocket to stardom that soon followed the release of their first album as Pearl Jam. Boy I am getting old quickly - fun then to have the band playing like a bunch of teenagers on this album, albeit exceptionally talented teenagers...makes me feel young.

Oregon's Recovery: Asia and Exports

This article on the strong rebound in economic activity in Asia is good news for Oregon, whose economy exports substantially to the far east - Japan, China, South Korea and Malaysia accounted for about 32% for Oregon's exports in 2007 ($5.3 billion):

Asian economies slumped steeply when exports plunged during the winter, but most of the region is now rebounding quickly, the Asian Development Bank said in a report released on Tuesday.

The multilateral institution, based in Manila, declared that economic growth in China would be 8.2 percent this year, 1.2 percentage points higher than the bank’s forecast in March, and 8.9 percent next year.

The bank raised its 2009 growth forecast for India to 6 percent, from 5 percent predicted in March, and for developing Asian countries as a group to 3.9 percent, from 3.4 percent.

“Developing Asia is proving to be more resilient to the global downturn than was initially thought,” the bank said in a statement accompanying its semiyearly assessment.

A common factor among countries doing better than expected is that they have been able to offset weak exports by stimulating domestic demand more than anyone expected. Chinese banks have lent heavily, while the Indian government has gone on a spending spree.

Here are the total tonnage statistics for the Port of Portland. Note how 2009 is way down, but August was a strong rebound over the preceding spring and summer months. Not a trend yet, but could be a sign of things to come.

Summers on Schumpeter: Creative Destruction and Growth

An interesting blog post by Larry Summers, Director of the National Economic Council:

During the past two years, the ideas propounded by John Maynard Keynes have assumed greater importance than most people would have thought in the previous generation. As Keynes famously observed, during those rare times of deep financial and economic crisis, when the "invisible hand" Adam Smith talked about has temporarily ceased to function, there is a more urgent need for government to play an active role in restoring markets to their healthy function.

The wisdom of Keynesian policies has been confirmed by the performance of the economy over the past year. After the collapse of Lehman Brothers last September, government policy moved in a strongly activist direction.

As a result of those policies, our outlook today has shifted from rescue to recovery, from worrying about the very real prospect of depression to thinking about what kind of an expansion we want to have.

An important aspect of any economic expansion is the role innovation plays as an engine of economic growth. In this regard, the most important economist of the twenty-first century might actually turn out to be not Smith or Keynes, but Joseph Schumpeter.

One of Schumpeter’s most important contributions was the emphasis he placed on the tremendous power of innovation and entrepreneurial initiative to drive growth through a process he famously characterized as "creative destruction." His work captured not only an economic truth, but also the particular source of America’s strength and dynamism.

One of the ways to view the trajectory of economic history is through the key technologies that have reverberated across the economy. In the nineteenth century, these included the transcontinental railroad, the telegraph, and the steam engine, among others. In the twentieth, the most powerful innovations included the automobile, the jet plane, and, over the last generation, information technology.

While we can't know exactly where the next great area of American innovation will be, we already see a number of prominent sectors where American entrepreneurs are unleashing explosive, innovative energy:

In information technology, where tremendous potential remains for a range of applications to increase for years to come;

In life-science technologies, where developments made at the National Institutes of Health and in research facilities around the country will have profound implications not just for human health, but also for the environment, agriculture, and a range of other areas that require technological creativity; and,

In energy, where the combination of environmental and geopolitical imperatives have created the context for an enormously productive period in developing energy technologies as well.

It is all a nice way of talking about the forces of economic growth. The problem I am having (as are many economists) is where growth is going to come from in the near term. However, I am optimistic that our environmental problems will actually be the genesis of a period of sustained growth through vast improvements in energy usage (efficiency) and generation (renewable energy).

Eco-nomics: Full Information and Efficiency

One of the requirements necessary for a free market to reliably achieve an efficient outcome is full and symmetric information. So this article on a smart electricity grid pilot project is pretty interesting. What this project did, in essence, is give customers real-time information on energy usage from all parts of the house.

Consert attached controllers on hot water heaters, air conditioners and pool pumps and then let customers go online and set targets for their monthly electricity bill. Smart meters and a wireless communications system provide real-time electricity consumption data to allow the utility to cycle appliances on and off to achieve the savings and help it manage peak demand.

The initial results are pretty dramatic: a 20% decline in average energy usage.

Regardless of the 'target' usage, what this system does is provide information to consumers about how much energy they are consuming and how much it is costing them. Not knowing this information apparently causes consumers to use more energy than they would in the full information setting. This suggests that current market outcomes for energy are inefficient (in the economics sense - we are not maximizing societal welfare) and that this inefficiency comes from an asymmetric information problem.

I think what this suggests in general is that if technology can allow consumers to understand the real-time monetary cost of energy usage, some pretty substantial conservation could be achieved, both in current consumption (like the pilot project) and in energy saving investments which, this suggests, would more likely occur if the true cost of energy usage were immediately apparent.

A Mankiw Monday: On Healthcare and Keynes

Greg Mankiw is an economist with whom I often disagree when it comes to policy but nevertheless is someone who I think is an extremely smart and thoughtful purveyor of his discipline. It does not bother me that he often comes to different conclusions in policy matters, for this is generally a matter of opinion about the magnitude of the market failure and the ability of government to correct it efficiently and effectively. I tend to have more faith in government than he and see market failures as a bigger deal, but I always try to continually challenge my own assumptions and reading his take is always useful (and occasionally convincing).

Mankiw is also an exceptional writer and he had two articles in major newspapers over the weekend that are well worth reading. The first, in Sunday's New York Times, is a worthwhile piece on the realities of modern medicine and societies role is its distribution. An excerpt:

An optimist might hope that my doctor, or someone higher up in the health care hierarchy, made a rational cost-benefit calculation on society’s behalf. To figure out whether my treatment makes sense, one would have to weigh the cost of the drug against the benefit of an extended life. And to do that, one would have to put a dollar value on my life — the kind of calculation that makes everyone but economists squirm.

The second is a review of a new book on Keynes by the author of the authoritative three part biography on Keynes, Robert Skidelsky. Skidelsky's new book talks about the sudden and swift revival of Keynes's theories in the recent crisis. Mankiw, writing in the Wall Street Journal, is impressed with Skidelsky as an historian but less so with Skidelsky as an economist. He takes umbrage at Skidelsky's distain for math in economics:

To economists his discussion of macroeconomic theory will seem pedestrian and imprecise. To laymen it will seem abstract and hard to follow.

As an ardent fan, Mr. Skidelsky fails to give Keynes's intellectual opponents their due. In academic circles, the most influential macroeconomist of the last quarter of the 20th century was Robert Lucas, of the University of Chicago, who won the Nobel Prize in 1995. His great contribution to the discipline was to analyze how government policies influence the economy in part through their effect on people's expectations—a lesson that Keynes would likely have appreciated but that early followers of Keynes often ignored.

Yet Mr. Skidelsky chooses to make Mr. Lucas sound like some kind of idiot savant, more interested in playing with mathematical models than in trying to understand how the world actually works. Mr. Lucas, we are told, is following in the tradition of the "French mathematician Leon Walras [who] pictured the economy as a system of simultaneous equations." The very idea is made to sound slightly crazed.

This brings us to the biggest problem with "Keynes." Mr. Skidelsky admits to being poorly trained in the tools that economists use: "I find mathematics and statistics 'challenging,' as they say, and it is too late to improve. This has, I believe, saved me from important errors of thinking."

Has it, really? Mr. Skidelsky would like to think that his math-aversion allows him to focus on the big ideas rather than being distracted by mere analytic details. But mathematics is, fundamentally, the language of logic. Modern research into Keynes's theories—I have conducted such research myself—tries to put his ideas into mathematical form precisely to figure out whether they logically cohere. It turns out that the task is not easy.

Keynesian theory is based in part on the premise that wages and prices do not adjust to levels that ensure full employment. But if recessions and depressions are as costly as they seem to be, why don't firms have sufficient incentive to adjust wages and prices quickly, to restore equilibrium? This is a classic question of macroeconomics that, despite much hard work, is yet to be fully resolved.

Which brings us to a third group of macroeconomists: those who fall into neither the pro- nor the anti-Keynes camp. I count myself among the ambivalent. We credit both sides with making legitimate points, yet we watch with incredulity as the combatants take their enthusiasm or detestation too far. Keynes was a creative thinker and keen observer of economic events, but he left us with more hard questions than compelling answers.

I am like many PhDs of my generation in that I was raised on Keynes as an undergrad (and as a masters policy student) and then disabused of all things Keynes in grad school in economics where the 'real business cycle' school was dominant. To use the vogue term of art, I was taught by a freshwater economist (in this case a Minnesota-trained one). But I also had the very useful experience of having previously taken a graduate level macro class in Keynesian economics which was engaged in just the endeavor to which Mankiw refers: trying to apply modern mathematical logic to Keynes and see if it can survive. [The answer, by the way, was yes, but with some pretty strong assumptions that may or may not be realistic - however the notion is sticky prices and wages is pretty well established now and is perhaps the most important assumption to get Keynes in the modern economic world]

I agree completely with Mankiw in his take on math, it is indeed the language of logic and for that we can all be thankful that it has a prominent place in economics. And just as it can be taken too far, where mathematical elegance is prized above economic insight, dismissing economics too quickly as just mathematical abstraction is equally wrong.

Paradoxes in Economics: The Ultimatum Game

Economics, with its basis in rational decision making, can lead to paradoxical results. One classic paradox is the ultimatum game whereby one player has an amount of money (say $100) and has to make an offer to share some part of it with the other player. The second player can only say 'yes' and both players get the agreed upon shares, or 'no' and both players get nothing. It is played only once.

The economic solution to the game simple: the first player offers the smallest amount possible (say $1) and the second player agrees (as $1 is better than nothing). In the real world, however, this rarely happens - the second player will often say no to too small an offer as the dis-utility of the feeling of being cheated is worth more than $1. [This by the way, just means we have to be more careful when we describe the 'true' payoffs to players and include psychic costs] The first player is also motivated by the positive utility one gets from being generous.

I was reminded of this last night when I watched a wonderful Argentinean movie "Nine Queens." [I have to travel to Buenos Aires for a conference and this was suggested as a good movie to watch to see a little of the city] You can get the gist of the plot from the trailer (though it is a pretty awful trailer - don't worry the movie is very good), but in it there is a scene that illustrates the ultimatum game perfectly. A forger has made a perfect copy of some extremely rare stamps and is ready to sell them to a wealthy collector when he falls ill and is unable to complete the transaction that absolutely has to happen that day. So he calls a fellow confidence man to help him and offers a 50-50 split. The con man realizing the nature of the game says "no: 90% for me and 10% for you." What is the sickly forger to do? 10% is better than 0, so he agrees. Of course the con man should have realized he could have offered only 1%, but perhaps the dis-utility from the feeling of being taken advantage of may have led to a refusal, so he adjusted.

Its a good movie and highly recommended, especially if you want to practice your spanish with a rapid-fire Argentinean accent. [If not, the sub-titles are fine]

The ultimatum game is one paradox of economics, I'll leave you with another classic: why do you leave a tip after service in a restaurant at which you are not a regular?

Can you think of other paradoxes in economics?

Unions and Wage Effects

I am trying to occasionally come back to some unfinished business, today's being another look at the economic effects of unionization. A while back when the Employee Free Choice Act was in the news I promised a series of posts on the effects of unionization. I started the endeavor but quickly lost the plot. So here is another look at some research (here and here) I recently came across that generally confirms the positive effect unions have on wage formation (meaning unions are successful in negotiating higher wages). What does this due to firms, well this paper suggests that it cuts into firm profitability but only the amount of the wage premium. In other words unions are able to negotiate a bigger slice of the pie.

So, again, the evidence seems to square with a overall general characterization of some real wage premiums from unionization and some small hit to overall firm performance. The overall welfare implications of this are therefore unclear.

I think a provocative question for the 21st century is: are unions as necessary in a world in which information is so readily available and switching costs relatively low? And if health care reforms happen that make employees less tied to their firms, will this erode the influence of unions even further and it this a good thing?

Beeronomics & Bikeonomics: The Greatest Thing Ever

Via John Foyston, the greatest thing ever:

That would be Hopworks's Christian Ettinger on the new HUB BarBike.

You got to love it, but I would not want to try and pedal that thing up Powell when full.

Eco-nomics: Another 'Green' Revolution

A few of days ago, Norman Borlaug died at the age of 95. Borlaug was widely known as the father of the green revolution, the advances in crop science that dramatically increased yields in the developing world and averted what certainly would have been numerous mass famines. The obit linked to above does a good job of explaining his importance to the world as well as giving a little time to his critics. In my primary field, development economics, there is little debate about the importance of his work and what it has meant to developing countries. In the intervening half century it is simply mind-boggling to think of how many lives these advances have saved.

Criticisms of the green revolution raise very important questions, however, and it is time that the world start addressing these problems. I think of the criticisms not as attacks on what Borlaug did, but on what has happened in the last 40 years, which is to say not much. But let me back up. The essence of the criticism of the green revolution is that the new crop strains developed by Borlaug and others are highly dependent on fertilizers and pesticides and in some cases extensive irrigation. An effect of this type of farming was the displacement of many small scale family farms who did not have access to these modern seeds and chemicals - leading to the rise of more industrial agriculture in the developing world. Sure the use of petrochemicals and digging of tube wells enabled massive increases in crop yields, the argument goes, but it also has lead us on a path of un-sustainability and has caused environmental damage on a mass scale. [A more subtile criticism, never made directly but euphemistically, is that these advances lowered the cost of babies and thus enabled the population growth of the last 40 years] So going back the my point: I think these advances were extraordinarily important, but since then, there has not been enough work done to try and move toward more sustainable practices and away from chemically intensive farming. With the specter of mass starvation gone, the incentives of the developed world to continue to make advances in this area were drastically reduced.

The new reality of increased population pressures, global warming and depleted and contaminated ground water supplies are going to likely lead to another crisis in the next decade or two and thus another green revolution will be needed, however this time the green revolution will need to be truly 'green' in the modern usage of the term.

Oregon August Unemployment: 12.2%

With a loss of 6,600 jobs, Oregon's unemployment rate rose to 12.2% in August. Still wallowing at the bottom and, as I said before, we could be there a while...

Who is Afraid of Non-Profits?

You may have noticed that I have said nary a word on the health care debate. Not that I think it is unimportant or not worth of my time, but I just have had nothing to add to the conversation. But one thing about the recent debate has really started to annoy me, and that is the idea that promoting non-profit insurance is a threat you the nation's insurance industry. Come again?

There has been a lot written about how for-profit and non-profit health care insurers already coexist and criticism from the left (about how private non-profits are insufficient) and the right (about how non-profits are going to destroy the for-profit industry). Both views are misguided in my opinion.

But first it is useful to remember that there is no prohibition against not for profit businesses in any industry, so if they somehow represent unfair competition, why do we not all shop at non-profit supermarkets, buy gas from non-profit gas stations and buy our TVs from non-profit electronics companies? The answer is, of course, that non-profit does not necessarily mean lower cost and capital flows to where it finds the highest return - so it is the very incentive for higher return that causes for-profits to be as efficient as possible.

So, there is really no reason to expect that promoting private non-profit health care providers will do any serious damage to the for-profit sector. For profits will continue to attract capital that will continue to promote more efficient management.

At the same time there is no real reason to expect that a government run, but self-funded, non-profit would be any better (or worse) than private entities. A self-funded government agency (of which examples abound - I used to work for one nobody has heard of, OPIC, and the reason no one has heard of it is that it runs on its own dime) has no more advantages than a private non-profit, except I suppose the government ensures it presence at the outset. Still, this could happen with the private sector as well fairly easily with well thought out legislation.

I think it is clear, or should be by now, the real problem with the health care system is the incentive for insurers to cherry pick the healthiest and wealthiest leaving the sick and the poor to rely on the public safety net. This costs us all immensely even though it is reasonably hidden-medicare and medicaid are ballooning as entitlement programs and this required the devotion of more and more revenue (tax dollars).

So I don't care if there is a public option or not, but I believe that regulating insurers behavior and mandating health insurance is essential. The whole point of insurance is pooling risk. This is what needs to happen so let's stop quibbling over non-profits.

Eco-Nomics: France Gets Serious About a Carbon Tax

Hooray for France! The Washington Post reports on this very good proposal by Nicolas Sarkozy. The economics of the thing is simple: a Pigovian tax is one that equates the market price of an economic activity equal to its private and social cost resulting in an efficient market outcome.

From the WaPo article:

The tax would be initially based on the market price for carbon dioxide emissions permits, which is now euro17 ($24.74) per ton of carbon dioxide, Sarkozy said. At that level, the government expects to raise euro3 billion, which will be entirely returned to households and businesses through a reduction in other taxes or repaid via a so-called "Green Check," Sarkozy said.

[HT: Greg Mankiw]

Update: Math in Economics

Paul Krugman clarifies his views on the use of math in economics. His take is almost identical to mine: math is a means not an ends. It is an extremely important tool that provides clarity and precision but it is not, in itself, the point. He states: "What I objected to in the mag article was the tendency to identify good math with good work." Indeed.

Krugman: "So by all means let’s have math in economics — but as our servant, not our master."

Beeronomics Update: Hoppin' It Up in Hood River

I got a note from the good folks at the Hood River Chamber that the Hood River Hops Fest has a website with loads of information. From the website:

Featured breweries again will include Gorge favorites such as Double Mountain Brewery, Full Sail Brewing, Big Horse, Elliot Glacier, Walking Man and Mt. Hood Brewing.

Oh yum. Plus, if you go, you'll also be able to enjoy the delights that await you at the Double Mountain Taproom and the Full Sail Pub if you want some more Killer Green or Lupulin, are ready for a different variety of excellent beer or are just ready to sit and enjoy some good eats - you can't go wrong either place.

Beeronomics: Hop Shortage Update

In 2007 the worldwide hop shortage loomed as a potential disaster for breweries. Fortunately, those crafty craft brewers seemed to have weathered the shortage with aplomb. And now some good news: 2009 was apparently a bumper year for worldwide hop production. Why? Good weather and increased acreage that is a result of the recent high hop prices (hooray for markets!).

Expensive hops are partly to blame for increased beer prices. With a bumper crop, hops prices should return to something close to pre panic levels suggesting that we should see beer prices come down as well. However, economists have found that in many markets producers are quick to increase price when costs increase but slow to decrease prices when costs come back down - the classic example being retail gasoline and crude oil prices.

So, brewers, distributors and retailers: how are you going to respond?

Beeronomics: Going Local and Staying Connected

Regular readers of my blog will know that I am a bit skeptical of the net economic benefits to 'going local,' but this is often confused with lack of support. On the contrary, I am a supporter of the local economy, I just think claims about the economic benefit tend to be grossly over-inflated. But, though overall monetary benefits are likely small (and may even be negative), I support the local economy because I am a big believer in the public goods aspect of community itself. I believe that an inter-connected and supportive community reaps huge non-market benefits to all its members. I am also enough of a naturalist (though usually of the economic kind) to relish the ability to connect to the earth and its bounty as directly as possible.

This is why I rejoice in living in Oregon when the hop harvest time arrives. And it has arrived! What this means to you, dear closet economist and beer lover, is an astounding array of fresh, or 'wet' hop beers on offer throughout the state. Now, some purists decry the use of fresh hops as a gimmick that produces mediocre beer as the essence of wet hops are different and much more unpredictable than their dried counterparts. Bah! To me fresh hop ales give me a connection to the land from whose bounty beer is made that is unattainable in regular beers. I love those too, but to be able to taste the raw hop essence that Oregon soil has spawned is a delightful fall treat.

And each year the treats become more numerous. Here is just a sampler of what you can find this year:

John Foyston (who is responsible for these wonderful pictures - I stole them wantonly) is all over the latest Full Sail Lupulin offerings. Normally I save Beeronomics Posts until Friday, but am posting this early so that you know to get yourself to the Pilsner Room tonight to savor John Harris's latest fresh hop magic. Not to be missed (though you will have the opportunity to try them for a while at the pub). John is arguably the grand master of the fresh hop ale (arguably the grand master of northwest brewing, for that matter), and his 2007 Lupulin won Beervana's coveted Satori Award.

[Grower Doug Weathers and brewmaster John Harris at Sodbuster Farm in late August. Credit: John Foyston]

Eugene City Brewery, an affiliate of the Rogue empire, goes one better in the freshness quotient: Rogue grows their own hops and ECB managed to get their hops into the kettle just one hour and 37 minutes after the harvesting from Rogue's hop farm in Independence. Talk about fresh. The first taste is ALSO tonight so if you are in Eugene you can drown your sorrows about having a football team that is all flash and no substance in fresh hop beer! (Okay, that was a gratuitous and uncalled for jab - but it's all right, you can just come on up a bit north if you want to see how a real college team plays football).

Bill at It's Pub Night reports on a first taste of Deschutes' King Cone Ale which is currently pouring at the Portland pub.

The Oregon Brewers Guild has also announced the fresh hop "tastival" schedule: October 3 - Hood River Hops, October 10 - Oaks Park, Portland, October 17 - TBD, Eugene. Oh happy day! I live just a hop skip and jump from Oaks Park, so hopefully I can manage to swing by...

And finally, what hands down is the coolest fresh hop happening of them all (even if it doesn't necessarily yield the 'best' beer of the bunch): Angelo of Brewpublic reports on The Lucky Lab's all-comers hop harvest ... The Mutt is a-brewin'!

And who could resist stealing Angelo's wonderful photograph of this guy. I wonder who he is?...

Are Universities Failure Factories?

The New York Times' David Leonhardt has a provocative piece on the graduation rates of US colleges and universities. The essence is that some universities have pretty abysmal retention rates and that this represents a massive failure of the system. Now, of course, the first criticism is pretty obvious: if you want better graduation rates all you need to do is just lower the bar. A more thoughtful response is given in The Economist magazine's Free Exchange blog. In it the author points out that a lot of economic research has shown that troubles in education start early. So even though students from poorer schools might end up in universities that are lower ranked than ones in which they could have enrolled, their preparation might be very different than students form more wealthy schools - a difference perhaps not well measured by GPA and the SAT.

Looking at the chart above from the NY Times article, less selective colleges do worse than more selective colleges across the board. The explanation for this is not just the level of preparation of students (though I suspect that this has a lot to do with it), but the resources available to students who struggle academically.

I have taught at three very different places: Cornell University, Oregon State University and the University of Colorado Denver (listed in order of selectivity). At Cornell, 'at risk' students are identified before they even arrive on campus, their performance is monitored while classes are in progress and an entire office staffed with full time professionals and a cadre of student tutors are ready to serve these students. Any red flags in performance are responded to by reaching out to the individual student with offers of help. By contrast, poorly funded state campuses like UCD offer almost nothing and most students there are on campus only when they have classes and are juggling full-time or close to full-time jobs. The difference in the average preparation of students for the college academic curriculum is also markedly different. It is little wonder, then, that retention rates are very different across these two campuses. Making more resources available to students will inevitably help, but better K-12 education is just as, if not more, critical in my opinion (though this is informed opinion, nothing more - I'd love to see more data).

[Thanks to commentor Oliver for the tip]

Portland is Stressed Out?

Forbes magazine lists what they consider the most stressful cities in America. Portland comes in at number 14. Actually this is not so bad, the city is dinged especially for its high unemployment rate and dearth of sunny days (where it comes in at #1 with Pittsburgh a close second), but given that these are particularly high we might have expected worse. I don't know, but it seems like the weather is endogenous to a pretty relaxed attitude. So rather than being a source of stress I think of it more as a buffer against stress. Since it is gray and rainy outside, why worry about trying to do too much? Now depression, that's another matter...

[HT: Portland Business Journal]

"Rapid De-leveraging" = Paradox of Thrift

NPRs Planet Money reports on the record fall in consumer borrowing. Americans slashed their borrowing by $21.6 billion from June to July. They go on to state that this represents a crisis of rapid de-leveraging. But while this might be a new and fancy-sounding term, it is nothing new: this it the same thing as the paradox of thrift. Individuals that increase savings are considered to be doing a good thing, but when everyone in an economy does it at the some time it can cause a big drop in consumer demand. As consumer spending represents about 70% of the economic activity in the US economy, this can be a painful adjustment process. What this report shows is that we are still well in the process of this adjustment and thus we should not be looking for a robust recovery any time soon.

Why You Should Be an Economics Major

For those of you getting ready to go off to college (perhaps to OSU) and still wondering what to study, here are some data:

Best Undergrad College Degrees By Salary

Methodology Annual pay for Bachelors graduates without higher degrees. Typical starting graduates have 2 years of experience; mid-career have 15 years. See full methodology for more.

See the full report here. HT: Greg Mankiw, who notes that this is not necessarily value-added since it does not control for self-selection. For example studies have shown that more attractive people do better in the job market and everyone knows that the most attractive college students are always the econ majors. Oh, and it also does not account for people who got a degree in these fields and are unemployed. So, for example, Aerosopace engineering may be incredibly lucrative, but only for those who can actually land a job (get it? ... 'land' a job ... I crack myself up) - jobs are scarce. So, you'll be happy to know that the employment rate for econ majors is very good.

And what can you do with your degree? Here is a list of the most popular choices and the median salary:

Popular Jobs for Economics Degree

Methodology Jobs ranked by popularity among graduates. Annual pay for Bachelors graduates without higher degrees from all colleges. See full methodology for more.

Tuesday Notes

Paul Krugman had a very nice essay in the NY Times' Sunday Magazine about how the economics profession missed the current crisis completely.

One of his theses suggests that mathematical fireworks became more important than the utility of the models themselves. Paul is the perfect person to make this claim: his work is delightful in that it is amazingly lucid and insightful with sparing use of high-level math. Try and publish some of his same seminal works today and you would have trouble - "too simple," referees would inevitable say. And yes, this resonates with me as I strive for the same simplicity in my theoretical work but sometimes wonder whether I should dress it up will a bunch of useless math. And I can't tell you how many papers I have received to referee from good journals that have pages and pages of math and proofs all to make a simple point that could have been made with one simple algebraic equation. That said, the introduction of serious math into economics has been hugely beneficial - allowing for precision and insight that would have not been there in its absence. But like anything, there can be too much of a good thing, however, it is this pushing of the boundaries, however, that enhances the profession overall. I don't think that Paul would argue for less math, just more attention to what it buys you in terms of insight and a much lower reliance on the rule of thumb that more math means better economics. In fact, I think it is more likely that the opposite is true.

Also in the NY Times, a nice article about how stimulus spending is being dwarfed by state level cuts (in this case in education), something I have talked about before. Having just returned from dropping my child off at his second grade classroom that is overstuffed with little bodies, I can relate.

Eco-nomics: Dense Living = Green Living

Via the Oregonian comes news of this new study on the correlation between driving and density. Portland, Oregon was used as the primary case study for this analysis. From the Oregonian story:

"The evidence indicates that Portland's policies to steer growth into more compact, mixed use development have paid off, not only in revitalizing the downtown and many of its neighborhoods, but also in changing travel behavior, the primary concern of this study," the report says.

Portland-area residents drive 17 percent less than the U.S. average, because denser development provides shorter travel distances and higher mass transit use reduces driving. From 1993 to 2003, the region's mass transit ridership grew 55 percent and housing density grew 18 percent, while the population grew 21 percent.

Now, I believe that dense living is easier on the environment and I have reported on some careful economic studies that have shown this to be true (at least in the form of apartment towers). And I am also pretty sure that dense living cuts vehicle trips for the very simple reason that you don't have to go as far when all the amenities are around you. But as I have said many times you have to be careful about making causal statements from correlations. In this case it is impossible to deal appropriately with self-selection.

Here is an example - a statement that says something like "based on the evidence from Portland if all people in the US lived in equally dense areas we would see an overall drop in vehicle miles travelled of similar proportion to Portland." But this would be incorrect. Many of the people that live in inner SE Portland have chosen to live there because that area matches their lifestyle preferences. They are already predisposed to walking, riding a bike or taking mass transit. If you were to take the average Happy Valley resident and move them into the inner SE, you would likely see a decrease in driving but of lesser proportion to the overall average difference between Portland and the US.

I say this not with the intent of debunking the report or its findings, for it seems rather careful about this precise problem. Rather, I say this with future users of this report in mind. For if we are going to get serious about promoting density, we need to be exceptionally clear and accurate about its social welfare benefits. Overstating them is not useful in the long run (to this academic, at least - I suspect my more politically minded friends would disagree).

US Unemployment Rises to 9.7%

[Charts from the BLS press release]

The latest jobs report is out and the numbers are just about exactly as expected, the US August unemployment rate stands at 9.7% and the number of job losses is at 216,000. Job losses continue but the rate is falling and the unemployment rate is hovering in the mid 9 percent range. There are some rays of hope now - increased industrial activity, Europe and the Far East recovering a but more quickly than expected, and stimulus money that is finally finding its way into paychecks - that should help the situation. But consumer confidence remains low, retail sales are weak and the housing sector is and will be depressed for some time.

All of this points to an ending of the free fall but a long time digging out of the pit. I am optimistic that nationally we shall avoid double digit unemployment and the 13% level in Oregon, but I am prepared for a 2010 that has a stubbornly slow rate of growth, especially in employment.

Blog/Stimulus Update

Sorry, slow to no posting this week. This is the last week of summer for my kids and I am devoting this week to them.

In the meantime, here is a nice Wall Street Journal article about the effects of the stimulus package.