Picture of the Day: US Research Universities Still Dominate

Credit: New York Times. Source: O.E.C.D. and SCImago Research Group (CSIC) (forthcoming), Report on Scientific Production, based on Scopus Custom Data, Elsevier, June 2011. Statlink http://dx.doi.org/10.1787/888932485310

Cosmic Order is Restored

Credit: Boston Globe

Growing up with a Bostonian as a father - and one who grew up a short walk from Fenway Park no less - I was always taught that there is only one thing you can count on in life: that the Red Sox will blow it in the end.  Recently this has not been true, they won two World Series in 2004 and 2007.  And while this delighted my long-suffering dad, it was clear that it was also slightly unsettling, as if the sun suddenly started rising in the west.

So it is with great relief that I note that the Red Sox have finally restored order to the universe with a late-season collapse to eclipse all others.  It is as if that are atoning for the sins of '04 and '07.

And this morning I noted with some satisfaction that the sun again rose in the east.  Phew...that was close.

Picture of the Day: Effective Tax Rates

From The Economist a nice chart compiled from a KPMG report on relative tax rates for those earning $100,000:

Picture of the Day: A Three-fer!

Courtesy of the Wall Street Journal's Economics Blog and the Oregonian.

The first is some good news in housing:

Quoth the Journal:

Because of a drop in housing starts and fewer existing homes put on the market, the inventory of homes for sale has been whittled down.

Taken together, the months’ supply of new and existing homes for sale stood at 8.4 months at August’s selling rates, down from a large supply of about 11 months a year ago.

Equally important, fewer homes are waiting to go on the market. This so-called “shadow inventory” consists of homes in foreclosures, those already repossessed by the lender or homes with a mortgage delinquent for 90 days or more.

While we are talking about housing, here is the Oregonian on the latest Case-Shiller numbers showing that Portland home vales remained flat - which is an improvement:

Lastly here is a little snapshot of where consumer spending goes from the BLS's 2010 Consumer Expenditure report.

You can see a cool interactive version at the WSJ.

Tuesday Catch-All

A mashup of randomness from the internets:

1. I must be very superficial, because I attended two of the top ten most beautiful colleges in the nation (according to Travel + Leisure): Lewis & Clark College and Cornell.  And it is probably true about me - I visited both campuses while in the process of choosing schools to apply to and was stuck by the beauty of both. But I also attended the University of Wisconsin and am surprised it didn't make the cut.  True, the campus careens from beautiful to ugly in a heartbeat, but the setting on the shore of Lake Mendota is spectacular. 
2. Portlanders are cheapskates! Apparently the Hollywood district pay-what-you-choose Panera Bread Co. is doing much worse than similar stores in St. Louis and Detroit.  Detroit!  Surely we can do better than the economic catastrophe that is Detroit people. Or maybe Portlanders are just better educated in economics...
3. Pity the poor cocaine dealer.  Apparently Cocaine is a normal or even a luxury good - usage appears to be way down since the beginning of the crisis.  

Opening Day

Classes at OSU begin today and so I am quite busy.  So this is a note to say welcome to new students and welcome back to returning ones.

Class Warfare?

Here is Elizabeth Warren doing a pretty good job at a populist description of the social contract (as she sees it):



I wonder how this will resonate? What do you think, do you buy it? [HT: The Washington Post]

Inequality and Growth: Do We Need the Rich to Prosper?

One of the general themes of the recent debates about budgets is that if we burden the wealthy with a too progressive tax system it will create a disincentive for them to make the kinds of investments that are vital to grow the economy. It is a powerful argument and one with a long historical tradition in economics popularized by Arthur Okun (of 'Okun's Law') who called it the equity/efficiency trade off. It is powerful, but it also appears to be wrong.

From the IMF:

Do societies inevitably face an invidious choice between efficient production and equitable wealth and income distribution? Are social justice and social product at war with one another?

In a word, no.

In recent work (Berg, Ostry, and Zettelmeyer, 2011; and Berg and Ostry, 2011), we discovered that when growth is looked at over the long term, the trade-off between efficiency and equality may not exist. In fact equality appears to be an important ingredient in promoting and sustaining growth. The difference between countries that can sustain rapid growth for many years or even decades and the many others that see growth spurts fade quickly may be the level of inequality. Countries may find that improving equality may also improve efficiency, understood as more sustainable long-run growth.

Actually, I think the verdict is far from in on this one, I am not convinced we have the data we need to settle this question. But the bulk of the evidence points to inequality being more of a drag on growth then a boost.  Certainly there is no good modern evidence to support the equality v. equity tradeoff.

R.E.M.

R.E.M. have called it quits:

"To our Fans and Friends: As R.E.M., and as lifelong friends and co-conspirators, we have decided to call it a day as a band. We walk away with a great sense of gratitude, of finality, and of astonishment at all we have accomplished. To anyone who ever felt touched by our music, our deepest thanks for listening." R.E.M.

A sad day. My wife and I had our first date at an R.E.M. concert in 1989 at Memorial Coliseum. It was a great night and a great concert and the rest - 22 years, a dog and two kids later - is history. Which, of course, means two things:

1. A seminal part of my youth and young adulthood is now gone.

2. I am OLD.

Truth be told the time was probably right - their music of recent vintage has lost that certain edge (e.g. Rolling Stones), still great but no longer transcendent.  They will be missed.

My first ever R.E.M. concert was at the Civic Auditorium - back in the day when Portland was more civically minded (Civic Auditorium, Civic Stadium, etc.) - for their Life's Rich Pageant tour.   Over the years I have caught their shows in many places, the best venue perhaps being Red Rocks in Denver which is incredibly cool.  But I had managed to score fifth row center seats for the concert with my future wife (apparently this was impressive enough that she agreed to a second date) and it remains my favorite concert for obvious reasons.  Besides it was the Green tour and the band were, by that time, incredibly tight and had learned all about arena showmanship.  Big fun.

Comparative Crises

Absolutely essential reading over at the Oregon Office of Economic Analysis blog where Josh updates the Reinhardt and Rogoff data on comparative crises.

He shows this graph which I have also been showing from time to time to give some perspective on the seriousness of the current recession relative to US recessions past.  Ouch:

But how does the current US crisis compare to other serious crises around the world?  Here is a comparative graph:

As you can see, our crisis is not at all exceptional.  And look how long it took the other crises to resolve themselves.  Lost decade, anyone?  Go check out the full post.

Soccernomics: To Be or not To Be

Jere Longman and Sarah Lyall have a very nice piece in the New York Times today about one of the more curious quirks of international sport.  The International Olympic Committee, along with the United Nations, recognizes the United Kingdom as a country for their participation in the Olympics. Thus, athletes complete for Great Britain under the Union Jack for the purposes of the Olympics.  The United Kingdom, however, is an entity for external purposes only, inside the UK are four fiercely independent counties.  And in soccer, the four countries that make up the UK, England, Scotland, Wales and Northern Ireland play independently under FIFA rules.  As soccer is a major sport of all four countries, the national teams are closely related to each country's national identity and pride.

Those familiar with the UK will know that there is a very strong sense of parochialism in Great Britain, where virtually no one considers themselves British in the larger sense, but English, Irish, Scots and Welsh.  The separate identity of their soccer teams is thus vitally important to all the four nations and most fans of Scotland, for example, will actively root against England and vice-versa.  There is also the considerable concern that if Great Britain fields a team at the Olympics, FIFA (despite assurances to the contrary) will stop recognizing the independent national teams of the four UK countries and force them to merge.  So, for the last half decade there has been no Great Britain soccer team at the Olympics.

Which has been pretty much fine and well with all parties involved.  The Olympics is not a major event in the soccer world which has its own international championship: the World Cup.  In fact, to make the Olympics relevant, it has become an under 23 tournament in which professionals are allowed to participate.  But now the Olympics are coming to Great Britain and the prospect of hosting a soccer tournament on British soil without the participation of the British themselves - the inventors of the game - is causing some consternation.  There is a movement afoot to field a Great British team for this Olympics and FIFA have assured the national authorities that their independence as separate footballing nations would not be put in jeopardy if it came to pass.  But few believe it - and anyone who follows FIFA in the slightest will know how corrupt, arbitrary and unpredictable is the governance of the body.

And then comes the players for whom their national identity is sacrosanct, but for whom the Olympics may be their only chance to compete in a meaningful national tournament. This is a tension not easily resolved. Here is a nice excerpt from the NYT piece:

It has also divided players. Some, like Julie Fleeting, Scotland’s career-leading female scorer, have said they will not risk their futures by competing on Team GB. “I am Scottish through and through,” she told reporters in June.

But other high-profile players — including Aaron Ramsey, the captain of Wales’s national team, who plays for Arsenal in England’s Premier League, and his Welsh teammate Gareth Bale, who plays for Tottenham Hotspur — have said they would like to play. (David Beckham, the onetime England star, has also expressed interest.)

“I don’t see why anyone would want to stop a player from playing in a massive tournament like the Olympics,” Kim Little, a top Scottish women’s midfielder, told The Guardian.

One incentive to play for Britain, noted by Bale, could be that the non-English national teams have such woeful international records. Wales, for instance, has only ever qualified for one major international competition: the 1958 World Cup.

But the federations resist and many worry that this will lead to the erosion of relevance for the smaller nations.

Scotland, for instance, already worries that its soccer federation is “by and large forgotten” and that “for many people abroad, England is Britain,” said Raymond Boyle, a professor at the Centre for Cultural Policy Research at the University of Glasgow. Many Scots, it seems, sympathize with Craig Brown, the former Scotland manager who now coaches Aberdeen. “I would rather lose as Scotland than win as Great Britain,” he told The Guardian.

And in Wales, Neville Southall, the national team’s former goalkeeper, told reporters recently that he could not conceive of supporting a non-Welsh team. “The whole point of going to the Olympics is that special moment when your flag goes up,” he said.

“What flag are they going to put up if Team GB win the football? The Union Jack? Well, it’s not my flag; my flag’s a Dragon.”

As a personal note, my grandfather's family emigrated from Scotland to England (and even then the ancestors were probably part of the great Irish migration to Scotland) and then to the US.  My grandfather used to fly the Royal Standard of Scotland, the Union Jack and the US flag at his house in California which made him unusual in his embrace of the Union flag (though perhaps less unusual in the expat community).  I would imagine that WWII had a lot to do with his perspective.  As a veteran of the war, having served in the RAF, I think the experience of fighting off foreign would-be invaders under the Union flag must have an impact.  But perhaps the youngsters have lost this memory and are back to the tribalism of old.  I, for one, think it would be cool for all the young stars of the four countries to play together, but then my family spans Scotland, England and Wales so I don't put much emphasis on national identity.

Okay, so there is not a lot of 'nomics to this soccer post...

Picture of the Day: Portland's GDP and Employment Growth

... was relatively strong in 2010

Q: Why?

Bike-o-nomics: Infrastructure, Part 2

A reader and economist friend e-mailed me in response to my post on bike infrastructure and biking to argue that there is a lot of endogeneity at work with infrastructure as well as politics and socialization.  I agree completely and will discuss each below, but I was trying to focus on a simple point in the post: though many factors are clearly at work, it seems quite likely that part of Portland's exceptionalism is its aggressive push on bike infrastructure.

It is simple economics, reduce the cost of an activity and more of the activity typically happens.  Same thing with increasing the benefits.  Bike infrastructure reduces the cost of biking making it safer (or at least feel safer), reduce car/bike conflicts, decrease travel times, etc.  It may also increase the benefits, for example the Springwater trail which I take to go downtown is a lovely ride and increases the pleasure if the ride (as well as substantially reducing the cost).

But of course it is also true that the more bikes on the road the greater the need for infrastructure and this pressure prompts the city to provide it.  So the causality does not all run one way and I didn't mean to suggest it does.  But the interesting empirical question remains, what explains the fact that Portland has increased ridership so much faster than other cities?

Credit: New York Times

Washington, DC, for example, is a great biking city over-run with young hipsters and in 1990 the proportion of bike commuters is roughly equal. It is realtively flat, the weather is generally conducive to biking, etc.  I lived there in 1993 and enjoyed biking all around.  I would argue that the lack of equal bike infrastructure along with the great subway system makes biking more costly and public transportation less costly relative to Portland.  So while the growth of infrastructure in Portland is partly in response to bikers, the the number of bikers seems to clearly respond to infrastructure investment.

There are also two other feedback loops that were mentioned.  The first is the political one: more bikers means more political pressure that can (and is) brought to bear on local bureaucrats to provide more bike infrastructure. More infrastructure, more bikers, more political pressure, etc.  The second is the social aspect of biking.  The more that do it the safer one feels in doing it as well, the more socially acceptable it is, the more 'doable' it seems and the more fun it is potentially.  However this can also become a cost - bike traffic jams and difficult traffic (e.g. Hawthorne Bridge at 8:30am) can make the commute more burdensome.

The point of the original post is precisely that it is not obvious to me why these feedback loops would be so much stronger in Portland.  They may all be a little stronger, but the increase in bike commuters in Portland over the last decade suggests that this is not a complete explanation.  I suspect then, that it it probably the case that Portland is exceptionalism is due to an above average push for infrastructure.

What I don't know is if my notion of more aggressive bike infrastructure spending in Portland is correct.   The only data I can find in a quick search is from a paper by Jennifer Dill and Theresa Carr of Portland State which includes a table that suggests Oregon was second only to New Mexico in terms of 'average spending per capita for pedestrian and bike infrastructure.' But this is not really informative enough to make the connection to the graph above.

Oregon Unemployment Rises to 9.6% in August

The Oregon unemployment rate is essentially stuck in the mid-nine percent range.  It has been there for five months and this month it inches up marginally to 9.6%.  On the jobs front, the seasonally adjusted payroll numbers rose by 800, following a newly revised July loss of 3,300.  Relative to past performance, construction was down sharply, while professional and business services employment grew more than is typical.  Government employment is off by 7,700 jobs over the last five months while private employment grew each of the last five months.

The local story is essentially the same as the national story: the economy is not creating jobs at the moment, leaving us stuck at the bottom of a very large hole dug by the financial meltdown and subsequent recession.  We just aren't making any substantial progress and as the federal government switches from stimulus to austerity there is little hope of a near-term recovery.

Income and Poverty in the US

I will jump on the same report everyone is talking about: the US income and poverty numbers from the Census Bureau.  It is sobering reading and really captures not just the impact of the current recession but also the slow erosion of the middle class lifestyle in the US.

Here is the New York Times:

The portion of Americans living in poverty last year rose to the highest level since 1993, the Census Bureau reported Tuesday, fresh evidence that the sluggish economic recovery has done nothing for the country’s poorest citizens.

And in new evidence of economic distress among the middle class, real median household incomes declined by 2.3 percent in 2010 from the previous year, to $49,400.

So what we have currently is a tremendous number of US households under extreme stress while at the same time we are cutting social services drastically.

Another sobering statistic:

According to the Census figures, the median annual income for a male full-time, year-round worker in 2010 — $47,715 — was virtually unchanged from its level in 1973, when the level was $49,065, in 2010 dollars.

Bike-o-nomics: If You Build It, They Will Ride

Here is an interesting graph from an interesting opinion piece in the Sunday New York Times about Janette Sadik-Khan, New York City’s transportation commissioner, who has made big waves in NYC for her aggressive push for more bicycle infrastructure.  Whenever anyone talks about urban biking in the US, Portland is mentioned.  You can see why above.

What strikes me about this is twofold: One, 5.8% of all workers in Portland commuting by bike is an enormously large number and the growth over the last two decades is stunning both in absolute terms and in relative terms.  Two, I think it is pretty clear that building bicycle infrastructure works if the goal is to promote more biking, especially commuting.

I bring this up because the amount of city funds devoted to bike infrastructure is a hot button topic these days what with all the budget crunches.  The question of whether infrastructure matters that much is a good one, and this of course does not answer it - we will never know the counterfactual - but it seems hard to argue that this hilly town with lousy weather for six months would have seen the same explosive growth absent the infrastructure.  Look at the other cities listed and tell me what is exceptional about Portland other than the excellent bike infrastructure.  It is possible that lots of semi-employed hipsters account for it all, but I doubt it.

I also think it disingenuous for motorists to complain about bikes getting in their way and the spending on infrastructure in the same breath.  The infrastructure is precisely designed to separate the two.  I was reminded of both the sheer number of commuters and the effectiveness of bike routes the other morning when I was traveling north on SE 12th at about 8:30am and had to wait at a red light at Hawthorne.  The traffic was backed up to SE Clay so I stopped short of Clay to let the bikers pass.  Once the coast was clear the stream of bikers crossing 12th at Clay heading west toward downtown was impressive, there must have been 30 bikes in that one group.  I thought then about how much better traffic is without those 30 cars and how much better traffic is without those 30 bikes competing for space on Hawthorne.

Of course, it would be interesting to see this data plotted against per capita spending on bike infrastructure.   Anyone know if that data is easily available?

Eco-nomics: Hot

Each dot represents a day where temperatures met or
exceeded 100 degrees. (Credit: NOAA)

This summer was the second hottest ever in the US with several states, Texas, Oklahoma, New Mexico and Louisiana, had their warmest summers on record.  So as the temperatures start climbing toward 100 this weekend in the Willamette Valley, just be glad you don't live in Texas.

Picture of the Day: Jobs and Job Seekers

From the Wall Street Journal

September 7

1.  The day Brazil declared independence from Portugal in 1822.

2.  The day the German blitz on London began:

3. A slow blogging day.

Economists Are Not So Dismal After All

Nate Silver has a nice little piece in the New York Times about economists' predictions and the subsequent jobs reports and finds that economists have been routinely too optimistic during this downturn.  See, we are not a dismal lot after all - we are all optimists at heart!  [Actually, it seems to me the verdict is far from clear - just look at his first graph above]

But why should this be so?  Quips about how economists are a bunch of charlatans don't actually hit home here, because we are not talking about accuracy which would cut both ways, but bias which cuts only one way.  I think the problem is that his data come from news reports - economists quoted in the media.  He wonders about selection bias, suggesting perhaps that only the bullish economists get quoted.  I think there is selection bias but not from the bullish economists being quoted more, but from the fact that most economists that are surveyed in such stories are professional business economists rather than academic economists and business economists might have an incentive to be too optimistic for two reasons.  The first is that it might make their employers happy to hear good news rather than bad and these economists are eager to please  the folks they work for and with.  The second is that being rosy might help overall consumer sentiment which helps the firms that employ these economists.

No need to worry about me, however, I am as dismal as can be these days...

Eco-nomics and Newspaper Economics: Solar Manufacturing

This is a post with two themes.  Both are based on the interesting article from the New York Times, which appears on the front page of the Oregonian's Business section today, on the bankruptcies of US solar manufacturers and the growth of the industry in China.  

The first is a theme that I have sounded on before:  I am worried about the future of solar manufacturing in the US and thus I am pretty pessimistic when I hear the rah-rah talk of local politicians about local manufacturers. Don't get me wrong, I rejoice when I hear about big investments by companies like SolarWorld and the jobs they bring, but I am not sure there is much of a future in their presence here unless it is in innovation and R&D and away from pure manufacturing. Perhaps this transition is already happening. I have no idea.  But I know about comparative advantage and right now in solar, China has it.

The second is a theme from this week - the troubling economics of daily newspapers.  I mention this here because of the fact that the Oregonian republished a NYTimes story with huge local implications - which is why, I am sure, they chose it for the front page.  But I can image a time not too long ago when the O would have assigned a business reporter to work the local angle on this.  Go to SolarWorld and get a response, talk to local politicians and get their take, etc.  But today what we get is the NYTimes piece verbatim without any mention of local impact.  

And why I bother talking about newspapers all the time is that these things matter a lot.  Many local politicians, many government development dollars, many state tax breaks have gone into bringing solar manufacturing here.  It is important that the public understand the implications of these decisions and are able to evaluate the decisions on their merits.  I can mention it all here and ponder what this may mean to our local economy, but I am not a reporter and I can't really give you any answers.

US Unemployment Holds at 9.1%

The BLS's August unemployment report is out today and the report makes for some sobering reading.   I am going to quote from the report as it is remarkable:

Nonfarm payroll employment was unchanged (0) in August, and the unemployment
rate held at 9.1 percent, the U.S. Bureau of Labor Statistics reported today.
Employment in most major industries changed little over the month. Health
care continued to add jobs, and a decline in information employment reflected
a strike. Government employment continued to trend down, despite the return
of workers from a partial government shutdown in Minnesota.

Yes, that is a zero. No new jobs. None. Zilch. This means of course that we are losing ground as we need more than 100,000 a month just to keep up with population growth.  And we are worrying about the deficit right now.  Sigh...

Picture of the Day: Productivity and Costs

Source: The Cleveland Fed