Wednesday, August 31, 2011

Mea Culpa

My last post was clearly not as well considered as it should have been.  I apparently caused offense where none was intended.  I was not trying to demean the new reporters at the O, but to point out a part of the difficult current economic times newspapers face.

Anyway, here is a response from the comments that bears reposting here:

Patrick: You are, of course, entitled to your opinion but your post regarding The Oregonian is both demeaning to a talented group of journalists and factually incorrect. Yes, we have taken hits in our staffing as have all businesses the past few years. But there remain many, many talented, experienced and award-winning reporters at the paper, whose work is evident every day. In total, we have far more reporters than any other news organization in the state has total staff. In addition, we have hired experienced, veteran reporters this year as well as the extremely able reporters to which you refer. Calling them children is wrong and insulting. They are not replacements for those who have left; most are assigned to local coverage of communities around the metro area, an area of coverage we have stepped up in the past year. They are all graduates of top-flight universities and journalism schools and skilled in the new technologies journalism requires today. We are fortunate to have them, as are our print readers and online viewers. A blog is a blog, but please report before commenting.

Peter Bhatia
Editor, The Oregonian

And here is my response:

Peter,

In my bloggy flippancy I occasionally speak a little too loosely, and this may be one of those occasions, but I think I was reasonably fair in general. I was, of course, joking about the children and the 16-year old thing, and I apologize if I have caused offense. A blog is a place, in my opinion, where irreverence is part of the modus operandi.

I think, however, that I am pretty accurate in terms of the economics of newspapers these days and I have in the past sounded the alarm. I think we, as a society, will suffer from the decline in investigative reporting if current trends continue. I also often point out that no one should mistake the opinion found on blogs for real reporting and I do not believe that blogs are any substitute for newspaper reporting. Which, is of course, why I worry about the hardship daily newspapers are facing.

Regarding the staffing at the O, I think I was pretty reasonable in saying: " I have no doubt that these are skilled and well-trianed reporters, but they lack the experience and connections of those they replace. It could be that the energy and eagerness of the new crop might make up for this, but I have some reservations." This is a statement of opinion and pretty fair I thought.

I do take your point about the newly trained reporters and new media, it could be that these reporters will be better than ever. It is an interesting question and one to which I have no answer.

The Oregonian is a wonderful local paper and I am a loyal subscriber (and will be as long as there is a paper to subscribe to). I am very grateful for all the great work the reporters and editors do there. I have interacted many times with quite a few reporters from the O and have always come away very impressed. I think daily newspaper reporting is, as I said in previous posts, a valuable public good.

So let me be very clear, I appreciate what all the reporters at the Oregonian do and I sincerely apologize if I have caused any offense, it was not my intent. I am also worried about the newspaper business in general and think that our society needs to think seriously if the free market can provide an optimal level of investigative reporting. That is really the point of my post.

-Patrick

Newspaper Economics

It has been a while since I lamented the decline of the newspaper industry, or more precisely, the decline of quality investigative journalism.  So let me dive in once more.

Anyone who is paying attention could hardly miss the children's crusade that is going on at the Oregonian. After the massive bloodletting of experienced (and expensive) reporters, there is a whole new gaggle of fresh faced (and cheap) reporters who look (thanks to the new little pictures that accompany their bylines on-line) all about 16 years old.  Apparently this is happening everywhere.  I have no doubt that these are skilled and well-trianed reporters, but they lack the experience and connections of those they replace.  It could be that the energy and eagerness of the new crop might make up for this, but I have some reservations.  I think we are losing a huge amount of human capital.

Anyway, what prompted this is a fascinating (and a bit troubling) article on the youth of the campaign press corps in the New York Times:


A group of five fresh-faced reporters from National Journal and CBS News clicked away on their MacBooks one recent afternoon, dutifully taking notes as seasoned journalists from the campaign trail shared their rules of the road.

The journalists were mostly in their 20s, learning the basics: never get too close to a source; master the art of eating while driving; never rely on a hotel wake-up call.

For decades, campaign buses were populated by hotshots, some of whom covered politics for decades, from Walter Mears to David S. Broder to Jules Witcover. It was a glamorous club, captured and skewered in Timothy Crouse’s best-selling “The Boys on The Bus,” about the 1972 campaign.

Now, more and more, because of budget cutbacks, those once coveted jobs are being filled by brand new journalists at a fraction of the salary. It is not so glamorous any more.

By the way, I still link to the NYT frequently despite the paywall (which I pay for) because apparently the paywall is easy to circumvent and, in fact some believe that it is intentionally so.  So those that want to hassle with deleting part of the url can do so and get the content for free.  Here are instructions. But even more to the point apparently if you follow a link to the NYT, you will never hit the paywall. Here is Felix Salmon: "The NYT paywall is so porous that it can be considered to be a genuinely freemium model. If you follow a link to the NYT site, you will never run into the paywall — no matter how many times you do so or how many NYT articles you’ve read that month."

Tuesday, August 30, 2011

Portland Home Values: Case-Shiller June Numbers

Here are the latest Case-Shiller Numbers for Portland:

Portland Metro Area
June 2011 Level: 134.52
Monthly Change: 0.0%
Annual Change: -9.6%

A 0% increase puts Portland at the bottom of the 20 metro areas it tracks and the -9.6% annual change is second worse to Minneapolis.

Here is a nice sortable table from the Wall Street Journal.

Monday, August 29, 2011

Eco-nomics: Fuel Efficiency - There Should be an App

Okay app nerds, here is an idea for a good one (though probably not a profitable one).  Today's fuel efficient cars are fuel efficient in very different ways.  Diesel cars tend to be very efficient at constant revs but less so the revs vary a lot, thus they are great for highway driving, less so for city driving.  Hybrids are the opposite, the electric motor does a lot of the heavy lifting in the city but the gas engine has to kick in on the highway.

So what car is right for your particular driving habits?  A lot of us can make some generalizations about our driving and many might be able to point the car to purchase if our goal is to burn a little fuel as possible.  But there a probably lots of folks like me whose driving habits don't provide a clear cut answer.  For those people I think the new smart phones can provide a precise answer.

The app would be simple, keep track of city versus highway driving by using the GPS function of the phone.  Feed the data into a simple algorithm that computes combined fuel efficiency for your particular driving habits for every car for which the EPA provides fuel efficiency estimates.

Shazam!  Here are your top 5 fuel efficiency choices.

Brilliant! I think I am the second coming of Steve Jobs, perhaps Apple will call...

Thursday, August 25, 2011

Wednesday, August 24, 2011

Bike-o-nomics: Why Lighter Bikes Don't Make You Faster


[I am on a bit of a Felix Salmon kick these days and here is another little gem he uncovered]

From the British Medical Journal an interesting little paper about one person's experience moving to a lighter bike for his 27 mile commute.  He found that it made him no faster.  The entire paper is summed up nicely by the abstract (which is of course the purpose of an abstract):


Objective To determine whether the author’s 20.9 lb (9.5 kg) carbon frame bicycle reduced commuting time compared with his 29.75 lb (13.5 kg) steel frame bicycle.

Design Randomised trial.

Setting Sheffield and Chesterfield, United Kingdom, between mid-January 2010 and mid-July 2010.

Participants One consultant in anaesthesia and intensive care.

Main outcome measure Total time to complete the 27 mile (43.5 kilometre) journey from Sheffield to Chesterfield Royal Hospital and back.

Results The total distance travelled on the steel frame bicycle during the study period was 809 miles (1302 km) and on the carbon frame bicycle was 711 miles (1144 km). The difference in the mean journey time between the steel and carbon bicycles was 00:00:32 (hr:min:sec; 95% CI –00:03:34 to 00:02:30; P=0.72).

Conclusions A lighter bicycle did not lead to a detectable difference in commuting time. Cyclists may find it more cost effective to reduce their own weight rather than to purchase a lighter bicycle.

Salmon wonders what is going on and proffers this theory:
So, what’s going on here? Groves has his own theories, mainly surrounding the idea that big factors, like the weight of the rider and the amount of drag, completely obliterate smaller factors like the weight of the bike and the resistance of the tires. But I think there might be something else going on, too. Here’s Joshua Foer on what he calls the “OK plateau”:

In the 1960s, the psychologists Paul Fitts and Michael Posner described the three stages of acquiring a new skill. During the first phase, known as the cognitive phase, we intellectualize the task and discover new strategies to accomplish it more proficiently. During the second, the associative phase, we concentrate less, making fewer major errors, and become more efficient. Finally we reach what Fitts and Posner called the autonomous phase, when we’re as good as we need to be at the task and we basically run on autopilot. Most of the time that’s a good thing. The less we have to focus on the repetitive tasks of everyday life, the more we can concentrate on the stuff that really matters. You can actually see this phase shift take place in f.M.R.I.’s of subjects as they learn new tasks: the parts of the brain involved in conscious reasoning become less active, and other parts of the brain take over. You could call it the O.K. plateau.

The skill of riding a bike fits perfectly into this scheme. It’s not easy to learn at first, but over time we get better at it, until we’re so good at it that we basically stop thinking about it, and stop trying to get any better than we are. I’m sure that a doctor like Groves has much better things to think about on his commute than his bicycling technique.

As for me I wonder about the folks I see around on weekends in Portland riding super lightweight road bikes. If the objective is to get a good workout, surely you are better off riding an old heavy one speed bike? Ditto commuting. I suppose making it easier promotes commuting, but I have a friend who will go from his downtown office to his Sellwood home via Terwilliger just to get the extra workout. Of course he rides a lightweight road bike. Why not just get an old three speed bike and go home via the much easier Springwater Trail route?

Tuesday, August 23, 2011

Soccernomics: A Tale of Two Sports in New Jersey



The New York Times had a fascinating article on a tale of two stadiums in New Jersey over the weekend.  One, a $34 million dollar stadium built for minor league baseball 13 years ago is a complete flop.  No one goes to the games.  The other, the new Red Bulls Arena is a big success (though, truth be told, the Red Bulls should not have to work had to sell it out, which they still do).

This has a lot of resonance in Portland, given its own struggle with the baseball vs. soccer question.  The Newark experience suggests Portland got it right:

Given the large soccer constituency in the city’s Portuguese and Latino strongholds, did Newark get its demographics crossed and build the wrong field of commercial dreams? Did the city bet on the wrong sport?

A Yankees fan who said his priest’s salary was better preserved by spending a few dollars at a minor league game than paying a small fortune at Yankee Stadium, Kwiatkowski, 54, who has a Roman Catholic parish in Glen Rock, N.J., has attended Bears games because he once lived in Newark’s Ironbound district and hoped that a successful team could contribute to the city’s revitalization.

“I was within walking distance, right over there,” he said, lifting his chin in the direction of the outfield fence.

Within the hour, a multitude of fans “over there,” in the Ironbound, would stream from restaurants on Ferry Street and across a nearby bridge to help pack another area sports facility, the 17-month-old Red Bull Arena, in the neighboring town of Harrison.

While Major League Soccer was growing in Harrison, minor league baseball appeared to be dying in Newark, along with the expensive dream of restoring a slice of its vintage past.

***

Although the Newark-Harrison story is an extreme and somewhat unusual case, it reflects an urban cultural shift on which soccer hopes to capitalize as an emergent and faster-paced sport in 21st-century America. Still enormously popular in many markets, baseball has lost traction with young people, especially African-Americans, with a 26 percent decline in youth participation between 2000 and 2009, according to the National Sporting Goods Association.

“In terms of drawing people, the soccer stadium in Harrison has been a success,” said Rick Cerone, a former Yankees catcher and the Bears’ original owner, who grew up in Newark and lobbied county and city politicians for the return of the Bears, a popular Yankees farm team more than half a century ago.

He acknowledged that misjudgments might have been made about the Newark of then and now.

“Probably the best thing to do would have been a soccer stadium or maybe coordinate one stadium that could have been used for both,” Cerone said. “But, you know, it’s easy to look back.”

The demographics are entirely different here than in Newark, of course, but one only had to attend a typical Portland Beavers game and see the emptiness of a 20,000 seat stadium with less than 2,000 other spectators to understand what a perfect fit MLS has been.

[NB: Ironically, I was clued into this interesting article by Jack Bog who was using it as evidence to criticize Milwaukie for proposing to develop a minor league baseball stadium.  Ironic because he is a vitriolic critic of, well, just about everything, but especially about the re-purposing of Civic Stadium for MLS.  Surely he sees the irony: The Timbers are a runaway success, filling the stadium and breathing new life into what was a dying city asset?  I doubt it, he seems to be almost entirely irony free...]

Thursday, August 18, 2011

All About the Selection

A new paper by Josh Angrist and co-authors shows that top students that went to elite prep schools do no better than top students who did not go to elite prep schools.  In fact, the overall performance of elite prep schools is all down to the fact that they can select.  This is also my take on so-called "successful" charter schools - their success is often a result of selection: motivated families switch their kids while unmotivated ones don't.  Which is another lesson from the good research out there on schools: all the stuff that private schools can offer - nice facilities, homogeneous populations, so called 'rigorous' curriculum and so on, do not matter much in terms of actual academic achievement.  Their success is all about selection.

I refer to this thanks to Felix Salmon, whom I shall simply quote bacause I could not say it better myself:

There aren’t a lot of studies of public vs private schools, but the ones which do exist generally show no difference at all in educational outcome, once you control for the socio-economic status of the kids being admitted. Essentially: middle-class kids who grow up with two well-educated parents and lots of books around the house will generally do very well in school no matter where they go.

Which is why I am always try to be a calming voice to well-educated middle-class parents in PPS who are dismayed at the erosion of support for public education. It is generally not their kids that suffer.

Tuesday, August 16, 2011

Oregon Unemployment 9.5% in July


The new employment numbers are out the and news is dismal.  The unemployment rate is still stuck at 9.5% with only 300 new jobs added on a seasonally adjusted basis.  This means that the Oregon economy has added a total of 400 jobs since February.  Oregon's experience is essentially the same as the national trends which signals a stalled recovery.

Monday, August 15, 2011

Picture of the Day: Credit


A striking picture from the Wall Street Journal.  In some respects it is not too surprising: when jobs are hard to find, many go back to school to get new skills.  The question is, is this increasing debt a bad thing?  Well, if these are investments in human capital that will make our country more productive in the future, no.  But if this money is being spent on areas where the job prospects are dim (e.g. if everyone is going to law school) then, yes.  I think in general, however, that it is not a bad thing to see people investing in themselves rather than things like new cars - it is just that the effects take a while to be realized.

Friday, August 12, 2011

Eco-nomics: Ah, the Weather!


From the NY Times' Green blog, I learn that, according to NOAA July was the fourth warmest on record for the United States.  [Really? Was it hot? I wouldn't know anything about it here in Oregon]

The nation’s average temperature was 77 degrees, almost 3 degrees above normal, and states like Oklahoma and Texas had the hottest July ever, with average temperatures of 88.9 and 87.1 respectively. Oklahoma’s statewide average temperature was the warmest for any state for any month on record.

Temperatures in Dallas exceeded 100 degrees on 30 of the 31 days in July. Over all, 85.4 percent of states in the continental United States experienced July temperatures exceeding the long-term average.

NOAA’s National Climatic Data Center maintains temperature records dating back to 1895.

July’s extreme heat exacerbated the plight of the rain-starved South, leading to conditions dry or drier than those that prevailed in the Dust Bowl of the 1930s. Exceptional drought now afflicts more than 75 percent of Texas; 100 percent of Oklahoma is suffering from moderate to exceptional drought conditions.

***

The area affected by exceptional drought conditions is now the largest in the 12-year history of the United States Drought Monitor.

While the South withered, the upper Midwest and the Gulf and Pacific Coast had unusually soggy summers. California had its fifth wettest July and Utah, Wyoming and South Dakota all got enough rain to place this July on the “top ten wettest” list.

For this fair-skinned, weak-willed and fey economist of English descent, the current summer is as ideal as they come.  So can we just stop climate change right here, because it suits me fine!

Seriously, when do you think it is time to take the threat of climate change seriously? Carbon tax anyone?

Thursday, August 11, 2011

Things I Think About When I Should be Thinking About Other Things

Why don't medical practices of a decent size have on-site pharmacies that dispense the simple stuff?  It seems to me that most of what a family practice prescribes is anti-biotics, why don't they just dispense that stuff themselves?  More exotic and problematic drugs (like narcotics) can be left to the big pharmacies, but it would seem a fairly simple thing to dispense the other stuff.

But as an economist, I figure there must be a reason since it doesn't happen - either with the economics or with the regulation - so what is it?  Anyone know?

Wednesday, August 10, 2011

Economics of Riots

Photo Credit: Matthew Lloyd/Getty Images
Well, okay the title is a classic case of an economist overreaching. There may be an economics of riots - it would probably go something like: each additional rioter lovers the probability of any one rioter being caught, lowering the expected cost, which brings in more and more people for whom the benefit from rioting is lower than for those who would start it all off.  But this isn't really informative and not much different from the social psychology literature.

What is interesting is how these things start.  We know the immediate cause - a questionable police shooting - but are the riots also a sign of pent up frustration with a UK economy that is not providing opportunity for youth and if so are we likely to see it in the US as well?

Perhaps thinks the Wall Street Journal Real Time Economics blog:

Last year, the unemployment rate for youths between the ages of 15 and 24 was an average of 18.9% among Organization for Economic Cooperation and Development countries. High unemployment has played a role in protests in Spain, uprisings in the Middle East and North Africa and, many suspect, the riots in the U.K.

The countries face unique challenges, but the outcome is often similar: Unrest among sidelined youths who find themselves with little else to do amid daunting unemployment.

“This is a very big cohort that you ignore at your peril,” said David Blanchflower, a Dartmouth College economist. Older workers “if they’re unemployed go home and watch the television. Unemployed 18-year-olds go out on the street,” he said.

When conditions were poor for everyone, unemployment may have been easier to cope with, Mr. Blanchflower said. But as economies nationwide slowly recover, young people are growing more aware that their situation isn’t improving relative to older generations.

The big risk for youths is that unemployment early on can carry a scarring effect that impacts their future employment and earnings. Even in the U.S., where youth joblessness is mild compared to the 41.6% jobless rate young people faced in Spain last year or the 32.9% rate for youths in Greece, recent graduates could be caught in a trap where they find themselves earning lower wages for decades. And that could hold true even if they do find jobs.

I think this is also a symptom of societies that are growing more and more unequal. And in the UK, the severe austerity measures under Cameron may be adding fuel to the fire.

Tuesday, August 9, 2011

Credit Ratings, Austerity and Markets

This is essentially what I said on KGW last night, but my take on the whole S&P downgrade is that the S&P action was essentially a non-action.  There is no new information out there that they revealed, they simply gave their opinion about the chance of a US default which is slightly higher now that Washington has revealed a new and higher level of disfunction.  The S&P statement was a political statement, not an economic one.  

So why have markets crashed?  It has everything to do with the global economic malaise and new threat of recession, especially coming from the Euro zone but also created by the debt ceiling deal's new spending cuts.  Cutting government spending in the midst of a recession cuts aggregate demand right at the moment the economy can least afford it.  I think investors are now very jittery as both Europe and the US are on similar trajectories - stumbling economies and new austerity measures.  The future does not look good at the moment.

I think the evidence in support of this comes from the fact that as investors were shedding equities, they were gobbling up US Treasuries, driving the 10 year T-Bill yield to a new yearly low.  This is the very security the S&P just downgraded - which demonstrates just how meaningless the S&P's action was in that sense.

I don't think the timing was entirely coincidental, however, the S&P action was still a shock to a system that is hyper-sensitive right now.  

Finally, I don't think you can take the markets' downturn as any evidence of an impending return to recession and in fact, as I said last night, I don't think it matters whether we return to slightly negative growth or stay with anemic positive growth: both imply unacceptable levels of long-term high unemployment.   

Monday, August 8, 2011

KGW

FYI: I will be on Live @ 7 tonight talking debt, downgrades and depression.

Update: I included the link to the video above.  I got to meet Ron Wyden who was on just before me - which was fun.  I imagined he would have an entourage but nope, just one other person with him.  He struck me as a down to earth, intelligent public servant - not what I expected from a long time member of the US Senate.  

Friday, August 5, 2011

US Unemployment Falls to 9.1% in July

The news that the US economy added 117,000 jobs is welcome indeed. I, for one, was dreading another weak report.  But there was a time when such a number, barely enough to keep up with population growth, would have been a big disappointment.  And in this lies the main problem right now with the US economy - we are not making any forward progress.  To me, discussions of whether there is going to be a double dip recession is misguided, whether we stay at excruciatingly low growth or actually see negative growth is beside the point.  In either case we remain at unacceptably high levels of unemployment and have a significant number of long term unemployed whose unemployment insurance is running out.  Which is why Congress' infatuation with debt and spending in the midst of a historic recession is very very frustrating to me.

But not to be too dismal, there are some very good aspects of the report.  First, it is a huge improvement over the June report which, even at the revised number of 46,000 was simply terrible.  Second, this comes at a time of massive cutbacks in most states so the number is net of all of the public sector job losses which means that the private sector is adding jobs at a reasonably healthy pace.  

For a nice illustration I turn to the New York Times' David Leonhardt who has a couple of nice graphs:

First the decline in government employment:


Next the increase in private sector jobs:

Annual private-sector job growth (blue) vs. population growth (red).
And no, I don't think this has anything to do with crowding out.

Wednesday, August 3, 2011

Debt and Deflation



I am, like many, pretty disappointed in the direction the federal government is taking by charging headlong into austerity in the midst of a very serious economic crisis. Yes, I still call it a crisis, what else would you call it when our economy has almost 10% unemployment for such an extended period?  There is a time for austerity for sure, but that is when the economy is on solid footing, not when it is struggling to gain any traction at all.

If you need any proof, look no farther than the latest report from the BLS on personal income which shows that deflation has returned and wages and salaries are falling. Here is Catherine Rampell of the New York Times on the report:

For the first time in a year, consumer prices fell in June, according to a new report from the Commerce Department released Tuesday. The price decline was driven by energy declines, and is just one month’s data point, but even so, the figure is worrisome. The Federal Reserve pays close attention to this price index (more so, reportedly, than to the Consumer Price Index released by the Labor Department); and you may recall that part of the reason the Federal Reserve engaged in quantitative easing was the threat of a deflationary spiral.

The Commerce Department’s report delivered other bad news, too.

Nominal personal income increased by just 0.1 percent in June — and the increase was due to higher government transfer payments (like unemployment benefits) and capital gains income, not wages and salaries.

In fact, private wage and salary income fell in June.

None of these facts bode well for growth in the third quarter of this year, given that the economy is so dependent on consumer spending. And the austerity measures created by the recent debt ceiling deal look unlikely to make things better.

It is hard to see how moving prematurely to austerity does anything but add a couple of years onto the economic malaise we now find ourselves in.

And to me the entire narrative is discordant: the US did not become the economic superpower because of small government alone, it was also because of things like public higher education, government sponsored research, infrastructure and so on.  So let's talk about investment, not just cuts.