The Fish and Chip Shop

The Fish and Chip Shop owner Mick Shillingford was kind enough to comment on my post praising his business. Here are his thoughts, hoisted from the comments:

Thanks for coming to the fish and chip shop! Here's a quick update. I'm expanding the dining area (within the next 30 days) so seating room should double. Also I applied for a beer and wine license. People like beer with their F&C yes? Soon hopefully. The cod is fresh year round, I buy true cod over ling, the halibut season started last week so I have fresh and previously frozen right now.(not sure what you guys tried) The market price for fresh is up a little right now. I'm told due to the volcano and the weather in alaska. But it should drop back down soon. ... Also fyi the portion sizes went up, we stopped using lettuce for garnish and switched to green checkered paper. Our menu also has fish and chip combos now, as well as our ala carte menu which seemed to just create confusion. I'm sure as we grow there will be more changes to improve service and quality. Thanks for all the great comments on the F&C. Much appreciated! See ya at the chippy!

A few notes in response:

One, the picture I grabbed from this article (and should have credited, sorry!) because it was pretty and I forgot to snap a pic or two. What I really wanted was a closeup of the storefront, but alas, the internets failed me. Anyway, the lettuce garnish was indeed absent from our plates (which is a good thing, because then you feel guilty that you are not eating any leafy greens - unless you want to eat the leaf under your chips...).

Two, the service was great - fast, friendly and casual. They also have a great kids menu and my son had a good time coloring Mikey the Fish. I am not a professional restaurant reviewer so I don't tend to think about all the stuff I should cover.

Three, they had a great flat screen TV showing football (er, soccer) - it was a Barca v. Mallorca replay when we were there. Learning that Mick hails from London however raises the ugly spectre that it is entirely possible that he is a Tottenham supporter, which, if true, would be too terrible to contemplate... Say it 'aint so Mick! Of course my Grandad thought I must have been switched at birth for supporting Arsenal and not his beloved QPR so there you go.

Fourth, the news that you might soon be able to enjoy a beer with your fish and chips is too wonderful to contemplate. One wonders how far Mick will go to stock British beers given his superhuman efforts to stock British soda. The thought of a good fish and chips with a pint of Theakston's Best Bitter? Oh the rapture!

Hmmm, I am hungry again....

A Better White Stag Sign?

From The Oregonian: Randy Leonard's proposed design.

Portland Housing Market: Case-Shiller January

Last week I posted on some interesting data from the OFHEO. That data showed a modest gain in January home values. Today the Case-Shiller numbers came out for January and they show a steep decline. Here is the graph for Portland, Seattle and the 20 city composite:

What explains the discrepancy? Well, the OFHEO numbers could just be an error (they are preliminary and are subject to revision), or a statistical anomaly from the fairly low home sales in January, but it could also reflect the key differences in the two indices. The CS data are for 20 major metropolitan areas and include all houses of any price. The OFHEO is for both urban and rural areas and include only houses with conforming loans. So if it is expensive houses and urban areas that are driving the downturn in average home values in the US, this could different numbers in the two indices. But these are so different, I suspect the OFHEO data is an aberration.

These are for January and what will be key is to see how home values are responding to the current fed programs and low mortgage rates. What will the March through June numbers look like in other words? Given the dismal employment picture I am not too optimistic

Is Economic Growth Good or Bad?

On April 13th I will be participating in a City Club of Corvallis discussion about economic growth and development and whether it is a good goal for a city like Corvallis. In preparation for the event, John Sechrest, the Economic Development Specialist for the Corvallis-Benton Chamber Coalition, has initiated a preliminary discussion between me and Rob Dietz of the Center for the Advancement of a Steady State Society. The first exchange was about setting the table, defining growth and its implications. Here is a slightly edited version of the first exchange:

Rob Dietz

A large part of the problem with economic policies today is that governments, businesses, and citizens have confused the concepts of"economic growth" and "economic development." Pursuit of economic growth has become the top priority of virtually every nation in the world, and this priority, in turn, affects policies at all scales of society -- from states to regions to cities to communities.

Economic growth is not an end, but rather a means to an end. We are not interested in growth for growth's sake, but presumably to achieve a higher level of individual and societal well-being. Before we can decide whether economic growth is a good way to increase well-being,we need to agree on the meaning of economic growth.

The most policy-relevant and publicly resonant definition of economic growth is increasing production and consumption of goods and services, indicated by rising GDP. Some definitions add a few more words, but they tend to be more convoluted. Instead of "increasing production and consumption," they use phrases like "increasing capacity to produce and consume" or"increasing value of goods and services." Regardless of the phrasing, economic growth boils down to more quantity of more things. For a colorful definition, Brian Czech writes in his book Shoveling Fuel for a Runaway Train that economic growth means "more MacDonald's and Antoine's, more Fords and fiats, more jeep trails and ship sails."

Here are a few definitions from various economic authorities... [He describes them , but for brevity I'll just provide the links]
http://canadianeconomy.gc.ca/english/economy/economic_growth.html
http://www.worldbank.org/depweb/english/beyond/global/glossary.html
http://www.minneapolisfed.org/glossary.cfm#e
http://www.finance-glossary.com/define/economic-growth/12811/0/E
http://www.bloomberg.com/invest/glossary/bfglose.htm

All of these definitions have at their core the concept of quantity. Economic growth is about quantity. Economic development, on the other hand, is about quality. A well developed economy is one that meets peoples needs and provides a high level of well-being for citizens. If increasing quantities of goods and services help achieve that goal, then pursuit of economic growth makes sense. If growing bigger does not help society get better, however, then pursuit of growth is wasteful and potentially hazardous.

Patrick Emerson

All of the definitions of growth are acceptable to me (they are all essentially the same), but the key to all of them is this: growth is about creating more value per person. With that additional created value a society can afford to do more things: more medical care, more and better schools, fund parks and arts and cultural institutions, etc., etc..

Suggesting that growth is about using and consuming more quantity of more things is a bit misleading. Growth is about producing more value - not just about making more material stuff. For example, if someone is good a singing songs and other people find it enjoyable to listen to those songs, the singer can create value by performing in a cafe and charging admission. This activity has created more value where there was not before and thus can caused economic growth to happen. It has also increased both production and consumption, by the way.

The point is that growth and resource depletion are not inexorably linked. Yes, the industrial revolution and growth in the 20th century is closely linked with resource depletion, but future growth will have to be different - it will be driven by increased productivity much more than resource extraction. In fact it is in economic growth that hope for the future rests - without major improvements in things like energy efficiency the future is not so bright. But every increase in average energy efficiency is an increase in growth.

I agree completely that economic growth is a means to an ends and not an ends itself. But these ends are critically important. John [Sechrest] mentions some of the worldwide metrics of the human condition, here is another one: for the almost one billion people that live in the "Low Human Development" countries, life expectancy is 53 years old. Much of this is due to the fact that many of these people do not have access to clean drinking water and basic medical care.

Here are some more statistics (from 2003):
•826 million people do not have enough food
•1 billion people have no access to safe drinking water
•2.4 billion have no sanitation
•10,000 children die EVERY DAY from diseases caused by contaminated water

Some of this is due to political reasons, but most of it is due to poverty. And while growth will not automatically cure these ills, it provides the means to do so. Without growth in these countries there is virtually no hope in improving the lives of the citizenry.

Locally, we have problems with poverty, malnutrition, inadequate access to medical care, under funded schools, etc. I can't imagine that most local residents are satisfied with the way things are and the way to improvement in these areas is through future economic growth.

So I think that growth is not the point but the means to the ends, and in the same vein growth is not the enemy but the friend as long as it is done right. Growth can be dumb or smart, and no one wants dumb growth, but smart growth is the way we can create the town, the state, the nation and the world that we can all be happy with.

What do you think?

Beeronomics: Recession Proof?

The Portland Business Journal is reporting that Widmer-Redhook lost $33.2 million in 2008.

From the article:

In the [annual] report, the company said one-time charges related to the merger, the economic environment and fuller-flavored offerings from big-name domestic brewers have sliced into the company’s sales.

This is the first place where I have seen it said that offerings like Budweiser’s American Amber are starting to cut into craft brewer's markets. I hope this is not a reflection of the market, which only turned really grim in late 2008. As 2009 is horrendous, this would be very worrying for the state of craft brewers if it represents a general trend.

Fish & Chips: The Verdict....So Far

[Note: Spring term begins today and I am in scramble mode after a spring break entirely consumed by illness. The tally: two double ear infections, one viral chest infection, one pneumonia, two colds and counting... Anyway, this is just to say a quick post on F&C (which the pneumonia kid got as a treat) and more blogging tomorrow - I hope]

Well, my search for authentic British fish and chips is over: the perfectly titled "The Fish and Chip Shop" on N. Killingsworth in Portland is a marvel. Absolutely perfect fish and chips in every way and lots of other gastronomic wonders from the Old Country like scotch eggs and, my favorite, Irn Bru soda from Scotland!

Both the fish and chips were exceptionally well done and you have a fine choice of fish. My son and I had the Cod and the Halibut to compare and we both decided, surprisingly, that the Cod was better.

One caveat, this is true British style fish and chips, meaning the batter is thick so as to make the fish finger food. If you are looking for lighter batter necessitating the use of a fork and knife, the pub route might be a better choice (and if you want beer - The Fish and Chip Shop does not serve alcohol). My current front runner on the pub front is the New Old Lompoc's Oaks Bottom (and perhaps it is the same at all of their pubs). The Fish and Chip Shop is a very small place and seems reasonably busy so a call ahead for take-out is probably a good option. But this is truly it: the holy grail for fans of British fish and chips. I look forward to taking me mum there on her next visit.

Enjoy.

Unions - A Mea Culpa and an Anecdote

I have been trying to get back to my unions posts but it has proved more difficult than I anticipated.  I have tried to find some general overview article of the JEL type or some relatively recent paper that presents some convincing and wide ranging evidence, to no avail (but have not had much time to look).  Instead there are a multitude of (mostly older) papers that are hard to generalize but about which I think I can make a few statements.  Call them what, stylized facts?  Unions tend to raise wages and this effect is more pronounced for lower skilled workers.  Unions can also lead to rigidity that cause more unemployment (though this is buy no means a general result at least in my investigation).  Unions have no clear implications for the profitability and success of firms - I have found research that have found both positive and negative effects.  I hope soon to be able to find some time to discuss this in more detail.   

In the meantime, thank you for your comments.  Many have shared personal anecdotes, so I'll share mine:

When I was a UPS delivery person and was still relatively new, around Christmas (Dec 23), I was given a rental truck with hastily lashed 'shelves' that was literally stuffed to the roof with packages in only a minor semblance of order.  I was out until 10pm delivering these packages and at about 6:30pm I finally unearthed a series of packages for a medical office that was now closed given the hour of the day.  This is a cardinal sin at UPS - you make an attempt on every package in your truck and never, ever miss a business delivery.  But I had no control over this.  Anyway, I finally return to the UPS facility exhausted, not having eaten anything for ten hours. I was the last one in and the supervisor (whom I had never met as he was the overnight super) gave me a dressing down for the unattempted packages in my truck.  I gently suggested that if he had seen my truck in the morning, he would understand that it was overloaded and that I had done a pretty good job delivering as many packages as I had.  

So that was bad enough, but when I got to the locker room the union rep came in to tear into me for staying out too late.  All I could do was laugh.  

Now, he was trying to do me a favor, as a new guy, he wanted me to know that I had the right to return earlier and not to let UPS take advantage of me. "No one stays out past 9, said he."  But at that moment I was not interested.

Anyway, are the Teamsters good for UPS and its workers?  Well, I knew that (then, at least) I got paid much more than drivers at FedEx and had fantastic benefits.  Though I also noticed that FedEx workers were always pretty casual and unsweaty - in stark contrast to my haste. UPS was a very successful company and was always on the list of great companies to work for.  They aggressively promoted from within and they tried to stop me from quitting by promising that I would not be in a truck for long with my degree in economics - so clearly they thought of their employees as a long-term investment and wanted to keep them, which is a good thing.  There is also a 3 month probation period during which UPS aggressively weeds out those who cannot cut it which is a part of the union contract.  So in general, I think it is a pretty good model for a successful union shop.  But that is from a pretty small observation period.  As an economist I am trained to be suspicious of such rigidities, but the information asymmetries and job-specific investments present in the UPS example seem to provide a pretty good justification for unionization.  

Just a thought...hopefully more data to follow.

Portland's Economic Malaise as Seen by The New York Times

Peter S. Goodman of The New York Times brings us this article about how the economic downturn is affecting Portland and he does a nice job tracing through some of the interconnections that characterize the economy.

I think he overstates the demand side, however, people can only withhold spending so much and for so long -  which is why the initial fall into recession can be quite steep, but recovery can too.   But for a recovery to be relatively quick and robust, we must have a well functioning credit market.  Hopefully Geithner's plan will pay quick dividends - I am skeptical, but am willing to give it a chance.

Economist's Notebook: The White Stag Sign Redux

Randy Leonard has suggested that the city condemn the "Made in Oregon" sign and take ownership of it to prevent the University of Oregon from changing the wording of the sign. I have blogged about the public goods nature of the sign before: there are good economic reasons for public control over the sign as it is something that affects all Portlanders.  Bravo to Commissioner Leonard for being a good public steward and boo to the U of O for being a bad citizen.  Their hubris is unbecoming and unhelpful.  

The O suggests that this is a strategic ploy to come to some sort of compromise.  I hope not, the sign should either be a public property or it should go away. 

Beeronomics: Back to the Future?

The craft beer cognoscenti often talk about how the new craft beer movement in America is a return to the past where breweries were decidedly local (and perhaps reflected local tastes though most beers were pilsner style beers imported by german and eastern european immigrants).  I agree that the local brewery is a return to the past, but the localization of breweries in the late 19th and early 20th centuries was largely a consequence of the difficulty of transporting a bulky and heavy product.  The modernization of transport, especially post WWII, in my mind at least, was a major factor in the consolidation of brewing which was able to exploit economies of scale in all aspects of the industry.  But of course you loose something in the process: variety (such as it was).  

But this supposes that there was a lot of variety in local markets prior to the great consolidation.  I suspect not, for the very same reason that led to the creation of local breweries: transportation was costly.  On most local shelves in the US in the early 20th century, I suspect, was a choice of only a few locally produced beers. 

So really then, we are currently in an unprecedented era where we now have a dizzying array of beer choices available to us in our local stores.  I used to buy Rogue in Ithaca, NY, and in Portland I can find obscure Belgian beers, microbrews from all around the US, and tons of special brews.  What does it all mean?  Well, for one, we can identify regional tends in styles and flavors more readily and as producers try and distinguish themselves in a crowded marketplace the incentives are probably to try and produce more and more unique beers.  

Which is the point of this rumination: the rise in specialty brews (things like Deschutes' Dissident, Full Sail's Slipknot, etc.) is part and parcel of this newly crowded marketplace.  I think breweries are finding it ever more important to create some buzz and attention through the creation and marketing of these brews.  It is a wonderful trend for the beer enthusiasts, but is also a sign of an industry that is still evolving.  I think a lot about where it will all settle (e.g. how many breweries can the market sustain), but I suspect that this is an industry that will always have a lot of churn - many new breweries starting up and many old ones closing.  This is not necessarily a bad thing, it means lots of constantly changing variety.  Or perhaps the big brewers will successfully capture the market by introducing their own micro-style brews, it all remains to be seen and is pretty fascinating.  

Okay, so in the final analysis this post is pretty aimless, but this is what happens to someone shut in for over a week with sick kids.  Hopefully it makes a little sense.

Fish and Chips Update

Thanks for all the good advice about places to try fish and chips.  Today, on a lark, I tried the Oaks Bottom Public House which is a part of the New Old Lompoc empire.  Good thing too, the fish was perfect: light crispy batter and juicy steaming fish inside.  I was the only person at that time ordering food, so my order came right away and it was clearly the only thing the kitchen had going on, so it is possible that the quality will decline with a busy kitchen, but this time at least it was done perfectly.  The chips were good as well, however they were seasoned with paprika, I think, or perhaps cayenne pepper, so that was a bit weird and took away from the fish a bit, but I grew to like them.  Presumably all of the Lompoc locations offer the dish, so it is worth a try in my opinion. 

In my F&C post, commenter Mick points me to this outfit:

Go to "The Fish and Chip Shop" 1218 N. Killingsworth St. www.thefishandchipshop.com and your search will be over.

I had just read about this place in Portland Monthly Magazine and I had it in mind for today, but sick kiddies kept me close to home.  So I will get there soon and report.  

The Oaks Bottom, to their great credit, has kept a few rotating taps and today they had the Russian River 'Damnation' on tap.  This belgian style ale has received a lot of attention but I found it strange and antiseptic, so I went for the Diamond Knot 'Industrial IPA' which was pretty good and yet another hugely hopped beer of the type that I keep running into (and good for post tax prep cleansing).  

The Oaks Bottom also played a steady stream of late eighties pop/rick and, perhaps depressingly, I found I knew every word to every song.  

Home Prices: Some Good News?

I am not so excited about home sales data, housing starts or median prices, but I am cautiously optimistic about this: the latest OFHEO data on home prices using repeat sales data shows an uptick in home values from December to January for the US as a whole (1.9%) and for all regions but the Pacific. What explains this? Well it could be an anomaly - sales were scarce and this could cause results that do not represent an overall trend - and it could be the lowering cost of mortgages along with some pretty cheap homes. Who knows, but it is better than another bad report in any event.

We will know soon whether this is a robust result when the other repeat sales data index, the Case-Shiller, releases the January numbers next week.

Beeronomics: Death and Taxes and Beer

Well I am not dead, so I guess I had better turn in my tax forms. As I am not enjoying Bend and Mt. Bachelor as was the plan for this spring break and am instead dodging nasty germs that my sick kids are constantly releasing into the stale air of my house, I figured I might as well do my taxes.  But now that they are done, my thoughts turn to beer.  This begs the question, what is the best beer to have post-taxes? (And this year I don't owe any extra taxes so I don't have to go the malt liquor route to drown my sorrows, in fact I can be a bit profligate since I get a modest refund - permanent income hypothesis?, pah!)

Well, I had to go to the local Safeway for a prescription (see: sick kids, above) I figured I'd pick up some post-tax filing celebratory beer.  Unfortunately, Safeway's beer selection is the worst in Portland, but I figured that among the many Widmer beers they sell would be the new 'Drifter' that I am eager to try.  Nope.  Dang.

But aha! Salvation.  Of all random things they have a 22oz-er of Deschutes' hop bomb 'Hop Henge,' this is a perfect post-tax beer.  A huge beer that will nuke your senses and rid you of that bad tax after-taste.  I find 'Hop Henge' and the similar 'Hop Lava' from Double Mountain a wee bit much, yet I still enjoy them immensely and they are perfect for certain situations (and this is one).  I love hops, but these are intentionally out-of-balance for the serious hop heads, so beware should you go looking for that perfect post-tax beer.

After my Hop Henge, all the nasty memories of the Form 1040, the Schedule A, the Form 2441, the Schedules SE and C-EZ and on and on and on fade away and my consciousness is transported to Bend - where I was supposed to be all along.  Thanks Gary and the Deschutes crew! [BTW, be nice to my brother who is in the brewing program at UC Davis and going to be doing an internship with you in April]

So, what is your choice for your "Thank God I am Finished With My Taxes!" beer?

When Life Interrupts...

I did not expect to be blogging much this week, it is spring break for OSU and public schools and we were supposed to go to Bend for a little R&R.  Well that all got torpedoed by illness that started in one kid and passed to the other.  It looks like we are finally all on the mend.

But last Thursday, when it all started, I was scheduled to go on the Bob Miller Show on KPAM to discuss some small yet positive signs in the economy.  Unfortunately I got stuck at home with a sick kid and so I called to cancel, but they wanted to do it with me anyway from my home.  Well, I tried, and for a few minutes it worked, but then my sick child came looking for me...  The result was terribly embarrassing (I am sorry Bob!) and the entire time I was very distracted so I can't imagine I was very coherent.  But you know, life is what it is and sometimes we have to roll with the punches.  It is what being a parent is all about.

Why Study Economics?

As an undergraduate at a small liberal arts college (Lewis & Clark), I studied economics.  I am very glad I did, but when I think back about the things my undergraduate education provided me that I find particularly valuable today, it has little to do with the specific economics content and more to do with the well-rounded liberal arts education in general.  First and foremost, the amount of writing I had to throughout my undergraduate career was invaluable.  As I progressed through graduate school at Wisconsin and then Cornell, I found that my comparative advantage in writing was pronounced and helped me succeed.  As a research economist, I have come to appreciate that, now matter how good the underlying research is, a research paper is only as good as the writing.

I also appreciate the exposure I got to many different ways of viewing the world.  L&C at the time had a core curriculum that emphasized critical thinking and I took courses in many different subjects that forced me to first understand how each discipline analyzed the world and then think critically about this particular way of looking at the world.  These writing and critical thinking skills formed the bedrock of my education, without which subsequent investments in my education would have been worth a lot less.

But that doesn't mean I regret being an economics major, in fact the opposite it true.  In addition to being a subject that interested me, Economics taught me to think logically and precisely.  When I started to focus on international development, I appreciated this level of intellectual rigor for a subject where there was an endless supply of 'good ideas' but a dearth of critical analysis.

This is all to say that I think this article in the Chronicle of Higher Education by David Colander about the popularity of the economics major at liberal arts colleges has it just right. [HT: Greg Mankiw]  In it Colander makes this statement:

Companies like to hire economics majors from liberal-arts colleges not because the students have been trained in business, but because they have a solid background in the liberal arts. What I hear from businesspeople is that they don't care what a job candidate has majored in. They want students who can think, communicate orally, write, and solve problems, and who are comfortable with quantitative analysis. They do not expect colleges to provide students with specific training in business skills.

I try and tell my OSU students this, but most choose Business anyway as they see it as a more useful major and a lot easier.  It is true that the econ major is hard, at my last job the economics department had the second lowest GPA in its classes (Physics had the lowest), but for me as a student this was part of the point.  I was intimidated by it but I wanted to challenge myself as an undergraduate and I think this too served me very well - it forced me to become a much better student which helped me a lot in graduate school.  Colander's research shows that rigor is a motivation for other students as well.

Consider the results of another question in my survey. We asked economics students to identify majors as hard, moderate, or easy, and we found that 33 percent viewed economics as hard, 3 percent said sociology was hard, 7 percent saw psychology as hard, and 13 percent thought political science was hard. Since other social sciences were the primary alternative majors that most of the economics students considered, that data is compelling evidence that the respondents perceived those other majors as too easy. Students likely reasoned that taking a "too easy" major would signal to potential employers that the student had chosen an easy path through college, thereby hurting their chances of being hired.

In my current job I see students that consistently eschew hard courses and majors for what they deem as more practical and more marketable alternatives.  This is part of what I perceive as a general moving away from the liberal arts based undergraduate education to a more vocational approach at large state universities.  I think we need to do a better job informing the students that this may not be the best long-term strategy and that basic skills in writing and math are incredibly valuable assets that you keep with you your entire life - especially as the economy evolves and the vocation you trained for as an undergraduate may not be there for you in the future.

The New Treasury Plan

One thing strikes me about this new plan from Geithner to deal with the toxic assets weighing down the banking sector: doesn't this seem an awful lot like trying to create a new bubble to solve the popping of the old one?  [You could also say this about the housing rescue plan and the Fed actions to drive down long term interest rates]

Let's see, create an awful lot of cheap, non-recourse loans to get the 'market' to realize that these assets really are valuable.  Why? Because the underlying assets are strong?  No.  Because other investors think they are valuable, and all of us think so because this scheme creates a humongous subsidy for these assets.  This is bubble 101.  [Paul Krugman has a nice primer on how this scheme works in reality]

That said, I am not so rah-rah about nationalization as some other, much more prominent economists (like Krugman), because I believe doing so with just one big bank could topple the entire system as investors pull out in droves.  So I do believe in treading carefully.  So I hope this plan works, but I am worried... 

The Decline of Western Civilization, Part 1

I suppose I should mention that this tremendous deal is available to you today at the Pilsner Room. But even better - at least as of last night - there is still some of John Harris' 11 year old imperial stout. If you have the chance you should try this remarkable beer, it is so robust yet so smooth, it will blow your mind. You might even forget you are eating corn dogs, which is a bonus.

It's Official: MLS to PDX in 2011

Econ 101: Financial Intermediaries

Something in Ethan Lindsey's story on OPB about real estate fraud in Bend caught my attention. Bend attorney Martin Hansen was explaining a crooked deal and made this statement about the deal between the allegedly fraudulent firm and its depositors: “It did not authorize any removal for any purpose whatsoever under any terms in any circumstance. Period. It would just be tantamount to your bank removing money from your savings account to investment in real estate. They don’t have the authority, without your consent.”

Um, just how does he think banking works? In fact, this is precisely what you are doing when you deposit your money in the bank, which is why they pay you interest for the right to use your money. They are required to give you your money on demand, that is true, but they aren't paying you for the pleasure of looking at your stack of cash. They don't need your specific consent to use your money, such consent is part of the contract from the outset.

Which brings up a bigger issue, why are we so interested in getting the banking sector working efficiently again? This is because the banking sector plays such an important role in our economy. All of us with savings have idle money that could be put to productive uses but it is hard for an individual to know about these. Some of us invest directly in startups, stocks, etc. But many of us simply don't have the time knowledge or level of savings to do so. Banks, by consolidating the savings of many individual depositors and making these funds available to loan direct this idle capital to productive uses. This investment is vital for the growth of the economy and benefits us all in general and individually: both depositors and borrowers gain from this transaction that would not have happened without the financial intermediation of the banking system.  

No matter what scale we are talking about, the role of the banking system is essentially the same - taking idle capital from one set of economic actors (whether your neighbor or the Chinese) and directing it to its most productive use (from a new coffee shop to an international conglomerate to a sovereign nation).  Without this essential link between savers and investors, investment general crashes and, well, you can see the result.  

This is why, without a well-functioning credit market the economy is unlikely to turn around and why, like many other economists, I believe the key to the recovery lies in getting the credit markets sorted, and soon.  Everything else is secondary.

Beeronomics: Pelican

Its Friday, so let's talk beer because I am just tired of talking about economics.  John Foyston reports in The Oregonian that Pelican Brewery of Pacific City brough back 10 medals from their 10 entries in the Australia International Beer Awards.

This is some well deserved recognition for one of Oregon beers real treasures.  Of course, somehow it seems unfair.  Good beer should come from the dreariest, dankest corners of Oregon.  Pelican, in a spectacular setting on the coast, should cook up some mediocre beer for the tourists and leave well enough alone.  Well, they don't.  Their beer is exceptional with an impressive range and amazingly consistent quality.  

Economists know about compensating wage differentials - what about a compensating beer differential?  Folks in Bend and Pacific City have it all, its not fair.  

NB: Spring break is upon us so spotty blogging ahead for the next week.  I am going to Bend to get my own dose of the good life.