Here is a picture my colleague, Vladimir Ponczek, sent me and our co-author, André Portela Souza, of a publicity banner for his talk on our research, "Child Labor and Learning," that he is giving today in Manaus, Amazonas. He says the banner is in the main square and that the Mayor of Manaus is going to attend.
Today Manaus, tomorrow the world!
Tuesday, November 25, 2014
Wednesday, November 5, 2014
Football-nomics
A column that appeared in The New York Times' Upshot section caught my attention. It being election season, David Leonhardt wrote about football being a new partisan divide:
This article, however, got me thinking more about class than political views. I don't refute the premise above but I hypothesize that you could look at participation in football and socio-economic status (SES), you would find a high correlation between participation in the sport and lower SES. In fact, if you go to the poll Leonhardt references you find this:
"Highly educated (college degree or higher) individuals were ... about half (46 percent) as likely to be comfortable with sons playing football, relative to adults with lower levels of educational attainment."
So I suspect my hypothesis is correct. All of this leads to the conclusion that football payers will be increasingly drawn from poorer populations.
At the same time NFL ticket prices have increased:
Which raises the specter of poor folks causing themselves serious harm playing a sport in front of rich folks: gladiator indeed. In the past 'gladiator' has been used to describe the NFL but it appears to be gaining new resonance.
As an academic economist, what interests me is why participation cuts along SES lines. I think there is a simple model that describes the situation. A potential participant in football thinks about the expected payoff of participating which could lead to college scholarship and eventual pro paycheck on top of the fun factor. There is also a payoff to not participating - perhaps less fun but potentially better long term health. This payoff to not participating depends on the outside option - what would the person do if not play football as a profession. Those from wealthier, more educated families are likely to have better outside options - colleges and careers less available to poorer kids.
So my model looks like this. You choose to pursue football seriously if:
Exp. Payoff = Exp. Benefit – Exp. Cost > Exp. Payoff of Outside Option
As we learn more about the dangers of football to long-term health the expected payoff from participating falls for everyone regardless of socio-economic status. But the expected payoff from the outside option is unchanged as we learn more about the detrimental effects of football participation but increase with SES. I have illustrated this below:
The blue lines are the expected payoff from football and the shift is downward as we learn more about head injuries and their long-term impacts. Kids choose to participate in football if the blue line is above the black (the value of the outside option). So high SES kids choose not to participate but as the blue line falls fewer higher SES kids participate leaving only the lowest SES kids playing football.
Now, of course, like any model this is a overly simplified (which is the point of models, after all) and there is tons of complexity in the real world not captured here. But the point is, if this is one of the dynamics going on in football we could quickly come to the point where the gladiator analogy is quite apt. And we could quite quickly get into some very uncomfortable territory about what is ethical in terms of allowing and sanctioning a sport that causes serious harm to its participants.
I am a HUGE football fan and so I hope there are reforms and ways to make the game safer because I would hate to lose it.
To the list of issues that divide the country along partisan lines, you can add an unusual item: football.
Yes, virtually every slice of America still watches football in enormous numbers. But blue America — particularly the highly educated Democratic-leaning areas of major metropolitan areas — is increasingly deciding that it doesn’t want its sons playing football.
The number of boys playing high school football has fallen 15 percent over the last six years in both Minnesota and Wisconsin, according to the National Federation of State High School Associations. The decline in Colorado has been 14 percent. It has been 8 percent in Massachusetts and Maryland, 7 percent in New York and 4 percent in CaliforniaThe problem is, of course, the increasing evidence that football is bad for your brain. This appears to be especially true if played as an adult pro, but there are also worrying signs that it may be bad for high school aged kids as well.
This article, however, got me thinking more about class than political views. I don't refute the premise above but I hypothesize that you could look at participation in football and socio-economic status (SES), you would find a high correlation between participation in the sport and lower SES. In fact, if you go to the poll Leonhardt references you find this:
"Highly educated (college degree or higher) individuals were ... about half (46 percent) as likely to be comfortable with sons playing football, relative to adults with lower levels of educational attainment."
So I suspect my hypothesis is correct. All of this leads to the conclusion that football payers will be increasingly drawn from poorer populations.
At the same time NFL ticket prices have increased:
Which raises the specter of poor folks causing themselves serious harm playing a sport in front of rich folks: gladiator indeed. In the past 'gladiator' has been used to describe the NFL but it appears to be gaining new resonance.
As an academic economist, what interests me is why participation cuts along SES lines. I think there is a simple model that describes the situation. A potential participant in football thinks about the expected payoff of participating which could lead to college scholarship and eventual pro paycheck on top of the fun factor. There is also a payoff to not participating - perhaps less fun but potentially better long term health. This payoff to not participating depends on the outside option - what would the person do if not play football as a profession. Those from wealthier, more educated families are likely to have better outside options - colleges and careers less available to poorer kids.
So my model looks like this. You choose to pursue football seriously if:
Exp. Payoff = Exp. Benefit – Exp. Cost > Exp. Payoff of Outside Option
As we learn more about the dangers of football to long-term health the expected payoff from participating falls for everyone regardless of socio-economic status. But the expected payoff from the outside option is unchanged as we learn more about the detrimental effects of football participation but increase with SES. I have illustrated this below:
The blue lines are the expected payoff from football and the shift is downward as we learn more about head injuries and their long-term impacts. Kids choose to participate in football if the blue line is above the black (the value of the outside option). So high SES kids choose not to participate but as the blue line falls fewer higher SES kids participate leaving only the lowest SES kids playing football.
Now, of course, like any model this is a overly simplified (which is the point of models, after all) and there is tons of complexity in the real world not captured here. But the point is, if this is one of the dynamics going on in football we could quickly come to the point where the gladiator analogy is quite apt. And we could quite quickly get into some very uncomfortable territory about what is ethical in terms of allowing and sanctioning a sport that causes serious harm to its participants.
I am a HUGE football fan and so I hope there are reforms and ways to make the game safer because I would hate to lose it.
Monday, November 3, 2014
The Economics of Marijuana Legalization
So I am trying to claw my way back into more regular blog posts and what better occasion than the midterm elections coming up to do so...or so I thought. My well-intentioned plan was to try and inject some economics into the ballot measures, but it has been hard to find time to stop and blog.
So in a last gasp effort on the eve of the election I just do a quick drive-by on what economists have learned about the effects of legalizing marijuana.
In a well-cited paper, my former Colleague Dan Rees and his co-authors, Ben Hansen of the U of O and Mark Anderson, find that: "The first full year after coming into effect, [medical marijuana] legalization is associated with an 8–11 percent decrease in traffic fatalities." The implication is that marijuana is a substitute for alcohol and easing access to marijuana reduces alcohol consumption and related DUI traffic fatalities.
In a newer paper by Wen, Hockenberry and Cummings, released as an NBER working paper, it is found that the implementation of Medical Marijuana Laws (MML): "increases marijuana use mainly among those over 21, where there is also a spillover effect of increased binge drinking, but there is no evidence of spillovers to other substance use.
Finally, Anderson, Hansen and Rees are back at it with this paper that suggests that the: "results are not consistent with the hypothesis that legalization leads to increased use of marijuana by teenagers." Again, they are talking about medical marijuana.
Recreational legalization is still so new we don't have any good studies yet that I am aware of. So the takeaway. It appears that marijuana use by adults increases with medical marijuana legalization but it is not clear whether it it is a substitute or complement to alcohol. It does not appear to increase teenage use nor lead to the abuse of other substances.
Do with this info what you will.
So in a last gasp effort on the eve of the election I just do a quick drive-by on what economists have learned about the effects of legalizing marijuana.
In a well-cited paper, my former Colleague Dan Rees and his co-authors, Ben Hansen of the U of O and Mark Anderson, find that: "The first full year after coming into effect, [medical marijuana] legalization is associated with an 8–11 percent decrease in traffic fatalities." The implication is that marijuana is a substitute for alcohol and easing access to marijuana reduces alcohol consumption and related DUI traffic fatalities.
In a newer paper by Wen, Hockenberry and Cummings, released as an NBER working paper, it is found that the implementation of Medical Marijuana Laws (MML): "increases marijuana use mainly among those over 21, where there is also a spillover effect of increased binge drinking, but there is no evidence of spillovers to other substance use.
Finally, Anderson, Hansen and Rees are back at it with this paper that suggests that the: "results are not consistent with the hypothesis that legalization leads to increased use of marijuana by teenagers." Again, they are talking about medical marijuana.
Recreational legalization is still so new we don't have any good studies yet that I am aware of. So the takeaway. It appears that marijuana use by adults increases with medical marijuana legalization but it is not clear whether it it is a substitute or complement to alcohol. It does not appear to increase teenage use nor lead to the abuse of other substances.
Do with this info what you will.
Monday, October 6, 2014
Steve Jobs and Pricing in the Nines
When the new iPhone 6 was announced, so too were prices that ended in 99. This is almost ubiquitous in consumer pricing, but it catches my eye because it comes from the company of Steve Jobs. From what I know if Steve Jobs I suspect that this pricing would not have pleased him, he seems like the kind of person for whom the price of $200 is much more elegant than $199. And yet, even when he was in change, Apple product prices inevitably ended in 9.
So why is this? It seems that the rational costumer of economic theory would not be moved by such tricks, instantly rounding up or understanding that $199 is simply a dollar less than $200. But the widespread use of pricing in nines clearly suggests that the story is more complex. Pricing in the nines remains, then, a bit of a puzzle in economics.
Most economic and psychological theories that I have encountered have to do with consumers not really spending cognitive energy to fully evaluate the price. Psychological research has suggested that we tent to fixate on the most important number - the one the the far left. Economists have suggested we truncate to use cognitive energy economically. I wonder if we are happy to fool ourselves to convince ourselves to buy something we really want. In other words, we feel better knowing we have spent "less than $200" on the new iPhone we really want. Which is, I suppose, just another form of the same explanations above.
Whatever the reason, I bet Steve Jobs didn't like it.
Thursday, September 18, 2014
Pleased
As a British subject and member of Clan Munro, I must say I am grateful the Union stands.
This whole thing has been interesting to me as it really signals a major generational shift. As I wrote in an e-mail to a friend upon hearing the news:
As a Briton of Scots and English heritage, I approve. As an economist, I am relieved as I was worried about the future of an independent Scottish economy tied to the Pound.
Most interestingly to me is the generational shift this whole thing signaled.
My grandfather was born in England to a Scot and was fiercely proud of his Scottish heritage and clan, but he served in the RAF in WWII and fought under the Union flag. I think his generation identified strongly with the United Kingdom as a result. But that memory has faded as new generations without such a unifying experience identify less and less with the UK.
I guess this is also a part of the imperial history of the UK. The union flag used to fly over all of the colonies as well. I do believe that Scotland and the rest of the UK are better off together economically. Socially, I actually think it is often better to be forced to get along in the same family then to separate and be angry neighbors. I am in favor of more national autonomy for Scotland but happy they remain in the UK.
Friday, September 12, 2014
Should We Reset Property Tax Assessments at Sale?
Editor's Note: I really can't give any prognosis for how soon this moribund blog will recover. It has been a pretty stressful time in the Emerson household and this blog has had to take a back seat. Fortunately, we have the sagacity of Fred Thompson to warm our hearts and stimulate our brains in my absence.
Take it away Fred:
Property taxes are fair and efficient only where there is a
reasonable relationship between tax payments and property wealth. Severing that
link renders their incidence both arbitrary and capricious. Oregon has a one-off
property tax system, which emphasizes stable growth in tax assessments and
payments and inter-jurisdictional uniformity in tax rates. On balance this
system has probably been good for Oregonians.
However, it has one feature that is not entirely likeable:
assessments are not readjusted to realign tax payments with property values.
Consequently, those that are out of step with their neighbors tend to drift
ever farther apart over time. Figure 1 shows the assessment ratios (assessed
value/market value) of 14 houses along one side of a block in Portland’s
Alberta Development District last year. This is clearly an extreme example, but
when the current system of property tax assessment went into effect, assessment
ratios within neighborhoods tended to be closely bunched together. This is
increasingly not the case.
Figure 1: An Extreme Example of
Neighborhood Dispersion
How serious is this problem? How misaligned are tax payments
and property values, is the misalignment getting worse, and, if so, how much?
To answer these questions for one jurisdiction, my colleague, Robert Walker,
and I, regressed tax bills on market values for every residence in Portland for
each of the years 2003-2012. In this analysis the coefficient of
correlation (R2) shows the strength of the relationship between
property wealth and tax payments: the higher the R2 the stronger the
relationship (according to professional assessment standards, an R2 less
than .80 is unsatisfactory). The regression coefficient shows how tax bills
change as a result of changes in property value. If greater than 1, a 1% change
in in property value is associated with an increase in the tax bill of more
than 1%; less than 1, an increase of less than 1%. As a general rule, the
greater the misalignment between property wealth and tax bills over time, the
greater the likelihood that low-valued properties will be hit with relatively
higher tax bills than high-valued properties.
Figure 2 shows what happened in Portland. The results for
2003 and 2004 are for the whole city; for 2005 through 2012, the city is
divided at the Willamette, owing to the adoption of a higher statutory tax rate
on the Westside of the river.
Figure 2: How Tax Bills Vary with
House Prices, Portland
What Figure 2 shows is that, on the Westside of Portland,
the relationship between property values and tax bills remains reasonably
strong, although the trend appears to be downward. On the Eastside, more homes
started off out of step with their neighbors and, over time, have drifted ever
farther apart.
We don’t want to overstate the dimensions of the problem: it
is real, but even on the Eastside, the misalignment is not huge, on average,
and, while it is growing worse, it is doing so at a fairly slow rate.
Nevertheless, the direction of change is unmistakable and the longer we go
without fixing this problem, the more costly and unpleasant the fix will be.
Cognizant of this problem, the League
of Oregon Cities has proposed
that property tax assessments be “reset” whenever a home is sold, which would
instantly stop the growth in misalignment and, over time, reduce it to a stable
and acceptable level (see below).
This fairly straightforward proposal has triggered a surprising
amount of opposition. The Oregonian’s editors claim that it
would supercharge tax collections and create new inequities: “People who’d just
bought homes would resent, with good reason, neighbors who’d owned their homes
for a long time.” Bill Sizemore agrees, adding that, compared with the current
system in which assessed
value does not change when a home is sold, “adjusting assessed values to sales prices creates far worse
inequities. This has been well documented. Our system may allow …
inequities …, but adjusting values at the time of sale creates gross inequities
between next door neighbors.” The Oregonian’s
Erik Lukens concludes, “this is a classic ‘tax the other guy’ proposal that
taxpayers likely will regret. There are problems with the property tax system …
but this isn't a very good solution.”
Are the critics correct? As is usually the case, it helps to
look at the numbers, not merely a few illustrative cases. Using our Portland
data, we can estimate what would have happened to property taxes if assessments
had been reset whenever a title transaction occurred and recalculate the R2s
from the previous exercise. We have performed this analysis using two different
reset standards: setting assessed value equal to real market value, as
initially proposed by the League of Oregon Cities, and setting it equal to
market value multiplied by the ‘changed property ratio’ (CPR), as proposed by
several county assessors. (CPR is a county’s mean assessment ratio, i.e., the
assessed value of all the properties in the county of a given property class
divided by the real market value of those properties. This procedure is used
throughout Oregon and is currently applied to all newly built properties and major
improvements.)
What this analysis shows is that resetting assessed value to
real market value each time a sale occurred would increase 2012 R2s
on the Westside from .89 to .93, on the Eastside from .71 to .84, and total
annual property tax collections 11.4%. In other words, contrary to Sizemore’s
claims, the inequities would be substantially less on average, on both sides of
town and overall, than under the current system. However, this proposal would
also, as the Oregonian alleges,
significantly boost property tax payments. In contrast, reassessment using the CPR
increases the Westside R2 to .95, the Eastside to .89, and total
property tax revenues by less than 2%. This appears to be an altogether fairer,
less objectionable way to go.
Thursday, August 14, 2014
Oregon Origins
I pop my head up above the earth to post this little gem from the wonderful New York Times' Upshot blog. They have one for each state and it is some fun clicking. The graphic here does not label the vertical lines but they are, moving from right to left: 2012, 2000, 1990, 1980, 1970 and so on. It was in the late sixties that the mass influx of Californians started. My dad followed in the early 1980s. My sons were born in Colorado and I moved them back in 2006 so they are under western states, though sometimes Colorado is considered midwestern (a jarring description for a kid who grew up partly in Wisconsin). What is fascinating is the general theme of the West still being a land of immigrants, while in the Northeast the same-state born folks are generally in the in the high 60% range. Same with the Midwest and even more in the South. The story is, in those places you are either bon and stay or you leave. But in the West, we are still welcoming immigrants and moving about amongst ourselves.
[P.S. A note of thanks to the well-wishers who have reached out to me. All is well in the Emerson household, but we are still adjusting to some new life realities.]
Wednesday, July 9, 2014
Dear Readers
Dear readers:
Recently a family health crisis has caused a severe disruption in my life and made it impossible to continue to blog for the time being. I do hope to return to blogging at some point but right now I need to focus my attention and energy elsewhere. Please accept my apologies and understand that blogging will be light to non-existant for another month or two. If you follow me on Twitter you'll know when a new post is up.
Fred Thompson: Do You Really Think the DOD Spent $140 Billion to Protect the Lowland Gorilla?
Note: Here is another dispatch from Fred Thompson.
We
were talking about the Ebola Virus outbreak in West Africa, which has been boiling
for several months now, when a colleague asked: “There are Ebola vaccines for
primates and mice, but not for humans. Why?” And, answered: “for the same
reasons that there has been a West Nile vaccine for horses for a decade, but
none for humans— partly regulatory hurdles, but more decisively the actions of
that ‘free marketplace’ that our governmental and corporate elites are so fond
of.”
I
replied, colleague, the Center for Disease Control has a limited budget. It is
obligated to allocate its resources in the most cost effective manner possible
– which means doing as much good as it can with the funds at its disposal – if
other initiatives generate more quality-adjusted life years (QUALYs) per dollar,
they have first call on the dollars. Normally, where health issues are
concerned, Congress appropriates funds whenever an agency can show that a
program will generate net benefits (expected additional QUALYs @ $400K each less
program cost – in this case the cost of developing and distributing a vaccine –
is greater than 0). Presumably, the CDC has not made such a representation with
respect to Ebola. As for West Nile Fever, the finding was negative (taking
account only of threats to Americans).
Decision
tree for vaccination program analysis
My
colleague replied: “The CDC’s evaluation concerns only the desirability of widespread
vaccination, and they’re probably right on that point. But this doesn’t
address the prior question of the non-existence of the human vaccine. I
continue to feel that the government should be in the business of developing
and manufacturing vaccines, and perhaps all pharmaceuticals.”
So
far as vaccines are concerned, I agree. But vaccines are a special category of
pharmaceuticals. Pharmaceuticals generally look like toll goods
(non-exhaustible but excludable). Vaccines look more like pure public goods. Left
to the private sector, they would almost certainly be undersupplied. For that
reason, most vaccine development is underwritten by public agencies. In some instances,
those agencies will not stop with research and development, but will also
guarantee sufficient purchases to pay for the testing needed to prove the
safety (to humans) and efficacy of new formulations, which the FDA requires
before it will grant regulatory approval for a prescribed use. In most cases,
however, the US government will underwrite these activities only where it is
deemed cost effective to do so. Consequently, your horse can get a jab for West
Nile virus, but you cannot. Moreover, you won’t be able to get one legally in
the US until the FDA is satisfied through clinical tests that the vaccine is
both safe and effective (unless, of course, you are a uniformed member of the
US military deploying abroad).
Note
that the legal requirements for the approval of new formulations (or the
application of existing formulations for new purposes) are not subject to any
kind of benefit cost test, but are very close to absolute fiat (although, under
special circumstances, the FDA can put a new formulation on a fast track aimed
at reducing testing costs; it can also weigh relative health risks, although it
does so very cautiously). Moreover, proving the efficacy and safety of a
vaccine is fraught with difficulties not encountered by other drugs. First,
they are supposed to be prophylactic. One doesn’t have a population of the
afflicted to test the formulation upon (using a nice neat double-blind
experimental design, with the test population randomly assigned to treatment
and control groups). Consequently, testing for efficacy under normal
circumstances requires large sample sizes and monitoring over a wide area for a
long period, which greatly increases the cost of approval and the return on
investment (no matter who makes the investment). Second, with respect to
safety, vaccines are inherently hazardous. This http://www.naturalnews.com/vaccines.html is way over the top but it
gives a feel for the potential for litigation that vaccines entail; yet another
reason business enterprises usually avoid vaccine development.
What’s up for grabs?
Novartis’
and Pfizer’s applications to the FDA for fast-tracking vaccines aimed at
preventing meningitis B infections is the kind of exception that proves the
rule. Current vaccines approved in the US cover four strains of bacterial
meningitis, but not strain B. In this case, the vaccine is already available in
Canada and Europe and there is solid evidence that it is safe and good reason
to believe that it is also effective. So we have a situation in which there are
no or minimal development costs, compelling evidence that the clinical trials
will be successful, and even the expectation that FDA will fast track approval.
That isn’t the case with respect to the Ebola or West Nile vaccines.
Why
doesn’t the US government just pay for vaccine research for diseases prevalent
in the 3rd world? It does, but its budget is limited. Moreover, in
most instances vaccination programs aimed at diseases for which vaccines now
exist are far more cost effective than the development of new vaccines. “A
systematic review of the literature on the cost-effectiveness and economic
benefits of vaccines in low- and middle-income countries conducted by IVAC was
published in the December 17, 2012 issue of Vaccine. The review identified 108
relevant articles from 51 countries spanning 23 vaccines. Among the 44 articles
that reported costs per QUALY saved, vaccines cost less than or equal to $100
per QUALY in 23 articles (52%) and less than $1,000 per QUALY in 38 articles
(86%).” Ozawa et al. – http://www.ncbi.nlm.nih.gov/pubmed/23142307
Finally, even where it is not cost effective to do so, US government will pay for vaccine research against terror threats – and Ebola has been deemed a bioterror threat. But the government still won’t finance widespread clinical trials because of the enormous costs. Scientists from the Vaccine Research Center (VRC) at the National Institute of Allergy and Infectious Diseases (NIAID) have been conducting limited human trials on Ebola vaccines since 2003 and on fast acting vaccines since 2007. Both vaccines have been tested for safety on dozens of volunteers without significant adverse effects (not nearly enough for FDA approval but probably enough for military purposes) and both produce antibodies with the appropriate markers.
Also, March 5, a Canadian firm, Tekmira Pharmaceuticals, reported
that the U.S. Food and Drug Administration had agreed to fast-track testing of
TKM-Ebola, an anti-Ebola viral therapeutic, also developed under the sponsorship
of the U.S. Department of Defense.
Are
these treatments effective in humans? (Actually, according to one report, in 2009, a researcher in
Hamburg, Germany, accidentally pricked herself with an Ebola-infected syringe. She
was treated with a vaccine brought in from Canada, which consisted of a
weakened vesicular stomatitis virus genetically engineered to contain a portion
of an Ebola virus protein that had been proven effective in monkeys. She was
subsequently observed to be asymptomatic.) It’s hard to imagine
financing the massive clinical trials that would be required to answer the effectiveness/safety
questions under normal circumstances.
Epidemics
can change this calculus. They raise the possibility of human trials in
situations where volunteers, treatment and controls, are directly exposed to
the disease, vastly reducing the needed sample size and trial time. Doctors
without Borders, which had positive results from a quick and dirty vaccine in
the Congo, has been pushing hard for permission to run clinical trials of these
vaccines in West Africa, both from NIH and the local governments in question.
So, dear colleague, the US is already pretty much doing what
you want, although maybe not exactly. Reasonable people can disagree about how
many dollars to spend and for what. But it doesn’t look to me like slavish
adherence to “the ‘free
marketplace’ that our governmental and corporate elites are so fond of” is of
more than tangential importance here. Rather, in the case of pharmaceuticals, our
regulatory apparatus is simply much more sensitive to the threats from
dangerous drugs than it is to the threats from dangerous diseases and, maybe,
that’s not an entirely bad thing. With respect to Ebola and West Nile, we have vaccines.
They will probably work on people. In a serious emergency they would almost
certainly be used.
Wednesday, June 18, 2014
Attendance in Sports Leagues Around the World
Once again The Economist comes through with a fun chart:
Note the MLS is the sixth highest average attendance soccer league in the world. I would, however, argue that this should be normalized by population to make a rank comparison. Oh wait, there it is in the last column - economists think alike!
Note the MLS is the sixth highest average attendance soccer league in the world. I would, however, argue that this should be normalized by population to make a rank comparison. Oh wait, there it is in the last column - economists think alike!
Tuesday, June 17, 2014
Soccernomics: Exciting World Cups are a Rarity - Live This One Up!
To give the haters some ammunition: The dull nil-nil draw and draws in general are a World Cup tradition. See above from The Economist. This year, something is different.
Fred Thompson: Some Modest Suggestions For Fixing Oregon’s Property Tax System
Note: here is another dispatch from Fred Thompson.
Thanks to a series of initiatives and referenda during the
decade of the 1990s, primarily Measure 5, enacted in 1990, and Measure 50,
enacted in 1997, Oregon has acquired a one-off property-tax system, which
emphasizes stable growth in tax payments and inter-jurisdictional uniformity in
tax rates. The system seems to be somewhat popular. At least the property tax
no longer consistently tops the worst-tax list in local polls. Nevertheless,
the prestigious City Club of Portland, after a year spent studying property
taxes, concluded that “the current Frankentax has got to go” and proposed to
restore the property tax system that was in effect in 1990, with some major
modifications.
My reading of the evidence tells me that they are wrong, in
the sense that they want to take a sledgehammer to things where a tack hammer
would suffice. The current system gives Oregon a lot more funding
predictability and stability than the old one, it places different
jurisdictions on a more equal footing with respect to the provision of public
services, it has reduced the burden of property taxes across the board, and has
led to increased understanding on the part of voters about how much they will
pay and why; it has, as the City Club stresses, also greatly reduced local
autonomy, made public schools creatures of the state, reduced government
services, and reduced reliance on one of the most progressive tax sources
available (given that both wealth and income are measures of ability to pay).
Like the City Club, I too am troubled by the transfer
of fiscal autonomy from local school districts to the state. But, evidently,
that is precisely what the state’s taxpayers wanted. Insuring equal student
funding, while preserving local autonomy, is about as practicable as building a
perpetual motion machine. Much the same thing can be said about the regime’s effects
on the provision of general-government services. Here too, I share the City
Club’s concerns.
However, I would point out that the most severe local
service shortfalls, as in Curry and Josephine Counties, have occurred in
jurisdictions with statutory tax rates below one percent. State mandated
lock-in of general-government o tax rates was justified by compression-driven
cannibalization of inter-jurisdictional tax bases, but it applies equally to
all jurisdictions, whether they are in compression or not. That hardly makes
sense. Indeed, rather than freezing them, requiring the approval of any
affected jurisdiction to increase local rates would on the face of it
constitute a more reasonable fail-safe mechanism. If none of a jurisdiction’s
neighbors are affected by a tax increase or if arrangements satisfactory to all
the parties concerned can be worked out, the jurisdiction ought to be free to
raise rates consistent with the levies its citizens have authorized.
Moreover, we now have conclusive proof assessment
quality is slowly but inexorably deteriorating. That means that the burden of
the property tax is increasingly not borne in proportion to the value of
property owned, but is in fact arbitrarily and capriciously allocated. That is
unfair. It is also something that can and should be fixed.
With respect to this issue, the League of Oregon
Cities recently proposed a constitutional amendment that would “reset” a
property’s assessment for tax purposes to real market value when it is sold.
This looks like a reasonable solution to the problem of deteriorating
assessment quality. Reassessment to
market tends to improve tax uniformity. Moreover, from what we know
about residential mobility, the folks who are most likely to stay put are the
ones we want most to protect against rapid, unanticipated increases in their
tax bills: senior citizens without mortgages, perhaps the most important
beneficiaries of Measure 50. Shifting to a system of reassessment to market at
title transfer would preserve that protection. In any case, given the high
proportion of properties now at the Measure 5 limit and the general increase in
the assessment ratios that has taken place over the past five years, this seems
like a politically opportune time for political action. Right now reassessment
on title transfer would harm relatively few homeowners, primarily the ones who
have already received disproportionate gains under Measure 50.
How well
would this work? Probably reasonably well. Assessment quality is
deteriorating at the rate of about one percent each year; real estate turnover is
about eight percent. Consequently my guess is that reset at transfer would take
us to a stable coefficient of dispersion of less than 10 percent and covariance
levels between market value and tax payments of 90 percent or better.
Thursday, June 12, 2014
The World Cup Begins & The Soccer Gods are Angry
After all of the press, good and bad, about the World Cup being hosted in its spiritual home (England is the ancestral home) it is a relief that today it finally starts. My friends in Brazil have, up to now, been pretty ambivalent about the whole thing, but this has started to change in the last week or so and now there is full blown Cup fever among them. The game itself is the best palliative for all of the organizational ills. And for one day, my adopted city, SĂ£o Paulo, is the center of attention which is pretty fun. And if I hear anyone say San Paulo again on the radio or TV I will scream! How hard it is to separate Spanish from Portuguese?
Para a sexta!! Vai Brasil!
On a domestic note, I am a bit of a traditionalist when it comes to soccer. I think that the team colors are pretty sacrosanct and at home you wear them always. In Europe this is generally true. If Arsenal is at home they will be in red with white sleeves, white shorts. No question. Now some teams have taken to making a special kit for the Champions League so seven this tradition is beginning to wane. However, the Timbers insistence on wearying their red and alternate kits at home is grating and has clearly, given their home woes, angered the soccer gods.
Last night was the second game in a row in their red kits and yet another disappointing result.
I understand the desire to sell shirts but at some point you have to establish some boundaries and I think that for all league home games, the primary shirt should be worn. You still have US Open cup, exhibitions and Champion's League matches for the other stuff...
Okay, rant over.
Wednesday, June 11, 2014
Soccernomics: Eve of the World Cup Edition
The Upshot, The New York Times's answer to FiveThirtyEight edited by David Leonhardt has some fantastic poll data about soccer around the world. Here are the two charts from the article:
This first one has some interesting talking points. The first is the overwhelming favorite to win the World Cup is Brazil. Not too surprising except for the unanimity - I thought there would be more love for Argentina. For the record, I concur: I have Brazil wining it all in my pool. They do so by beating Argentina 3-1 in the final - this is also my fantasy final and if it happens it will be beyond huge. But I digress. The best part of the poll is Americans who answer USA. There has been a lot of talk about the USA coach's statement that the team cannot win the Cup and how un-american it is (he is German, and it looks like that criticism is correct: Americans really do believe.
As for who folks love to hate, the results are pretty predictable but revealing. Argentina hates the English (the Falklands are still a massive open-wound in Argentina and whenever they scab over a new populist politician will pick it off to score some political points). Mexico and Russia root against the USA, of course, but why do Australia and Italy? I thought we were friends! The rest of South America reserves their wrath for Argentina while Brazil's second most rooted against team is Brazil! (Of course they say that now - focusing on the World Cup debacle - but trust me if Brazil starts winning the entire country will come around)
Finally, it is funny how Brazil is still associated with the beautiful game despite the fax that Brazil, over the last couple of decades has become a much more defensive, counter-attacking side. Most 'purists' think Spain played the most beautiful soccer, but recent poor results by Barcelona and Spain have taken some of the warm glow of the Tiki-Taka style.
This first one has some interesting talking points. The first is the overwhelming favorite to win the World Cup is Brazil. Not too surprising except for the unanimity - I thought there would be more love for Argentina. For the record, I concur: I have Brazil wining it all in my pool. They do so by beating Argentina 3-1 in the final - this is also my fantasy final and if it happens it will be beyond huge. But I digress. The best part of the poll is Americans who answer USA. There has been a lot of talk about the USA coach's statement that the team cannot win the Cup and how un-american it is (he is German, and it looks like that criticism is correct: Americans really do believe.
As for who folks love to hate, the results are pretty predictable but revealing. Argentina hates the English (the Falklands are still a massive open-wound in Argentina and whenever they scab over a new populist politician will pick it off to score some political points). Mexico and Russia root against the USA, of course, but why do Australia and Italy? I thought we were friends! The rest of South America reserves their wrath for Argentina while Brazil's second most rooted against team is Brazil! (Of course they say that now - focusing on the World Cup debacle - but trust me if Brazil starts winning the entire country will come around)
Finally, it is funny how Brazil is still associated with the beautiful game despite the fax that Brazil, over the last couple of decades has become a much more defensive, counter-attacking side. Most 'purists' think Spain played the most beautiful soccer, but recent poor results by Barcelona and Spain have taken some of the warm glow of the Tiki-Taka style.
The second chart measures soccer's popularity among the World Cup nations. I think the big takeaway here is how many other sports matter in the country. The USA is dead last, as you might imagine, but England and France are pretty close. Both countries have other big team sporting traditions (cricket and rugby for England and Rugby for France). I am a bit surprised how high Spain is but this is what success breeds I suppose.
As a dual-citizen I'll be rooting for the USA and England heartily, as well as Brazil, my adopted country after my year-liong sabbatical stay there. But mostly I root for an entertaining cup full of great goals and attacking play - something often missing from World Cups. The spectacle is more reliable and the way that Brazil deals with it and reacts to their teams performance will entrance me.
Finally, to end this soccer post on a somber note. It is always quite a shock when a random act of violence hit close to home and this one did. My sons play for the soccer club that the victim of the Reynolds HS shooting, Emilio Hoffman, played for. My older son has played on the same team with Emilio's sister many times. Please consider donating to a fund to support Emilio's family.
Tuesday, June 3, 2014
Time to Reboot the Push for Self-Service Gas!
It looks like it is finally time again to start the rallying cry for the introduction of self-service gas in Oregon. The Oregonian reported on this poll of Oregonians that shows ... wait for it ... support for self-service gas in Oregon!
As long-time readers of this blog know, self-service gas was something that I would just not shut up about for a very long time, as evidenced by this long series of posts. Once the recession hit I knew it was a non-starter because supporters of the status-quo will inevitably bring up the jobs that will be lost, and despite the obvious economic fallacy of increasing employment by mandating jobs, this argument cannot be countered by showing specific job gains from repealing the ban. So a time of high unemployment is definitely not the time to try and get support for a repeal of the ban.
However now that we are well on the path of recovery it appears it is time to once again start up the call for repealing the ban.
There are a number of things that are very interesting about this poll. First is the way the question was worded. Many people assume that if you allow self-service gas you will no longer be able to have it pumped for you. There is no reason for this. It is true that in most states, many gas stations are self-service only, but it would be easy to mandate pumping on request. I suspect if you asked respondents "you you support giving drivers in Oregon the choice of having their gas pumped for them or pumping it for themselves" the support would be dramatically higher.
Second is the gender division. Men support it and women oppose it. Based on the comments I received from readers during my first crusade, I suspect that again this represents the concern that there would no longer be the option to have it pumped for you. I'd love to see the results with my alternate wording of the question.
Third is the racial breakdown: whites support, non-whites do not. This is more curious perhaps this reflects a concern about losing these jobs?
Fourth is the age breakdown. I was shocked to see that support was tepid among 18 to 29 year-olds. Perhaps again this reflects a concern about the jobs? The grumpy middle aged folks like me show the strongest support.
Finally, the support by political party is predictable given this argument tends to shape up along the less regulation vs. more regulation debate.
I'll end by once again pointing out the obvious: allowing customers to pump you own gas is not dangerous, will lead to lower prices and would not harm (and most likely help) overall employment in Oregon. You can still preserve the ability to have your gas pumped for you and allow those who wish to pump their own. That petition that I started about six years ago is still there, so it is never too late to go and sign...
Who knows, maybe in my lifetime...
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