Everything Old is New Again

Note: Just about every post these days begins with an apology for it has proven to be extremely difficult to keep up with the blog while in Brazil trying to accomplish all of the tasks big (completing the research project that brought me here) and small (comprehending the intricacies of the Portuguese language, understanding the Brazilian school system for my kids and navigating the byzantine Brazilian bureaucracy).  But my time here is quickly drawing to an end and as of September 15th I will be back full time at OSU.  It is my hope to resuscitate the blog upon my return but that may prove difficult as well as I will be taking on the duties of 'coordinator of the economics program' which is moderno speak for 'chair of the economics department' except that they don't trust me to make final decisions about the budget. [This was all a part of the grand reorganization of OSU that was supposed to make it lean and mean and lower administrative costs, but for me at least it has just added an entirely new layer of bureaucracy and the associated costs therein - but I am sure that statement is evidence of my lack of understanding of the 'efficiencies leveraged']  Plus I am writing a textbook which is no small task as well.  Anyway, the point is that I am doing my best but this blog has always been a hobby and I started it and maintain it under the strict self-imposed constraint that it not interfere with my real job(s).  So my apologies and I hope it will get better soon, but I can make no promises.  

During the last decade or so of Chinese triumphalism I was often asked, as a development economist, what I thought of China and whether it was poised to become the dominant economy in the world.  I would always sound a note of caution: deficiencies in social services and infrastructure as well as poor environmental safeguards were tremendous challenges to China that I was unconvinced they were well prepared to tackle.  Recently India, Brazil and Russia were also added to this sense of a new economic world order taking shape.  Again I was cautious.

Being in Brazil only served to deepen my sense of caution about declaring these newly emerging countries triumphant.  The protests in Brazil during the Confederations Cup perfectly demonstrated my point.  As Brazil has grown extremely fast and succeeded in many areas such as decreasing poverty, increasing primary education and the like, it still faces tremendous challenges as the protest showed.  Complaints about corruption, lack of adequate health care, education and public transport reflect the challenges that rapidly growing economies face. São Paulo itself is a perfect example (as is, I am sure, Beijing): a city that has exploded in growth, much faster than planning and infrastructure could keep up with which, as a result, has left is a bit of a mess.  It is a city of enormous wealth, enormous inequality and enormous problems that will not be easy to fix - they will take a very long time and a lot of money.  

Anyway, this is all a lead in to an interesting New York Times article about this and how the 'old' economies of the US, Japan and Europe are starting to pick up steam just when the growth of the BRICs is slowing considerably.  Here is the interesting graph that accompanied the article. 

This is not to say that the era of strong BRIC growth is over, just that there is a maturation process that is probably about a 50 year horizon that these countries have to go through in order to create economies that are mature, self-sustaining and work for the entire population, not just the lucky few.  

The other theme that I have talked about when asked about China and the relative position of the US, echoed by the NYT, is that China is going to have to shift to a more consumer-driven economy rather than a government-driven one and that the US is poised to become a prime beneficiary of this shift.  

Sitting here in Brazil it is pretty easy to become a bit pessimistic.  Years of commodity-driven growth have allowed some social spending, which has been good for the Worker's Party in its quest to hold on to power, but they have done far too little to tackle government graft and corruption, and invest in transportation, healthcare and education.  Without healthy, educated people and a transportation and information infrastructure to support them, where is future growth going to come from?  

My favorite image that, to me, is evocative of all of Brazil's promise and challenge is around Avenida Paulista in São Paulo - Brazil's version of wall street.  Among all of the high rises and wealth and situated next to Jardim Paulista one of the fanciest neighborhoods in São Paulo, overhead power and telephony wires struggle to stay aloft under the massive weight of the sheer number of wires.  You see, the area grew so fast and with so little planning, regulation and public investment that the power lines for buildings 20 stories high are not buried in tunnels below the street but are carried aloft on old poles never meant to hold so many lines.  And despite the sheer wealth that Avenida Paulista represents something as fundamental as a reliable power source is left unattended.  [In response, most modern buildings have their own generators to provide power when the outside source is interrupted - once again showing the privatization of what should be a public good.]

Democracy and Economics

Yes, I am well aware that this blog has become moribund to the point of extinction.  But it is not quite dead just "pining for the fjords" to borrow a phrase, it has not ceased to be.  My sabbatical in Brasil has caused severe disruption in the content of the blog but I hope that normal programming can resume once the fall term begins.

But here in Brasil I do keep track of the goings on on the The Oregonian blog (as this appears to be what the O is quickly becoming, the hallmarks of the blog species are all there: typos, fluff and opinion mixed in with a bit of news) and this caught my eye, apparently someone has been going around posting flyers declaiming the fact that those that benefit from government handouts are also allowed to vote:

I wonder what dear Artemis believes a government by, for and of the people is all about?  We all benefit from the work of the government - that is the entire point of the exercise.  Pointing out one small population is absurd.  Ranchers get federal grazing rights, farmers get subsidies, the timber industry gets to cut on federal land and then counties receive payments when these timber revenues dry up.   All of these folks vote.  The poor get assistance in the form of tax subsidies, food stamps and healthcare, and they vote.  But it is not just these particular groups, we all benefit from government provided roads, parks, fire and police protection and so on.  And we all vote.  Many of our kids go to pubic schools and still we vote.  We are all beneficiaries of government spending and we all have a say in that spending.

The whole point of a democracy is for us all to figure out together the proper limits of government.  But the point of government itself it that it makes out lives better, it takes care of public goods, it controls and regulates activities that have externalities and it promotes the advancement of the citizenry and the economy through investments in human capital, research and infrastructure.  If it didn't we would not have it.

It has been known since the beginning that voters in a democracy will have a say in the benefits that accrue to them, that is the very point of democracy.  And to complain about a subgroup is simply absurd - it is precisely because such groups are relatively small that they cannot decide for themselves the amount of benefits they receive.  Their votes (nineteen in one neighborhood!) are too few to matter, it is the votes of the rest of us that will determine their fate.

Now I realize that arguing with a flyer-posting crank is a bit silly, I do think it is important to understand the point of government.  

US Unemployment Data Show Continuing Struggle to Recover

Yet another month with good-but-not-great job growth figures.  How long has this been now, five years?  Today we find out that the US economy added 162,000 jobs and that unemployment fell to 7.4%.

I think it is pretty clear that folks that were pointing to a Japan-style malaise had it just about nailed.  Japan's lost decade is looking a lot like what the US is in now.  I think those that argued for a more forceful monetary and fiscal response has the weight of the evidence on their side though I for one remain unconvinced that we have the ability to pull off more fiscal and monetary stimulus.  Needless to say the timing of the sequester and the Fed's potential tapering look unfortunate.

 

 

Fred Thompson: Does Oregon Need a Mileage Tax?

Note: Another dispatch from Fred Thompson:


Oregon’s State Highway Trust Fund is broke. Options addressed by the Oregon Transportation Commission, the Governor's Office, and the Legislature aimed at fixing this state of affairs include raising DMV fees to recover the full cost of the products/services it delivers to Oregonians. By state law most of the division’s services are supposed to recover their costs; the remainder are supposed to make substantial contributions to the Highway Trust Fund. But, because the legislature has repeatedly failed to authorize DMV to increase its user fees, the DMV is instead costing the Highway Trust Fund over $100 million per annum. ODOT has also been looking at alternatives to replace the gas tax, now the main support for the Highway Trust fund, among these are a fee for studded tires, a leading cause of road wear, and a weight-use-per-mile tax for personal vehicles. Cars are becoming more fuel-efficient. Consequently, the gas tax isn’t keeping up our needs for highway construction and maintenance. A car that gets 60 miles-per-gallon is great for the environment, but it contributes substantially fewer tax dollars and as much highway wear-and-tear and congestion as any other car.

Oregon is a leader in the study of mileage-based taxes. It has long relied on a weight-use mile tax for commercial vehicles. And it began to develop a mileage tax for personal vehicles as early as 2001. The pilot programs it has conducted since then have garnered national attention in transportation circles. As Governing Magazine reports: “Many view the state as being on the cutting edge of transportation funding. A Congressional Budget Office report published in 2011 suggested a miles-driven fee as a viable alternative to the gas tax, and many national transportation experts have endorsed the idea too.” These pilot projects have looked at outfitting cars with a special-purpose GPS device that would tell them where they have been. The latest iterations rely on commercial GPS devices (like phones or navigation devices) or more simply a wireless device that would report mileage back to ODOT HQ on a daily or weekly basis.

A lot of folks don’t like mileage-based taxes. Blue Oregon’s Keri Chisholm calls them a “terrible, horrible, no-good, very bad idea that just won't die.” Keri grants that more money is needed to maintain Oregon’s transportation infrastructure, but, like a lot of people (although not a majority of the state legislature), he would prefer to increase the gas tax, 15 to 20 cents per gallon.

I like mileage taxes. Most people do as long as they remember that the tax is a charge for highway use, not primarily a means of deterring driving or harmful emissions. A good mileage tax would reflect axle weight and miles travelled, which, together with vehicle speed, constitute the main determinants of highway wear and tear. Ultimately, it would probably be advantageous to incorporate operating speed into the mileage rate. This would allow the tax to be calibrated to the damage a car causes to the State’s streets and roads, but would require something more than a simple report of miles traveled. Installing a system based on GPS data on highway usage, would also make it easier for ODOT to figure out when and how much maintenance state highways need and to allocate funds to municipalities and counties based upon the actual use of their streets and roads.

Of course, the critical advantage of a GPS-based mileage tax is that: "You can potentially calibrate the level of the tax to the degree of congestion on the particular road at the particular time of day, so the tax better reflects the changing externality associated with driving." In the longer run, congestion pricing would also be useful for planning for future highway needs. In my opinion, its potential use in congestion pricing is the best possible argument for building a GPS system.

Several reasonable objections have been raised against mileage taxes. The first is that vehicles licensed in other states would be exempt from the system. That is not now the case with commercial vehicles and occasional visitors to the state could simply be included in system by which we collect taxes on commercial vehicles. More frequent visitors would undoubtedly find it more convenient to plug into the state’s GPS system.

Second, “removing financial advantages of low carbon impact driving is antithetical to the health of our ecology and the direction our economy needs to go.” I have a lot of sympathy with this argument, but Oregon’s current gas tax is too low to have significant effect on carbon emissions, the state is the wrong entity to impose a carbon tax (although in the absence of national action, better than nothing), and abating greenhouse gases calls for taxing all sources at the same rate, proportional to the harms they produce, not just motor fuels. Moreover, there are substantial federal and state incentives aimed at persuading folks to substitute high mileage vehicles for gas guzzlers.

Third, giving ODOT the means to monitor our cars’ movements throughout the state would infringe upon personal privacy. Putting a GPS device in everyone's car is evidently upsetting to a lot of people. This seems silly to me. Most new cars already have such devices and many of us carry cellphones around on a regular basis. Is it safe for Verizon or GM to have access to the information produced thereby, but not ODOT? OK, I think we are a bit nuts about privacy in any case: that personal and corporate tax returns, information on children and families, and personal heath records are all private makes the formulation of coherent public policy nearly impossible. By my opinion here doesn’t matter. The fact is that it would be a simple matter to allow folks with serious concerns about their privacy to buy their way out of the system. 

There is one objection to this proposal, however, that really doesn’t make sense, that road use is the wrong tax base: “even people who don't drive are road users. Any type of commerce or business depends on our road network; every product we buy is shipped via roads at least partially. The idea that the cost of roads must be paid through a ‘user fee’ is silly. We are all road users.” That we are all road users whether we drive on them or not is absolutely true, but it is equally true that insofar as paying a road tax is a cost of doing business, the tax will be shifted to those of us who ultimately benefit from their use. But, in fact, this argument is irrelevant to the proposal under consideration, which is concerned exclusively with the use of personal vehicles. Oregon already applies a mileage tax to commercial vehicles.

Fred Thompson: Thinking About School Districts and Property Taxes

Note: I have been bust moving my family back from Brazil to Portland and have had not time to blog.  It is back to Brazil in August so my time here in Oregon is tight and I will have difficulty blogging regularly.  Fortunately Fred Thompson rides to the rescue with a couple of blog entries - the first is what follows:

Local school districts, their boards, school superintendents, and district offices have come in for a lot of criticism of late. Dylan Scott, in a recent Governing magazine article (May 2013), reports that advocates, both left and right, increasingly call for the outright elimination of local school districts, which would mean turning educational policy/finance over to state control. This notion is surprisingly attractive to some conservatives, who would make state governments the only higher authority for individual schools, which would be state funded but independently controlled and operated, although a more likely outcome of full state-level funding and control would seem to be machine bureaucracies of even greater scale and scope than at present.

Is the antagonism toward local school districts justified? In Making the Grade: The Economic Evolution of American School Districts, William A. Fischel argues that it is not. Fischel adopts the prevailing economic view of the function of local governments in our unique system of fiscal federalism: local governments, both general-purpose governments and special tax districts are like businesses, property owners are equivalent to shareholders, and local officials create value by maximizing property values within their jurisdictions’ boundaries via the provision of services and amenities that can be more efficiently financed collectively than by individual property owners. This basic logic underlies local reliance on user fees and property taxes, which, where assessments reflect market prices, are the economic equivalents of user fees.

According to Fischel, school districts play a central role in this system, because of the importance of schools to a critical class of property owners: homeowners.

“A significant factor for many people deciding where to live is the quality of the local school district, with superior schools creating a price premium for housing. The result is a ‘race to the top.’ as all school districts attempt to improve their performance in order to attract homeowners.” Fischel also argues that locally funded schools, especially those funded by ad-valorem property taxes, provide homeowners with the motivation to monitor and control local jurisdictions, because amenities and taxes are capitalized in the value of their largest asset, their homes, and local governance gives them an opportunity to do so. Finally, he provides evidence that home prices are more responsive to district boundaries than to the boundaries of school attendance zones, which he attributes to the special role played by local school districts in the accumulation of community-specific social capital, “mainly through the networks parents establish,” which spills over to a wide array of collectively provided services and not just to schools.

 In defending school districts supported in part by local property taxes, Fischel also questions voucher programs, noting that their greatest virtue is also their greatest vice: greater competition among schools erodes location-specific social capital.

The tax-financed, local public school system makes “exit” (to private schools) more costly, which in turn promotes more “voice” within the community. Parents will inevitably seek to make their voices heard in their children’s schools, wherever they are located. Public schools induce those within the same jurisdiction to have a more common voice in self-governance in other community matters.

Critics of Fischel’s argument in favor of linking resources to location typically ground their claims on two priori beliefs. The first has to do with the demand for educational services, the second with democratic governance. The first of these is that education is primarily a public, not a private good, and should, therefore, be supplied equally to all. I am inclined to believe that this argument misconceives the nature of public goods. Public goods are characterized by two characteristics, non-excludability and non-exhaustibility, which means that only one quantity can be supplied to the citizenry within a given jurisdiction, that the citizenry’s enjoyment the good is entirely passive, and that the good must be equally provided to all, whether they like it or not.

Clearly neither of these characteristics nor their implications applies to educational services, at least not for the most part. Consequently, most economists believe that educational services are primarily private goods. For a friend of education, this should generally be seen as a good thing. The single most powerful implication of the theory of public goods is that they tend to be under supplied. The principal exception to this generalization occurs where they are combined with private goods and dominated by the latter.

However, to say that education is not primarily a public good does not mean that this argument is wrong. Repairing it in this case is fairly straightforward. Equity or, more correctly, enjoying the benefits of living in a reasonably fair and equitable community is itself a public good and the delivery of educational services and amenities may be an effective means of promoting its provision. However, the relationship between educational services and a more equitable society is an empirical question, one that that most of those calling for equal student funding neither ask nor answer. My own view of the evidence is that improving access to and the scope of pre-school services and meeting students’ basic needs and, thereby, raising attendance once they have started school will go further toward improving outcomes for students from low-income families than increasing school resources per se, and that those things are appropriately state responsibilities

Opposition to using local property taxes to finance schools also rests upon a peculiar view of democratic governance, which holds that citizens are entitled to certain services simply “by virtue of their membership within a polity,” that governments are obligated to provide these services equally to all, and that this obligation cannot be outweighed by other considerations. Consequently, if education is one of the services to which the citizens of a state are entitled, it must be provided equally to all. Here too, I am inclined to take issue with the argument. I would freely grant that all citizens have certain rights and have been afforded certain entitlements, but what those entitlements are and how far they go is entirely a matter for the members of the polity to decide through its participation in the processes of democratic governance, deliberation, and debate. Folks are well within their rights to argue that education should be a service to which all citizens are equally entitled; that education is a service to which all citizens are equally entitled violates both fact and logic.

Indeed, I would argue that, from the standpoint of democratic governance, the most important criterion by which any institutional arrangement should be judged is the degree to which it promotes citizen engagement and participation in the management of the polity and an understanding of the consequences of collective choices for themselves and their neighbors. And, while this factor does not outweigh all other considerations, it should weigh very heavily in our assessment of alternative institutional arrangements.

From this standpoint, our idiosyncratic system of fiscal federalism appears to work fairly well in general and specifically with respect or the governance of public education. There is evidence that the system promote citizen monitoring of school performance, that higher tax prices and home ownership are associated with higher levels of monitoring, and that greater reliance on property taxes and other measures of decentralized control are associated with greater efficiency on the part of school districts. Further, looking at interstate variations in average student achievement, operating stability, flexibility, and transparency, one consistently finds that they are inversely related to state level financing and control, both in cross-sectional analysis and panel studies. In the face of this evidence, one might conclude that it would be wiser to question the merits of state-level finance/governance than district-level governance.

Oregon College Tuition Plan

Currently most Brasilian schools are on winter break, my kid's included, so we are doing as many Brasilians do and having a short vacation - thus the lack of blogging.

Nevertheless, I have wanted to blog about the proposed college tuition plan for a while but spotty internet has held me back.  The internet is still spotty but fortunately Betsy Hammond in The Oregonian (can I still call it that?) has written a brilliant article that says most of what I was going to write.  Here is a rather large excerpt (so go to the O site and read it all so they don't get mad at me):

Such a plan has legions of problems, however, said Mark Kantrowitz, a widely cited financial aid expert and senior vice president of the Edvisors.com group of financial aid websites. That helps explain why the approach, though studied many times, isn't being used anywhere in the United States.
Among the catches he cited:

• Many students would still end up owing big loans -- plus the promised percentage of their income. Only tuition and fees would be free, and many students need loans to cover the other costs of college. According to Di Saunders, communications director for Oregon's university system, the typical four-year cost for an in-state undergraduate is about $87,000 -- $31,000 for tuition and fees and $56,000 for rent, food and other expenses. "You'll end up with the hit to the income and you still have student loans," he said. "It's not really going to solve anything." 

• Twenty-four years is a long time to burden a student with college costs, even if payments are only about $2,000 a year during the final 12 years of the contract. 

• Asking students to pay 3 percent of their income, even for that long, would be unlikely to cover the state's costs to operate universities for free. Students would likely be asked to pay a higher percentage or the system would go broke, Kantrowitz said. 

• Collecting money from former students who move out of state or out of the country would be tricky at best. Oregon doesn't have the power to compel other states or the Internal Revenue Service to tell it how much individuals outside Oregon earn. And other states would probably try to regulate the repayments as loans, which could run afoul of usury laws. 

Saunders said she sees another, bigger challenge: To keep universities operating, Oregon would have to come up with a lot of money to replace the lost tuition and fees until enough graduates have started making repayments -- perhaps for as long as 10 years. "The state would have to pay a lot more in general fund support until the pool is built up," she said. Given that Oregon struggles to pay 30 percent of the cost now, relying on students to pay 70 percent, "that might be too heavy a lift."

I would also make one larger point. This scheme is not a lot different than the current system of financial aid. We already charge very different prices to students based on financial background through the use of grants, subsidized loans and so on.

 The current system of student loans allows delayed repayment, deferment in times of unemployment and you can even get your loans stretched out over as much as 25 years. yes there is explicit interest but the proposed repayment scheme still has to deal with the time cost of money and will have to collect enough to cover it. To me it is hard to see this anything different than internalizing the student loan market.

The main difference is that the current system means tests based on current income status of the family (or the individual for non-traditional students) this means tests on the ex-post labor market outcome of the individuals.

This creates an interesting moral hazard problem - borrowers (which is what I will call them) will be more apt to choose careers that pay less well. It also creates an adverse selection problem - those that seek such loans will be disproportionately those whose interests are in areas in which the labor market has set the wages lower. This may be good for the spirit of those that choose arts, literature and the like - and society might be better for it - but it will also cost more and the system has to be ready to defray those extra costs.

Finally, I call the folks that would take advantage of this deal borrowers because this is functionally no different than a loan. It is a different kind of loan to be sure, but it is a loan just the same. Now the lender becomes the state of Oregon or the universities themselves - but the fact remains that students are borrowing for school. Which is why I have nothing agains to the plan and am willing to be convinced that it is a better system but I am not yet so convinced. It sounds pretty cool, but the nuts and bolts are less thrilling.

More Thoughts on The Oregonian

I fear for The Oregonian, but do not delight in its demise - in fact the exact opposite is true: I think investigative journalism is a incredibly valuable public good and I worry that society is undervaluing it and squandering it as the print journalism business model dies as I have said many times here on this blog.

That said I am very worried about the future of the Oregonian and here are a few reasons why:

One: The move into being a digital first company would inspire a lot more confidence if they hadn't shown over the last decade that they are so completely inept at it.  I realize that a lot of this is the way Advance structured the separate "OregonLive" operation, but the "OregonLive website, even after the extensive overhaul, is one of the worst sites I have ever used for news.  And this, by the way is the sum total of Advance's economies of scale and scope strategy - OregonLive.com is identical to the other advance sites, most notably NOLA.com. So what makes Advance believe that they can suddenly, by switching focus, become great at it?  They have had more than a decade already with terrible results.

The slow switch to a digital first model has been painful to live through.  Horribly written and seemingly unedited stories pop up on OregonLive as soon as possible only to go through many mutations and eventually end up as the finished product (usually edited successfully, but not always) in the print paper.  On line there may be two or three versions of the story still on OregonLive (but of course if you try to use their search function for them you will find none) and a number of ancillary bits to wade through (let's give them VIDEO!!).  O reporters suddenly pop up on social media and desperately try and get a twitter following so they can show their editors how hip and 21st century they are. [Here is a tip - too late for most I am afraid - follow EVERYBODY and just go and find irrelevant, amusing, pithy stuff on the internets and tweet them all the time]

Two: which leads us to comparative advantage.  If the new business model is to be based on on-line page views and the ad revenue they generate (did I just say that?) readers need to come to the O and not other places.  Why would they do that?  The ONLY valuable asset (now that the printing presses and ops are worthless) the Oregonian has is its name and reputation.  I still turn to the O for the authoritative word, but there is not much of a reason to anymore except that I am old and slow to adapt.  The human capital at the O, upon which its reputation is based, has been completely gutted.  Reporting is a science and art that takes many years to perfect.  Over the years reporters learn how the systems work, learn how to get the information, develop contacts and sources, etc.  The digital age has not been kind to the O in its efforts to shed legacy costs (read: high salaries and pensions) as all the of the new fresh faced journalism school grads they hire quickly have their faces up with there digital byline and a website full of reporters who look like they are writing for the high school paper is not something that enhances the reputation of the O as much as destroys it.

So there is no reason, I am afraid, that folks will turn to the digital O for news when there are so many other sources.  True, maybe there will be no serious competition, for which society will suffer no doubt, but then there also may be too little viewership to support it anyway.  For if the O's business model is successful, there will be competition, but if it is a looser, they will have the market to themselves.

Three: being driven by the eyeballs on pages business model means being driven by more fluff and less serious investigative journalism.  The most read stories as of this morning on OregonLive?:

1. Bumblebee memorial scheduled for Sunday at Wilsonville Target
2. Canzano: Trail Blazers pass draft test, but face tricky free agency
3. Quick: CJ McCollum provides his first assist on his first day with the Trail Blazers
4. Trail Blazers nab unexpectedly available Allen Crabbe, Jeff Withey in second round
5. Blazers Insider: Although LaMarcus Aldridge wants out of Portland, don't expect it to happen Thursday

Okay so the sports part of OregonLive might be able to sustain itself...

Perhaps the most ironic thing is that the very week after which all of the changes to the Oregonian were announced, they roll out one of those long-form investigative journalism Pulitzer-fishing pieces that is certainly a relic of the bygone era.  You can almost hear the discussion in the editor's room: "well, hell, he has done all of this work, let's just get the thing published quick before Advance can round-file it."  Hell, Les Zaitz has only 470 twitter followers, there is no room for a reporter with so few twitter followers in the new Oregon...(Joe Rose, master of the new form, has more than 6,700, so maybe commuting news will sustain itself too).  Besides, who the hell cares about Pulitzers anymore?  Not the kiddos looking for Blazer draft news...  So what it really does is serve as a stark reminder of what we have lost.

So what would I do?  I honestly don't know so though this reads like a relentless criticism, it isn't.  I don't have any good answers.  This is more about my worry that this strategy will not work.  Hell, even the New York Times couldn't make open access profitable.  Can an old-style newsroom still exist and what are the implications for a democracy that depends so heavily on the fourth estate if they can't?  

Or maybe I am all wrong - maybe we don't need the MSM in this new digital world.  Maybe blogs, press releases and the occasional look in from wire services is enough.  I doubt it.

So here is hoping that the new digital Oregonian will be a success and that we can still count on one place where real, original, investigative reporting thrives.  If not we will all be the poorer for it.

[UPDATE: Here is an interesting perspective from New Orleans]

On Inequality, Mobility and the United States

Being here in Brazil brings issues of income inequality to the forefront as Brazil, despite significant progress on this front remains one of the worlds most unequal societies.  The US, among rich countries has always been one of the most unequal, but that has been partly by choice - we forgo a strong government involvement in altering the distribution in the belief that this makes entrepreneurship more robust and leads to better overall growth.  But a pillar of this philosophy has always been the Horatio Alger factor: that in this society only your individual smarts, work-ethic and daring-do determine how high you can rise.  This is akin to saying that there is high income mobility in the US - that kids from poor parents have a good chance to become much wealthier than their parents.

Unfortunately this is only true in anecdotes and is becoming less and less true as the US economy morphs into a much more unequal distribution of the vast wealth it creates.  The Hamilton Project at the Brookings Institution has put out an excellent primer on the topic and here are the graphs that speak thousands of words.

This first is a alarming illustration of the increasing inequality of the US economy since 1975.  In a wealthy and growing economy such as the US, should we not expect that the poorest children are doing better over time?  This is a key metric of development in other parts of the world...

This one illustrates how low is our social mobility - born poor: you tend to stay poor, born rich: you tend to stay rich. Why? It is not genetics...

This next one rebuts the myth that it is all inherited genetics - smart rich parents have smart kids who get rich thanks to their own smarts and not the socio-economic position of their parents.

No, in fact, the amount invested the the future success of kids is rapidly increasing along with inequality.  Especially as the public sector dis-invests in education, these enrichment activities are being privatized and this is likely contributing to the increasing income inequality and the decreasing mobility:

And these investments matter - the academic achievement of rich kids relative to poor kids is increasing rapidly.

To paraphrase Rawls: the true test of a just society is on into which you would be willing to be placed at random.  Would you take your chances in the US?

Picture of the Day: Jobs -- Recovery, What Recovery?

Today for my attempt to disguise real content with multicolored graphs stolen from other places, I give you this nice little depressing picture.  It shows very effectively just how slow the recovery has been and just how far we still have to go.  

There are signs of life in the US and Oregon for sure, but nothing that portends a hotting up of the recovery - Europe needs probably a decade to sort itself out, growth has slowed in Brazil and China is showing itself ready to finally curtail the rather reckless debt acquisition of its banks.  

Add to that the perhaps immature pivot to austerity that the US is making and we are probably going to be living with unemployment in the 6-7% range for the next 5 years or more.  

Graph from The Wall Street Journal.

Picture of the Day: Rich People

From The Economist

Requiem for a Daily

The almost inevitable has happened - The Oregonian will cease to exist as a daily newspaper becoming more    focused on digital content and finding a way to make it pay.

I say inevitable because once Advance Publications (which owns the O) cut the New Orleans Times-Picayune to a three-times-a-week product you just knew the writing was on the wall at the O.

I say almost because since that happened a competing paper has started and in response the T-P has decided to fill in the daily delivery gaps with a printed product just for newsstands.

Plus the T-Ps strategy has been an omnishambles - totally and completely unrecognizable as anything remotely associated with smarts and business savvy.

David Carr in the New York Times suggested, when the Times-Picayune decided to produce another printed newsstand-only edition to fill in the gaps it left with the delivered paper, that print journalism is still where it is at.  I suspect that this is more wishful thinking than sober analysis.  What the recent history of the T-P suggested to me is that traditional print newspaper businesses are ill-equipped to deal with the future, or perhaps more precisely Newhouse's Advance Publications is ill-equipped.  Unfortunately, the O is owned by Advance.

I had a dream, which is now fantasy but to which I hold dearly, that Advance would crumble and that someone, perhaps Robert Pamplin, would snap up the O and save it.

In the meantime we have the OregonLive website - recently revamped and a total mess.   Full disclosure, this  blog is a part of the Oregonian News Network (okay, maybe not for long after this) for which I receive absolutely nothing...at all.  I said yes primarily because I am happy to support anything that might just possibly help keep the O afloat.  Because I have said many times in this blog that I think investigative journalism (which takes real hard legwork and should not be mistaken for blogging) is a public good of which we far underestimate the worth.

We also have the revolving door of recently minted journalism school grads that the O has become and coverage of most issues has become transparently superficial as a result.  This is not the talented and hard-working new reporters fault, just the simple result of the fact that the job, done well, requires experience, knowledge and contacts - something you build up over decades at a paper.

I do think we are in a period of transition, just like music and  movies and that journalism will end up more digital than paper, but we haven't yet figured out how real investigative journalism is going to survive.  I think it might just take a real dearth of investigative journalism for people to realize what they have missed.  But we can't leave journalism to run as a charity, there has to be real public support of it.  We do it for radio and TV because it is clear that the market will not support enough of it, so let's do it for journalism in general.

The only silver lining for this old-school daily print newspaper and coffee sipping middle aged man in Portland, Oregon is that you can get the New York Times delivered to your door seven days a week for $16.  I'll keep my O subscription for now but I am skeptical of what the future holds - there is barely enough investigative journalism now, what will the new newsroom look like?

In the meantime, I am deeply saddened for those reporters who are on their way out: they have made positive and significant contributions to the state of Oregon, the city of Portland and to my like and for that I thank them all.  

Notes from the South: Protests

Another night another impressive turnout across Brazil including, here in São Paulo, a massive demonstration on Avenida Paulista three blocks from my apartment.

Though there was more violence and vandalism elsewhere, São Paulo was generally very peaceful.  The interesting evolution was the arrival of a number of competing political party activists that showed up in T-shirts and carrying flags and started fighting between themselves.  Equally interesting is the anger at the Workers Party folks that showed up the crowd jeered them and called them "oportunistas" and "mensaleiros". Traditionally the populist party, they now represent the entrenched politicians and have been badly tarnished by the Mensalão, a massive corruption scandal that has reached up into the highest echelons of Lula's government.  (Lula himself has escaped indictment largely - my cynical friends say - due to his talent at filtering all of the proceeds of his corruption to family members, never directly to him).  

The best english language coverage I have read has been the spot-on reporting of the New York Times who captures the amorphous spirit of the demonstrations perfectly and the Guardian who downplay the vandalism and violence.  It should be noted that there is anger directed at mainstream media (especially TV) here who folks believe are part of the corruption and cronyism and who have, in their view, unfairly focused on violence and vandalism.  I am not sure about the last - TV news has always been about fires and car crashes rather than context - this is the same with the protests.

Updates and Notes from the Social Uprising in Brasil

The sign reads "Not for pennies but for rights!"

A few random updates and notes about the protests here in São Paulo.

First, the protesters won the concession they were originally seeking: bus, metro and train fares are returning to R$ 3.00 from R$3.20.  (Divide by 2 to get US$ equivalent)  However the protests will continue all over SP (and Brasil) today as the movement has quickly spread to become much broader.  The group that started the whole thing, Movimento Passe Livre, is now moving on to demand free transit (as is the raison d'etre of the movement whose name is 'free pass').  Though the protests have morphed to include all sorts of gripes about current social conditions, Passe Livre is still the focal point and the group that organizes the initial protests - i.e. sets up time and dates with local police.

Second, one interesting aspect of these protests is that normally you might be expecting that they call for the government to get out.  But the government is the Worker's Party (PT) and has traditionally been the party of the poor and working class and who stand for exactly these issues.  Even more interesting is that it was the PT that started Passe Livre in the first place (or so I have been told).  Many of these social groups are established to put political pressure on government to help out an opposition party and such was the case with Passe Livre - their demand helped the cause of the PT as they were trying to gain national power (which they did, Lula and Dilma are both PT).  So the protesters are demanding changes and are angry at government but can't quite get themselves to demand the PT get out (or at least as far as I can tell).  The state governor here is not PT so the protesters have one head to call for.

Third, I wrote yesterday that the R$0.20 fare increase seems like a little but it is a lot for the poor and working class and, even more, is a powerful symbol of balancing budgets on the backs of the poor.  But São Paulo is such an gigantic city that the repeal of the R$0.20 fare increase leaves a R$ 325,000,000 for the rest of the year.  So roughly the R$0.20 fare increase yields R$700,000,000 a year to the government coffers.

Fourth, some foreign newspaper have tried to push the story of frustration over the squandered opportunity of the economic boom (which has cooled of completely here).  But this is unfair - the government has made remarkable progress on many fronts.  They have massively expanded Bolsa Familia, the government transfer to poor households which also incentivizes kids going to school.  They have invested in social services like schools and public health and there are now twice as many university students in Brasil than there were just 12 years ago.  So the progress Brasil has made in many indices of human development is impressive, but that Brasil still lags so far behind other countries demonstrates the sheer depth of the problem. (The New York Times has the best English language article I have read on the protests, by the way)

Finally, though the protest have been largely peaceful (save for a bunch of localized vandalism by kids more intent in using the moment as an excuse to smash and steal stuff) it does completely mess up transit in the city that already has massive transit problems on normal days.  My kids school has cancelled after school activities today due to the planned protest (much to my son's despair - Thursday is futebol day!) and we had to cancel an after school playdate because getting from one neighborhood to the next is too hard. Needless to say, the protests do not enjoy the full support of my kids!

Of Ten Cents and 14 Billion Dollars

Why the fuss over a ten cent bus fare hike?

Consider that while the government cannot find money to avoid a ten cent bus fare hike, significantly raising the cost of living for the poor and working class of São Paulo, they have no problem finding 14 billion Dollars to spend on the World Cup.

And it is not just the sheer magnitude of that number but the combination of graft, corruption, incompetence and so on ensures that this is probably about twice what they needed to spend.  Add to that they fact that the World Cup is going to me a upper middle to upper class event.  Most tickets are far too expensive for the working class.

And while Brazil's growth has been fantastic over the last decade, Brazil still has woefully inadequate public education and health infrastructure.  As I mentioned previously Brazil still lags far far behind Argentina in education metrics and Argentina has been a basket case for the last 20 years while Brazil is a BRIC!  They can and should do better.  

So it is not just the ten cents in itself (which is significant), but the symbolism of the ten cent fare hike amidst all of the other decisions by the government about where to spend money.  Added to that is a high tax rate that, with ridiculously high leakage in the form of graft and corruption, yields a unacceptably low return in the form of basic public services and infrastructure.  

The serious demonstrators have a lot of legitimate points.  You should also understand that the current violence and destruction that you see on TV are a small fringe of young men and boys who delight in taking this opportunity to smash stuff up (including, conveniently, shop windows after which they can take stuff).  I'll leave it to the sociologists to decide whether this rage and destructive urge is the obvious artifact of a desperately unequal society that has a lot of young men without much hope of a life without financial struggle.  Regardless, wanton destruction is ridiculous and only serves to delegitimize the greater struggle.  Sadly.

The image above is from Avenida Paulista, three blocks from my apartment, and the center for the more peaceful protests.  I would have no problem taking my kids there to join in (save for the fact that they are fast asleep long before they arrive). 

Economist's Notebook: The World Cup and its Discontents

Here in Brazil, folks are taking a host of grievances to the street.  The popular unrest is growing quickly and, save for some young hooligans who seem to delight in taking advantage of a good protest to smash and burn things, it is largely a peaceful and thoughtful protest.

In São Paulo it started with a ten cent increase in the cost of a bus or metro ride.  Small change to be sure but the contrast between the working class being asked for a little more in an incredibly expensive city while at the same time the government seems to have almost endless capacity to build stadiums for the world cup is stark.  At first the protests were small and filled with vandalism.  Subsequent protests were violently cracked down upon by police who were told to prevent vandalism.  Now the protests have grown from just a complaint about the bus fare and people are joining in with a litany of complaints: health care and education being the top two as far as I can tell.  The protest last night swelled and became massive but mostly peaceful.

Protests in other cities, most notably Rio, were less peaceful.

The timing of the protests are a combination of the timing of the transit fare increase in SP and the start of the FIFA Confederations Cup, a World Cup warm up.  The anger at the amount of money spent building and rebuilding stadia and other related projects for a one-month event while poverty, inequality and serious deficiencies in social services has come to a head with this event.  Smart protesters know also that their protests will get world attention while the Confed. Cup is going on which will put more pressure on the government to respond.

My wife, Kristina, a teacher, was able to go to a São Paulo public school in a good neighborhood.  One of the first things that struck here was that the neighborhood is wealthy so those kids all go to private school and the kids who attend the local public school are the kids of the domestic employees of the neighborhood.  Weird and totally Brazilian. But the other thing that she learned was the predictably bad infrastructure, overworked teachers, and lack of support.  Teachers in SP have to work two jobs to make ends meet.  Education is delivered twice a day here: there is a morning and afternoon session so that they can get more out of the already inadequate infrastructure.  Most teachers Kristina met were talented, enthusiastic and dedicated, but totally worn out by having two jobs (usually in different schools so that they have to dash from one to the other).  So it is natural then that people are asking about government priorities when there seems to be an endless supply of funds.

Another big theme of the protestors is contra-corruption which goes hand-in-hand with football, the CBF,  big construction projects, government...all of the key World Cup talking points.  People here don't trust the government and are skeptical that a ten cent increase is necessary when there is so much corruption and graft.

So it will be interesting to see, over the next week or two, how these protests evolve and whether they return for the World Cup.  It is also a bit of a cautionary tale to any country that accepts ever greater inequality in its midst - Brazil in this regard has come a long way but there is clearly a lot of work still to be done.

Picture of the Day: The Output Gap

US manufacturing still struggling to get back to pre-recession levels.  The long slog continures...

From the Wall Street Journal.

Soccernomics: News and Notes from Brazil

New Maracanã: From my seats (brag). Notice though, how intimate it feels. Super-nice.

Absent any real content, I give you some random musings on soccer from Brasil.

The New York Times covers the rather difficult path to the World Cup hosts Brasil are having.  The Confederations Cup will go off as planned but in only about half of the stadia to be used for the world cup.  The rest are in different stages of construction with the worst laggard probably the Itaquerão in São Paulo.  

I got to test Brasil's preparedness first hand at the grand re-opening of the fabled Maracanã stadium in Rio as Brasil hosted England in a friendly.  Getting tickets was not easy.  First the web site failed miserably and when I eventually was able to buy tickets I had to repeat the process twice as you were limited to only two.  That part took about two and a half hours.  Oh and I could only do it because I am a registered foreigner - you had to have a Brasilian ID.  One good thing here in Brasil is that the law mandates that kids be allowed to buy tickets to games at half price, so I saved a lot of money that way.  The second bad thing is that you still had to pick up tickets at least a day before the match at a local Rio ticket window.  I chose Gávea and Flamengo's ticket office and wound up waiting for more than an hour just to collect the tickets I had already bought.  Ah Brasil!:

Outside CR Flamengo: this is about 1/3 of the line.

The game day experience, though, was absolutely awesome.  The Stadium had hordes of people to help out, it was beautiful, modern and the sight lines are fantastic. Getting in and out was a snap and they didn't mind if we had food (you listening Merritt?).  The field was immaculate and the soccer was good and bad but in the end four goals was good value for money.  Even the subway, while straining under the sheer weight of all of the fans leaving at once, did admirably.  Kudos and a very good sign for the World Cup. 

Pelé thinks fans should not boo their team (yes, it happened v. England, but not that much and they were not playing that well so...)

To give a contrast to the shiny new Maracanã here is a panorama of the Estadio Pacaembu in São Paulo which was built in 1940 and looks it.  Still, it is pretty nice if totally basic.  We went to watch a desultory 0-0 draw between my adopted São Paulo team, Corinthians, and the lowly Portuguesa team.  Corinthians did not play well:  

Not much fancy abut this place but hot dogs are $2.50, so that is nice...

I read a little article on the struggle and success of Brad Evans at the right back position for the US national team and was struck by this Jurgen Klinsmann quote on playing outside back:  “It is one of the most demanding roles in the modern game” 

Why did it strike me?  Well, one, I recently converted to the position and I feel like it took me two years to master it.  But more so because I distinctly remember former Timbers coach, frustrated by the play of one of the many we put there, saying that exact opposite: that it is the easiest position on the field.  It was a stupid comment then, and is stupid now. But this is not to bash Spencer but to say that perhaps his view of the game needs some updating? 

Finally two interesting notes about watching futebol live in Brasil: Now that big screens are a part of new stadiums, they need to figure out a replay policy.  Right now they don't show any to avoid problems with fans and refs.  I think MLS does this well, avoiding controversial replays in the stadium.  But c'mon, show the goals!?!.  They also don´t typically show the game clock - I guess for the same reason, but it is annoying.