Beeronomics: Complements - Beer and Cigarettes

OK, so I had to find some excuse to post this picture which is all over the Oregon beer-o-sphere. It is Don Younger striking a familiar pose on the last day smoking in bars was allowed in Oregon. How will the ban affect Oregon's bars, pubs and breweries?

Matthew Engle in the Financial Times, writes that beer sales in Britain have declined 10% since the smoking ban was imposed there. Why should this be so? It is certainly true that the two, beer and cigarettes, are complements and so increase the cost of one [smoking is more costly because you have to go outside and do it] and the demand for the other falls.

Will this have as big an effect in Oregon as in Britain? I think it unlikely as most of the ever-so-popular pubs and brewpubs are generally non-smoking establishments anyway. But I do imagine that some small bars could find business down. I guess the bigger question is: given that there are many alternatives to patronizing and working in non-smoking establishments, is the ban necessary? The free market side of me suspects not. But the ban is no so much about this, I assume, as about public health and the cost of caring for smokers later in life. If this ban manages to reduce overall cigarette consumption, then it could easily save the state a lot of money down the road.

Mileage Tax Redux: Mankiw and Thompson

It turns out that Greg Mankiw has blogged about Oregon's mileage tax proposal and, lo and behold, frequent guest blogger and friend of the blog, Fred Thompson has chimed in with some clarification. The essence of which is that congestion pricing is indeed a major motivator of the whole GPS idea and (as Fred rightly notes) without such motivation, the GPS doesn't make much sense.

But I still wonder how you deal with the problem of non-residents. Since the bulk of the congestion problems in Oregon are in Portland, particularly the I-5 and I-205 crossings of the Columbia river, it is not clear how something tied to Oregon registered vehicles will work. A lot of the congestion in these areas is apparently coming from Washington residents that work in Oregon, which means that the GPS in Oregon cars won't be effective in dissuading these drivers.

London has famously instituted congestion pricing, but there the tax works based on photographs of license plates. So if you enter London you pay, regardless of where your vehicle is registered.

Given the cost, complexity and incompleteness of this system, I still cannot see why it trumps the simple and effective gas tax. It strikes me as a wonderful idea of you are an engineer (especially a traffic engineer) because you get to play with new toys and tools, but I remain unconvinced in my mental cost-benefit analysis of the idea.

Unemployment Poll

Just back from a quick trip to San Francisco (where it was delightfully sunny), the poor unsuspecting city that was just invaded by a plague of Economists [which I shall now coin as the official collective noun for economists - inspired by Louise Erdrich's "Plague of Doves"].

The fact that the new term starts today probably means slow blogging for this week, but I will try and get to part two of my little education series which will look at the wisdom of investments in higher ed.

However, there is one self-referential news item, which is the official poll results from my little on-line unemployment poll. And the news is that for the self-selected group of readers of this blog that bothered to vote, pessimism rules the day. A whopping 40% of you selected 12% and I suspect that there is some censoring going on - meaning that some of these voters would have gone higher if the choices were available. Wow. I thought 12% was a real extreme, and should we hit that, I will be breathing into a paper bag. I fear that we will indeed reach the 10% range in unemployment in Oregon (which was my vote), and hopefully we won't stay there too long. But then I was wrong about what the depth of the current crisis would be 6 months ago, so perhaps I still don't get it. There are some votes for 7% (which we had not reached when I fired up the poll), so some optimists were there at least in the beginning.

Though self-selected, it seems to reflect the overall pessimism of the populace these days and that is a problem. The Consumer Confidence Index is at a new low and without getting consumers a little more optimistic, it is hard to get businesses optimistic and banks optimistic about businesses, etc.

I hope congress can get its act together soon and get a stimulus bill for Obama to sign immediately, for I fear that without massive federal stimulus, the global economy is headed off a cliff.

Happy New Year!

Economist's Notebook: A Green Game Theoretic Conundrum

Suppose you wished to see a greater proliferation and use of 'green' or natural cleaning products.  Would you, as a consumer, do better buying from companies such as Seventh Generation or Ecover that have been solely devoted to green products since their inception, or would you do better buying the green product from the decidedly non-green company?

On the one hand supporting the green companies will hopefully help them get bigger and grab a bigger market share and you would feel reasonably confident that they would stick largely to their green product line since it is such a part of their corporate identity.   This would, in the long run, hopefully lead to their becoming more and more dominant in the cleaning products business and support your original goal.  

On the other hand, you may wish to reward an established company in the hopes that you can prompt them to devote more and more of their energy to green products, will be able to leverage economies of scale and scope to provide a low cost green product that will encourage many new customers to try it.  The risk, I suppose is that they are not really concerned about the greenness of their company but sales and if they can use low priced green products to compete Seventh Generation away, they may just do so and then abandon green products altogether.

Thus was my thought process yesterday when I was confronted with a bottle of Green Works dishwashing soap for $3-something, or the Ecover stuff I usually buy that was $6-something.  I decided to go for the Green Works stuff.  My wife disagreed with me later when I brought it home.  I was convinced by the line of argument that went, if the goal is to get as many people using the stuff as possible, then who cares who makes it, what is important to get the price down to the point where people who only marginally care will switch.  My wife is more persuaded by the whole company ethos argument.  But as an economist I tend believe that good intentions are almost always swamped by market realities, and if you want real change in the habits of American consumer, you have to make it work economically.  Witness the Prius.  It was not until finally a car came along that was affordable, reliable and you didn't have to go the extra yard of plugging in or driving to the Biodiesel station that we saw mass adoption.  

Anyway, apparently the Sierra Club feels the same way I do.  They have taken a lot of flak for their support of Clorox, but I understand where they are coming from.    

Portland's Housing Market: The December CS Numbers

The December Case-Shiller numbers are in and the news is more of the same for Portland. Here is the raw data in graph form for Portland and the 20 city composite:




And here is a sobering picture, it is the average annual appreciation of a Portland home over the last seven or so years. As many near-in neighborhoods are holding on pretty well, it means there is some pretty severe bloodletting elsewhere.



I always wonder, however, what to think of the bloodletting in the new developments. Sure there are people who invested in their own home who see the value go down, but if they are there for the long-haul, this is not necessarily a problem as long as they could afford the original mortgage. Then there are the speculators who bought for investment purposes and it went south, but with limited liability they are not too badly off (one of the reasons for the real tanking of the housing market is the ease at which such investors can walk away).  There were also the liars who used the no doc loan opportunity as a chance to fraudulently obtain a home.  Finally, there are the people who couldn't really afford what they bought but were counting on quick appreciation to allow them to extract equity from the home. These are the folks who are really adversely affected by the downturn and represent people who made a reasonable calculation but extraordinary times dealt them a bad hand. These are the folks I feel for.

There is a bright spot: the Fed is actively working to push long-term rates down and it is working - mortgage rates are insanely low. I think the worm is about to turn. It is crazy to sit on the sidelines too much longer and good deals are plentiful. So, though I have been wrong before, I think we may see some leveling off this spring (remember, these data stop in October).



By the way, as a side note, one of the reasons the Fed is doing this is because banks are still not loaning money like they should be because they can borrow from the Fed at these incredibly low rates (.25%) and buy treasuries that pay about 2%. Not a great return, but incredibly safe and since all other lending seems too risky, that's what they are deciding to do. So the Fed reckons they can buy treasuries and drive the rates down so much that banks will start to switch to the riskier loans. This is quantitative easing.  See a great Marketplace whiteboard video for a nice explanation of this.

Oregon Has a 529 Problem

The Oregonian has yet another front-page article on the 529 debacle.  It raises an interesting question (and on, by the way that I have no idea the right answer to): should the state insure against the losses of the plan for those invested in the conservative fund? 

The reasons not to are obvious: investors take on risk when these investments are made and insurance will only encourage them and the funds to act in a more reckless manner, these are private individuals and their wealth (and the loss thereof) is not a public matter, though administered by Oregon, anyone can participate meaning the state may bail out non-residents, etc.

But a case could be made for at least a one-time insurance payment for these families.  These families are doing the state a favor in some senses - they are being prudent with their money and will therefore be more likely to send kids to college, be less likely to need state assistance to do so and will encourage future families to undertake the same kind of long-range planning that will increase the likelihood that Oregon's children will attend college in greater numbers and need less state assistance.  

Though the actual loss to these families is severe and this could have a measurable impact on Oregon's higher education outcomes, the bigger problem is the fact that the publicity about the losses will be hugely dissuasive and will likely serve to limit participation in these funds.  This is a problem for the state because by encouraging families to invest on their own these families are limiting their reliance on state support and are increasing the percentage of college educated Oregonians.  This is a publicly administered plan and is promoted by the state.

So perhaps a one-time bailout is called for.  Something like 75 cents on the dollar for losses sustained in the most conservative plan.  I realize that this will never happen and perhaps the adverse effects I outline are really not that bad, but it is worth contemplating...I suppose.  At any rate it was a little thought experiment I was running with myself while jogging yesterday and I thought the case could be made for it.  What do you think?

Beeronomics: The 22oz Bottle

[Note: Slow blogging this week as I enjoy the holidays with my family]

As mobile bottlers allow more and more small breweries to sell there wares in retail outlets, the 22oz 'share bottle' has proliferated.  Now in stores in Oregon it is not uncommon to see a selection of these bottles displayed in the refrigerated case.  

But why 22oz bottles?  Mobile bottlers can presumably just as easily handle 12oz bottles, and getting customers to buy a six-pack means you are selling 72oz of beer rather than 22.  

I can think of a few reasons: shelf space is scarce in markets and it is probably easier to get retailers to stock 22oz bottles.  Also, in the space of one six-pack, you could display three varieties.  Finally, the amount of packaging is reduced - lowering costs.

But why do consumers buy them?  They are a pretty bad deal.  Last night I paid $3.39 for a bottle of Ninkasi Total Domination IPA (an amazing beer - in fact, probably my favorite Oregon beer and just one of Ninkasi's outstanding beers so I am delighted they are bottling).  This translates to $11.09 for 72oz - a six-pack.  Ouch.  [But well worth it by the way]  But the thing is most of us don't make these calculations in our head and a little over three bucks for a big bottle of beer seems like a reasonable deal.  Also, there is a nice kind of pre-commitment to opening up a 22oz bottle I suppose: once it's opened you gotta finish it.  Finally, many of these are 'big' beers and perhaps a six pack represents just a bit too much, plus making these big beers are more expensive, so charging $11 for a six-pack might be required should they go that route.  As a consumer, I used to prefer the convenience of the 12oz bottle, but I am beginning to like the 22oz bottle more and more.  Still it is a lot of beer for one person and my wife is not really a beer drinker so I wouldn't mind more sixers.  

Anyway, 'tis the season not to worry about it and just enjoy.   Cheers to the new year!

Economist's Notebook: Education, Part 1

This post will be the first in a series of posts in which I try and distill the frontier of economic research on education.  I have talked a lot about how, as a development economist, I think that a state like Oregon should spend heavily on education as human capital is perhaps the most important investment for future growth.  

But am I right that this translates directly to a high income country?  Is more money the solution or are there other things the state can do to improve the human capital accumulation of its children?  And, should the state focus more on K-12 or on higher education?  These are all questions that I realized I did not have good answers to, because I did not have enough knowledge of the latest evidence.  

So in a series of posts over the next few weeks, I hope to focus on some particular pieces of evidence from the economics literature.  Economists do not have all the answers, of course, and bring only one perspective, but economists are particularly good at examining data and teasing out causal links, so I don't claim these to be the last words, just starting points.  

So the first paper I want to introduce to the discussion tries to tackle the very difficult problem of assessing what matters for the quality of primary education.  The difficulty lies in the fact that since families choose to locate in areas in part because of the quality of the school district or a particular school itself, if we see variation in student achievement it is hard to tell whether it is the school that is causing the high levels of achievement or the families.  So, for example, we may see that one school spends twice as much per pupil than another school and has student achievement scores that are twice as high in the well funded school.  The question is whether it is the spending per pupil that is causing the high achievement or that the families of the kids in the better funded school are better educated, wealthier, etc.  Why this matters is that if we see a poor performing school, we might be tempted to say that increasing the per-pupil spending is the answer based on the evidence above.  But we just don't know.  

So how do you tackle this problem?  Well, Rivkin, Hanushek and Kain, in the March 2005 issue of the journal Econometrica use a unique data set from Texas that observes multiple cohorts of children as they move through grades 3 through 7.  This data set allows a very serious examination of some basic questions.  Do schools matter in the achievement of children, or is it all family and peer effects?  Do teachers matter?  Do observable things like class size, teacher education and teacher experience matter?  Finally, if these observables do matter how big are the effects (important if you want to know what to focus on)?   Though these are some pretty basic questions, answers to then have been elusive.  Why?  Well imagine you see that teachers with masters degrees seem to have better performing students than teachers with only bachelors degrees.  You might be tempted to conclude that this means that teachers with masters perform better in the classroom.  But it could be that talented students and their parents seek out such teachers (probably through seeking out well-funded schools that employ such well-qualified teachers in abundance).  Also schools themselves sort teachers and students and often match well performing students to the well-qualified teachers and therefore create a self-fulfilling prophecy.  

How does this data help overcome this problem?  Well by seeing how individual students do through repeated observations over a number of years and by seeing how different groups of students perform in the same teacher's classroom allows an econometrician to control for student heterogeneity and the non-random matching of students and teachers.  Students may have many things that make them better students that are not observable (drive, diligence, intelligence, etc.) but by looking only at individual students through the course of their studies you can effectively control for the effects of these unobservables.  Ditto the non-random matching of students (as long as the policy remains the same through the time of the data).  

So what do they find?  Well, teacher quality is incredibly important.  In fact they find that exposure to high quality instruction can largely offset the disadvantages associated with low socioeconomic background.  However, the quality of teachers is NOT related to their academic background: teachers with masters were not systematically better than those without.  Also, after the initial years in the profession, experience was not related to achievement.  These results help explain a puzzle in the education literature: it is believed that teachers are incredibly important but when we look at things like education and experience of teachers they seem unrelated to student achievement.  So it is true that they are incredibly important, but education and experience are not what characterizes a good teacher. [This poses another puzzle for those who believe in the Spence signaling model, but that is another story...] 

They also find that smaller class sizes do matter, but not as much as teacher quality.  Class size matters most in earlier grades, but other school resources have little to no measurable effect. In other words increased spending on schools seems to matter through the smaller class sizes and in teacher quality, but not in teacher credentials and in other school amenities.  

This research created a policy puzzle, if good teachers cannot be easily identified by their credentials or experience how do you figure out who the good ones are?  It appears that to a large degree, you have to learn their quality by hiring them and observing them.  This argues for considerable flexibility in schools' ability to hire and fire teachers, especially in the first few years of their employment.   Being able to effectively identify the talented teachers and retain them seems to be the first-best solution, but after that, reducing class size seems to be the best way to spend money on student achievement.  I am having a hard time locating recent data on state-by-state comparisons of average class sizes, but the data I can find from the 90s places Oregon near the bottom of all states in terms of class size.  

In the next post in this series, I will look at higher education. 

NOTE: I have updates this post with a link to the article

Grim...

John Foyston on the economy's impact on Portland's restaurant scene.  

Is Going Local an Alternative to Growth?

One of the reasons I became an economist was because of the precision it demanded.  Other disciplines that I explored that addressed the issues I was interested in were too seduced, in my view, by the allure of good sounding ideas without any real evidence or theoretical underpinning suggesting that they would be effective.  Economics is, for some, too rigid for those same reasons, but I appreciated the disciplined thinking economics demanded.  Today, in an opinion piece in the Oregonian is a good example of the kind of sloppy thinking and nice-sounding idea that does not survive real scrutiny in economics.  Unfortunately, I think we are going to see a  lot of this type of rhetoric in these troubled economic times. 

Seth Walker in his earnest opinion piece discusses the plight of an educated but unemployed homeless couple. He claims that 'flawed economic theory' in the form of 'free market economics' was the cause of their plight and the current economic crisis.  Their jobs were, apparently, victims of downsizing and there is a suggestion that globalization and outsourcing could be to blame.  His answer? Investing in local business, but not just local, business that do business with other local businesses.

Now, let me pause here and say that the idea that local businesses should strengthen local ties, source locally when possible, and reinvest locally are all fine.  I have no problem with this idea, nor do I have a problem with the similar idea of local currency.  These efforts can have marginally beneficial effects on local businesses and to the extent that we care about eating locally and the like, it can lead to increased consumer surplus.  But please don't sell these ideas as something they are not, and they are certainly not an alternative to market based growth strategies.  [The piece is a little confused, by the way, talking alternately about not focusing on growth but suggesting that investing locally is the way to economic security]

There are two big problems with this line of argument.  The first is that growth comes from investment and productivity and this strategy offers neither.  The second is that without growth it is virtually impossible to to focus on the "other factors" he identifies such as social benefit and environmental well-being.  

The idea that if everyone were to concentrate on local investment we can make the local economy better is simply wishful thinking.  This is not net new investment in the local economy, just a shift in investment capital (assuming everyone everywhere took his advice) and it represents investments in an ideal (localism) that presumably would lead to lower returns -  since efficiencies from comparative advantage would be sacrificed.  Thus the return on these investments would be lower, future investment would be muted and so on.  So the end result would be slower growth.  There is also no reason to believe that this investment strategy would spur the development of new technology that would promote efficiency gains that could be growth promoting.  In fact, if new capital is not chasing the best ideas wherever in the world they may be, there is good reason to believe this would stifle the development of new productivity enhancing technology.

The suggestion that we shift our focus away from economic growth to 'other factors' ignores the inconvenient truth that all of these other factors are inexorably linked to growth. Without increasing productivity and growth we have no way to combat serious issues such as global poverty, malnutrition, low life expectancy, political disintegration and the environmental degradation emanating from developing countries like China.  With about one billion impoverished people in the world, I have to admit that as much as I like the idea of localism it is, for me, a second-order concern.  It is also quite possibly harmful to the environment.  Sourcing everything locally suggests that we need to make everything locally even if it is less efficient.  Doing so would leave a larger carbon footprint.

So these nice sounding ideas are not much help to the unemployed couple mentioned in the piece, without growth where are their new jobs going to come from? Their story perhaps (if indeed their jobs were outsourced) is one of a lack of government provided retraining opportunities in response to the disruptions increased globalization can bring. 

The ironic thing is that these ideas are not new.  During the 70s and 80s many developing countries, such as Brazil and India, pursued a strategy of 'import substitution' where they tried to develop local industries to provide goods that were being imported from other countries.  The results were disastrous.  Growth stalled and these became lost decades for these countries with real and dire consequences for the millions of the resident poor.  It was not until this strategy was abandoned that these countries have experienced the rapid growth that has allowed them to lead serious campaigns to eradicate poverty, address environmental degradation and the like.  

Not all is rosy about the recent growth of these countries, Brazil, for example, is one of the most unequal countries in the world.  So even though it is now considered a middle income country, it still have a massive poverty problem.  So growth is not the end goal, you can have growth and still see little progress on the other dimensions, but it is the means by which you can achieve these goals.

While it is true that the current economic crisis has revealed some egregious flaws in the way we regulate the banking sector, and the unequal returns we have seen from the latest growth episode in the US is also a problem, to suggest that it has shown free market economics as a whole to be a failure is misguided. It is only by harnessing the power of markets that we can seriously hope to deal with the earths biggest challenges. The key is in becoming better at recognizing the limits of markets and addressing these limitations with appropriate policy.  We need to embrace globalization and free trade but better manage the global economy so that we can tackle these problems - problems that are global, not local.

Snowbound

I am not sure when I'll be able to ski from my front door to downtown again, so yesterday I made it almost all the way down the Springwater trail in Portland (had to turn around to avoid being late for dinner - hopefully tomorrow I can make it).  There is about 10" of snow in my yard and it has reached the point where my car would have trouble going anywhere, chains or not.  But since I can walk to just about anything I need - I have made two trips to New Seasons in the last two days - and classes are over for the term, I can just sit back and enjoy the beauty of it all.  We can also walk to a great sledding hill, so the kids are happy.  Strange to see that Corvallis and OSU are without any snow at all given the sheer volume of the stuff in Portland.  

Anyway, here is a picture of the wonderful scene in my neighborhood (this was yesterday actually, it is significantly deeper today).  Happy snow for those who are able to enjoy it.

Beeronomics: Honest Pints in Britain - or - Still Imperial after all These Years

There has been a lot of attention paid to my good friend's Honest Pint Project here in the US as people start to wonder what size glass of beer they are being served. Now from the UK comes this tidbit: after a battle with the bureaucrats in the European Union, the Brits won the fight to keep the imperial pint. Doing so preserved an essential part of their culture: to drink an ungodly number of true imperial pints in one sitting. [I honestly don't know how they do it - I was once in Heathrow Airport in the early morning in the international departures lounge watching a group of English holiday makers down beer and each had about 6 empty pint glasses in front of them, and they hadn't even left yet for their vacation! Truly astonishing, and pity the poor Spanish who have to put up with the louts. Me mum's English so I know of what I speak.]

From the BBC: "Innovation, Universities and Skills Secretary John Denham, who is responsible for national weights and measures, was delighted. He said after the European Parliament vote: 'People in Britain like their pint and their mile. They should be able to use the measures they are most familiar with, and now they can be sure that they will continue to do so. '"

I have two comments. First, why don't we label the glassware used in bars so we know what we are being served? Second a minister of innovation, universities and skills?!? How cool is that title? Of course, that the secretary of I, U and S is involved in the imperial pint fracas kinds puts lie to the title, doesn't it? Still, it doesn't seem like such a bad idea to institutionalize the idea that a country should have a coordinated approach to education and research and development.

Ah well, its Friday, so cheers! Have a good weekend.

Is Investing in Weatherization a Good Stimulus Plan?

An editorial in The Oregonian this morning touts a plan proposed by Joe Cortright to invest in weatherization of private homes as a way to stimulate the economy.  But is this really such a good idea?

Sure weatherization is good: saving money on energy costs and dependence on fossil fuels, reducing the carbon footprint of the state and injecting money into the economy in a downturn are all noble pursuits.  But is this plan the best way to address the very serious economic crisis in the state of Oregon?

The problem with this proposal is that the public goods aspect of this plan is minimal at best.  These are investments in which the costs and benefits are almost all private and thus there is not much justification for governmental involvement.  By contrast, investments in transportation infrastructure, education, and creating an infrastructure for a sustainable energy industry all have very strong public good aspects, the benefits are enjoyed by everyone, not just (in the case of weatherization) the private home owners.  The difference between something that basically replaces private investment and one that adds new public investment is precisely the difference in real stimulus versus little to no stimulus. In economic terms, the multiplier effect of this type of spending, on something that replaces private investment, is likely to be low.   By way of contrast, the governor's proposal to attack deferred maintenance at public colleges and universities has the same attributes of being quick to implement and a strong potential to suck up excess labor supply in construction, but it also represents a large and lasting public goods investment.    

Sure there is a social cost to the use of fossil fuel based energy and this is a problem.  But if you want private home owners to make these kinds of investments there are much more effective ways to do it - tax incentives, for example, or, even better in my view, a carbon tax on fossil fuel-based energy.  It is important not to confuse other goals with the immediate problem of fiscal stimulus in a horrendous downturn in the economy.  There is a way to align the two goals - like the aforementioned investment in sustainable energy infrastructure - but just because something is easy and sounds good, does not make it good economic policy and The Oregonian does itself no favors by not asking the hard questions when analyzing a proposal like this. I am actually fairly surprised that an economist has proposed this because in my view it does not survive the economics litmus test.

What troubles me most is that this is exactly the type of kind of nice sounding policy that becomes politically popular but that is actually damaging in that it stands in the way of better policy options and has the potential of, therefore, prolonging our misery in this terrible economic crisis.

Economist's Notebook: Incentives and Leaves

There have been a few recent news stories about Portland's leaf collection program. As an economist I obsess about incentives and am inclined to believe (much to the derision of other social scientists) that people's behavior is usually most easily understood through the prism of incentives. So it amuses me to see frustrated Portlanders angry with their neighbors about raking leaves into the street.

It is simple really. It costs $1 do bag your leaves and haul them to a collection point that only operates a few hours a month. However, it is free to simply rake them into the street. You are not 'supposed' to do this, but there is no law prohibiting it nor will any fies be levied. So what do you expect.

[In my defense, I may be an economist, but I try to include social responsibility in my utility function so I took two car loads of leaves to the drop-off. However, I did do a little raking of the front yard into the street as well, so I kinda am a semi-scofflaw. But my inner economist really wanted to just rake it all into the street - which shows you why undergraduates who take principles of economics end up more selfish as a result]

But I digress. Fallen leaves are clearly a public goods problem, they make the streets dangerous, clog storm sewers, etc. We could just tax trees to lessen the problem, but we like trees. Mayor-Elect Sam Adams wants the city to consider a Leaf-Tax Surcharge. Hmmm, I am not sure how you collect a special leaf tax, as this would cause people to feel more justified in raking into the street - what you don't want. As this is a general public goods problem, the city should probably start by simply not charging people to drop off their leaves and perhaps have weekly yard waste pick ups with allowances for extra bags.

In the end though, leaves will simply be a city problem that should be thought of as no different than any other street problem: city wide and something that matters to everyone. So trying to niggle with taxes and surcharges is not a good approach.

Detroit and Chapter 11

I have argued in earlier posts that the government should allow Detroit to go into Chapter 11 but provide credit to avoid Chapter 7. The White House and Treasury seem to have come to the some conclusion. This news story seems likely to be a trial balloon, we'll see how it flies with the punditocracy and on the mythical 'main street.'

The Fourth Estate Redux

I have fretted in the past about the decline of newspapers and, unlike some, am not convinced that blogs and on-line media will be able to fulfill the same roll that newspapers play in a democracy.  Anyway, more fuel for my paranoia, Washington News Bureaus are shrinking and disappearing.  The link is to an excellent New York Times article - highly recommended - and addresses some of the issues about why I think that local dailies are indispensable.

Oregon's College Savings Plan Takes a Hit

I have a 529 account for both of my children in the Oregon College Savings Plan.  [Why?  See my earlier post about cost disease - I am sure college is just going to get relatively more expensive and I am trying to prepare]  Luckily my kids are years away from enrolling in college because these funds have taken a hit thanks to the stock markets shedding of value (as they are years off, most of the investments are in stocks).  Surprisingly, however, The Oregonian breaks the news that the supposedly 'conservative' funds (which are supposed to be mostly invested in bonds) managed by Oppenheimer have lost 38 percent of its value!  Holy smokes, that is inexcusable.  These are the funds you switch the money to as your kids get close to enrolling in college to be safe.  There is no problem with returns in the bond market - so what happened - why would a fund manager play games with a fund that no one expects high returns from anyway?   This is bad news for Oregon's higher education aspirations, at the very moment the state is trying to maintain its investment in its kids educations.  It also seems indicative of a real problem in the culture of Wall Street (as if we needed more evidence) where ego and personal reward is more important than the business itself.  

Aw Shucks...

I had stocked up on supplies, the kids schools were closed and we were all ready for the GREAT BLIZZARD of 2008.  At 7 am, no snow, but soon we were assured a tremendous onslaught of the white stuff would descend.  At 10 am a few flurries and some wind.  By Noon, nothing.  A few moments of wind and snow in the afternoon, but essentially nada.  Dang it.  I don't blame Portland Public Schools for closing I suppose, but geez, how could the forecast have been so wrong?

Now I know how most people feel about economists at this point in time (or perhaps in all points in time).    

Slow Economic News Day

Blogging hampered by school closures caused by weather these last two days and looks like tomorrow might be worse. No matter, not much going in the economy these days.

Oh, there are a few notes. First look at this excellent graphic from The Oregonian.
This really reveals the sequence of the contraction in Oregon. Starts with construction and then brings down financial activities (makes sense - mortgages, etc.) and manufacturing and high tech (manufacturing first, now high tech is crashing). Then comes the steep declines in trade, retail, leisure and hospitality.

Here are the rest of today's headlines:

Here it comes: deflation.

Oregon's housing market is wallowing.

And finally the Fed hits the zero interest rate bound.

Like I said, not much happening today, perhaps tomorrow will be a bit more interesting...

Oregon Unemployment Going Over the Cliff...

Graphic from The Oregonian. Enough said...