World Cup Video of the Day, 3

Why is Diego Maradona considered one of the best ever (no not the best - sorry all of my Argentinean classmates)? Here is perhaps his most famous goal (not his most infamous - the hand of god which occurred earlier in the match):

Your World Cup Viewing Guide

A little exhausted today after finishing teaching for the year yesterday and unable to focus as well as I would like.  So I went looking for the TV schedule for the World Cup and found only poorly formatted ones and ones only in Eastern Time.  So, as is typical of me sometimes, I did the anal retentive thing: I got it all in an Excel spreadsheet, organized it nicely and put all in Pacific Time.  You are welcome.

Here it is and I hope you are an early riser (click here for a pdf version):

By the way, posting it on my blog makes me feel like I haven't wasted as much time...

Beeronomics: Micro Brew / Cask Ale Revolution in England

Here is an NBC Nightly News segment that came to my attention from the Oregon Brewcrew listserv on the growth and popularity of craft breweries in England. Sound familiar? It is, but with a twist - this report suggests that the craft breweries in England are concentrating on cask ale. I don't know if this is generally true, but if so it is an interesting contrast to the US where cask is very slow in catching on. Perhaps the difference is that the UK never lost reasonably good beer but did lose local beer whereas in the US we lost local and good beer. Now we are happy to have good beer back, but it seems only a matter of time before the local, fresh, sustainable food movement embraces cask ale.

Visit msnbc.com for breaking news, world news, and news about the economy

World Cup Video of the Day, 2

Okay, here is a more modern one, from the 1998 World Cup in France. The Netherlands's (And Arsenal's) Dennis Bergkamp with the goal that beat the Argentineans and put them out of the Cup.  It is all about the first touch...

Eco-nomics: Incentives, Innovation and Catastrophe

Ken Rogoff, Harvard professor and former chief economist at the IMF, has an excellent piece in Project Syndicate on the problem of regulating complex new technologies. This was true in the case of exotic financial instruments that caused the financial crisis and is now true in the case of deep water drilling. Here is Rogoff on the Gulf of Mexico disaster:

The disaster, however, poses a much deeper challenge to how modern societies deal with regulating complex technologies. The accelerating speed of innovation seems to be outstripping government regulators’ capacity to deal with risks, much less anticipate them.

The parallels between the oil spill and the recent financial crisis are all too painful: the promise of innovation, unfathomable complexity, and lack of transparency (scientists estimate that we know only a very small fraction of what goes on at the oceans’ depths.) Wealthy and politically powerful lobbies put enormous pressure on even the most robust governance structures. It is a huge embarrassment for US President Barack Obama that he proposed – admittedly under pressure from the Republican opposition – to expand offshore oil drilling greatly just before the BP catastrophe struck.

The oil technology story, like the one for exotic financial instruments, was very compelling and seductive. Oil executives bragged that they could drill a couple of kilometers down, then a kilometer across, and hit their target within a few meters. Suddenly, instead of a world of “peak oil” with ever-depleting resources, technology offered the promise of extending supplies for another generation.

...

The basic problem of complexity, technology, and regulation extends to many other areas of modern life. Nanotechnology and innovation in developing artificial organisms offer a huge potential boon to mankind, promising development of new materials, medicines, and treatment techniques. Yet, with all of these exciting technologies, it is extremely difficult to strike a balance between managing “tail risk” – a very small risk of a very large disaster – and supporting innovation.

...

If ever there were a wake-up call for Western society to rethink its dependence on ever-accelerating technological innovation for ever-expanding fuel consumption, surely the BP oil spill should be it. Even China, with its “boom now, deal with the environment later” strategy should be taking a hard look at the Gulf of Mexico.

Economics teaches us that when there is huge uncertainty about catastrophic risks, it is dangerous to rely too much on the price mechanism to get incentives right. Unfortunately, economists know much less about how to adapt regulation over time to complex systems with constantly evolving risks, much less how to design regulatory resilient institutions. Until these problems are better understood, we may be doomed to a world of regulation that perpetually overshoots or undershoots its goals.

The finance industry already is warning that new regulation may overshoot – that is, have the unintended effect of sharply impeding growth. Now, we may soon face the same concerns over energy policy, and not just for oil.

Given the huge financial stakes involved, achieving global consensus will be difficult, as the Copenhagen climate-change fiasco proved. The advanced countries, which can best afford to restrain long-term growth, must lead by example. The balance of technology, complexity, and regulation is without doubt one of the greatest challenges that the world must face in twenty-first century. We can ill afford to keep getting it wrong.

I would add only that the political economy of regulating against activities with uncertain risks but with fairly demonstrable gains is hugely difficult. But it seems to me that the scale of disaster whether it is the almost comical inability to stop a massive man-made fissure in the earth crust from gushing toxic oil or the potentially devastating effects of global climate change suggests we need to change our calculus. In our risk models the worst-case scenarios are turing out to be orders of magnitude worse than we thought and so our probabilistic models of expected benefit and expected cost need to be fairly radically adjusted.

World Cup Video of the Day

To get you all warmed up for the World Cup (and because I am very busy in the final throes of the academic year) I shall post a WC video of the day to get you all ready for the real thing in 11 days.

To start off with, the undisputed king of football, O Rei Pele who, as a teenaged sensation, scored this wonder goal the 1958 World Cup final v. Sweden:



Brasil won the match 5-2 and won the first of their 5 World Cup trophies.

OCPP Party at Roots!

Normally I would be weary of promoting an event that could be seen an endorsement of a cause (I try to keep this blog non-partisan), but when you combine my two of my main interests, economics and beer, well it doesn't matter who is throwing the party, I am your shill.

I have been meaning to post this for a while, but these are busy days as the term wraps up and now it has snuck up on me - my apologies for the late notice - but don't let that deter you from making your way to Roots Organic Brewing Company on Thursday to see the "the world's first (and only) stand-up economist," Yoram Bauman, at a benefit for the OCPP.

Now, I take a little issue with Mr. Bauman: my friend and Iowa State economist Peter Orazem also does stand-up, but Mr. Bauman may indeed be the only funny stand-up economist...rim shot please.

The event is from 7pm to 9pm and the tickets are $30 at the door ($25 in advance but it may be too late for that).

Beeronomics: Going Extra Local - Cask Ale

Over at Beervana, Jeff has a really nice post on Ted Sobel, Oregon's Pied Piper of cask (or 'real') ale, trying to lead Oregon's craft beer lovers to a new frontier - but here the analogy ends for this frontier leads not to their doom but to a new and glorious part of Beervana.  Ted is the owner and brewer at Brewers Union Local 180 in far-off Oakridge, Oregon (pretty far even for the real Pied Piper to get followers to come) and he is the states only cask-only brewer.

Here is Jeff:

There are a lot of ways to sell beer in this state, but the easiest is to make them big and hoppy. It helps if you're conveniently located in East Portland--though Eugene seems like a pretty good location, too. A sure-fire business model includes a pub/taproom and capacity to distribute 22-ounce bottles and/or kegs to alehouses around the Northwest. Do that and your road is lined with rose petals.

Ted Sobel ... has not chosen the easy way. He makes small beers with low levels of hops. His pub is three hours from Portland, in Oakridge. He brews real ale, sold exclusively by firkin, and only really trusts one other pub to handle his beer. To reach the Portland market, he must load the casks into the back of his station wagon and drive them up himself. For his trouble, he earns less per firkin than he would if he sold the beer in his own pub. In the term of art, Ted has not yet figured out how to "monetize" his vision in the way other pubs have. His road is thorny, cold, and lonely.

For those Portlanders and Oregonians who are into fresh, natural and local, cask ale would seem to be a no-brainer. Cask is all of those things and nothing is more local and ephemeral than a locally brewed and prepared cask. In only a few days it will spoil after it is tapped, no artifical gases are injected into it - all carbonation is naturally occurring (and as I write this I am fearful of making a error that Ted will surely correct for such is the state of cask knowledge that even someone such as I, a huge cask enthusiast, only has rudimentary knowledge of the art).  The absence of injected carbon dioxide tends to reveal flavors that are hidden by the gas and, to my mind you get a fuller, richer experience of the ingredients and flavors that mingle on your tongue.  Which is also why mild beers are perfect for cask, flavors that CO2 washes out will remain on cask.  Mild beers are also perfect for an evening of socializing - quaffable, enjoyable and easy on the brain.

But because of the difficulty of preparing, serving and keeping cask ales, until the appreciation for the product causes a real demand shift it is hard to make them profitable.  Which is why I am here to tell you that if you missed the meet-the-brewer event at the Green Dragon last night, you have another rare chance to meet Ted and taste his beer served the way it is supposed to be served - from a fresh cask - tonight at Belmont Station.  The cask gets tapped at 3.  I shall be making a mad dash to meet Jeff there after my last meeting in Corvallis and hoping that y'all have to wait until later so there is some left for me.  [If you see me, say 'hi.']  It is only through repeated exposure that cask - just as craft beer itself - will catch on and create its own market.

The Hopopotamus™ Update: It has been racked into bottles and will be ready in a week or so, but the occasional zwickel has left me confident that it is, and I am sure all tasters will agree, The Best Beer Ever Brewed™.  In case you were wondering...

Also, my wee hop plant is not so wee anymore, and have been convinced by the beer savant to add about 6 more feet to my trellis support.  It has about 15 feet to grow up now.

Now all we need is some sunny weather and I can get to work perfecting my Northwest Best Bitter.

Soccernomics: World Cup - Part 1

Can hosting a World Cup - the world's most watched sporting event - be a good thing for a country's economy?  Most economists believe that investment in stadiums is a loosing proposition and it is easy to see why: the opportunity cost of hundreds of millions of dollars in infrastructure investment going to a large stadium that is used infrequently just seems preposterous.  Added to that is the fact that try as we might, we just can't find any evidence they the contribute in any significant way to growth.  As I have said here before, however, I think economists that assert confidently that this means the investments are losers are falling victim to the fallacy that lack of evidence for the positive is evidence for the negative.  I don't know if they are good or bad over their lifetimes, but I find it hard to believe they don't matter at all given how much our society loves sports.  Whether they matter enough to justify the cost is a different question.

But what about big giant sporting events like the World Cup or the Olympics?  These not only cost a lot in terms of stadia but also in other massive infrastructure investments.  It is hard not to think of all of the money Greece poured into the Athens Olympics when you look at their current fiscal crisis.  However, they do bring lots of exposure - but does 'exposure' really matter? It is hard to say overall, but I discovered two interesting little tidbits about such matters.

The first is that apparently events in developing countries bring bigger gains than in developed countries mostly through he fact that they force general transportation, communication and other infrastructure improvements that are strong determinants of growth - and otherwise tend to be underinvested in.

The second is that countries that stage such events tend to have a strong positive effect on trade.  But, it turns out, so do losing bidders for such events.  This suggests that there is a strong correlation between wanting to liberalize in trade and wanting to host such events - it makes sense that they would go hand in hand.

On a completely different note, I find it interesting that the sportswear maker Puma has gone heavily for the African teams, providing the uniforms for Algeria, Cameroon, Côte d'Ivoire and Ghana.  These are lower profile teams and are likely to be cheaper to sponsor, but it could be a masterstroke this year.  African teams are perennial under-achievers: super-telented but lacking in the strong team identity and discipline that is so crucial.  But being in Africa this year could change everything and I have a hunch it will.  In the past playing in your home country has proven to be a hugh boost.  And though South Africa are weak and unlikely to be able to leverage home country advantage too far, playing in Africa will still be a hugh motivation for other African teams.

There are some pretty great African teams out there and so following in the footsteps of my correct prediction that Spain would win the Euro 2008, I am going out on a limb and predicting that Côte d'Ivoire will wind the world cup - you heard it here first.  Allez Les Éléphants!

And just to get you in the mood for African football:

It is All About the Incentives...

Behold the tip jar at the Beanery in Corvallis:

Though this doesn't overcome the free rider problem for brewed coffee, it does suggest that your espresso's milk might be a bit tepid if you are a cheapskate....

Econ Humor - Australian Style

HT: Greg Mankiw.

Best bit (paraphrasing). Questioner: "And why is the US economy so much stronger than the European economies?" Respondent: "Because it is owned by China." Questioner: "Correct."

Portland Home Values: Case-Shiller March Numbers

Farmed out entirely to the Wall Street Journal's Real Time Economics Blog:

Home Prices, by Metro Area

Metro Area	March 2010	Change from February	Year-over-year change  ↓
Las Vegas	102.58	-0.8%	-12.0%
Detroit	67.66	-4.1%	-4.6%
Charlotte	114.74	-1.1%	-3.9%
Seattle	143.73	0.1%	-3.6%
Tampa	136.46	-0.1%	-3.5%
Portland	143.61	-0.1%	-2.8%
New York	169.42	-0.7%	-2.4%
Chicago	119.71	-2.3%	-2.3%
Miami	146.15	-0.9%	-1.7%
Atlanta	103.74	-1.8%	-1.3%
Phoenix	109.52	-0.5%	2.4%
Dallas	115.74	0.4%	3.0%
Boston	151.42	0.0%	3.8%
Denver	125.31	0.6%	4.1%
Washington	175.28	-0.7%	5.6%
Los Angeles	170.62	-0.7%	6.0%
Minneapolis	116.66	-2.7%	6.5%
Cleveland	103.32	1.8%	6.7%
San Diego	160.22	1.5%	10.8%
San Francisco	136.74	1.5%	16.2%

Portland is not a particularly bad market, nor is it particularly good and I don't expect this to change any time soon. I think, as I have said before, that we are like to go through all of 2010 without too much appreciation or depreciation.  The new home buyer tax credit will expire, but the summer season will pick up and long-term mortgage rates are still incredibly low (helped now, ironically, by the troubles in Europe as the Dollar becomes a safer bet than the Euro), however unemployment will continue to depress housing. Which all means it is about as good a time to buy as you are likely to see in your lifetime as long as you are in it for the long -term.

Economist's Notebook: Statistical Inference

Nate Silver has a fascinating blog entry on the problem that modern people are causing pollsters.  He uses this graph from the CDC which shows the population of cell phone-only adults in the US:

Pollsters don't like cell-phones apparently because they are more expensive to call (I don't know why) and there are more restrictions for automated calls to mobile phones. What this poses to pollsters is a problem of statistical inference: making generalizations about a population from a sample.

Here is silver:

Cellphone-only households are different from their landline-using counterparts. They tend to be younger, poorer, more urban, less white, and more Internet-savvy. All of these characteristics are correlated with political viewpoints and voting behavior.

The pollsters' usual defense mechanism against this is to weight their polls by demogrpahics [sic] -- something which they need to do anyway, since polls are subject to many forms of non-response bias (for instance, it's harder to get men on the phone then women). But this is potentilly an inadequate response for several reasons. First, some characteristics that correlate with both cellphone usage and political preferences may not correspond to those that are most commonly used to weight polls. It is somewhat rare, for instance, for pollsters to weight their polls by characteristics like urban/rural location or marital status, which are predictive of both cellphone usage and political beliefs. Being cellphone-dependent also appears to be significantly correlated with media consumption habits (in particular, getting more of one's news from the Internet and less from television), which also seems to be increasingly important in determining one's political views. And there are some characteristics that may be even more subtle. For instance, there are some hints in the CDC data (such as the higher prevalance of binge drinking) that cellphone-only adults are less "domestic" and more "bohemian". I suspect that, in young adults, this is correlated with more liberal political views.

Secondly, even where weighting occurs, one may encounter problems when upweighting from very small subsamples. It is now very difficult, for instance, to get young people on the phone when using a landline-only sample. About half of all adults from age 25-29, for instance, are cellphone-only, and two-thirds are either cellphone-only or cellphone-mostly. (The numbers are actually slightly better for adults aged 18-24, who are more likely to be living in a college dormatory, or still to be living at home, where a landline will usually be available.) Couple this with the fact that young people have grown up in a call-screening culture, and their response rates are often completely inadequate. Say that you're supposed to have 100 people aged 18-29 in a poll of 500 adults, but in fact you only get 30 because of problems with call-screening and cellphone usage. The margin of error on a sample of that size is 18 percent. And yet, you may essentially let each of these young people speak on behalf of two or three of their peers, to compensate for the ones you haven't gotten in contact with.

A new study from Pew, in fact, has found that these weighting schemes may have become inadequate. In their experiment, a weighted landline-only sample produced a generic ballot result of Republicans 47, Democrats 41, whereas a weighted landline-plus-cellphone sample had the generic ballot tied 44-44. That six-point net difference is statistically significant, and needless to say, could have huge implications for where the parties finish in November.

His suggested solutions include using non-traditional sample weights and larger sample sizes. The second one baffles me, if a sample is biased just making it larger doesn't help. Seems to me, the solution is to pay up and call cell phones. But it is interesting that what has worked for decades, calling land-lines, is now starting to fail thanks to new technology.

More Soccer

Too bad Ronaldinho is not going to South Africa - I think Nike would have like to have known that in advance.

Soccernomics: Peer Effects

It turns out that peers matter in lots of ways in economics: you academic performance is influenced by them, you decisions to engage in 'risky behaviors' is influenced by them and your happiness often depends on others' around you.  So what better way to increase your happiness from the World Cup than by watching the games in a public place?

In Portland there will be two opportunities.  The June 12th match between England and the US will be shown in Director Park on a big screen and the World Cup final on July 11 will be screened in Pioneer Courthouse Square.

Okay so this is not the Champs Elysees:

Or the Copacabana in Rio:

But it'll still be fun.

The Timbers will use the June 12th showing as the opportunity to unveil their new MLS crest as a bonus and will apparently be ready to sell you lots of schwag with the new logo.

I will root for the US as far as they take me, I will honor me roots and cheer for Eng-er-land as well, but my heart will be behind my adopted second country: Brasil:

Eco-nomics: Global Warming

The science is solid, the evidence is real and the culprit is human activities - so says the National Research Council:

The compelling case that climate change is occurring and is caused in large part by human activities is based on a strong, credible body of evidence, says Advancing the Science of Climate Change, one of the new reports. While noting that there is always more to learn and that the scientific process is never "closed," the report emphasizes that multiple lines of evidence support scientific understanding of climate change. The core phenomenon, scientific questions, and hypotheses have been examined thoroughly and have stood firm in the face of serious debate and careful evaluation of alternative explanations.

"Climate change is occurring, is caused largely by human activities, and poses significant risks for — and in many cases is already affecting — a broad range of human and natural systems," the report concludes. It calls for a new era of climate change science where an emphasis is placed on "fundamental, use-inspired" research, which not only improves understanding of the causes and consequences of climate change but also is useful to decision makers at the local, regional, national, and international levels acting to limit and adapt to climate change. Seven cross-cutting research themes are identified to support this more comprehensive and integrative scientific enterprise.

The report recommends that a single federal entity or program be given the authority and resources to coordinate a national, multidisciplinary research effort aimed at improving both understanding and responses to climate change. The U.S. Global Change Research Program, established in 1990, could fulfill this role, but it would need to form partnerships with action-oriented programs and address weaknesses that in the past have led to research gaps, particularly in the critical area of research that supports decisions about responding to climate change. Leaders of federal climate research should also redouble efforts to deploy a comprehensive climate observing system.

So what to do? A carbon tax is the solution most economists favor, at least in part because if the relative simplicity. Here is Ed Glaeser on the current bill:

This bill is a behemoth for three reasons. First, it tries to do far more than just charge for carbon emissions. The bill starts by providing “incentives for the growth of safe domestic nuclear and nuclear-related industries.” It supports carbon capture in coal plants, expands offshore drilling, establishes an Office of Consumer Advocacy and promotes “clean energy career development.” Standard economics suggests that many of these interventions would be unnecessary if we had the right tax on carbon emissions; if companies pay the full social costs of their actions, they have the right incentives to invest in greener technologies without any further help from Uncle Sam.

The second reason that the bill is so big is that it uses a complicated cap-and-trade system rather than a simple Pigouvian tax. In theory, a permit system can be identical to a tax. Selling permits to emit carbon at $50 a ton is equivalent to taxing carbon emissions at $50 a ton. But tradeable permits, typically and as promulgated in the American Power Act, differ from a tax for two reasons: the quantity of permits is relatively fixed, and many permits will be given away rather than sold.

Fixing the number of permits may actually be the right thing to do. As my colleague Martin Weitzman wrote almost 40 years ago, quantity controls are better than prices if we are more certain about the right quantity than we are about the right tax. In the case of global warming, we may arguably be more confident that the amount of carbon should stay relatively flat than we are about the per-ton damage from carbon emissions.

Giving away permits rather than selling them is often defended as a means of ensuring that global warming doesn’t become an excuse for higher taxes. A carbon tax could easily get out of hand if the public sector starts seeing it as a solution to America’s budgetary shortfalls. Freely distributing permits seems to be crucial in building support for the bill, but the cost in simplicity is significant.

International trade is a third reason that this bill is so complicated, because we are trying to use domestic legislation to handle a global externality. If America charges for the carbon emissions involved in making an industrial product but our trading partners do not, then American producers will be at a competitive disadvantage.

Oregon Unemployment in Historical Perspective

Not long ago the Oregon Office of Economic Analysis started a blog.  It is infrequent but still a great addition to the discussion of the Oregon economy.  The also have some great graphs generated from Oregon data and today they have another of the graphs that look at Oregon's present labor market troubles compared with those of the recent past.  The picture is grim but probably quite accurate.  No one can say for sure how quickly we will climb out of the current recession-created hole we are in, but there is no great hope it will be a quick process.

Anyway, check out the blog for a more in-depth discussion.

Another blog that should be on your radar is the one from the Research Division of the Oregon Employment Department (and I will update my blogroll to include both of these).

Oregon April Unemployment: 10.6%

The April unemployment figures are out for Oregon this morning and the news is better. Though the unemployment rate is unchanged at 10.6%, the state added 3,900 jobs.  The reason for the unemployment rate not dropping is the job seekers retuning to the labor force.

But there is some worrying news: manufacturing, bucking the national trend, actually lost 500 jobs. Also, given the big national job number from last week, 290,000 new jobs, I would have liked to see a better number from Oregon.  It might appear that Oregon is a laggard in the recovery, but I think it is far too soon to tell this yet and the robust growth in Asia should help us recover faster.  

St. Helens

Somewhere around 1983, my dad chartered a little plane to take us over and around St. Helens and view the devastation from above.  It was stunning.  From above all of the trees that had been knocked down and stripped bare looked like hundreds of thousands of toothpicks that had been dropped from above.  For a relatively young and impressionable kid, it was a lesson in the power of nature that has never left me.  Hard to believe that it has already been 30 years.

Picture of the Day

From the New York Times' Economix Blog.

It is a bit hard to read, even when blown up to full size so I'll describe it.  It shows real median weekly earnings (from the BLS) for college graduates (red), those with some college or an Associates degree (brown) high school graduates (dark blue) and those with less than a high school degree (light blue).  The point is that in relative terms a college degree is becoming ever more valuable.