-
Obama and the Olympics: An Economic Boost?
Tweet Share on Facebook September 29, 2009 Comment (1)The president's trip to Copenhagen to promote Chicago as an Olympic host city has raised criticism that Obama is wasting time for what is essentially a vanity project. Robert Gibbs has responded to those criticisms with a familiar argument that the Olympics are substantive for economic reasons:
White House press secretary Robert Gibbs said winning the games for Chicago would help the U.S. economy.
"Obviously any Olympics showcases the country that those Olympics are in and there's a tangible economic benefit to those games being here. And the president wants to help out America's bid."
But even people who generally support Obama are skeptical of this argument. Both Matthew Yglesias and Michael Tomasky doubt that the Olympics add much value; if any Olympic-associated infrastructure improvements are smart, then they are smart regardless of whether or not the Olympics come.
-
Barney Frank on Executive Compensation and the Financial Crisis
Tweet Share on Facebook September 28, 2009 Comment (1)People are starting to realize that while the story of lavish bankers' pay as one of the main root causes of the financial crisis might make sense, there is not much evidence to back it up. Jeffrey Friedman deftly explains how empirical studies of bank compensation have revealed that those banks where the CEOs had more of their own money invested in the success of the bank didn't perform better than those where the link was more tenous.
So this Times story looks at the debate (but strangely doesn't mention the Ohio State study Friedman discusses.) Here's how proponents of the theory are responding to the critics:
Professor Bebchuk, via e-mail, said he and Professor Spamann had not tried in their study to assess the evidence presented in the Stulz-Fahlenbrach study. But even if one accepted that evidence at face value, he added, it wouldn’t mean that bankers’ incentives were inconsequential.
Representative Barney Frank, the Massachusetts Democrat and chairman of the House Financial Services Committee, concurs. Mr. Frank, whose committee is considering pay reform legislation, said in an interview that it is entirely possible that in something as complex as the credit crisis, any one factor taken in isolation can seem insignificant even when it plays a large role.
-
Will G-20 Look At Farm Subsidies and Climate Change?
Tweet Share on Facebook September 25, 2009 Comment (2)The G-20 meeting in Pittsburgh is considering ways to reduce subsidies that articifically keep down the price of fossil fuels, thus contributing to greenhouse gas emissions. But what the G-20 nations will probably not talk about are the even more expensive set of subsidies that contribute to climate change in less obvious ways: farm subsidies.
I can think of two immediate examples: First, ethanol subsidies, which cost the U.S. $3 billion in 2007, lead to increased corn production. Deroy Murdock has written about the effects on emissions:
According to a study in the August 1 Atmospheric Chemistry and Physics, scientists discovered that “the use of several agricultural crops for biofuel production and climate protection can readily lead to an enhanced greenhouse warming by N2O emissions.” Nobel Prize-winning chemist Paul Crutzen and his three American, Austrian, and Scottish co-authors explain that nitrogen-rich fertilizers used in ethanol-driven corn production yield nitrous oxide, a greenhouse gas. Hence, “the relatively large emission of N2O exacerbates the already huge challenge of getting global warming under control.”
-
Wayne County, Indiana: Don't Blame Economy For High Divorce Rates
Tweet Share on Facebook September 24, 2009 Comment (2)Why are divorce rates so much higher in some places than others? An AP story looks at recent Census numbers revealing a climbing divorce rate, and that Wayne County, Ind., is the nation's leader in divorced residents. Why that particular county?
Divorce counselors say the economy could be partly to blame for adding more stress to marriages. Indiana has been hit hard by the collapse of the auto and manufacturing industries. Wayne County had an average annual unemployment rate of 6.8 percent in 2008—when the census data was collected—a rate above the state average at the time but still below many other areas of the state and country.
It makes sense—times of great stress expose weaknesses in many institutions, and marriage could be one of them. It might not also be a coincidence that the county with the second-highest number of divorced residents is in Florida, one of the states hit hardest by the housing bubble collapse.
But, somewhat surprisingly, actual research done on the subject of divorce rates and the state of the economy seem to suggest there is little relationship. Check out this paper.
More recent research confirms that the rising level of female participation in the labor force, not unemployment or the overall state of economy, explains rising divorce rates to a much greater extent. In addition, female participation is associated with rising, not falling, incomes.
-
Federal Reserve Unwinding: Not Until Next Spring?
Tweet Share on Facebook September 24, 2009 Comment (1)Of all the commentary and speculation from economists in reaction to the recent Fed statement, I found this one the most interesting:
First, the Fed continues to extract itself from the array of special programs adding to the balance sheet more or less as expected. This doesn’t mean that tightening is around the corner, but policymakers are inching away from the extraordinary measures put in place in 2007 and 2008. Second, the Fed is taking their sweet time to do so. If in fact the Fed buys agencies and MBS until the end of [the first quarter] next year, then the Fed’s balance sheet is unlikely to peak until then, and various exit strategies (reverse RPs, etc.) may not even begin until next spring. –Stephen Stanley, RBS
[Emphasis added]
-
G20 Talks: Damned If You Do...
Tweet Share on Facebook September 22, 2009 Comment (1)The FT reports how expectations are low for the G20's meeting this Friday on ways to achieve more "balanced" global growth:
British officials warned that unless more balanced growth could be achieved, the global community would have to accept either lower growth or a retreat to protectionism, as every country tried to create a trade surplus.
[emphasis mine]
So you can have either lower growth or... protectionism, which almost always means lower growth. What'll it be?
-
Youth Interest In Entrepreneurship Still Declining
Tweet Share on Facebook September 21, 2009 CommentIs renewed interest in big government sapping young people's interest in starting businesses? I'm not saying I subscribe to that theory, but there's at least some evidence for it.
Here's more: a new survey from Junior Achievement finds that 51 percent of U.S. teens are interested in starting their own businesses. That sounds high, but last year I reported that Junior Achievement had found 60 percent wanting to start their own businesses—down from 67 percent the year before. This new poll isn't the same as the old one, but that the number is at 51 percent is significant enough.
Better news in this current survey is that 92 percent of teens want entrepreneurial skills taught in school. You can't say the same about every scholastic subject.
-
Marvel Disney Deal: Copyright Law Complexities
Tweet Share on Facebook September 20, 2009 CommentThe Times reports how the possible expiration of Marvel's copyright claims on many of the biggest superhero characters like X-Men and the Fantastic Four complicates Disney's acquisition of the company.
The rise of the Internet has made copyright law more politically controversial than ever in recent years.
If you're a comic-book fan and want to learn more about the very confusing topic of copyright law, you should check out this comic produced by the Center for the Study of the Public Domain at Duke Law.
It reveals just how much the expiration terms in copyright law favor holders versus creative people that might want to use say, the X-Men in a project of their own. It's very difficult to calculate just how much money Disney would lose if it were not able to gain copyright control over these characters.
-
Wall Street And Silicon Valley: Not That Different After All
Tweet Share on Facebook September 18, 2009 Comment (1)Daniel Gross of Slate says: East Coast financial suits bite the government hand that feeds them, while West Coast cleantech gurus, with their "wide-eyed hucksterish world-changing idealism," are happy to accept hope and change.
It's simple enough to explain why the finance guys are so skeptical.
Having saved the banking system from failure and taken a significant ownership stake in the system, the government is now interested in telling banks how much they should pay employees, how much leverage they should use, and how aggressive they should be in modifying mortgages. And since such proposals would influence profitability, Wall Street detests them.
Now the Silicon Valley guys--is it really the case that, as Gross puts it, what they really care about is "changing the world," and if government funding is needed to do that, all the better?
-
More On Big Boxes Destroying the Competition
Tweet Share on Facebook September 17, 2009 Comment (1)The "common-man" view of Wal-Mart and other "Big Box retailers" is that they are lethal to other businesses. That was the assumption behind a Time magazine headline from last week. Even a South Park episode that in the end defended a Wal-Mart-like retailer portrayed an abandoned, hollowed-out Main Street that had deteriorated when a big box moved into town.
But there hasn't been much evidence beyond these popular notions. Academic studies, however, are rolling in. Here's a new working paper from several economists that examines the effects Big Box retailers have on the employment growth of small chain businesses and single unit businesses (that is, the traditional Mom and Pop) in the Washington, D.C., metro area.
The study found that, yes, big box retailers reduce employment among smaller competitors, and even drive them out of business—but only in certain situations. What matters is 1) location and 2) industry.
