The World Cup

The concept of the 'Winners Curse' is common in sports. This is especially relevant with big name free agents that demand large amounts of money. The team most likely to overbid on that free agent gets an enormous pay burden placed on the team. They won the bidding, but are cursed with the contract. The same was true yesterday in the bidding for the world cup as Dennis Coates puts it (via Freakonomics).

Federal Reserve and Politics

A very good talk about the independence of the Federal Reserve. In short, making the Fed accountable to short term political objectives at the expense of long term economic problems is a mistake (most economists probably would agree). So too does Tim Geithner.

Cutting Our Debt

We talk about what is happening in Europe and say the we are going down that path. We decide we need to get our deficit under control, and begin cutting our debt. We agree that we need to cut government spending and raise taxes to do this. But WHAT exactly do we cut, and WHICH taxes do we increase? This article gives us a good idea. It is worth the time to figure out.

Many people believe we will have to do this, the only question is if we do it before or after our nation get to the point that our European friends are in.

The Gold Standard

I thought the debate among economists over the Gold Standard was over right after the Great Depression. Apparently the actions of the Fed have brought them back again.

Journalist Majors

For my journalism majors you may like this. For those interested in doing their final paper on this industry this may be a good start.

The State of Monetary Policy

The Federal Reserve has exhausted their ability to conduct traditional expansionary monetary policy. This outlines it nicely. The money quote:

“There’s no silver bullet right now,” and central bankers have “very few options left in terms of lowering interest rates,” said John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina.

But that does not mean they are content to leave the economy alone as the article outlines.

A Cynical Look at Higher Education

For those interested in getting their PhD you may enjoy this. No comments needed. Enjoy.

The Future of the Textbook

When a technological shock is ushered into an industry economists examine what the ramifications are. This is an excellent example, and if your stuck on a final position paper this may give you some ideas. In addition if you are writing about the music industry or journalism there may be some correlations here. The old way of doing things has changed. How do we move on? (this is not an economists, but it is a great read for this type of class)

Deficit vs. Debt

Yet another example of how politicians try to play on words. This is a typical article about how our federal government needs to cut the deficit. What should be the serious discussion is what to do about the debt. I don’t know who to blame, the politicians or the journalists who never mention this to them. At stake are your generation’s future austerity packages. As we learn in class, cutting the deficit every year will still result in increasing the national debt.

The Beginning of TARP

We learn about the theory behind TARP and we read about it in the paper, but this video really explains how things really started. Please take the time to watch the video and be ready to discuss it next week.

Batting .300

For those baseball fans out there this article is a great one. Another example of how economists are everywhere. The picture is very telling.

Our Stagnate Economy

Technically speaking we are not in a recession. That does not mean our economy is doing well. Far from it as this article details. What they do not even mention is that we need about 100 to 150 thousand jobs just to keep up with the retiring baby boomers. Not only are we not getting these jobs in our economy but we actually lost about 100 thousand jobs this past month. The charts in the article tell the story of just how many jobs we need to recoup to get to where we were. The bottom line is that just because we stopped digging ourselves in a deeper hole doesn’t mean we are near climbing out of it yet.

Will Philadelphia Tackle The Marijuana Controversy?

The big question is “Should we (Philadelphia) legalize Marijuana?” This issue is right around the corner. Many local publications have given their takes on it. Some good recent sources:

The Philadelphia Magazine, and three from the Inquirer this past Sunday. One against, two for it (one by an economist).

Bundling Athletics Into Higher Education

If you did not like that story about how cable companies bundle their product (so you have to pay for a bunch of channels that you wont use) you probably will not like this one. Basically we are doing the same thing in our athletic fees at universities.

The Economics of Higher Education

What should society’s role in Higher Education be? If left to the free market is the equilibrium quantity of degrees floating around in society the socially optimal amount? If society should try to increase higher education (by subsidizing it) how should that be done exactly? Pay the schools, pay the students tuition, give tax breaks, etc… (One good topic to consider for your position paper)

On a similar note how should endowments to universities work? They are often of a staggering amount. This is the case for Penn State, only the money to be used seems to be constrained so it is only used for an ice hockey team (and arena). But how can this be? Basically in the same day’s news I read about how Penn State is getting $88 million at the same time they will increase tuition next year by 5% (in an economy with no inflation). (This is another good position paper, what is the role of sports in higher education)

On another side note, I admit I have not had the time to look into the issue much but this is bound to cause problems with Penn State’s athletic department in other areas. Title IX basically says the percentage of male athletic opportunities is equal to the percentage of female opportunities. This constraint is especially significant in big football teams since there is no female equivalent. I wonder how Penn State will end up complying with Title IX. (The ‘fairness’ of Title IX is another good position paper)

The Flexibility of Economics

When I mention to people that my current research is an investigation into point shaving (in this case NCAA Basketball) I often am asked how that is done. I can tell by the look on people’s face that my explanation is not a very good one. This article explains it in lay terms far better then I can. I tip my hat to the author. He did a great job.

The actual working paper can be found in our department website here. Any comments or thoughts are most welcome (please do so in person).

A Penny's Worth

I really like this rant via Freakonomics. It is about the use of pennies in our economy. We should get rid of them, yet they remain. Why is this? The video rants about it.

Cost of Baseball Stadiums

Earlier we had a post about how professional teams cry poor in order to get financing of the stadiums which grant them enormous financial benefits. What about the costs of these stadiums to society? This is a great article. The money quote:

The old Giants Stadium, demolished to make way for New Meadowlands Stadium, still carries about $110 million in debt, or nearly $13 for every New Jersey resident, even though it is now a parking lot.

This is an excellent final position paper if this think interests you.

Paying for What You Watch?

Imagine you go to the store to buy an apple. When you get to the checkout line you are told in order to buy that apple you also have to buy three other products. You refuse and walk out the store. The next store tells you the same thing and it quickly occurs to you that in order to buy an apple you have to buy a bundle of other products. You have no choice to buy simple that apple (what is called ‘a la carte’).

This is exactly what cable is doing. They are telling us that if we want to watch the lifestyle network we also have to buy ESPN (and vice versa for people like me). What if we could buy only the channels we actually want to watch? How much would it cost us? This article gives you an idea. Congress has refused to require a la carte pricing for cable channels (probably because the cable industry is making a lot of money off of charging us money for things we do not want to watch). (this should be against anti-trust laws)

Financing of Baseball Stadiums

For those fans of MLB you may know that the teams in poor locations cry poor whenever an issue of collective bargaining comes up, and every team cries poor whenever the issue of stadium spending comes up. The arguments usually sound something like “If this city does not build this stadium for us we will not be able to remain competitive”. When collective bargaining comes about the talk sounds like “We cannot afford these players and need a cap on salaries just to stay competitive”.

The natural response is “prove it by opening your books” but no team has ever done this in the history of the leagues. Now their dirty little secrets have been leaked out to deadspin. The inside financial numbers of the Pirates, and Marlins (two of the lowest payroll, and smallest markets) among others have leaked out and show they actually make quite a bit of money (or some would say they are sitting on the money that was given to them via revenue sharing).

Now if you pay taxes that eventually went to the Marlin’s or Pirates’ stadiums (which as Pennsylvanian residence I believe many of you have) and your local government is living in these tight times wouldn’t you be demanding an investigation into why they got this money? Did they lie to get it? Did the politicians know they were financially sound and gave them the money anyway? Is the federal government justified in their investigation into if a player took steroids (or more accurately lied about taking them under oath) but not investigating the appropriation of tens, often hundreds of millions of dollars to a seemingly thriving business?

Congrats to deadspin for doing what players unions and traditional newspapers have failed to accomplish. Very impressive considering how long the unions and papers have been trying to get this info, and how short a period of time deadspin has been around.

Books as an Infant Industry

For all of my Journalist majors out there (I have quite a few in my Tuesday Thursday class) this is a post for you. Basically the issue is: how so you go from the invention of the printing press to a thriving industry for books? This is an interesting read.

The State of our Economy

Some past posts to give us an idea of the state of the economy.

From our Federal government

From Google

From Slate

Welcome Fall 2010!

Read this blog and offer some insight in the comments section (don't forget to leave your name!).

Social Security Numbers

An excellent paper by Gokhale and Smetters that explains some of the discrepancy in the Social Security numbers we found in the Taking Sides article (Baker's view). The money quote:

Although the Social Security Trust Fund is not projected to be exhausted
until 2042, Social Security's $10.4 trillion present value imbalance is accruing
interest and will grow by $600 billion during 2004 alone.

Structural Unemployment

Unemployment as a result of opening up international trade, or technological advances are called structural unemployment (as you all know). This is a healthy type of unemployment. This link are some interesting types over the years.

Crowding Out Before Our Eyes

The cautionary tale of our current fiscal spending is called the "crowding out effect". The Federal Government demands more bonds to finance their deficit and in turn the interest rates climb. This decreases private investment. (page 122 of our text) Greece has spend far more in terms of their deficit (and debt) as a percentage of GDP. This is the outcome.

In the United States we are also seeing this take place before our eyes. This is the latest evidence suggesting we are spending too much.

Marijuana Debate

As I have just finished grading our latest position paper (the one that has legalization of marijuana as an optional position) I found the vast majority of students taking the position that marijuana should be legalized. This is three semesters in a row (five classes) that I have found this to be the case (each of my classes ranging from 80% to 100% pro legalization). So I plan on opening our next class with the question of "If so many people think this way, why is it still illegal?". One answer is that this is a political dilemma, not so much an economic one. Talk about a timely piece in our Inquirer today by a political writer to put the politics into perspective. The money quote:


Update: I cant get over how timely this topic is. Here is an article from Rolling Stone
(The quote is from the first link)

So much of the marijuana debate used to be about morality; now it's mostly about economics and practicality - which is why New Hampshire, Massachusetts, and Rhode Island are also floating measures to legalize and tax; why similar voter referendums are in the works in Washington state and Oregon; why 14 states (including, most recently, New Jersey) have legalized medical marijuana, and why even Pennsylvania, hardly a pacesetting state, is weighing the sanction of medical pot, complete with 6 percent sales tax

Netflix

Netflix is an industry changing business. I remember how excited I was at going to Blockbuster on the weekend. Now I am amazed at how easy and efficient Netflix is. For those that have wondered how they get and return your movies so quickly this article is for you.

(HT/ Marginal Revolution)

Movies

For the education majors you will enjoy this. I wish I could say it were an April fool's joke, but it is not.

For the Freakonomics fans out there believe it out not there is this documentary coming out.

Update: Another education movie for you called "The Cartel". Looks great.

The State of Macro

Macroeconomics is in a state of soul searching. Serious questions have to be answered for our discipline to remain relevant. Questions like "What happened a year ago?" and "Why did the Macroeconomists not see this coming?" are valid questions.

Here is David Brooks' take from the New York Times. Here is Greg Mankiw's take. Both sources I respect a great deal, and they are interesting perspectives but I am not sure I buy either of them personally.

Federal Reserve's Target

The Federal Reserve is as complicated and hidden as organizations get. They are assigned the task of conducting Monetary Policy, and this action works best in the dark. Just like any other economic agent the Fed is challenged with trade-offs. They often have to decide between unemployment and inflation. Fighting the latter is a trademark of the previous three Federal Reserve chairmen. This article talks about how the vice chair of the Federal Reserve nominee will fight the unemployment problem. Lets hope that trade-off does not become a crucial decision faced by the Fed anytime soon.

More on Trade

The fact that free trade is even debated is very frustrating to economists. We can all prosper by free trade, but politics often get in the way. This article is more evidence of this. (More of this has been talked about in the past, for more info look to the "trade" label at the end of the article).

Obama's Agenda

Two Contracts, the first is the intrade contract for a public option being passed and signed into law by the end of June. The second for what intrade calls "Obamacare" (basically the reconsiliation process kicked around in the news right now). Big difference here. Basically the public option looks dead, while the current push looks probable. So the question is "Is Obama pushing too hard for his adgenda?" The answer (according to David Brooks) is who are you asking.

Here is what reads as an unbiased article by someone who is known as 'the' conservative at the New York Times (which is known as left leaning... confusing, right?).

Rules of Academics are Changing

Technology is changing everything. As an undergraduate student this is evident in the position papers you write. Now you find reliable sources on the web which is much less time consuming then it was 15 years ago when you had to go to the library and pull up each article. This article from the Freakonomics blog explains how the world of high end Academics are changing as well. A good read for those interested in graduate school (especially those interested in a PhD).

The Landscape of an Uncapped NFL Season

Those that are interested in the NFL and how they deal with the salaries of their players should keep a close eye on whats around the corner. For more on this go to my previous post found here. This is the latest news. It does not sound very promising. The bottom line: An uncapped season sounds like its a win for the players union, but is actually a function of NFL owners infighting (the wealthier teams want to keep more of their money). My prediction is that there will be an uncapped season (a sentiment not shared by at least on other Sports Economist). Just what an uncapped NFL season would look like is anyone's guess.

Atlantic City

Atlantic City has appeared in trouble since the Pennsylvania casino's have opened. Increased competition drives down what economists call 'economic profit' (unusually large profits). What we should (and have) witnessed is the industry moving from one more monopolistic toward more competitive (look in your text for more on those types of industries). This article outlines the past few years in the industry and gives the general pessimistic tone for those who remember AC in its glory years. Should the government do anything about it? (like maybe legalize sports betting to give AC back its competitive edge... an issue more complicated than it appears... and a good one for a position paper in this class) Maybe a more relevant question is CAN New Jersey actually do anything about it. The money quote:

"Atlantic City is not a market in which we're currently exploring opportunities. We see the market there continuing to contract over the next couple of years," said Eric Schippers, a spokesman for Penn National Gaming Inc.

This type of industry (at least in AC) reminds me of the newspaper industry where a new business model needs to be implemented.

Political Contributions

We spoke earlier about the need to know where the voice is coming from (politically speaking). This article breaks down which companies give to which political party. I find the media graph very interesting.

(HT: Thanks Josh)

(BTW: Blogger has been giving me some problems with posts... when I resolve them there should be a steady flow of new material)

Trade with China

This classic post my Mankiw highlights how confidently economists feel about trade. That is why it is so frustrating to read this news. Usually these things are meet with retaliatory tariffs and in the end no one wins. It will be interesting to see how the US reacts.

Forclosure

An excellent link that helps connect the dots to how our housing crisis is linked to our financial crisis via NPR.

Insider Trading?

Intrade has a contract written for who will win the academy award for best picture. Tonight is the announcement (so no one should know who the winner is yet). But there is some suspicious activity trading for the movie "Hurt Locker". The graph is the shares trading prior to today, but those shares are trading up 20% right now and is currently running neck to neck with "Avatar". Is this a case of insider trading (maybe someone out there has peeked at the envelope and has an account with intrade), or someone really liked that movie. I guess we will find out tonight.

(Update at 12:45): "Avatar" is back up a bit on heavy trading.

(Update 2/1): Turns out the Grammy's were yesterday. But my wife did direct me to this article (published yesterday) that would cause the expected odds to change.

Keynes-Hayek Rap

F.A. Hayek is best known for his libertarian views (smaller government intervention) that are spelled out in his book “The Road to Serfdom”. John Maynard Keynes is best known for advocating government spending to temporarily stimulate the economy which is spelled out in his book “The General Theory of Employment, Interest, and Money” (“The General Theory” for short). Both well known economists but their views could not be further apart. So what is the natural thing that happens when two well known economists get together? A rap breaks out naturally. I like the lyrics and scenes. Think of the party as the recent stimulus. (I could not figure out how to get you tube embedded so I had to link to Marginal Revolution)

Bernake's Confirmation

There is a very good theoretical debate regarding the importance of the Federal Reserve's need for Independence. For the most part the past three presidents of the Federal Reserve have been independent from politics (which most economists would agree is a good thing). But this is one of the very rare times when the spot light is put on the political bureaucracy of appointing the president of the Fed (or in this case re-appointing him).

The stimulus package after one year

This chart makes you wonder about the stimulus package’s effect on the economy. It comes from Greg Mankiw’s quest to keep our government accountable.

Welcome Spring 2010!

Read this blog and offer some insight in the comments section (don't forget to leave your name!).

Aid to Africa

There are plenty of economic reasons to stop financial aid to African nation, but this is certainly one reason to keep funding.