Month: May 2007

How to save the NBA

Back when I was Tyler’s colleague (and Alex’s professor), Tyler and I shared a pair of season tickets to the then Washington Bullets. We’d sit in the stands and discuss how we would run things if we were the general manager. Now older and wiser, I’d like to offer suggestions for how to improve the league.

1. Re-seed after each round of the playoffs. I’m pretty sure the majority of other pro sports  do this and it makes sense. Keep the best teams in the longest, save the best match-ups for last. I know it might cause some extra days off and lengthen the already long playoffs but……

2. Shorten the regular season. Modern NBA basketball is a brutal sport. 82 games is a grind and a half. What shall we say? 60? 70 at the most. This leaves room for the extra time re-seeding might take, makes the games that are played more important, and reduces the potential for injury.

3. Make the draft lottery a true lottery. The tanking in the Greg Oden derby was hideous. Let every team that misses the playoffs (or better yet, every team in the league) have an equal shot in the lottery. Eliminate the lottery-created incentives to lose. And regarding the possibility that the rich would just get richer, that would actually be a plus.

4. Make the finals 2-2-1-1-1 not 2-3-2. Again, the shorter season gives us more time for travel days and the current 2-3-2 is just unfair. Stat boy can check me but I am pretty sure no home team has ever won all three of those middle games.

Am I missing anything?

Shut ‘er Down!

Back when I worked in a factory as a welder, that phrase was music to my ears. At the very least, an extended smoke break was in the offing while the foreman argued with the inspector. But here I offer it as a suggestion for what to do with the World Bank. I know it is unlikely; large bureaucracies do not easily go away. The Bank for International Settlements was set up to handle war reparations and still lives on and the IMF has survived the collapse of the system it was set up to monitor (Bretton Woods).

There are several reasons for considering shutting down the WB. Its history of policy advice has not always been the greatest, and its IADB arm that makes market rate loans is not really needed in this era of global financing. And, when it comes to dispensing aid, its a monopolistic bureaucracy that seems at times more concerned with quantity than quality (David Ellerman has a nice piece on the WB that discusses its quasi monopoly status under the heading Structural Problem #1).  I believe there are viable alternative modes of disbursing aid. Consider for example organizations like Global Giving which collects vetted projects on its website. There donors can search for and contribute to specific projects. Decentralized, streamlined and "ownership" of the project seems clearly delineated.

So lets "shut ‘er down" and move on. But if we can’t not replace Wolfowitz (son of Wolfenson), lets at least do the right thing and replace him with this proud son of Oklahoma.

How to improve the Presidential debates lists some of the obvious suggestions, which try to inject greater intellectual content.  I would prefer to see the following:

1. Allow all candidates to watch a short debate of experts — with a fraud or two thrown in — and ask them to evaluate what they just heard and why they reached the conclusion they did.

2. Test candidates for the ability to spot liars.

3. Give each candidate a substantive message and then give each two minutes to turn it into pure fluff.  This tests communications skills, plus we can see the meat grinder in action.

4. Require each candidate to conduct an orchestra.  Watch to what extent each candidate defers to the players, and to what extent he prefers "panache."

Your ideas?

Denmark has as much labor mobility as the United States

According to Daniel Schwammenthal (WSJ, April), about 30 percent of the Danish work force changes jobs each year.  There are few guarantees of job security, and the Danish government spends a great deal of worker retraining.   These training recipients face strong moral and financial pressure to take jobs which are offered to them.  There is also a new NBER paper on the miracle of the Danish labor force.

…we briefly describe some key features of the labor market in Denmark, some of which contribute to the Danish labor markets behaving quite differently from those in many other European countries…We show that mobility is about as high, or even higher, as in the highly fluid U.S. labor market. Finally, we describe and examine the wage structure between and within firms and changes therein since 1980, especially with an eye on possible impacts of the trend towards a more decentralized wage determination. The shift towards decentralized wage bargaining has coincided with deregulation and increased product market competition. The evidence is, however, not consistent with stronger competition in product markets eroding firm-specific rents. Hence, the prime suspect is the change in wage setting institutions.

Starting in the late 1980s, wage bargaining in Denmark became increasingly decentralized, and that is considered to be a major reason for Danish labor market successes.

fatty snacks!

From today’s WSJ (gated but a free preview is available) : "With Corn Prices Rising, Pigs Switch to Fatty Snacks".

This is a convoluted one, but I’ll give it a try. The US seeks "energy independence". Our government has decided corn based ethanol is the way to go and subsidizes gasoline made from it to the tune of around $0.50 per gallon. However, BRAZILIAN corn ethanol is NOT the way to go and we have placed a goodly sized tariff thereon. Thus the price of corn in the US is off the hook as the kids like to say. Commercial farmers, who like to fatten their charges as quickly and cheaply as possible and traditionally use 30-60 percent corn diets for their pigs and cows have turned to another, now cheaper, proven form of quick fattening: JUNK FOOD!! Cheese curls, tater tots, cookies, candy bars and french fries are now on the menu for our future food.  Pig farmer / comedian Alfred Smith says of the practice "I’ve heard no complaints".

counting unhatched chicks

I should preface this post by stating the obvious. I am not a trade guy. But I do think its interesting how trade agreements like NAFTA have already been judged as either failures or successes before the full agreements have ever been implemented! Consider the example of trucking in NAFTA.  Even though NAFTA "began" in 1994, Mexican trucks were supposed to be granted access to US highways in 2000, Bush finally made a move in that direction this spring, but given the latest Congressional action it doesn’t look like its going to happen. Among the new requirements: Mexican drivers should be fluent in English.  Interestingly, I believe that Mexican trucks were allowed to drive in the US in the 1970s, at least the linked article implies that was the case. In any event, the full implementation of NAFTA is scheduled to occur in 2009 (a 15 year implementation period) and trucking is not the only item way behind schedule.

Facts about Danish energy independence

1. The U.S. uses a bit more than 300 barrels of oil to produce one million Euros of gdp, Denmark uses just a bit over 100 barrels.

2. Pig blubber is an important medium for heating.

3. Energy consumption has held roughly steady for 30 years, even though gdp has doubled.

4. Non-profit cooperatives are common in the Danish energy sector.

5. Buying a new car involves a registration fee of 105% of the car’s value.

6. Electricity costs 43% more per megawatt hour than in the United States.

Those facts are from The Wall Street Journal, April 16, 2007, "How Denmark Paved Way to Energy Independence."

Will bad things get better?

Jane Galt, who is (was?) down, later argued:

So probabilistically, the chances that something good will happen to me right now are, I assume, about the same as they always were.

Holding quality of type constant (an important qualification, as some people are simply prone to bad events, and receiving another bad event signals as such), I more readily expect reversion to the mean.  Good economies grow rapidly after wartime, often because they find it easier to reassemble preexisting pieces than to press forward from full employment.  Much of the human capital is still there and rebuilding can occur quickly once in motion.  The personal analogy is that once you start recovering from (some) catastrophes, the process is speedy.  You already know where you need to go, and you might sample more randomness to court additional good events.

There is also a "naive" evolutionary argument for bad things getting better.

When things go badly, your body borrows resources from the future.  It pumps adrenalin, eats stores of fat, in some views it mobilizes the (only temporarily available) placebo effect, etc., all of which restore better states of affairs and make up lost ground.  More psychologically, a setback may cause a person to try harder.  If a computer crashes and wipes out a page I wrote, I can write it again at an especially high speed and with the energy of anger and adrenalin.

Of course those short-run compensations can herald a problem for the longer-run future, a’la Long and Plosser.  You are digging into your capital stock.  At some margin pumping more adrenalin brings a long-run health cost.  The computer crash means that I write lots today but tomorrow I feel a bit burnt out, and so on.

So if there is anything to worry about, it is the day after tomorrow.  The immediate future appears quite bright.

Guest Blogger: Kevin Grier

We are delighted to have Kevin Grier guest blogging with us this week.  Kevin is a pioneer in the political economy of macroeconomics.  Kevin’s early work on political business cycles established that politicians do attempt to manipulate the economy via the money supply.  Later, in a series of papers with Tony Caporale, Kevin showed that changes in the real interest rate can be explained via political regime shifts.  My favorite paper of Kevin’s is Congressional
Influence on
Monetary Policy: An Empirical Test
(JME 91, subs. req.) which is a great example of how to combine different types of evidence to convincing effect.  But Kevin’s greatest contribution to economics?  Well, I am to modest to say and no doubt Kevin is too embarrassed.

Kevin is also an expert on low-watt tube amplifiers, check it out here.  Welcome Kevin!

Nicolai Foss on jazz guitar

My Danish host, Nicolai Foss, has a blog on archtop jazz guitar.  Here are his posts on the best of jazz guitar.  I’ll nominate Joe Pass’s Virtuoso album, any number of Django Reinhardt collections, the Jim Hall-Sonny Rollins album, and the Wes Montgomery live album Smokin’ at the Half Note as my top picks.  George van Eps and the old Kress and McDonough recordings are particular favorites as well.  John McLaughlin is not to be neglected, and there is also the incomparable Bola Sete from Brazil.

Here is Nicolai’s home page, with many papers on management and also Austrian economics.  Nicolai, of course, also blogs at Organizations and Markets, which has been on our blog roll for some time.  Here is my other host, Mark Lorenzen.