Market Power

The Cost of Green Jobs

Sports economists have long-known that the economic gold mine predicted to arise from building sports stadiums never actually arises.  While some specific people (namely team owners) benefit from the building of stadiums, their effects on local economies as a whole are virtually non-existent at best. 

One reason for this is that government funding for sports, funding paid through taxes of some sort, crowds out spending in other industries.  Another reason is that consumer spending on sports comes at the expense of spending in other industries.  At best, subsidizing a sports stadium is a wash.  At worse, government ports subsidies may actually lead to fewer jobs because consumer sports spending is more likely to leave a local economy.

This article in Bloomberg suggests much the same thing about government subsidizing of so-called green jobs (HT Warren Meyer):

Subsidizing renewable energy in the U.S. may destroy two jobs for every one created if Spain’s experience with windmills and solar farms is any guide.

For every new position that depends on energy price supports, at least 2.2 jobs in other industries will disappear, according to a study from King Juan Carlos University in Madrid.

U.S. President Barack Obama’s 2010 budget proposal contains about $20 billion in tax incentives for clean-energy programs. In Spain, where wind turbines provided 11 percent of power demand last year, generators earn rates as much as 11 times more for renewable energy compared with burning fossil fuels.

The true cost of anything is its opportunity cost.  In terms of jobs, the study suggests that each subsidized "green" job costs 2.2 jobs in other industries.  In terms of the Keynesian economics, the jobs multiplier of renewable energy, at least in Spain, is -1.2.  There may be other reasons to pursue "green" energy sources, but I am skeptical that job creation is one of them.

Mankato Tea Party - A Call for Limited Government

Kudos to the Mankato Free Press for giving the Mankato Tea Party prominent front page coverage in this morning's print edition.  Here's a pdf of today's front page.  I fully expected some sort of coverage (the gathering took place right outside the Free Press's building), but I thought the coverage would be, at best, front page news in one of the paper's inner sections or, more likely, buried somewhere in the newspaper.  But I was wrong. 

Here is one of the front page articles entitled "Tea Party Attracts Hundreds" (Mankato/North Mankato only has a population of around 45,000 or so).  I couldn't find an online version of the second article on the front page. 

What intrigues me about the Tea Party movement is that (and I don't prefer to use the following term because it's cliche') it is really a true grass-roots movement.  Many of the organizers and the protestors are folks who go about their normal course of business*, who have probably never been part of an organized protest before, and are almost embarrassed to take part:

“I’m a reluctant protester,” Steve Moller said. “But I feel obligated to our children.”

He said he is opposed to the growth of government, deficit spending and government bailouts.

Even though the Tea Party movement appeals to many Reagan conservatives, it is much more than a conservative movement and it certainly is not something that comes from the Republican political machine (as Glenn Reynolds describes in this op-ed in yesterday's WSJ).  People are concerned about the impacts of the recently-passed "stimulus."  People are concerned about the push of government into the everyday business of the auto companies and the financial system.  People are concerned about the massive deficits that are forecasted to result from profligate government spending.  So instead of being a conservative movement, it's much more of a limited government and libertarian movement. 

*I did not participate in the Tea Party because I went about my normal course of business (trucking the kids around to their activities after work).

Update:  Tea Parties made front-page news at the Minneapolis Star Trib, the Sioux City, Ia Journal, the Dubuque, Ia Telegraph-Herald, the Omaha World-Herald, the Kansas City Star, and the LaCrosse, Wi Tribune.

Tea Parties are Insane?

From the LA Times:

I can recall only a few outbreaks of such collective insanity as these tea parties in recent years. There was that time in the mid-1990s when a $19.95 video proving Bill Clinton was some sort of serial killer went viral. And then, a few years back, there was that chilling, televised midnight seance from the floor of the U.S. Congress aimed at reviving the long-brain-dead Terri Schiavo.

And now this. Whip out your Lipton and don your tinfoil hat and join the protest against ... against ... against what exactly?

I've got a couple of things to be upset about. 

Number 1.  The bailouts of auto companies and financial companies, rather than letting them go through bankruptcy or, especially for the auto makers, fail.  But instead of letting this happen, the current administration has nationalized some of the banks and has gotten into micro managing the automakers to push their green agenda.

Number 2.  The stimulus bill which will likely lead to higher taxes and/or higher levels of inflation, both of which lower standards of living.

Both of these items are plenty for the average American to be upset about, and the tea parties are an excellent way to get the message across.

Market Power Named to a Top 50 Blog List

Market Power has been named a top 50 econ blog by Bankling.com.  So has the crew at TSE.  Thanks.

Mizzou Coach Mike Anderson's Contract Released

Courtesy of the KC Star, here is a pdf copy of the original.

DVD Preferences: Buy or Rent?

From Dave Switzer:

Here’s what I see when I look at these two lists. I see that there are two kinds of movies that people rent: Academy Award Nominees and crap. People wanted to watch Michael Clayton (good movie, btw) and No Country For Old Men (boring, IMO) so they could have some idea of which should win the Oscar. And people wanted to watch Good Luck Chuck (for some unknown reason) but knew based on its horrible box office performance and reviews that they would probably only want to watch it once — and even then probably only for $1 at Redbox. Baby Mama and Fool’s Gold are in this same league too.

King: 

Click his (Dave Switzer's - PM) link to see the chart. I rarely rent DVDs except when I travel (and nowadays I just download a rental and toss it on the iPod.) The movies I own are ones I want to watch over and again, which are seldom on the TV. (Note: I do not buy premium movie channels with my cable.) I own about 50 DVDs, many of them TV series. When Littlest was littler, we bought all manner of movies for her. Why? Because your kid watches movies 20, 30 times in a week, and often it's just one movie. I was joking with colleagues about the one Number One Son watched one night five times, Harry and the Hendersons. Godawful crap, and every time it would end, even at 3am, he'd wake up from the couch and cry for someone to restart it (this was in the days of VCR, so someone had to rewind, and he was four and not as skilled at operating the machine as Littlest, who was potty- and VCR-trained at about the same time.)

Here's what I left in King's comments:

I don't recall *ever* renting a DVD, but I own about 60-70 or so. Like you, these are either TV series, music DVD's, or movies I want to watch again and again. I guess if I don't want to watch it more than once, I don't want to watch it at all if I have to pay anything for it.

My wife has a polar opposite set of preferences. She buys almost nothing and hardly watches the few movies she buys (at least relative to me). But she rents a half-dozen movies almost weekly and watches them all.

The kids are 7 and 8, so I'll let you guess about their DVD habits. Here's a hint: King described the preferences well in his last paragraph.

We own about every kid movie imaginable:  Cars, Toy Story 1 and 2, Monsters Inc, Mary Poppins, etc.  We also own several SpongeBob sets as well as many others.  Like King said, the kids will watch movies over and over and over again.  We also have a DVD player in our Honda that works wonders keeping the kids occupied on road trips and we play both bought and rented movies in the Honda regularly.  But if they were bought, I most likely bought them.  If they were rented, my wife rented them.

Some NCAA Coaches' Salaries

Here are some current Big XII basketball coaches' salaries.  Here are some salaries in the SEC.  With his new contract, Mizzou coach Mike Anderson is the third highest-paid coach in the Big XII.  Had he taken the gig at Georgia for the reported $2,000,000, he also would have been the third highest-paid coach in that league.

My Latest at TSE

My latest post at The Sports Economist on the quirks of baseball stadiums is up.

Private Solutions to Public Goods Problems

Got a problem with potholes in your city?  Sick and tired of waiting for the government to get around to fixing them?  Call the Colonel:

Don't be surprised if you see Col. Sanders out filling potholes. In an unusual cause-marketing push, KFC is tackling the pothole problem in Louisville, Ky. in exchange for stamping the fresh pavement with "Re-freshed by KFC," a chalky stencil likely to fade away in the next downpour.

"This program is a perfect example of that rare and optimal occurrence when a company can creatively market itself and help local governments and everyday Americans across the country," said Javier Benito, exec VP-marketing and food innovation at KFC. Louisville Mayor Jerry Abramson noted in a statement that budgets are tight for cities across the country, and finding funding for road repairs is a dirty job. "It's great to have a concerned corporation like KFC create innovative private/public partnerships like this pothole refresh program."

And there's more

The KFC program appears to be part of a growing body of consumer-service marketing that connects in a meaningful way. This past holiday season, Charmin provided a public restroom in Times Square for the third year running. The company has also developed an application for iPhone and BlackBerry that helps consumers find toilets when the need arises. Samsung has installed electrical charging stations in many major airports to help travelers stay connected while in limbo.

I can hear detractors now:  "But they only did so out of greed."  To which I would respond:  so what?  If the result matters, who cares about the motivation?

HT King.

Coach Cal's Contract - Cha Ching!

Marginal revenue product is a resource's contribution to revenue.  For example, if company X earns $5,000,000 in revenue without Joe and earns $5,500,000 with Joe, then all else equal, Joe's MRP is $500,000.  If the company in question is solely motivated by profits, then Joe is worth $500,000 to company X and it would be willing to pay him up to $500,000.

Unless you don't pay attention to NCAA basketball, you already know that former Memphis coach John Calipari left the Tigers to become the head coach of the Kentucky Wildcats.  Despite the fact that the Tigers were the cream of the (mostly awful) crop in Conference USA, Coach Cal had over 30 million reasons to leave Memphis for the bluegrass of Kentucky.

Now suppose that you had perfect foresight and were able to calculate Coach Cal's future Ky. MRP.  Suppose you calculate his MRP at $33,000,000 over the life of his contract.  If he reaches all his incentives, he'll get paid about $31,500,000.  You'd say he was underpaid relative to his MRP.

Ah, but not so fast, my friend.  For there's more to the Cal Contract than meets the wallet.

The deal also gives Calipari:

•Two “late model, quality automobiles,” plus mileage.

•Membership in a country club of his choice, including monthly dues and initiation fees.

•Twenty prime “lower-level” season tickets to Kentucky home games.

•Eight tickets for each Kentucky home football game.

It's good to be Coach Cal.