Recommended
Hi all,
Welp, that was quite a fortnight. Under normal circumstances I’d be leading with LeBron James defying Father Time YET AGAIN, and LeBron and Steph Curry finally delivering the two-man game that nightmares are made of, or with Mijain Lopez winning his *fifth* gold in a row with another dominant performance. But these are not normal times. Instead of opening with a bit of sports chat, we’ve had a horrific murder of children that was then used as an excuse for a bunch of imbecilic fascists to take to the streets, rioting. The dunces were truly in confederacy, but after they began picking each other off and auditioning for the Darwin awards, not to mention getting arrested en masse, the real England took the streets back. Though there are grifters and racists trying to stir up trouble and make a name and a dollar for themselves, they should remember: the noise on twitter is not real life. The angry, violent, and hateful are and always will be in the minority here. You may win headlines and a cheap payday but you don’t win over the country with agitation and trying to start fights. And if you show up to a “vigil” with a six-pack of cider and a cudgel to start fights, your defence in court will be thin, short lived and unsuccessful.
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Well, I wanted to talk Olympics in the intro, and I couldn’t, so instead I’ll start the links with them. There is a huge amount of economics to be learnt using the Olympics as a case study, specifically the act of bidding for them, as Planet Money cover here (transcript). Bidding for hosting rights to the Olympics is often described as an example of the winner’s curse, where the winning bidder is not the one who has the highest actual value from hosting, but the city that has the most (over-)optimistic idea of its value. But the economics goes much deeper than this. It is true that more optimistic bidders may overbid for the Olympics, but because the value of hosting does actually vary by city, it doesn’t follow that the problem is that the bid itself is too high. Rather, the issue is that host cities literally always run over budget, and the culprit here is much more prosaic: bad contract design. Because it’s the International Olympic Committee that chooses the structure and specs for the games, but the host city that pays almost all of the costs (the IOC retaining the more predictable parts of the budget to pay for, such as broadcasting), there is almost no incentive to keep costs down as the deadline approaches; and because it’s impossible to write a full contract specifying everything that needs to be done ahead of time, it means the host city is always on the hook for more than it bargained for. It’s almost built into the structure of hosting that costs will spiral as the date of the games comes closer. And the one party that can do something about it, the IOC, has almost no incentive to do so. And there’s more: on the benefits side of the ledger, one value that the Olympics have is creating political will for investment: as in Barcelona and London, hosting the Olympics can act as a commitment device for much-needed and often-ignored infrastructure needs. This is worth a listen.
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While we’re on the subject of contracts, I liked this piece in ProSyn by William Rhodes and John Lipsky on how clever contracting can unlock a substantial amount of private finance for infrastructure (and in particular climate related infrastructure) in poor countries whose ability to repay may be affected by unpredictable shocks. As they point out, these contracts should be attractive on both sides of the market, and can be explored further.
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And while we’re on the subject of contracts (but really systems failures), read Tim Harford on major keying errors: when accidentally typing in the wrong thing can have big negative effects. An example of a major keying error is if you accidentally transfer £4000 to a colleague’s marathon fund instead of £40.00 (you may support research into glow-worm habitats, but not love it £4000 worth); rather bigger ones are covered in the article. The general lesson is simple, but surprisingly often forgotten: design systems in which errors of large consequence hard to make (I quite like it when there are separate boxes before and after the decimal—if I accidentally type in ‘4000’, I notice when I’m told I need to now add in how many pence…).
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I like this a lot, from Asterisk magazine (are you following it? If not, you should): a piece by Sarah Eustis-Guthrie and Ben Williamson about why they shut their development charity down, drawing lessons more broadly for the whole sector, where measuring final impact remains far too uncommon. The simple principle of closing failures early and reallocating money to successes is valuable, but even in large and well-functioning organizations relatively rare. Since failure carries organizational costs beyond the waste of resources, one of the most common responses to underperformance is to direct more resources to low performing projects to improve their outcomes. That may seem logical, but by definition it reduces their cost effectiveness and cost-benefit ratios compared to the basis on which they were agreed and financed. Very often the correct answer may instead be to not bother, shut it down and take the saved money elsewhere.
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Two very good pieces from VoxDev (there were many more than two in the last fortnight, but these are the two I’m highlighting). First, Gregory Lane on a new tool I’d not encountered before: pre-agreed loans which can be drawn down in the event of a disaster. This is a very clever idea: the knowledge that the loan can be claimed when necessary gives borrowers (at no up-front cost) some certainty and leeway to invest in resilience and adaptation to climate risks should the risks materialise. They also make money for the lenders, which makes them a sustainable instrument. And Dani Rodrik and Rohan Sandhu have a write-up of their new paper on ‘industrial policy’ for SMEs. I liked this: much of it is sensible and chimes with ideas I’ve proposed in the past, but I’d like to see this approach piloted and evaluated, too.
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This is really good from Ken Opalo on—among other things—the need for modernization of economic management and policies in many African countries. One thing that really struck me was this section: “It is true that some elements of economic policymaking have improved substantially over the last 30 years — including on important metrics like Central Bank independence, currency valuation, price controls, and the role of parastatals in the economy.” Anyone who studied development in the 1990s and early 2000s and worked in development in the 2000s will recognise that list: it’s basically the reform package the IMF, World Bank and big budget support donors united behind in that period. No-one should give them the credit: had the Governments who implemented those reforms wanted to undermine them, they could have (Malawi, where I worked was one place where the ‘weapons of the weak’ were arrayed towards doing so), but it is striking given how bad the press the Washington Consensus gets is, how successful it was in improving large chunks of macroeconomic policy. There is much more here, but that is worth reflecting on.
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I am not going to pass judgement on this research (mainly because I’ve not got past the first couple of paragraphs), but it’s a perfect link to close on. Via this Guardian piece, I discovered a paper that looks at the melodic complexity of major pop songs and finds that it has declined dramatically, which gives me a perfect opportunity for wildly uninformed commentary and youtube links: to the extent that good jazz was still hitting the charts in the 1950s, I can easily see how the decline from there would have been precipitous. Can you imagine going from Blue Rondo a la Turk in in 9/8 time with that impossible melody to I Wanna Hold Your Hand in 1964? But at the same time, what does that actually mean? What do you like listening to more? What do you listen to more often? What makes each amazing isn’t how complex they are but how perfect they are. Or imperfect: Scott 4 is so so polished, and Brown Sugar raw, but they’re both amazing. And it’s incredible to me that anyone can listen to something like To Pimp a Butterfly and not see layer upon layer of complexity. And on that note (see what I did?)…
Have a great weekend, all!
R
Disclaimer
CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.
