Sunday, July 7, 2024

The best of Europe is on the pitch

The best football (soccer) in the world is played in Europe, although there is a lot of good individual talent in other continents. But the best club and national teams are European and, to be more precise, Western European, as recently emphasized by Simon Kuper. Of the best eight teams in the Eurocup (those that played the quarter finals), only one was not from Western Europe (Turkey). The four semifinalists are Spain, England, The Netherlands and France. I know, the World Champion is Argentina, which is a European team of Argentinian expatriates with a coach that lives in Spain, that tend to play most of their friendly games in Europe.

The best individual players of these four teams are very different from many of the fans that cheer for them in the stands or in the streets of the cities where their teams play (sometimes with agressive nationalist chants or sexist slogans). Williams, Yamal, Gakpo, Bellingham, Saka, Mbappé, Kanté… are most of them descendants of immigrants that reached Europe sometimes in very difficult circumstances. Some of the best German players (Musiala, Rudiger, Gundogan), eliminated by Spain in the extra time of one of the quarter finals, are not precisely the model preferred by the far right party AfD. The contrast between the emerging stars of European football and some of the emerging (and also disturbing) stars of European politics could not be clearer, as highlighted by a recent article of Gideon Rachman in the Financial Times.

Some of these players have used their celebrity status to confront the far right (especially the French players), and the far right politicians have not resisted the temptation to criticise the players (especially when their teams lose).

In the last three decades, as the far right vote share has been increasing in France, the proportion of non-white players born in immigrant families in the national team has also been increasing. To be fair, most of the best French players have always had names that were not typically French (such as Platini, Fernández or Zidane), but now the pattern has consolidated: the team that defeated Portugal in the semi-final played with not a single player with a “French” name, with twelve players of originally African families playing during the game, and defeating the powerful Portugal. Thanks to the immigrants (and despite a mediocre typically French coach, Deschamps), France has become one of the best national football teams, when traditionally it was only in the middle class.

The success of European football is not only the success of descendants of African immigrants, but also the success of open borders and free movement in the European Union. The success of the English Premier League builds on the Bosman Ruling of the 1990s (this increased equality among national teams and decreased it among club teams, as brilliantly explained by Milanovic in an academic article), which banned foreign quotas. As a result, the English clubs had to open themselves and accept foreign talent. Today some of the best coaches and players in England are foreign. Unlike some suspected, this has not made the national team any worse, but in fact better, because now the best English players have to compete and cooperate with, and learn from, the best foreign experts.

Western European national teams are more diverse than Eastern European national teams. In one game with Serbia, I noticed that all the players had a name finishing with –ic. All the players of Georgia were bearded. A Turkish player had to be banned because he made a fascist salute. In these cases, probably the players are more similar to the fans in the stands. Deep historical and political currents explain this contrast.

Marine Le Pen, the French far right political leader, has dismissed the players’ appeals not to vote for her party claiming that they are billionaire elitists, in many cases playing abroad. They may be billionaire today and some of them may work abroad (which sometimes is a good thing that may do even Le Pen some good perhaps), but they know their origins very well, and the origins of their families. These superb players are the best of their countries, and the best of Europe, and not the political leaders that fear and criticise them.

Monday, June 24, 2024

The left, the right, capitalism and democracy

Democracy is a set of political institutions that combine elections, the rule of law and civic freedoms. Capitalism is a set of economic institutions that combine markets, private ownership and firms where the owners of capital hire workers. These definitions, like all definitions in social sciences, may be disputed. I use the ones in the CORE Project’s e-textbook, The Economy (now in its second edition).

Democracy and capitalism do not always go together. There are, and there have been, capitalist autocracies and capitalist democracies. The main contradiction between capitalism and democracy is that the economic power in capitalism is in the hands of a minority, and this economic power may translate into political power. In a democracy, by definition, the executive and legislative powers are, at least formally, in the hands of a majority (who must respect minorities and the rule of law).

As a result of these tensions, the left is uncomfortable with capitalism and tries to reform it or replace it. In some extreme forms, the left has made the mistake of associating capitalism with democracy, speaking of a “bourgeoise democracy”. And atrocities have been committed in the name of the left over history.

But in general, the left and the center-left today are the most reliable defenders of democracy. The left is not by definition necessarily uneasy with the market as a mechanism of resource allocation, or with the existence of large private sector firms. But it is uneasy with the unfettered power of capitalists.

There is a left wing tradition of defending free international trade as a pacifist cause, and there are connections between progressive thinking and neoclassical economics. Kenneth Arrow, probably the most interesting of neoclassical economists, wrote an article making a “cautious case for socialism.” In pages 857-858 of Bowles and Halliday’s textbook on Microeconomics, they show that frictionless perfect planning and perfect markets can actually be represented by the same model.

But efficiency and equity are only separable under very unrealistic conditions, and in many realistic ones markets can worsen discriminations or segregation. Under appropriate institutions, markets have lifted whole countries out of poverty (China, but not Russia), but have done little to stop inequality, in fact they have increased it. Only when non-market (state or civil society) strong institutions can pre-distribute or re-distribute resources, markets are compatible with both efficiency and equity. That’s a possibility that should always be explored: an economic system with regulated markets (at the realistic scale, which is more and more global), efficient firms and constrained private property (call it reformed capitalism or cautious socialism) should be the perfect complement of democracy.

Today, the biggest threat to democracy comes from the support of some capitalists for political leaders that threaten the rule of law and civic freedoms (and also elections when they don’t deliver the result that they expect). It is not a mistery why many among the very rich (and many “both siders”) endorse Donald Trump or Marine Le Pen more or less openly, as well as in the past they endorsed Hitler. They give support to these likely authocrats because they give priority to their short run economic interests (lower taxes, less regulation), they don’t really care about democracy for any ethical reasons, and they underestimate the economic and social risks that themselves also face.

Thursday, June 6, 2024

Lessons from the Burmese dystopia

We receive news every day about Gaza and Ukraine, and there are good reasons to keep our focus on them. But there are other tragedies about which we only hear from time to time that we should pay attention to as well.

Thant Myint-U, a diplomat and grandson of a former secretary general of the UN wrote a few years ago a very interesting book, “The Hidden History of Burma. A Crisis of Race and Capitalism.” The author, born in New York city, knows the country well, and participated in an advisory capacity in the attempts to complete the transition to democracy until a military coup in 2021 stopped the process.

Myanmar (as the country is now officially called) is a country sandwiched between India and China, of incredible ethnic, religious and linguistic diversity, for historical and geographic reasons. The book is the chronicle of a failed transition, the history of the years between colonialism and the current civil war. Inter-ethnic violence is an important ingredient of this history, culminating in the tragedy of the wave of the Rohingya refugees as a result of this violence.

The cascading mechanism of ethnic violence is well known, and reached tragic proportions in this case in the second decade of this century, just some years ago. A supposed crime is perpetrated, and someone publicizes that the perpetrators are members of some ethnic, religious or linguistic group. The entire group is blamed for it, which triggers a reaction by the most radical members of the targeted group, and so on and so forth. One has to be careful with the narrative, and that is why it is important that the precise details are delegated to those that know the case very well, as it happens with the autor of this book.

The episodes of ethnic violence took place in the middle of a failed transition to democracy, after years of military rule, first trying to follow a socialist system and later opening up the doors to markets and private interests without much regulation. The case has similarities to dystopian fiction: “In a world with no shortage of mass atrocities, the civil war in Myanmar is perhaps the most inescapably dystopian

The book finishes with the Covid-19 pandemic, just before the military rebellion that put an end to the transition. The current situation is one of civil war, with the army fighting against a coalition of the legitimate government and armed ethnic groups: “The resistance aims to overthrow the Military Junta, establish a genuine federal democracy, and remove the military permanently from the country’s politics."

The book is a warning about what happens to capitalism without a strong state: violence, warlords-business men, and drugs are together in a tragic cocktail. Climate change meanwhile devastates a country that is most vulnerable to it.

The mistake of ethnic federalism results from choosing to deal with fixed ethnic groups (a mistake to which the UN apparently contributed) instead of using a fluid interpretation of ethnicities, emphasizing diversity and a common purpose. Ethno-nationalism and unregulated capitalism feed each other, and Facebook contributes to it, as it did with the Rohingya catastrophe. 

The international celebrity business projects a simplified view of complex countries, and in this case it invested too much hope on a leader (Aung San Suu Kyi) that in the most dramatic moments failed to take a principled view on human rights.

I strongly recommend this book, both if you are interested in this specific case, and more generally if you are interested in the co-evolution of ethno-nationalism, capitalism and democracy.

Wednesday, June 5, 2024

Milei's neoliberal dogs

The recently elected President of Argentina, Javier Milei, who was trained as an economist, has several dogs that are cloned from a previous dog that died not long ago. Some of these new dogs have the names of economists favorable to a minimum role for government in the economy. One of the dogs, for example, is called Milton, after Milton Friedman.

Javier Milei has many of the attributes of right-wing populism. I read in The Guardian: “More than Milei’s ideas, what worries me is his state of mind and emotional stability, said Juan Luis González, the author of an unauthorized biography which takes Milei’s nickname as its title: El Loco (The Madman). The book portrays Milei as an unhinged loner who was bullied and beaten as a child and gets political advice from four cloned mastiff dogs named after libertarian thinkers.”

Milei defines himself as anarcho-capitalist. He was recently in Spain for an international meeting with other far right politicians, including the leaders of VOX, a Spanish nativist movement that denies the importance of climate change, and other parties that believe that the experiment of the European Union has gone too far. Milei not only has close links with the European far right, but also with Trump and Bolsonaro.

Milei illustrates that neoliberal ideas seem to be complementary of populist methods and far right objectives. In logic, it wouldn't need to be like that. The three dimensions could be separated. However, when one explores the similarities between, say Reagan and Trump, or Thatcher and Johnson, although the neoliberal leaders on the 1980's did not qualify as populists, many of their anti-government (except in law and order) policies where very similar, for example promoting a race to the bottom to lower taxes. Perhaps the modern right-wing populists are more protectionist, but that is not always the case. Now they are more populist, but they are equally neoliberal.

Where does the complementarity between neo-liberalism and populism come from? One hypothesis is that the evolution of technology and institutions forces the right to manage themselves today in a hyper-democratic society, where citizens interact in the social media and finally they vote in unavoidable elections (although eroding democratic institutions is feasible in this context). The right has always had a very instrumental view of democracy (capitalism comes with democracy or without it, see Franco or Pinochet): if they cannot destroy it formally, they will use all the technologies available to make it work for its objectives. I interpret national populism as one of these technologies.

Thursday, May 30, 2024

What do people think?

In a typical interview or press conference with an athlete or a coach, he or she may be asked something like “do you plan to be in the same club next season?” He or she may find the question uncomfortable, but if in the answer she includes, hidden somewhere, the word “yes,” chances are that the headline in the media a few minutes later will be: “Athelete/coach X plans to continue in the same club next season.”

Smart people would use this as an example of the intellectual mediocrity or opportunism of the Sports media, because the athlete was not “planning” anything, or if he or she was planning anything, it was perhaps to avoid being asked about the topic, to even avoid having to decide. However, it is not very different from the kind of expert analyses that are derived from opinion polls and surveys.

This is important because how people truly form their opinions is a key input in the analysis of democratic societies and of particular aspects of them, such as politics or business. Economists such as Harvard’s Stéphanie Stantcheva have recently devoted significant efforts to learn, through online representative surveys, how people form their opinions on a variety of subjects, from taxation to international trade or inflation. I am also working on this with colleagues, especifically about how people think about public vs private ownership or about the importance of competition.

As Stantcheva and her co-authors have illustrated, it is important to complement closed questions with a few options, with open questions where subjects can openly express their views without limitation. It is interesting how people develop their thinking when they are less primed by the options given by the researchers.

The example of Catalan Independence and Catalan identity (or similar identity problems) illustrates my concern. Lots of political debate hang around surveys where, for example (taking the last one by an official sociological body of the Catalan government), around 40% of respondents say they are in favor of Catalan Independence when there is just another option (no to Independence), and the figure goes down than by more than 10 points when there are more than two options. This is an example of the well known fact that the framing of the questions determines the answers to a substantial degree in many areas. In both cases, it is not clear what independence means (in or out of the EU or the euro-zone, for example), or what the other options are (what is a state in a federal Spain as opposed to an autonomous community).

But pundits and experts use the results of these surveys to say things like “support for Independence” has declined (or increased), when they should just say that the answer to these questions in surveys has increased to decreased in some way or other. Similarly when they are asked whether they feel only Spanish, only Catalan, more Catalan than Spanish, etc. What if they don’t feel anything about this, or they care little. Surveys do not capture vague preferences or the intensity of them.

Saturday, May 18, 2024

Complex social sciences

Some weeks ago, I read a review of three books in the Week-end Financial Times on Complexity Economics. I bought the three of them, written by Brian Klaas, J.Doyne Farmer and Maja Göpel. They are a good complement of  “How China scaped the poverty trap”, by Yuen Yuen Ang who also uses complexity arguments to explain the historical evolution of China, with references to other societies.

Klaas book, “Fluke,” is perhaps the most interesting and ambitious of the three, in the intersection between philosophy, natural sciences and social sciences. The book reviews the properties of complex systems, such as emergence, self-organization, non-linearity, interconnection, randomness and difficulty to make predictions (the latter, as in Taleb’s books). Complex is different from complicated in that when a part fails in a complex system, the other units change and adapt. Feedback loops, tipping points, and reverse causality are also characteristics of complex systems. These can be analyzed using network analysis and evolutionary dynamics.

In a complex evolving system, small causes can have big consequences. Applied to the human world, we are all part of an interconnected reality, the result of multiple contingencies that result in our existence. When we are born, we do not come into this Planet, but we emerge from this Planet. Klaas urges us to downplay the importance that our Western culture allocates to the individual. Our brains are the result of the interaction of many neurons, and an anthill is the result of many ants. These social insects invented agriculture before humans. We have evolved to develop a sense of self-awareness to survive, not to seek truth, and other beings have developed other skills that we do not have (flying wings, radars). 

We control nothing but we can influence everything. The complexity of human societies suggests to the author that instead of using the expression that something is or is not “rocket science,” we should instead say that something is or is not “social science.” At our state of knowledge, economic systems are more difficult to predict than some physical systems (such as planetary orbits).

To facilitate the connection with social scientists trained in traditional methods and models, books for a general audience discussing complexity should emphasize some elements of continuity with the more advanced existing methodologies. For example, I see a continuity with game theory, just with more players and less (or different) rationality, as in Bowles 2004 book on microeconomics.

For example, in the last part of the book I found useful thoughts that will help in my course on soccer and economics. When the context changes, randomizing strategies may be useful, as a tribe in Borneo does with the selection of the exact location of rice fields. Or as the animal species that follow mathematically perfect random rules in the ocean. It provides a new perspective on the use of mixed strategies, which so far I justified only in terms of being unpredictable in contexts such as penalty kicks or military strategy.

I also found useful the reference to Moneyball (the book and movie about how statistics revolutionized baseball) as a not necessarily desirable trend if brought to the extreme, because it makes the game more predictable. The notions of contingency, complexity and randomness may help explain why Moneyball techniques have been more successful in baseball (although there seems to be a backlash there as well according to Klaas) than in soccer, where the game, less dependent on set pieces, is more fluid and difficult to predict.

Sunday, May 5, 2024

Why sports clubs fail

Acemoglu and Robbinson wrote “Why nations fail,” an impressive and controversial book that concluded that nations fail when they do not find inclusive institutions to make growth and cohesion compatible. Garicano wrote “Why organizations fail,” an article summarizing the literature on the economics of organizations, concluding that organizations fail when they do not allocate talent well, and when they do not balance well the short run with the long run.

A subfield of organizations that deserves a specific treatment is Sports organizations and soccer clubs in particular. Admittedly, in the current institutional setting, these organizations are very difficult to manage, because of the pressure of promotion and relegation and the economics of superstars. But clearly some of them are better managed than others. 

Soccer clubs never totally fail, but they may decline significantly, when their officials do not follow a coherent line and only care about the very short run, like bad politicians or business managers. They are too big or too important in their communities to fail, and that’s part of the problem: the moral hazard that results from the impossibility of totally failing.

Until the reelection of Joan Laporta as president of FC Barcelona in 2021, the history of the rise and fall of what some called the greatest soccer club is explained in Simon Kuper’s book “Barça.” At the end of the book, he didn’t seem very optimistic about the president that had been eleted for a second time.

Since then, three years later things are even worse. Today, the men’s Barça team (the one that just 10 years ago was the world’s best) is out of the new Clubs World Cup of 25 teams, 12th in the ranking of teams in Europe, 3rd in the Spanish league and 2nd in Catalonia after Girona. The financial crisis of the club is even deeper than then, and the president has been unable to retain or assemble a professional economic team to address the problem.

Barça does not sign the players they need, but those that they can afford or that are offered to them by opportunistic agents. Young talent, something the club keeps producing in abundance, will receive offers from clubs that have better chances of winning big titles, more money and are better managed. The club should learn from the good and bad things of the past: look abroad to learn from the best, control populism in the transfer market and coach appointment decisions, and build on the good assets that the club still has: youth academy, women’s team, a popular brand (have a look at the new and good Barça One app)… The team that had the three best players of the world in 2010 (Messi, Iniesta and Xavi) has been allowed to decay. Since it will never disappear, it would be better to give it a more decent life.