Sunday, October 15, 2017

Magical Thinking and the Catalan Fox News

The "Prodi doctrine" of the European Union (EU) says that any region that breaks away from an EU member state will automatically leave the club and have to reapply under the usual rules, a lengthy process. This is what The Economist says this week about the argument made by Catalan secessionists that instead the EU is no obstacle to create an independent country: "This tips some Catalans into magical thinking. The Prodi doctrine was a throwaway remark with no legal standing, they argue. Should Catalonia win its freedom, Europe’s leaders will put pragmatism before principle and ensure its place in the EU remains unmolested. Independence-minded business groups even suggest that worried German investors in Catalonia would lean on Mrs Merkel to shield it from ejection. (Brexit-watchers will recognise this questionable line of thinking.) It is hard for dreamers to swallow, but the existence of the EU has become the best guarantee of its members’ territorial integrity. For separatists, the EU once looked like the net that would guarantee their safety as they leapt into freedom. Instead, it has become their cage." This begs the question of why so many Catalans have been deluded by magical thinking. The answer may lie in another piece of the British press, in this case in an article in The Guardian by Peter Preston: "Catalonia has had its own television and radio services since 1983, delivering Catalan-only language programmes and – guess what? – paid for by the same government that declared quasi independence a few days ago. Bias comes naturally, perhaps inevitably, in the reporting of poor anti-separatist demonstrations, in the constant flashbacks to civil guard police wielding batons and throughout the hours of political discussion (...)" Many people living in inland Catalonia "have lived in a media cocoon of settled opinion, convinced that the EU will welcome their new nation into its midst, that the economic outlook is untroubled, that “taking control” will solve all problems. Passion becomes ingrained. No need to draw parallel conclusions closer to home, but this mingling of fact and conviction crosses many borders. If you can make the rest of the world go away, then doubt becomes a stranger (...). How did Catalonia wander so close to the edge of a cliff? Because – on screen, on the airwaves, in cosseted print – there was no real debate. Because (think Fox News) the semblance of real debate was quite enough, thank you." 

Thursday, October 12, 2017

A legal self-determination referendum is not a good idea either

It is a contradiction that many, but not all, well-meaning commentators on the Catalan issue advocate for dialogue and reforms (in a federalist direction) and also advocate for a legal and agreed self-determination referendum, "like the Scottish one." It sounds nice, but it is not. A referendum like the Scottish one does nothing to promote a dialogue that favours federalist reforms. Actually, the federalist option was not even in the ballot in the Scottish 2014 referendum. Most democracies in the world, that unlike the British do have a written Constitution (except Ethiopia, Liechstenstein and Saint Kitts and Nevis) either do not allow or explicitly prohibit a self-determination referendum of part of the country. That is, the best democracies in the world, like France, Germany, the USA, etc., would never allow this in their countries.The United Nations only approves of them for colonies or countries with human rights violations. The Council of Europe argues that any referendum about sovereignty must take place under full compliance with the constitution when this is democratic. The Spanish constitution does not allow it, but it could be changed, which takes time and convincing many people like me that are unconvinced. Some people, including the Catalan president and leader of the independence movement, argue that such a legal and agreed referendum should take place because the majority (of Catalans) want it. Probably the majority, which by the way does not favor independence (a myth demolished in an article in the Washington Post) compares this option with the reference point of a regional government trying to organize a vote out of the democratic rule of law. But to do something just because it is consistent with something people say they want when asked is not a good justification in a mature democratic society with high institutional quality, with checks and balances, and honest leadership. A self-determination referendum is what has plunged the UK into political chaos and economic uncertainty, but it is what parties like the Front National in France or the Northern League in Italy want to do once in power, either to leave the EU or to seggregate a part of their country to escape solidarity mechanisms. A referendum is also the preferred tool of Wilders, Orban, Erdogan and Putin. In some historical junctures they can be useful if they can unite all those in favor of peace and democracy, like in Spain in 1978, in Chile in 1988 and in Northern Ireland in 1997. But in the hands of leaders who want to play games with the rule of law, it is a tool that does little to preserve reasoned debate and the expression of political preferences in a way that fits with the collective will of neighbours and people with whom sovereignty is shared, in this case both in Spain and in Europe. A self-determination referendum is an instrument to institutionalize conflict, and conflict favours nationalism, as argued by the article in the Washington Post. Doing well a bad thing is worse than doing it badly.

Tuesday, October 10, 2017

Another behavioral Nobel prize

Richard Thaler was yesterday awarded with the Nobel Prize in Economics. After the Nobel prize to psychologist Daniel Kahneman some years ago, it is the second direct recognition of this institution to the merits of behavioral economics, the discipline in the intersection between economics and psychology. Before Kahneman, and before people used the concept "behavioral economics," Herbert Simon, who coined the concept "bounded rationality" and worked on it, also received the prize, as a student of mine reminded me in class. It is debatable whether Thaler has more merits as a generic promoter of the idea in books for the general public (like "Nudge," written with the celebrity legal scholar Cass Sunstein), or as a deep social scientist with frontier contributions. But the prize is a recognition that behavioral economics is already part of the mainstream. Other scholars that have received the Nobel prize, like Jean Tirole, George Akerlof, Robert Fogel, Robert Shiller and Elinor Ostrom have also been influenced by these ideas. The Economist says that "From a renegade offshoot within economics departments just a few decades ago, behavioural economics has gained an established place not only within academia, but also within government departments around the world. From Australia to America, as well as within organisations like the World Bank and UN, the “nudging” approach has been copied. The Nobel Committee’s decision to honour Mr Thaler is of course a recognition of his personal achievements. But it is also a testament to the newfound importance of his discipline." The New York Times has a nice collection of some of Thaler's columns, which I recommend.

Sunday, October 8, 2017

Hutton: the choice between federalism and an orgy of unforgiving remembrance

Dear reader, if I don't convince you, please read Will Hutton today in The Observer. And by the way, he doesn't need to finish his article with a call for another referendum (a typical concession to secessionism by lazy commentators). He knows better than that, because he interviewed Amartya Sen about it. It is the best article about Catalonia that I have seen, perhaps together with the one by Roger Cohen of the New York Times, "Damage to Catalonia." This is what Hutton, probably the best progressive writer in the UK, has to say:
"Europe is plunging ever deeper into an orgy of unforgiving remembrance. A collective curse has settled over our continent, in which past triumphs are contrasted with present grievances. Only independence, taking back control and avenging a continuum of injustice can restore justice, prosperity and lost glory, even if, in Catalonia, there could be a slide to civil war, as EU commissioner Günther Oettinger warns. It is not that the rest of the world is immune from this contagion: witness the passions over the Confederate flag in Charlottesville, Japanese politicians genuflecting at their war shrine or jihadists avenging the Crusades. But Europe, with so many tribes boasting so much history in so many countries, is the memory capital of the globe, where too many states are so vulnerable to the agonies of secession and fragmentation.
The best justification for what is happening is that these inflated memories are but froth on a deeper and natural yearning of every subnational, culturally united minority to enjoy civic self-determination. The worst interpretation is to see Catalonia as an expression of a destructive populist appeal to its citizens’ worst instincts – puffed-up hatred of the other, driven by false grievances and impossible hopes – while cloaking those unappetising instincts in the language of self-government and democracy.
The right response, as Catalonia’s Socialist party argues, is for Spain to recreate itself as a republican, federal state rather than attempt to sustain itself as a monarchially legitimised unitary state. The only way to avoid disaster and give the mainstream parties in Catalonia the political ammunition to argue against secession, which neither they nor the majority of Catalans want, is to offer the prospect of an autonomous Catalonia within a federal Spain. It is through political creativity that historical myth can be relegated to where it belongs, along with much more determined and imaginative activism to address inequalities and neglect.
Similarly in Britain. If the unfolding disaster of Brexit is to be stopped in its tracks, and the over-remembered, over-deified past restored to its proper place, we need parallel creativity – a constitutional settlement with Europe and, at home, a real assault on the injustices that fed what was at bottom a protest vote against a status quo too many found intolerable. Too much remembering has become toxic. It is time to forget and move on."

Friday, October 6, 2017

Gerard Piqué is no Colin Kaepernick

Colin Kaepernick is an American football player that put at risk his professional career to express his solidarity with African Americans who had been victims of police brutality. He lost his contract and he had to endure the hate of radical nationalists, including the current president of the USA, Donald Trump.  Some recent comments by the first authority of the country have pushed other American football players to join the protest. According to Wikipedia "Before a preseason game in 2016, Kaepernick sat down, as opposed to the tradition of standing, during the playing of "The Star-Spangled Banner". During a post-game interview, he explained his position stating, "I am not going to stand up to show pride in a flag for a country that oppresses black people and people of color. To me, this is bigger than football and it would be selfish on my part to look the other way. There are bodies in the street and people getting paid leave and getting away with murder", referencing a series of events that led to the Black Lives Matter movement and adding that he would continue to protest until he feels like "[the American flag] represents what it's supposed to represent". In the 49ers' final 2016 preseason game on September 1, 2016, Kaepernick opted to kneel during the U.S. national anthem rather than sit as he did in their previous games. He explained his decision to switch was an attempt to show more respect to former and current U.S. military members while still protesting during the anthem after having a conversation with former NFL player and U.S. military veteran Nate Boyer. After the September 2016 police shootings of Terence Crutcher and Keith Lamont Scott, Kaepernick commented publicly on the shootings saying, "this is a perfect example of what this is about."
This video explains how much he cares about the victims of police brutality in the US, in some cases killed by the actions of abusive agents.  I discussed recently with my students at the Study Abroad program at UAB the parallelisms between American football players taking a political position and some sports stars in Catalonia also taking a position in the independence debate, like soccer player Gerard Piqué or manager Pep Guardiola. Last Sunday Piqué echoed Kaepernick by complaining about the brutality of Spanish police in trying to prevent some voters from participating in an illegal referendum called by the Catalan regional government. There is little doubt that the Spanish police used excess brutality, but only one person suffered a major injury (a rubber bullet in the eye). I do not need to hide that I have much more sympathy for the cause of Mr. Kaepernick than for the cause of Mr. Piqué, which is also the cause of many upper and middle class people of the community where I live, but very far away from the sympathies of most poor and working class citizens. It is nice that Piqué, a multimillionaire descendant of a family of the Catalan bourgeoisie (his grandfather sat in FC Barcelona's board of directors) now for the first time cares about police brutality. Some years ago a Catalan woman lost an eye because of a rubber bullet of the Catalan police and he didn't say anything as far as I can remember. Piqué has never been seen expressing his solidarity with poor people for the dramatic budget cuts of the recent years (decided both by Catalan and Spanish governments), nor for the loss of money for the welfare state derived from the tax fraud of several of his colleagues and team mates. So far, he has not put at risk his career at all (like his colleague Arda Turan, who supported Erdogan in his last referendum to introduce autocratic elements in Turkey), nor he has started any controversy with the officials at his club. He is in the celebrity market, his partner is the Colombian singer Shakira, and he is most probably benefiting from his increased celebrity as a result of the controversy. Although he says he would understand that the Spanish national team stops calling him, he has not taken the step of refusing to go when called by the national coach, as the 2018 World Cup in Russia is approaching. I am sure that Vladimir Putin will welcome him with open arms.

Tuesday, October 3, 2017

Soccer secession, much more acceptable than political secession

FC Barcelona and R. Madrid (both) should leave the Spanish soccer League and join the English Premier League, perhaps at the beginning at least together with Glasgow Rangers and Celtic Glasgow. This would be the embryo of a true European superleague, which would exponentially increase the number of interesting soccer games every week. Now we have to endure many boring games in the Spanish league, which could recover some degree of competitive balance in the absence of the two big clubs. Now soccer leagues compete for attention, for managers and for players. Why couldn't they compete also for teams? Most of the audiences, and most of the best players and the best managers, find the EPL the best league. At the same time, there is an untapped demand for better games. Soccer fans have to wait until the end of the season to watch truly big games in Europe, or wait until the finals of the World Cup every four years. This move would contribute to preventing a hard Brexit, by highlighting the benefits of the UK remaining in the single market. It would cause no great problem to the Spanish or European economy because we would still enjoy two "Clásicos" every season. The Spanish Cup and the Champions League would remain in their current format. National teams would survive, but hopefully would be like tourist attractions deprived of political significance (more or less like the "calcio storico" in Florence and Siena). Instead, political secession to create or consolidate even more nation-states (with their package of flag, anthem and radical nationalism) creates instability and endangers investments and prosperity, as it is apparent in the case of Brexit. The poor would suffer the most with more political secessionism, because they don't have tax havens to send anything. A world of small nations competing for capital thereatens the welfare state. A world of soccer leagues competing for teams in a united Europe doesn't threaten anything and may be great for consumer welfare.

Saturday, September 30, 2017

Macron's Sorbonne speech for a sovereign, united and democratic Europe

French President Emmannuel Macron gave an important speech on September 26th at Sorbonne University. He proposed to refound the European Project on the basis of a more sovereign Euro-zone, with a stronger budget, a finance minister and a parliamentary control. His project includes some important key aspects in the form of much stronger common policies:
-A common Security and Defence policy that puts together information and resources to fight terrorism.
-A common Foreign policy and development, especially in the Mediterranean and Africa, to better deal with immigration in a human and forward looking way.
-A common policy of ecologic transition, to protect the environment and promote a common and integrated energy system.
-The digital revolution will require a common approach to regulate the digital economy, to protect intellectual property and to train workers in the skills of new technologies and artificial intelligence.
-The European Union and the euro-zone should commit to joint industrial and economic development and to fighting umployment, especially among the youth, in a context of fiscal and social harmonization.
My only problem with the speech is that somehow paradoxically with the objective of an integrated an multilingual Europe, it has been very difficult to me (in fact, so far impossible) to find the English version.
The speech gives more emphasis to objectives than to instruments. But he proposes at least one instrument to achieve this higher integration: the creation of pan-European lists in the next European election, starting with the seats that the UK abandons, but expanding the number of pan-European seats in the next two European Parliament election.
Macron condemns all forms of nationalism and hate, and expresses clearly his ambition to fight them with concrete and strong proposals to accelerate the transfer of sovereignty of all member states to the European level.

Tuesday, September 26, 2017

Talking with students about these interesting times

The Study Abroad programme at my university, in which I teach a course on soccer and economics to foreign students, has sent this wise message to our overseas partners:

"Dear Colleagues,
I am writing to you to keep you informed and to respond to enquiries we have received about the situation in Catalonia.
As you will have seen in the news there is a political dispute between the Spanish and Catalan governments and there has been a lot of activity, meetings and demonstrations. These have developed in a peaceful way and while there is debate and discussion there is no reason to fear violence.
The UAB officially inaugurated the course yesterday (news ítem here) and the Study Abroad programme is running as normal. We have reminded the students to be aware and make sure they are safe when they are out and about in the city.
We are also encouraging students and staff to talk about events to understand and learn from this aspect of  their Study Abroad experience. These are interesting times!
We will keep you informed. Please do not hesitate to contact us if you have any questions.
Best regards..."

I will do my best to encourage my students to talk about events and learn from these interesting times. I am very open to talk about everything related to what is happening in Catalonia in my classes and out of them. Since my course is about soccer and economics in a very general sense, there are actually some specific questions that I would like to discuss with my students:
-FC Barcelona officially promotes the idea that it is "more than a club" because the club has been linked to Catalan nationalism. Is the club in favor of Catalan independence?
-There is some debate about the league in which Barça would play in case of independence. However, Barça officials say they would play in the Spanish league anyway. Does that make sense?
-The Brexit referendum also raised some controversies about the English Premier League and the future of the UK, to which the economist Stefan Szymanski contributed with a blog post? Are there any lessons for Catalonia from the Brexit debate and experience?
-A few Catalan players and managers (Piqué, Guardiola) have expressed their opinions in the Catalan independence debate. These days some sports players in the US are also expressing their political opinions. Are there any similarities? What should be the behavior of sports stars in the political debate?

Friday, September 22, 2017

Reading "Corruption," by Fisman and Golden

Economist Ray Fisman and political scientist Miriam Golden have written a very useful book that summarizes a lot of recent research on corruption. It is one of those books that is meant for a general readership, but that ends up mostly being read by other academics because it gives a very efficient overview of recent frontier research. It touches on many angles of research on corruption. There are probably three main ideas. First, corruption is a coordination problem: one doesn't stop contributing to it unless others do the same. Second, in this coordination problem, common knowledge plays a very important role. This is probably the strongest part of the book, with very interesting examples on how not only actions that speak against corruption are important, but it is also important that information and participation become well known by many people. And third, there are no panaceas to fight corruption, although there are examples of societies leaving corruption behind, or at least some forms of corruption. Unfortunately, the book was written before Donald Trump becoming the US president. Seeing Trump every day on TV it would have been difficult to mostly forget, as the authors do in my view, about vertically integrated corruption, that is, moguls buying a political party or a political system to benefit from it. There were previous examples, either ignored or minimized in the book, like Piñera in Chile or Berlusconi in Italy, but now the problem also affects the first economy in the world. Although there are many examples in the book, one misses a more qualified approach to some cases of success, such as Chile or Sweden. The Latin American country has experienced recently important corruption scandals, addressed by a commission chaired by an economist, Eduardo Engel. Now the favourite candidate to win the next presidential election is again Piñera, one of the wealthiest capitalists of the country with interests in several regulated industries. Sweden escaped corruption, but it wasn't easy, as explained by Rothstein and Teorell. In my modest opinion, some dichotomies are a bit exaggerated in the book, like the big bang or nothing idea. Clearly, Sweden or the US cities escaped corruption after some decades of trial and error. As the authors say, there are no panaceas, and there have been many failed reforms. Then there is no way forward without learning from past experiences and try again. In multi-level democracies with checks and balances, in addition, centralized big bangs are just impossible. It is also in my view a false dichotomy as the authors seem to implicitly suggest at the end that we should go either for great leaders or bottom up efforts. Surely elites and organizations can do a lot to reform. Most people who get involved in political parties and other organizations are honest and well-meaning. I missed making a little bit more the connection between powerful transnational corporations and the concentration of fortune and corruption, and in general the connection between inequality and corruption. Sometimes in the book the idea is given that it is politicians who have most of the bargaining power. FIFA, Putin's olygarchs, corruption scandals in public-private partnerships and other examples show that the public-private frontier is fuzzy at best in corruption. Transnational implications of corruption are very relevant. Something is said on the importance of external pressure and coordinated international efforts, but the enormity of the problem is perhaps not exposed. In spite of all these comments, it is a great book that I recommend. Perhaps it should be read together with the book by Putterman on why humans CAN be angels, under the right environment of course. Democratic quality is a public good, and sometimes humans manage to provide public goods. The book finishes with a list of suggestions on what ordinary people can do. The list is taken from Transparency International. I fully support these suggestions. I would add two: if you are an angel, become a politician, and if you know any other angel, convince her or him to become a politician, or to get involved and active in politics.

Tuesday, September 19, 2017

Preference formation following autocratic regimes

Yesterday I attended the thesis defence of a student I have supervised. The dissertation is a collection of empirical essays in political economy that I hope will make their way to the publication circuits in the near future. One of the chapters was about how the memories of economic management in previous military regimes affected the support for democracy in Latin America. The main finding is that this benchmark does significantly affect perceptions of democracy, showing that reference points are important in political preferences, as we know from behavioral economics that they are in other fields. Another apparently very different chapter was about how the Catalan public TV channel had affected preferences for nationalism in the voting population. This influence is difficult to identify, as causality may go in different directions and there may not be enough variation to find statistical significance. However, by exploiting the fact that some territories started the channel before others probably for exogenous reasons, the author found that this channel, in the early periods (the only ones that can be analyzed using this technique) had an effect on preferences that was double in size than the effect in other similar studies. Finally, the third chapter was an event study about how the Catalan secession campaign of the last years had affected the stock returns of firms with interests in the region. In this case, the effects are very small and non-significant. I found very interesting that one of the very thorough members of the evaluation committee thought that the three studies were related because all of them analyzed preference formation following autocratic regimes. It was humbling to realize that many things that happen in Catalonia and Spain are the result of a country that just experienced a 40 year military dictatorship that finished just 40 years ago. Many of those who lived under that regime, in favour and against it, are still with us. The dark shadow of the Franco period still influences us in many ways, not always in the expected direction.

Sunday, September 17, 2017

Paying attention to the US debate from Europe

In Spain, Catalan nationalists are teeming up with a part of the radical left to take advantage of a weak an unpopular government to organize an illegal and revolutionary self-determination referendum. To hold a self-determination referendum is a legitimate proposal, but those who endorse it should do so with a minimum of rigour and some arguments that weigh the difficulties and contradictions of the proposal in XXI Century Europe. Of course, the weak and unpopular government of Mr. Rajoy in Madrid is not only a problem for the Catalans, but also for all the Spaniards. A secession campaign accompanied by the typical nationalist ingredients of hate, intolerance and demagoguery, will do nothing to improve democracy or democratic quality. The campaign is being suported by Julian Assange and congressman Dana Rohrabacher from the US, an ally of Trump and Putin. Watching yesterday an interview with Steve Bannon (former alt-right and ultra-nationalist advisor of Donald Trump) in Bloomberg TV, I see that the convergence of interests between nationalists and a part of the radical left does not only happen here. Some aspects of their tactics and their style of doing things is also similar in Europe and the US. Now in Europe we are more relaxed about national-populism after the defeat of Marine Le Pen against Macron, but we should not be relaxed about the dangers ahead. In that interview, Bannon predicted (as if wishing it) that the future will be a battle between left-wing populism and right-wing populism, and that the Americans will become united behind economic nationalism. Paul Krugman recently predicted that with the fall of Bannon in the White House, Trump would abandon economic nationalism and just spouse a traditional conservative agenda. Bannon predicts the opposite.

Thursday, September 14, 2017

Responding to the critics of economics without pandering to them

John Cassidy explains in The New Yorker the details of the CORE project to teach introductory economics at the undergraduate level in a way that responds to the critics without pandering to them. That is, the economists of this project have listened carefully to critical students that raised their voices especially after the last global financial crisis, and accordingly they have developed a new method and new materials to teach economics in a reformed but rigorous way. The new materials promise to be much better than the traditional textbooks. For example, in my introduction to economics for sociologists I use the book by Krugman, Wells and Graddy. Although its last edition covers the global financial crisis, some of the topics in the rest of the book (e.g., minimum wages) are covered in a way that is contradicted by what Krugman himself says in his blog. According to Cassidy, "The CORE approach isn’t particularly radical. (Students looking for expositions of Marxian economics or Modern Monetary Theory will have to look elsewhere.) But it treats perfectly competitive markets as special cases rather than the norm, trying to incorporate from the very beginning the progress economists have made during the past forty years or so in analyzing more complex situations: when firms have some monopoly power; people aren’t fully rational; a lot of key information is privately held; and the gains generated by trade, innovation, and finance are distributed very unevenly. The CORE curriculum also takes economic history seriously." Samuel Bowles and Wendy Carlin, two of the promoters of the project, explain in Vox that the new method (which can be downloaded for free) introduces politics and empirical evidence in a much more substantial way than traditional materials. Good work, economists everywhere should use it.

Tuesday, September 12, 2017

Are wild dogs smarter than us?

Animals also vote. Not exactly like us, but they also make collective decisions. A study about wild dogs shows that they use sneezes (or something similar) to cast their votes. An interesting part of the study is that the percentage of votes needed to make a decision is variable. They use variable quorum thresholds. In particular, the thresholds change with the status of the "agenda-setter." It may also depend on other variables, but human scientists are happy enough for the time being on what they have discovered. It is as if wild dogs had their own Venice Commission, that is, the Council of Europe's Commission for Democracy through Law, which prescribes the conditions under which referendums should take place. In the particular case of self-determination referendums to create new countries from existing ones, the conditions are very strong. That is, it is more difficult to change borders, especially in democratic countries, than to decide where to go for dinner. This is often forgotten by some superficial commentators, who recommend this kind of referendums usually for countries that are not their own. The USA, Germany, Italy, France, and all major democracies either prohibit or do not contemplate such referendums in their constitutions. Only four countries in the world include such possibility in their written Constitution (Ethiopia, Uzbekistan, Saint Kitts and Nevis and Liechstenstein). In some cases, of course you can reform the Constitution, but reforming it is difficult. This is probably for good reasons, to avoid lies, divisions and instability, as the British now know from the Brexit experience. Some referendums are necessary and good, but they must take place under very strict conditions. The distinction between good and bad referendums is crucial. Franco and Hitler did organize referendums. Orban, Le Pen, Wilders, and Putin have also used or tried to use referendums. Being rigorous about the defence of such instrument is as important as the distinction between democracy and autocracy. Wild dogs have very careful rules, not everything goes. They do not have a written document like the code of good practices of the Venice Commission. We humans have such a document, but many people refuse to know about it.

Saturday, September 9, 2017

What is the matter with Catalonia

September is the season of marches and pseudo-referendums in our land, and this year is no exception. A narrow majority in the Catalan autonomous Parliament tries to impose a new illiberal democracy that will be stopped by the Constitutional institutions of Spain with the support of the European Union. Catalonia has an average income that is above the average income of the EU citizens. Its original language is official and the one used as a priority in the school system. The police, prisons, universities, hospitals, are run by the regional government. Nevertheless, a successful campaign by the Spanish Popular Party, now ruling in Spain, in 2010, to put pressure on the Constitutional Court to reject parts of a new Statute of Autonomy, triggered a campaign for Independence that has been used by the conservative nationalists in Catalonia, under pressure from their own corruption scandals and austerity policies, to start a scalation of commitments to something that is ultimately impossible: a unilateral and peaceful process of Independence that disconnects Catalonia from Spain but not from the European Union. The Catalan society is deeply divided and examples of intolerance and the mob rule (so fare, limited to the social networks) now abound. We can afford it as long as tourists keep visiting us and our economy remains healthy, but we are giving a very sad example of fanatic nationalism and illiberal democracy. The narrow majority in the Catalan government (with the necessary support of a radical euro-phobic group) tries to impose a procedure to vote in a referendum excluding half of the citizenry from the decision about the question, the date, the legal framework, the electoral authority, etc., of the pseudo-referendum. Those who oppose it need more than reasons, we need emotions and narratives. We keep working on it, for example reading today Jonathan Freedland in The Guardian (the answer is Europe, not making the mistake that Spanish Prime Minister Mariano Rajoy is about to make, of visiting Donald Trump days before the pseudo-referendum): "In a talk on Thursday night, Le Carré spoke of the behaviour of Donald Trump and others as “absolutely comparable” to the rise of fascism in the 1930s. “It’s contagious, it’s infectious. Fascism is up and running in Poland and Hungary. There’s an encouragement about,” he said.
This is a warning to take seriously. Hungary is indeed led by a man who boasts that he is building an “illiberal state”, while Poland’s government is trampling over fundamental democratic protections, including an independent judiciary and freedom of the press (and Trump is cheering them on as they do so).
The US president is not making America great again, but he is making the 1930s current again. Perhaps, then, and in a way he would not want, Trump is providing the anti-Brexiteers with the one thing they always lacked: an emotional heart to their argument. Trump and the fascist contagion is reminding us why the EU exists: to ensure that the neighbourhood we live in is never again consumed by the flames of tyranny and hatred.
On that fateful day in June 2016, it’s possible that some of those who voted leave did so because they believed that democracy and peace were now safe and secure in Europe. In the short time that has passed since, we have seen that those things are, in fact, fragile. As the head of Nato warns that the world is at its most dangerous point in a generation, Britain’s duty, to use a word that might make Smiley wince, is surely to defend the body that helped lead Europe out of its darkness."

Sunday, September 3, 2017

There are other voices: the federalist alternative in Catalonia and Spain

As it has been happening since 2012, September is the month of nationalist demonstrations and political dramas in Catalonia. This year, another expected season of choreographed marches and a third so-called "referendum" (again, and for the third time since 2014, promoted as a decisive "vote of your life") between September 11th and October 1st will try to show to the world that the Catalan society is unanimously behind the idea of secession from Spain. A well funded and hypermobilized  strong minority of citizens mostly from the upper-middle classes, will also try to show support for the idea that only a unilateral self-determination referendum without a legal framework, where the question and the date are unilaterally decided, without a neutral authority, that only this mechanism can be chosen to change the status quo of Catalonia in Spain. However, the truth is that the Catalan society is very diverse and plural, and that there are many other voices. Among these voices, one of the best organized and the one with the most constructive proposal is the Federalist Movement, represented by Federalistes d'Esquerres, a platform that was born in 2013 to reivindicate the rich federalist tradition of the Catalan and Spanish left. It has organized many debates and events in Catalonia since then, and it has participated in federalist marches and public meetings in several Spanish regions, as well as in Brussels and in Rome. Among its more tan 3000 members and sympathisers, there are citizens from several political parties and trade unions. Its first president was the current member of the Spanish Parliament, the philosopher Manuel Cruz, and its current president is the Dean of the School of Political Science at the Autonomous University of Barcelona, Joan Botella. Their members include the former Anti-Corruption public prosecutor of Spain, Carlos Jiménez Villarejo, and the prestigious writer and professor of Ethics Victoria Camps. This group has been gathering strength since its birth despite the lack of institutional and public support, and it has a very active agenda of events. It is also promoting a crowd-funding campaign for the production of the documentary "Federal", directed by award-winning film director Albert Solé. This documentary is now in the last stages of production, and will be the focus of a strong campaign in 2018.
This movement defends the following ideas and positions:
1. Strong nationalisms reinforce each other: the Catalan question is now the excuse of Spanish and Catalan elites to avoid introducing in-depth reforms in our democracy that make it more transparent and egalitarian. In particular, it is an excuse that obfuscates and creates the division that prevents tackling the very serious corruption scandals that have affected the Popular Party in Spain and the party of the Catalan President (formerly CDC and now PdECat).
2. The nation-state is obsolete. In the XXIst century none of our greatest problems can be solved with the old tool of the nation-state. Climate change, fiscal fraud, migrations and refugee waves, terrorism, financial instability... all of our greatest problems require transfers of sovereignty and coordination at a large scale, which can only be achieved through a European and global process of federalization.
3.Spain and Europe need reforms. Although Spain is a very decentralized country that belongs to the EU and the Euro-zone, there are legitimate demands of cultural recognition and about financial arrangements from Catalonia and there are serious shared institutional problems. A federalist reform is not only supported by a large part of Catalan citizens, but it also has strong allies in the rest of Spain and would have the obvious sympathy of European political leaders and governments of member states. Instead, Catalan secessionists have dramatically failed in their quest for international, and specially European, support. The federalist reform should include Constitutional reforms in Spain to transform the Senate into a territorial chamber (similar to Germany), to introduce a multi-lingual system at all levels (similar to Canada and Switzerland), to establish a more transparent system of territorial transfers and investments, and to clarify the responsibilities of each level of administration following the subsidiarity principle. Instead of fighting for the obsolete concept of territorial sovereignty, we should all accept that we live naturally in a multi-level democracy where the identification of one state with one nation, one flag, one currency, one language and one army has disappeared.
4. Behind the façade of a peaceful movement, Catalonia has seen disturbing episodes of intolerance, such as virtual mob attacks in the social networks (sometimes supported by Catalan government's press conferences) addressed to journalists, intellectuals, artists and others who have dared to raise their voice or even to express doubts about the secessionist process. The legal plans of the pro-independence leader and the majority in the Catalan Parliament (a narrow majority that does not represent a majority of votes, because of an electoral system that privileges rural areas) include attacks to the division of powers and checks and balances. In particular, in a transitional period, they expect the judicial power to be subject to the executive branch, in a mechanism that has been compared by experts to the one for which Poland has received a serious warning by the EU institutions. The narrow parliamentarian majority of the pro-secession groups is achieved because of the support of an extremist euro-phobic group, the CUP, whose youth wing has promoted violent attacks to tourists and also acts of bullying against political dissenters.
5. Self-determination referendums are not allowed in the immense majority of democratic constitutions in the world. The international consensus is that they should only take place in exceptional circumstances, and if they take place, they should be subject to very strict conditions, established by the Commission of Democracy through Law (the Venice Commission) of the Council of Europe. The unilateral referendum promoted by the Catalan government fulfils none of these conditions.
6. The Independence delusion in Catalonia is similar to the Brexit delusion in the UK. It is accompanied by exagerations and lies that are sold as facts, especially relative to the economic and financial gains, the attribution of all problems to an external enemy and the illusion that Independence is easy, inexpensive and requires no agreement with anyone. The rhetoric is also similar, and similar to other national-populist movements that have attracted voters recently in ther parts of the world: "the will of the people, freedom, democracy, sovereignty..."
7. The pro-secession movement and its political use by the Catalan government has created a deep social division in Catalonia, in what had been an example of a diverse and tolerant society. The last example of the attempts to dig deeper into this internal division, and the sometimes artificial division between a falsely homogeneous Catalonia and the rest of the Spanish society was the manipulation of the social reaction to the terrorist attacks of August 17th in Barcelona and Cambrils, as explained by Roberto Toscano in La Repubblica. Instead, the federalist movement emphasizes the many links of Catalans with Spaniards: we share families, history, problems, businesses, sports idols and competitions. And most of us thank the immense solidarity of many Spaniards after the terrorist attacks and want to share our links more broadly now in a united and more democratic Europe.

Thursday, August 31, 2017

Multi-club ownership, efficiency and collusion

Red Bull owning soccer teams in Germany, Austria and New York, or Manchester City's parent company owning teams in New York, Australia and now Spain (Girona FC) are just examples of a new trend in global soccer: Multi-Club Ownership or MCO. The implications of this are different depending on whether it implies horizontal integration or vertical integration. If it is a case of vertical integration it may imply better coordination among different segments at different levels of a value chain (for example, recruiting and training players at young ages and then promoting them when they mature, and similarly with managers), which is efficient and reduces waste. But if it is a case of horizontal integration, then it may raise market power concerns and concerns in terms of authenticity of the competition. For example, it is not implausible that Red Bull Salzburg has to play against Red Bull Leipzig in the European competitions, and similarly for Manchester City and Girona FC in the future.
Simon Chadwick, an expert, argues in The Guardian that “How do you scout around the world as quickly and cheaply as possible? Rather than having to maintain a scout network where you can always miss out, you have a franchise where you save both on intelligence and scouting acquisition costs."
“My personal view is that multi-club ownership is a very interesting way of leveraging intellectual property,” says Ben Marlow, the head of football at 21st Club, a consultancy that advises potential investors in the game. “Yes, it gives them a geographical advantage in recruitment by having a presence in a market. But it also helps clubs breed economies of scale, it allows clubs to share best practice.”
Other problems of potential collusion arise when player or manager agents are involved. For example, the purchase of FC Girona by Manchester City has also involved the brother and agent of Manchester City's manager, Pep Guardiola. Pere, Pep's brother, will be the co-owner of Girona FC, but he is also the agent of many players and the agent of his brother. Will his decisions be guided by the best interests of Girona's fans or by his interest to promote players of whom he is the agent? Pere Guardiola is also associated with Mediapro, a sports media company investigated by its links with the FIFA corruption scandal. Global soccer is great, but it has some dark corners.

Wednesday, August 30, 2017

Worker democracy

A part of the left in countries with sovereignist movements has supported the idea of self-determination referendums as an example of radical democracy. This is surprising, as radical democracy has a very different tradition in labour movements and the left. Self-determination referendums are the preferred tool of populists and autocrats, and are the ideal way to divide the working class and promote an organization of the world based on nations and identities instead of based on the universal values of egalitarianism and common prosperity.
The true good tradition of radical democracy in the left is the ideal of worker democracy in the firm. The fall of the communist systems did nothing to erode the good properties of worker participation in the ownership and control of firms, because communist systems were not systems of worker participation but of state control. Prestigious economists such as John Roemer and Samuel Bowles and their co-authors have explained the positive properties of worker democracy in the firm both from the point of view of equity and the point of view of efficiency. There are positive productivity effects through enhanced individual and team incentives and through dispersed innovation. And of course there are positive egalitarian effects as the value of production is not asymmetrically captured by the owners of capital, and therefore the tendency of capitalism to concentrate income and political power in the wealthy is restrained. Fair structures of voice and decision-making also have an influence on more altruistic preferences, which contributes to internalizing externalities and solving social problems such as corruption. Since both efficiency and equity can improve, there is an improvement of the terms of the equity-efficiency trade-off to the extent that any trade-off remains. Improving worker democracy is a pre-distribution step that reinforces redistributive mechanisms in welfare states. Worker democracy and better institutionalized redistribution through a better federal system may make flexicurity mechanisms more acceptable for unions. In addition, a significant increase in the share of companies that practice worker democracy may be part of a more diverse economic ecosystem. Worker participation already exists in a large part of the economy. In some countries' large enterprises, such as in Germany, it is compulsory, which does not stop these societies from being among the most prosperous and efficient in the world. A good federal system of a multilevel democracy starts in the firm. That is what a radical democracy means for workers.

Monday, August 28, 2017

A referendum about an incomplete contract?

The economist and Nobel Prize winner Oliver Hart has rightly said in a Spanish newspaper that a good referendum must be preceded by a contract. In the short space of a newspaper interview, he only says that such contract should clarify the time before another similar referendum should take place. The objective would be to avoid the instability created by the fact that the voters may realize after the vote that the terms of what was being voted were uncertain. Oliver Hart, like almost all economists, was against Brexit and probably he was thinking of this referendum, after which the United Kingdom has entered one of the most uncertain periods of its history. But of course surely Hart would agree that many more issues should be covered in a referendum contract, like the exact terms of the policies and institutions that would be implemented in case of each possible referendum outcome. This is of course very difficult, although there are precedents in history, especially when referendums were preceded by wide-ranging agreements among all relevant stakeholders. This happened for example in the referendum after the Good Friday Agreement in Ireland. Or it happened in the Constitution referendum in Spain in 1978. I could not vote in those years, but I remember that all voters received the long text of the agreed Constitution at home (in my family, the copy we received could be read in Spanish from one side and in Catalan from the other side). However, when the referendum precedes a negotiation, the terms of the vote are totally unclear, which facilitates the work of demagogues and opportunists, as it happened with the Brexit referendum. It would have been interesting to dig deeper into the thoughts of Oliver Hart in this case, because this economist has promoted the idea of incomplete contracts, which preside those relationships where it is impossible (or too costly) to foresee all possible contingencies. Clearly, in many cases, it is not at all clear what will happen. In the economics of the firm, which is where Hart and others have applied the idea of incomplete contracts, the allocation of property rights (understood basically as control rights, because property gives the right to decide in all those cases that are not covered by a contract) is crucial to determine outcomes when contracts are incomplete. That is why citizens should be vigilant when opportunistic governments (democratic or autocratic, national or regional), political parties or international powers promote referendums. They will try (especially if the referendum has no legal framework, like in Crimea) to manipulate the agenda, the date, the question and everything they can because they know that the relationship between them and the voters is presided by a very incomplete contract. The control rights are crucial to try to influence the outcome of the vote, and the management of the events before and after it. Perhaps I should add this insight if I (hopefully with the help of someone else) ever come to write an English expansion of something I wrote in Spanish about social choice after the Brexit referendum. I infer from his work on firms that Oliver Hart knows that, in the presence of incomplete contracts, the moral attittudes of political leaders are as important as the vote of citizens.

Tuesday, August 22, 2017

De iure and de facto sovereignty: the Brexit case

According to the existing treaties and legal rules, the United Kingdom is a sovereign state that can decide its integration or separation from other organizations such as the European Union. Accordingly, the British Parliament decided to call a referendum more than one year ago to decide whether to remain or to leave the EU. The result of that referendum is well known: 52% voted to leave and 48% voted to remain. Those in favour of the Brexit option, such as Nigel Farage, said that the day after the referendum would be the Independence Day of the UK. However, more than one year after the referendum, the British have learned that it is not so easy to leave the EU. First, the operation requires a negotiation to establish the terms of the divorce. And, second, the British, even those in favor of leaving, still want to have some relationship with the other Europeans. It s just that the citizens were promised that they could pick those aspects of the relationship that they like and drop those that they do not like. They were promised a free lunch. The current British government seems completely unable to tell the truth to the voters, because it is intimidated by a tabloid press and a radical part of the electorate. Objective observers' only discussion now is whether a second referendum will be necessary to restablish the truth, or whether it is better just to leave things in a permanent transition, being part of the single market and accepting basically all the (judicial and financial) obligations that go with that, but without a seat in the table where the decisions are being made. It seems that the United Kingdom, a nuclear power and a former global empire, are much less sovereign that they expected to be. This is the story of the Brexit delusion.

Monday, August 21, 2017

Politics and terror

The first priority when a terrorist attack takes place in your city is to mourn the victims. But of course big terrorist attacks have political implications which in a democracy must be analyzed. The Guardian has today a very interesting editorial about the events in Barcelona last week. One paradox the British newspaper has paid attention to is that "On Sunday morning the king and queen led the mourners at a service in La Sagrada Familia, Barcelona’s cathedral, which, perhaps paradoxically in the circumstances, was conceived by Antoni Gaudí as a paeon to faith and nationalism." The service was exclusively Catholic: I wonder if a majority or perhaps any of the victims was a Catholic. The Guardian also says that "behind the solidarity, Spain’s national cohesion faces more stresses than in most European countries. At least eight of the terrorists appear to have grown up in one small town, Ripoll. Their horrified families are blaming Abdelbaki Es Satty, the imam of one of the town’s mosques, for radicalising their sons. Yet this is a region that is uncomfortably familiar with conflicts of identity. Catalonia’s president, Carles Puigdemont, attended the Sunday service with the king and queen, but it was a rare joint appearance with the monarchs for the republican politician, who is the architect of the unofficial referendum on independence that is scheduled to take place in less than six weeks’ time. Madrid continues to insist the plebiscite is illegal and that it will do everything it can to stop it happening. The last Catalan president who organised a similar referendum has been banned from public office for two years." Meanwhile the English edition of El País says that "An attack of this magnitude should be a wake up call for Catalan politicians, including the regional government, parliament and pro-independence movements, which have made the independence fantasy the sole issue on Catalonia’s political agenda over the last few years. It’s time to ditch the democratic nonsense, the flagrant law-breaking, the games, the tactics and political opportunism. It’s time that those governing us start working for our real interests. The fight against terrorism requires complete coordination and a concerted effort among the various authorities and security forces. And this kind of collaboration can only be achieved if there is absolute trust between the various layers of government and state bodies. So we appeal to the Catalan regional government and politicians in the region to work on a real agenda that will address the real problems affecting the people of Catalonia." I couldn't agree more.

Saturday, August 19, 2017

Come to Barcelona soon

When I was a kid, I used to live very close to the bull ring in Barcelona. From the spring to September there were bull fights which I occasionally attended. Most of the time I didn't go, but our passtime was to watch the tourists (and their funny clothes, or in some cases almost lack of them, to be honest) that parked their coaches in our street. In those years, before the Olympic Games of 1992, we only saw tourists on Sundays because they came for the day to the city to the bull fight from the Costa Brava. In Barcelona, there were not many hotels back then. Another way to see tourists was to go to Montserrat (a mountain near Barcelona) in summer, where visitors from the beaches also came for the day. Since the Olympic Games tourists now stay in Barcelona. They have many hotels and now more or less legal tourist appartments. That does not mean that Barcelona has not been a city of visitors. Most of our touristic assets were here before the Olympic Games, like the Gaudí buildings, the nice weather and... yes, the immortal Rambla where a horrible terrorist attack took place on Thursday. That is the pedestrian street, itself a monument to diversity and freedom, which had seen George Orwell, Pablo Picasso, Federico García Lorca, Gabriel García Márquez and many others walking up and down the avenue. Some of our occasional visitors come for a few days or for an academic course and then decide to stay and join us as citizens of Barcelona. And some of them become partners of those that were here before, and even come to lead our associations, political parties or even municipalities. Only a couple of decisions separate a tourist from a local. All those of us who can organize anything know the power of the subject matter "Invitation to Barcelona" in an email. Because of this power (exerted by myself personally or others, we all know the trick) I have been able to spend time with people I admire in my profession, like Paul Levine, Jon Stern, Neil Rickman, Sam Bowles, Branko Milanovic, Glenn Woroch, Maitreesh Gattak, Antonio Estache, Massimo Florio, Eduardo Saavedra, Miguel A. Montoya, Jean Tirole and others. And I am also happy to having spent time with other visitors with whom I don't have professional links. In the last ten to fifteen years, I have had literally hundreds of foreign students in the Autonomous University of Barcelona and its associated courses. I expect to have more this academic course. Every time I start with a new group I feel a sense of excitement for getting in touch with individuals with such varied backgrounds, a sense of excitement that I only hope it is shared by them. All of them will enjoy our street life and be part of us. This is an open city, this is everybody's city. Among the casualties of Thursday's attack the official version says that there are more than thirty nationalities. That's surely wrong. If they followed the appeal of Barcelona, surely many of them as individuals were multinational, multilingual and multicultural. Therefore, it should be thirty times the number of nationalities inside each of them. It could have been any of us, but we are not afraid. To all of the visitors that have been here before and to all those that will join us for the first time, I say: please come soon.

Tuesday, August 15, 2017

"Diversity and Complexity," by Scott E. Page

The book by Scott E. Page "Diversity and Complexity" is a useful complement of the book written before by the same autor, "The Difference," offering definitions and taxonomies of diverse and complex systems.
In that previous book, Page argued that diverse preferences, although presenting social choice challenges, also offer the opportunity for diverse perspectives that help to solve problems with uncertain solutions. Diverse communities or groups do not succeed automatically, as cycling is not something that one learns without some training. But once you learn, cycling goes much faster than running, which is much easier.
Complexity comes from systems that result from the interaction of diverse adaptive units from which patterns emerge that are difficult to predict in advance. A calculus exam is difficult, but not complex, because the parts do not interact.
The more recent book explains that the role of diversity is to provide insurance, competition, redundancy, and innovation. Although the book has mostly a positive tone, it also reflects a preference for diversity. This preference then must be implemented under the positive constraints set out in the book. There are many examples of this, and that is one of the good reasons to have institutional diversity. A preference for diversity makes many of us prefer big cities rather than small villages, although the countryside is also an example of natural diversity.  The author is very aware of the constraints: diversity is no panacea and not every kind of diversity works. If we put lots of randomly different things together they will not create a coherent system from the beginning. In nature, diverse ecosystems work precisley because they have been evolving for centuries. The book has many interesting insights beyond the relationship between complexity and diversity, like the distinctions between data, information, knowledge, and wisdom (in increasing order of structure).
In biology and non-human nature, change comes from evolution. In human societies, it comes both from evolution and from creative intelligence. However, intelligence has plusses and minuses, the latter especially coming from confirmation and other biases.

Thursday, August 10, 2017

The book about Buchanan, and what it says about Tullock

In Nancy MacLean’s “Democracy in Chains” there is an impressive account of the efforts of Nobel Prize economist James Buchanan to build over his career a theory of government and democracy to justify the reversal of all redistributive or environmental public interventions. These efforts were generously funded by billionaires and helped to create the intellectual infrastructure of what is today a very powerful network of right wing organizations. The origins of that network are traced in the book to the resistance of the Southern oligarchy in the US to the enfranchisement of African-Americans. How the school of thought promoted by Buchanan has come to be so influential not only in the US but also in Europe (this economist was one of the favorite of more than one of my undergraduate teachers) is probably a combination of the originality and audacity of his radical ideas and the financial support he received. The book is stronger in connecting Buchanan to the social context of the time than in analyzing his ideas on their merits, something for which the author delegates into basically only just another author (Amadae, which I’ll read). By this, she leaves aside an interesting history of economic ideas, which is the debate between Buchanan and his co-authors and other more progressive economic thinkers, such as Kenneth Arrow and Amartya Sen, who were also concerned about the problems of government and democracy (which are real), who took seriously the critique of Buchanan to public intervention, but who ultimately reached opposite conclusions.

Interestingly, in the book there is also more than a passing mention of Gordon Tullock, the most famous of Buchanan’s co-authors, and who was recently mentioned in this blog. In p. 99 of the book, for example, we can read: “In 1967 (…) for the third time in as many years, the senior economics faculty, led by Buchanan, again recommended that Gordon Tullock be promoted to full professor. (…) Tullock had never earned a PhD and by his own admission had never completed an economics course. Brilliant though Buchanan and his allies might have believed the law school alumnus to be, he lacked training in the field in which he taught, and his publication record –apart from the book he had coauthored with Buchanan- was undistinguished. He was also an awful teacher. It did not help that Tullock struck many as an egomaniac –or just a twit. (Once, for example, as a new colleague was unpacking his books, Tullock appeared at the door. “Oh, Mr. Johnson, I’m glad that you finally arrived,” he said. “I need the opinion of someone obviously inferior to me.”). Tullock would not be promoted. Buchanan was furious.”

Friday, August 4, 2017

The Scaramuccis of the world

The theatrical part of politics attracts individuals like Anthony Scaramucci, the financial executive that lasted ten days as communications director of the Trump administration. It is tempting to say that the chaotic current US presidency is fertile ground for this kind of characters, but the fact is that it is easy to come up with examples from other corners. In fact, the generals that had no option but to take over the sinking Trump presidency have sacked Scaramucci without much hesitation. In private I can give local examples of similar characters from my personal experience. Scaramucci and those like him are fast talking and arrogant. For them, what is important is not any particular ideas or values (they can defend different, sometimes opposite, things in a short period of time), but to express anything with apparent conviction. They have a tendency to talk about themselves and to emphasize humble origins or their contact with important people. In one of the few interviews he had time to give during his brief spell at the White House, he behaved with reporter Emily Maitlis more or less as a drunken youngster would behave in a night club at two o'clock in the morning. It is very revealing to know how this reporter obtained the interview in the gardens of the White House. It seems that she was there for a press conference and she saw Scaramucci taking selfies. She told him that she was from the BBC and asked him without preparation if he was interested in answering a few questions for the prestigious Newsnight program. Scaramucci, who probably had not much traing in international media, probably didn't know anything about the seriousness and the style of reporting at Newsnight. He felt flattered and he gave the interview without preparing anything. The resulting interview did not cause any dramatic accident for Scaramucci, but a similar contact with another journalist around the same days finished with him insulting other White House colleagues. When a new chief of staff was appointed and knew about that, Sacaramucci was fired. In a world of tweets, noise and self-promotion it is probably a matter of time before we see new examples of Scaramuccis, while honest citizens will keep looking for recognized adult behavior in politics. Expect more flamboyant individuals with expensive suits supporting opposite ideas and candidates, but always being flattering to the one they obtained power from.
Before I go to the beach for one week, let me give you two book recommendations to think about politics, economics and much more: the book about the role of James Buchanan in influencing the American right, and a book by Scott Page about complexity and diversity. More about them after the beach.

Monday, July 31, 2017

Cooperate or die

Here is an excellent speech about the virtues of cooperation in permanent institutions like the EU. It was meant to be about Brexit, but it is actually against any sort of nationalism in the 21st century. I found out about it from an article in The Guardian that says this: "In the weeks running up to the referendum, when Peter Mandelson was trying to galvanise remainers with an appeal to their pockets, and Yanis Varoufakis was making complicated speeches about conjuring forth ever deeper democracy, one man gave a simple, passionate speech that at the time I found bizarre. John Gummer, speaking to the Environmentalists for Europe, said – almost tearfully – that, because of the EU, nobody had had to send their son to another country to kill someone else’s son for 70 years. A eulogy to peace seemed quite tangential to the argument, but only if you had failed to see, as I had, how much bellicosity the leave side were generating, how much their nationalism and sovereignty were rooted in nostalgia, not for any old Britain of yore, but for a victorious Britain."

Sunday, July 30, 2017

Gordon Tullock's dangerous "minimal federalism"

Branko Milanovic twitted some days ago about a book on sovereignties apparently in Serbo-Croat by Gordon Tullock, so bad according to Milanovic that nobody cared to translate it into English. However, I did some research and found two pieces in English by Tullock that seem to correspond to the same period of time (early 1990s). These are a participation in a roundtable with among others Kenneth Arrow (to me, the one with the best arguments, which I am not aware that he developed in his research work) and a book that is available on-line, entitled "The New Federalist". From what I have seen in Google Scholar, this book has been cited by other authors suchs as Bruno Frey. The latter has some interesting work on what he calls FOCJ: "Functional, Overalpping, Competing Jurisdictions." The link with Tullock is what I believe Tullock calls sociological federalism, by which he means non-territorial sovereignty, that is sovereign institutions based on interests, ethnicity, preferences or any other affinity. Of course one can imagine dangerous developments of this, such as people getting organized only after some sort of ethnic cleansing. But the work of Frey has been interpreted as lending support to institutions like special districts in the US, where the organization of some public services gets structured overlapping but not coinciding with traditional administrative jurisdictional borders. These special districts have advantages and disadvantages, but perhaps would be (or perhaps already are) an input towards a more flexible European Union. In general, the Public Choice school of Tullock and Buchanan has been influential in a sort of free-market minimal federalism with a key role for jurisdictional competition and constraining public intervention. I would include in this tradition Tiebout, Weingast, Frey and also Alesina and Spolaore. Some of the work of these authors is valuable, as are valuable and should be taken seriously some of the contributions of Public Choice, even if those like me who advocate strong public intervention do not share the value judgements behind it. For example, the main points of public choice that government agents are no different from market agents, or that the outcomes of democracy have no particular normative properties for the fact of resulting from majority rule (but what matters is contractual process) are serious points that deserve to be taken into account, and that progressive authors such as Amartya Sen have taken seriously and responded to. But one can see the dangers of pushing the ideas of Tullock too far in federalism. For example, seeing some of his words in the above mentioned roundtable, one can be afraid of the kind of world that awaits us if that minimal federalism is ever implemented:
-"From 1790 until 1930, the US federal government, except in war time, regularly absorbed about 2.5 percent of our GNP. Most of that was used to mainatin a rather small military force (...). We got along beatifully -in fact, rather more beatifully tan we have gotten along since we became more fully integrated, I would say." I'm not sure that African-Americans among others share this view.
-"So, what we need, theoretically, is free trade and a lack of economic integration beyond that (...). Will the European Common market become a contribution to free trade, or will it build a tariff wall of its own, or will it disintegrate? I would not be at all surprised if it disintegrates." I'm happy that his prediction has failed on this.
-He also argues that Canada has no justification for existing beyond the fact that they do not like the USA: "if I were to offer them advice, I would suggest they just disintegrate." Here I'm happy that Canadians did not follow his suggestion, and remain today one of the most civilized federations on Earth.

Friday, July 28, 2017

Celebrating the 25th anniversary of the Barcelona Olympics

Barcelona celebrates these days the 25th anniversary of the Olympic Games. This event was hugely popular and an organizational success. A sub-literature in economics emerged more or less after those games concluding that these events have more costs than benefits for society, which is why some cities like Hamburg, Boston and Oslo have withdrawn from bidding races. Unfortunately this literature has not reached the general public in Spain. I believe there is no contradiction between deeming Barcelona 92 a success and accepting that in general Olympic Games are bad economic propositions. This is the same view that is taken by Andrew Zimbalist in Circus Maximus. I tried to develop it in a joint paper with Eloi Serrano that was published last year. This is the abstract of the paper: "An extensive literature mostly developed after the Barcelona Olympic Games has questioned the existence of net economic benefits arising from the organization (with significant amounts of public resources) of major sporting events such as the Olympics, although some studies still defend their positive impact. Host cities tend to become hostage of the governing bodies organizing the games. The Barcelona Olympic Games were exceptionally successful but still suffered from cost overruns, white elephants and the exaggeration of social benefits as it is usual in many mega sporting events. We report about the socio-political and economic considerations that surrounded the initial project of Barcelona 1992, and we evaluate the uniqueness of these games, including the legacy of infrastructures and sports facilities. Barcelona, a relatively rich city, was emerging from a long centralist dictatorship when the games were initially planned. It had many urban deficits and the games were used as a catalyst to coordinate public and private agents in a complex society that was in a fast process of decentralization. The games had enormous social support. Although it may be argued that the public funds could have been used in alternative projects, it is hard to think that this degree of coordination and support could have been achieved for them."

Wednesday, July 26, 2017

Non-conventional rationality and social choice in a referendum

Most of the Theory of Social Choice is based on the assumption of the exogenous nature of the preferences of rational voters acting in a consistent way. However, modern behavioral economics suggests that the presentation of options ("framing") plays a crucial role in determining people's choices. In this sense, the traditional sequence in the Social Choice Theory (exogenous preference formation, election of a voting system, final vote) does not have to be fulfilled, and the choice of details of the voting system can influence the formation of preferences. This raises the neverendum issue: the campaign for a referendum or the referendum campaign, even if secessionists lose the referendum (as in Scotland), they succeed in convincing the electorate to pay attention to what they want. That is, they are part of the battle for the attention of the electorate. The more plebiscitarian campaigns there are, the better. If the battle of the referendum demos is implicitly and cognitively won as a symbolic manifestation of the nation itself, democratic standards and international recognition are secondary to those who have nationalistic preferences. In this sense, the questions and the exact words of the questions are not innocent. In Catalonia, the referendum questions in ilegal plebiscites are barely innocent. Voter opinions can fluctuate greatly depending on how exactly the questions are asked. For example, before the 1991 Gulf War, nearly two-thirds of Americans said they were willing to "use military force," but less than 30 percent wanted to "go to war."
Our preferences are more vague and incomplete than the traditional theory assumes, and co-evolve with the institutions that claim to aggregate them. Hence the importance for Amartya Sen of the reasoned discussion and of being able to make a decision with the maximum possible information, something that according to this economist and many other observers did not facilitate the dichotomous character of the campaign of the Brexit referendum, where even the more neutral and respected media organizations had to treat both opinions and facts equally to comply with an appearance of neutrality. The objective of making decisions after reasoned discussions, negotiating taking into account the multidimensionality of problems, links with a tradition somewhat forgotten in economics and political science, due to the Swedish economists Wicksell and Lindahl, pointing to the virtues in terms of social harmony and efficiency of unanimity. In addition, as Amartya Sen reminds us, the perspective view of people from other latitudes should be welcomed in any debate to avoid the excesses of "parochialism": sometimes passions and emotions prevent us from facing the pros and cons of a decision, and observers from other latitudes can help us broaden the angle of observation and decide with more perspective.Research on these issues, insofar as it departs from the assumption of absolute rationality, should prioritize the study of conditions or interventions that facilitate cooperative solutions to social dilemmas (as is done with experiments on the voluntary provision of public goods) by adapting the study to the typical situations of this type of conflicts of sovereignty. For those involved in advocating one or another option, consideration of behavioral issues may also be important. For example, Matt Qvortup has pointed out that for Brexit supporters in the UK, Brexit was a commodity with inelastic demand (the perception of a high "price" did not alter preferences) while those who might be in favor of staying in the European Union did have more elastic behavior. By focusing on economic issues (although the economic debate was objectively won),  remainers focused on the price of exit, which did not guarantee them the vote of their potential "elastic" voters and did not allow them to conquer the vote of the "inelastic" and hyper-mobilized a priori supporters of Brexit.