Evolutionary managers

David Sumpter in his book Soccermatics simulates an process of tactical evolution in soccer. Teams in a 20 club league are initially equally divided by the use of four different styles of play. The last six teams in each season are replaced by teams with the same style of play of those that finished in the top six spots the season before. Over time, some styles disappear, but for more than 40 simulated seasons at least two styles survive: it is an example of polymorphism. In evolutionary processes, agents do not consciously decide, but they are one type or another, and the most successful types expand in the population. European soccer has lived its own evolutionary process. FC Barcelona started to import Dutch managers in the 1970s because they were successful in Europe. Rinus Michels, Johan Cruyff, Louis Van Gaal and Frank Rijkard tinkered with a similar model, total football (which had roots in several European traditions), following a trial and error process. Rijkard, not a particularly gifted manager, introduced perhaps by chance (a mutation?) a key innovation: replacing the offensive, short and technical central midfielder of Cruyff and Van Gaal by a more defensive player (Davids, Cocu), and sending Xavi Hernández closer to the penalty box. Then Guardiola found the perfect player for the position of defensive midfielder, Sergio Busquets, and had Xavi and Iniesta in the other two positions in the midfield at their best ages, accompanied by a young and energetic Messi. Now Xavi is no longer there, and Iniesta is ageing. The team is too dependent on three fantastic forwards, and somehow the rich total football game based on short passes and small spaces is being left behind. But not for long, if Xavi Hernández completes his training as a manager (please, no need to sack Luis Enrique before) and we soon recover the evolutionary thread that started in the Netherlands in the 1960s, arrived in Barcelona a few years later, and marvelled the world in the first decades of the European Champions League.

The real choice of California

I have a group of very nice American students in my course on the economics of soccer in Barcelona. I try to make my course interesting not only by talking about soccer, but also using soccer as an excuse to talk about other interesting issues. In our last class we discussed the implications of Brexit and secessionist debates for the future of  sports leagues and institutions. They seemed intrigued by the debate in the United Kingdom and the debates in other parts of the world that have nationalist tensions. I suggested that to think about the implications (not very important in my view, as sports borders should not be necessarily related to administrative borders) they should just wait and see about what will happen in California if secessionist voices keep getting louder. Most of my students started to laugh, as if believing that the demands of Californian independence after the last US presidential election are nothing more than a joke. I was relieved by that, but at the same time I wished that they don't have to suffer a humiliation like the one suffered by the members of the European Parliament when they had to listen to Nigel Farage after the Brexit referendum saying "You're not laughing anymore, are you?" To prevent that from happening, they'd better stay alert and do everything they can to help Californians make the right choice. I don't mean the choice between being independent or not, which is not something they have to decide in a meaningful way in the immediate future, but the choice between even starting such a campaign or devoting their immense resources to more productive uses. Perhaps one day they will really have to choose between being an initially rich isolated node, or being part of a cooperative decentralized network (that is what rich societies should be). But now what they have to choose is whether they start descending through the slippery slope of a debate on independence that divides their society and gives the front pages to the worst characters and their low instincts. Please don't do that, we need the best from California.

Water regulation in times of climate change

I participated yesterday in Madrid in a very interesting forum about the economics of water. The keynote speech was given by Gro Harlem Brundtland, former prime minister of Norway and UN leader on a number of initiatives related to public health, development and climate change. There were also several experts from a diversity of countries and perspectives. In the roundtable in which I participated I argued that a key issue was to have a robust system of regulation with the optimal degree of independence. I tried to explain that the ideas of authors such as Ostrom, Spiller and Akerloff are important in the field, for different reasons. Elinor Ostrom emphasized in her work the need for community owned solutions that are taylored to the specific problems, and one of the historical examples he gave was that of the river basin organizations in Spain. Pablo Spiller stressed the importance of mechanisms that are well adapted to the instititutional endowment (which is different for different times and places) that facilitate credible regulatory commitments that make sunk investments posible. Akerloff in his recent books on behavioral economics argues that narratives that convince the public of what is in their common interest must play an important role in public policies. In water, in these times of climate change where there will be geographically localized shocks in water supply and demand, it is more important than ever to have regulatory packages that are well adapted to the physical and geographic nature of the resource, taking into account the whole water cycle. Tayloring to geographic characteristics and to local preferences may be an argument in favor of functional jurisdictions similar to the water districts in the USA, but being aware that citizens face a fixed cost of monitoring and following the realities of too many authorities. Water is a typical sector in which several levels of government will need to intervene and do intervene, but must do so in a common framework and in a spirit of cooperative federalism. Agencies with a degree of independence are a key input in a robust regulatory system, taking into account the advantages (credible commitment, expert knowledge) but also the disadvantages (lack of coordination and political leadership) of expert insulated agencies. Independent regulators do not fully solve, but relocate, the commitment problem, which with independent agencies becomes a problem of the government and the political "principals" to commit to respect the independence of the regulator. There is no shortcut to the need to engage citizen/voters and their political representatives and convince them that water is a resource that must be managed efficiently and shared (while the effort is coordinated with efforts to fight poverty and environmental challenges) if we want to preserve life in our planet.

A world of "free" nations stumbling in the dark

The utter confusion and chaos that prevail in the UK after the Brexit referendum is just a taste of what may follow if the politics of nationalism and identity keeps making advances in the public opinion. The first thing we should worry about is the use of the referendum as a privileged tool of democratic decision making. National-populists love referendums both when they win and when they lose. Referendums are not bad per se. It was through plebiscites that Spain advanced to democracy in the 1970s and that Chile defeated Pinochet in the late 1980s. But it was also through plebiscites that Hitler cemented his monopoly of power in Germany. His 1933 referendum wad the last one in Germany, and not even German reunification in 1989 was approved or ratified in a popular direct vote. In Scotland, although the nationalists lost the vote in 2014, they used it to mobilize and to basically eradicate the left from the political landscape (as the nationalists have done in Ireland and Israel), so that they could have a huge victory in the next general election. In the UK, if Brexit had narrowly lost, they would also have achieved the great political objective of mobilizing and making their preferred issues prevalent in the public mind. Perhaps they would even have preferred to lose the referendum, given the mess in which their country has plunged subsequently. The second thing we should worry about is the thought that the relevant unit of freedom and democracy is the nation, or the nation-state. These are obsolete categories that only work in the mind of human individuals, but that are ill-adapted to solve the problems of today's world. A planet of communities dominated by people who believe that they belong to somehow "free" nations would be a planet that would not solve problems like climate change, fiscal havens, financial instability, Internet regulation or global migrations.

Nationalism as a social danger

Nationalists everywhere try to convince voters that they are guided by social concerns (mostly limited to their co-nationals, of course). But an editorial of The Economist that has just been published explains very well how the new cohort of nationalists pose a big danger to society (because of climate change, failure to address migration issues, lack of concern about tax competition, etc):
"The last time America turned inward was after the first world war and the consequences were calamitous. You do not have to foresee anything so dire to fear Mr Trump’s new nationalism today. At home it tends to produce intolerance and to feed doubts about the virtue and loyalties of minorities. It is no accident that allegations of anti-Semitism have infected the bloodstream of American politics for the first time in decades.
Abroad, as other countries take their cue from a more inward-looking United States, regional and global problems will become harder to solve. The ICC’s annual assembly this week was overshadowed by the departure of three African countries. China’s territorial claims in the South China Sea are incompatible with UNCLOS. If Mr Trump enacts even a fraction of his mercantilist rhetoric, he risks neutering the World Trade Organisation. If he thinks that America’s allies are failing to pay for the security they receive, he has threatened to walk away from them. The result—especially for small countries that today are protected by global rules—will be a harsher and more unstable world.
Mr Trump needs to realise that his policies will unfold in the context of other countries’ jealous nationalism. Disengaging will not cut America off from the world so much as leave it vulnerable to the turmoil and strife that the new nationalism engenders. As global politics is poisoned, America will be impoverished and its own anger will grow, which risks trapping Mr Trump in a vicious circle of reprisals and hostility."

We, the losers

The only satisfaction that accompanies the triumph of Donald Trump is that this time being a loser will not be a lonely experience, as it is sometimes when you only lose against local national-populists. Most of European leaders, tens of millions of American citizens (among them all their best intellectuals and academics) and all the decent media in the world, were against the winning candidate. A dark period is in front of us, and the obligation of anyone with a minimum degree of dignity is to start the fight for the democratic defeat of Mr. Trump as soon as possible, as we defeated Berlusconi in Italy not that long ago. Some will blame Hillary Clinton, the center left and the intellectual global elites. I wonder if the victory of Hitler in Germany was also accompanied by the same blaming game. Of course we have to think seriously about how to defeat the national-populist monster, but it will be easier if all those in favour of freedom and justice feel that they are in the company of many. This time it is not "we, the people..." but "we, the losers..." How the same society can elect a high quality leader like Obama one day and replace him with Trump four years later will remain a mystery. I guess the new president will not keep claiming now that the system is rigged. These are sad days, but life continues and at the collective level never ends. We should not content ourselves with the idea that we sided with the decent people when this happened. We must also join the millions that are willing to peacefully and democratically fight in making sure that this will be a short exception or a costly distraction in the route to a better world. As Krugman says, it is time to rethink, but not to surrender.

Thank you, Maria (and all decent Americans)

When my family and myself spent eight months in Berkeley (California) in 2008, we had a "host family." This was the Watt family, with Dennis and Maria Watt. Their generosity was unforgettable, and they represented for us the best of their society. In those days, Maria was an activist, always siding with the causes of solidarity and freedom. In the 2008 presidential campaign, she helped with the get out the vote drive in Nevada (if I remember well), because California was a safe state. In the recent past, we have learned that Maria has been losing memory. But we have not lost the memories of her hospitality and friendship. I have thought of her when I just read these words by economist and columnist Paul Krugman:
"...in the days ahead it will be important to remember two things. First, Mrs. Clinton has actually run a remarkable campaign, demonstrating her tenacity in the face of unfair treatment and remaining cool under pressure that would have broken most of us. Second, and much more important, if she wins it will be thanks to Americans who stood up for our nation’s principles — who waited for hours on voting lines contrived to discourage them, who paid attention to the true stakes in this election rather than letting themselves be distracted by fake scandals and media noise.

Those citizens deserve to be honored, not disparaged, for doing their best to save the nation from the effects of badly broken institutions. Many people have behaved shamefully this year — but tens of millions of voters kept their faith in the values that truly make America great." Maria has always been one of these. If tomorrow the USA makes history and elects the first woman as President it will be because the Marias of the USA have always been there. If the alternative prevails and we enter a dark, dangerous and hopefully short period of hate and division, we will all wish to forget like Maria, but will keep fighting from wherever we are to honour the values that she has spoused all her life.

Bounded rationality incentives and institutions in sport: links and lessons

I am putting together three topics for my part of the course on the economics of sport at the joint Johan Cruyff and UAB new master on sports management: institutions, incentives and rationality. What is the link? Bounded rationality fans exert a lot of pressure and experience sport fandom as addictive (not very rational). That is behind some inefficiencies such as an inefficient transfer market and hugely inefficient mega-sports events. Players and managers respond to incentives (both extrinsic and intrinsic), which implies that with increasing stakes (three points per victory, larger markets) they have incentives to win by any means, which involves higher quality perhaps but also more incentives for doping and corruption. Governing bodies and holders of the rights of tournaments have incentives to put together bigger and better tournaments (more teams in the world cup), which means more temptations to corrupt themselves. Since some of these governing bodies are global unregulated monopolies (FIFA, IOC), the only thing we have to constrain them is the FBI, Swiss Courts and perhaps the reputational concerns of sponsors. At least until we wait for a global democratic and federal government...

Countries as "Lego" blocks

I feel a lot of empathy for Branko Milanovic when he writes this (even if not everything he says is an endorsement of my current positions -I would rather have said that the break-up of Yugoslavia was another failure of the arrangements that tried to solve the nationality problem, but of course he knows much more than myself about it):

"I know of many people, myself included, who for several decades had one national identity, and then within months had to start believing they had another one. Anyone who thinks it is a simple process and that people can, at the drop of a hat, start believing the opposite of what they believed for several decades is deluding himself. Anyone who believes that countries are lego-blocks that can be, with ease, put together or broken  apart, is deeply wrong. Just look at the Scottish referendum, Brexit and Catalan strive for independence.

The India-Pakistan Partition in 1947 was and remains a defining moment in the lives of many Indian and Pakistani families, regardless of the fact that it is now almost 70 years old. The break-up of countries (or unification, in the case of Germany) likewise remains a defining moments for many people who had lived through the 1990s in Eastern Europe. Despite my pro-federalist and pro-Yugoslav feelings at the time, I am glad—today—that Yugoslavia no longer exists because I became convinced that managing it would have been impossible. Of all the books on the break-up of Yugoslavia, the most influential for me, was AJP Taylor’s “The Habsburg Monarchy”. It shows the failure of all constitutional arrangements between 1809 and 1914 that tried to solve the famous “nationality problem” in the Empire. Each arrangement solved one problem at the cost of opening another one. Taylor ends the book by pointing out that success or failure of Tito’s Yugoslavia will answer that perennial question of whether it is possible to have a multiethnic federation in Eastern Europe. We know the answer today.   

But the opinion about the inevitability of the break-up that we may hold today, cannot make us forget not only how traumatic and bloody the process was, but also how many of the newly-created countries, from Ukraine to Bosnia, remain utterly fragile and, it seems, permanently suspended over the precipice of yet another war. And how the past extends its long shadow over the present." 
I also read the article by Kuper he mentions. Anti-communist leaders discovered that there are more nationalist than liberal votes, he says. Unfortunately, what is true for the liberals is also true for the social-democrats. I guess some of us try to push for a Europe that slowly becomes more like the Obama's USA than the former Yugoslavia. Perhaps what keeps us hopeful is just a fantasy.  Something else: I can still see the former federalist in much of the work by Milanovic recently and up to today: a paper he has on how a global federalism would look like to improve global transfers, his comment in "The Haves and the Have-nots" that a democratic China would not survive in the absence of a federal system, his comments in the last book about identity politics...

Brexit: confusion, uncertainty or chaos?

The decision of a High Court to allow Parliament to intervene in a Brexit decision has increased even more the utter confusion that involves UK politics, and for which no one in the leavers camp had prepared anyone. Nigel Farage said that the day after the referendum would be remembered as Independence Day. But it took several months to Prime Minister May to announce that negotiations with the EU would start on March 2017. These negotiations will last for two years. Now it seems that even this calendar is not credible any more. The Economist says:
"Although Brexiteers campaigned on the promise to take back powers from Brussels and Luxembourg to Westminster, they have resisted the closer involvement of Parliament in the process because a large majority of MPs in the House of Commons and of peers in the House of Lords backed the Remain side in the referendum. Yet since the referendum produced a clear majority to Leave on a very high turnout, it seems unlikely that Parliament will actually block Brexit.
The prime minister has promised to keep Parliament informed over her plans for Brexit, but not to give a “running commentary” for fear that this will undermine her negotiating position. Yet she has also promised a Great Repeal Bill that will give domestic effect to most EU law after Britain leaves the club. And it is also clear that Parliament will need to approve the terms of Britain’s departure and of its future relations with the EU.
The Supreme Court may well endorse the High Court’s judgment. But even if it does not, the political argument for giving Parliament greater say both in the triggering of Article 50 and in the lengthy negotiating process that will follow now seems unanswerable."

And the New York Times says:

"If the High Court decision added another twist to an issue that has profoundly divided the British, it also contributed a sorely needed dose of democratic and legal clarity. The referendum date was set in February by Prime Minister David Cameron, in the hope that it would silence pro-Brexit members of his Conservative Party. Instead, the vote ballooned into an impassioned plebiscite on globalization, economic dislocation, migration, identity and other issues that have galvanized citizens not only in Britain, but across Europe and the United States as well. Mr. Cameron lost the vote and his job.

A mantra of the Leave campaigners was that Britain has ceded too much authority to Brussels, and that the British Parliament needed to “take back control” over British affairs. The court’s ruling follows this logic — that only Parliament has the power to alter British law and therefore only it can choose to leave the bloc.

Although there will be an appeal, the lower court’s decision already underscores what the Brexit process and other populist movements in Europe and the United States have demonstrated: that elected officials in representative democracies abrogate their responsibility for tough decisions at their own peril, and at peril to their country. Britain’s Supreme Court may come to a different interpretation of legal precedent, but the political lesson is not likely to change."

A simple message to those willing to defend a "social" nationalism: don't

Branko Milanovic is right that social democracy will not survive or return unless it addresses a number of structural challenges, namely multiculturalism, the end of fordism, demographic changes and globalization. All these together make both the politics and the policies of the social democratic movement problematic, unless there is a huge effort of experimentation and thinking to address these quite objective challenges. However, social democracy remains the egalitarian ideology and movement that has provided more welfare, to more people, during a longer time, than any other ideology or movement. The alternatives in the left, for example communism or currently bolivarianism in Latin America (with sympathizers among the Corbynists and Podemos), do not stand a comparison (no butter in Moscow in the 1970s, no toilet paper in Caracas today). It is true that the difficulties of social democracy may be taken advantage of by nationalists and opportunists that try and often manage to convince working class people that a return to identity and ethnic politics may be better for their interests. Milanovic himself has addressed the social determinants for the demand of sovereignty in his past research. John Roemer already said before that the mobilization of identities may be one reason why the poor do not expropriate the rich in democracies. Motivated believes and other forms of bounded rationality (like the role of stories, narratives and ideas emphasized by Rodrik) also help explain why many today may find it more comfortable to believe that they can improve their welfare more quickly if they support nationalists and demagogues like the Brexiteers or Donald Trump. The leaders of the national populist parties know this and that is why they have made a "social" turn, emphasizing that they want to build inclusive societies, as Theresa May said in the recent Conservative convention. The same is being done by the Catalan secessionists and by Marine Le Pen. We should not let them win this argument. If a world separated by walls and identities succeeds, it will be much more difficult to fight global inequalities, even national ones; it will be more difficult to fight fiscal havens; to stop climate change; to reduce international financial instability that hurts especially the most vulnerable. Let's better work on making the survival of social democracy (or something similar) feasible, by responding to the challenge of adapting it to a changing world.