Countries

The speech of the year was given by the UN Kenyan ambassador, Martin Kimani, warning about the obsession about changing borders to ethnically purify nations. African borders were drawn in distant metropolis. “Today across any border live people who share bonds. We didn’t choose to pursue states under ethnic lines. We pursue continental integration. Rather than form nations that look back in history with a dangerous nostalgia, we chose to look forward, to follow the rules of the UN, not because we liked our borders, but because we wanted to build something greater, forged in peace.”

If it was functional to the expansion of markets and capitalism a few centuries ago, today the economic functionality of the nation-state is over. Rodrik’s trilemma cannot be solved by eliminating globalization (think of the Internet and climate change, but also of moral universalism), and we must choose between combining it with jurisdictional (in taxes, regulations, etc.) competition or combining it with a progressive (both in the sense of evolving, and in the sense of social progress) democratic global federalism. The European Union should be only the beginning of this.

The federalist alternative to post-colonialism has been much more successful than the replacement of colonies by small countries. Africa and Latin America could have chosen to go the way of North America or India, but they chose (or others chose for them) to go the way of the small country with its flag, its currency and its army. There is no need for more of them.

The war that started in 1914 has not completely finished and we still see nationalism as one of the big political forces of our time. Yugoslavia shows the logical conclusion of the domino effect: from an integrated federation, nationalism threatens to push ourselves through a slippery slope where at the end each individual will remain on top of their roofs waving a different flag.

The times of Wilson and his opportunistic push for self-determination (of the territories in the losing empires) are gone. Perhaps state competition had some benefits until the nineteenth century, but after the catastrophes of the twentieth, they are over. The nation-state locks us in an inefficient evolutionary equilibrium. Many potentially better institutional innovations remain unexplored.

Happy new year.

Democracy according to Elon Musk

The era of the petulant olygarch, in the words of Paul Krugman, has brought us an illustration of the dangers of fake democracy.

Some days ago, the new owner of Twitter, a platform that should be a global public utility and that he recently purchased, Elon Musk, disguised himself as a democrat and asked this to the Twitter community:

“Should I step down as head of Twitter? I will abide by the results of this poll”

He did not specify whether "head" meant owner or chief executive, or both. Currently, he is both.

The possible answers were yes or no and the yes vote won by 57% to 43% (meaning that Musk had lost the vote). Many of us voted and others took him even seriously.

Hours after the poll being closed, Musk announced that he would continue ruling Twitter until he found someone “foolish enough” to take the job.

He will still be the owner, though, even if he delegates into someone who cannot be now someone of high calibre, since we already know that it must be someone foolish enough. And if he finds someone, Musk will retain the power to fire him at any time.

Capitalism and Democracy have different rules. In a true democracy, people vote under the rule of law, and it is in that context that one person has one vote, and the votes are aggregated with one of a variety of possible (none of them perfect) voting rules. When people vote, the consequences of the referendum should be clear to everybody (a criterion that the Brexit referendum did not satisfy). In a capitalist firm, there are also rules, but these give the residual control rights to the owners of capital, who are usually a tiny minority of the people involved in a corporation. That is why there are limits to unrestricted private ownership, as there are limits to markets, to protect the rest of us from owners who impose unwanted costs on the rest of society.

The Venice Commission guidelines on the holding of referendums, which sets the standards for this type of votes, establish that plebiscites must take place under clear rules and under neutral authorities, among other rules. Of course, none of these guidelines were observed by Mr. Musk, who most probably doesn’t even know about them.

But referendums are one of the preferred tools of national populists and autocrats. They obviously prefer to win them, but they will play with the result if they lose. Even when they are called under good intentions, like the referendum on the peace agreement in Colombia in 2016 (the same year as Brexit), they are used by demagogs and opportunists to erode democratic institutions.

The blurring of borders: moral universalism, nation-states and the World Cup

The appeal of nation-states today lies more in the emotional services they provide than in their functionality in the world of the twenty-first century. The demand for secession, for example, is more influenced by identity issues than by economic issues, although secession movements have clear economic implications. As the UN Kenyan ambassador recently said, more than fighting the battles of the past about borders, most countries today try to cooperate over them. In Europe, the mechanism to make borders irrelevant is called European Union.

The 14 players (out of 26) of the Moroccan national team in the soccer world cup that were born in European countries, are not fighting for a nation-state they barely know, they probably just want to be treated with dignity in Europe. And still, because there are residuals of old times where borders mattered more, they have been caught singing against the independence of Western Sahara (the intricacies of which may elude them).

National anthems (better not to understand what they say, usually related to arms and enemies) are still part of the ritual of world cups, but some players of the contending national teams may be team mates during the ordinary season and have difficulties to understand the animosities in the stands. Some of them have been criticised for not being able to sing anthems correctly.

Many of the world cup players are probably moral universalists, they are willing to cooperate and show trust with strangers as much as with co-nationals. Actually, that’s what they do all year long in their club teams. Hopefully, national rivalries will be more and more relegated to the soccer pitch, where we may accept to play our ritual warrior dances, in a similar way that there are folkloric festivals in many developed and multicultural cities.

The degree of moral universalism has an impact on many decisions that matter for our standards of living and for the kind of society that we are building. It may affect our decisions on education, investment, consumption and the policies that we support.

The semi-final between Morocco and France will show two national teams that are expressions of the same phenomenon: a multi-racial and multi-cultural Europe that should treat all its citizens equally, as an example of what can be done when nation-states lose their significance. The Moroccan national team is the result of a deliberate policy to recruit players in the diaspora, where they are part of the millions of descendants of Europeans from African origin. The French national team integrates in itself other children of these immigrant communities. One could think that the semifinal between Croatia and Argentina will be very different, between two proud nationalisms, but most if not almost all of their players also play in European teams (including just a few in Croatia), and have been living out of their countries since they were kids. The Argentinian superstar Leo Messi has lived more time in Barcelona than in Argentina. He has no plans to go back to live in his native country, but probably the national team provides him some valuable emotional services.

Gordon Brown's federalist proposal

In his article “Think our plan to fix British politics is a pipe dream? Think again”in The Guardian, former British Prime Minister Gordon Brown links very well two lines of reform that are usually presented as separate: economic policy reform and institutional governance reform. Instead, he rightly argues that the two must go together. Policy reforms to have a more inclusive society will not be successful unless government is adapted to a multi-level interconnected democracy where tax and regulatory competition is stopped. And abstract institutional reforms will not be supported by the voting public, unless they translate into improvements in the standards of living.

Here are some paragraphs from his article: “we need to change who governs but we also need to change the way we are governed. And to bridge the gap between the Britain we are and the Britain that we can become, the Commission on the UK’s Future, which reported to Keir Starmer this week, is demanding a new economic and political settlement to ditch a century of centralisation, end the over-concentration of power in Westminster and call time on the long era of “the man in Whitehall knows best”.

“... a tale as old as time that constitutional commissions take minutes and waste years, only to see their reports written off within seconds of publication. With good reason. They usually fixate on abstract, out-of-touch, legalistic remedies, at the expense of addressing the everyday lives and challenges faced by ordinary citizens fed up with poor government.”

“... in order to build economic prosperity across the United Kingdom and alleviate fast-rising poverty, political reform is a necessity. Any economic plan will fail unless the right powers are in the right places in the hands of the right people. The goal of an irreversible transfer of wealth, income and opportunity to working families across the United Kingdom is dependent upon the irreversible transfer of political power closer to the people. The two go together.”

“... doubling growth, increasing productivity and creating the new well-paid jobs of the future will not come from trying to win a race to the bottom to attract low-paying jobs from abroad”

“The mayors and local authority economic partnerships will oversee local bus and train services, as well as planning and housing. We will revamp the British Business Bank with a mandate to end the long-term equity shortage faced by growing firms in the regions, and we propose to seek joint ventures with the European Investment Bank, among a series of measures, to invest in local infrastructure.”

“... we must also prevent the wrong powers from being hoarded in the wrong places. Because past devolution programmes have left the centre unreformed, a new Britain needs a new Westminster and a new Whitehall.” The federalist plans are therefore complemented with proposals to clean up politics, to make government more transparent and less corrupt.

Although Gordon Brown proposals have the UK in mind, his arguments are of more general interest. The nation state and the emergence of market capitalism were not two orthogonal developments. The Westfalian nation-state as we know it today was one of the institutional innovations that emerged to consolidate markets and provide the large scale law and order aparatus that could sustain the Industrial Revolution.

Similarly, today we need an organization of democratic sovereignty that is adapted to and inter-dependent economy in a globalized world in the twenty-first century.

Everybody else is a hypocrite (World Cup edition)

In the last issue of The Economist there are some very interesting articles about the World Cup. One of them reports that there is an increasing number of autocratic organizers because democracies realize big sports events have more social costs than social benefits and vote against them.

Of the three corners of Rodrik’s trilemma (hyperglobalization, democracy and national sovereignty), the Qatar World Cup illustrates the consequences of removing democracy, but keeping national sovereignty and hyperglobalization: autocratic powers competing for resources, in this case the right to organize an event of global impact with huge demand and propaganda potential.

Prestigious media outlets such as The Economist or the Financial Times have made an effort to still provide a rationale not to boycott this World Cup. The Economist’s editorial ends asking ironically if we should rotate the tournament among the 3 nordic countries that have an absolute clean record of respect for human rights (why not?). Others have argued that in Argentina 1978 the World Cup threw light on a brutal dictatorship and contributed to its decline. But the same did not happen with Berlin 1936 or with the World Cup or the Winter Olympics in Putin’s Russia.

With less style, the President of FIFA, Infantino said that “we Europeans should apologize the next 3000 years for what we have done in the past 3000 years,” after saying that he was proud of the FIFA badge he was wearing and saying that he was not responsible for things that were decided 12 years ago, and now we have to make the best of it (although he is presiding over the same corrupt structure that gave the event to Qatar, the one that has decided that the next World Cup will have 48 teams instead of the current 32: more teams, more games, bigger deals). 

The dark side of soccer is explained by its success. Without the magnitude that the show has acquired in a world that lacks a global government, there would be no large-scale corruption, nor would there be bribed officials, nor the opportunistic magnates, nor the advisers who lead athletes to show up in tax fraud and tax havens scandals. Soccer is the most globalized and unified sport. FIFA is the gatekeeper of a global asset in an ungoverned world, and this privileged position is guaranteed by its ownership of the World Cup, the most successful competition, the one in which the best soccer players in the world star in different teams for a month, with a much higher level of equality and uncertainty than in club competitions. 

If someone dares to bypass the power of FIFA, it threatens the brave with leaving them without playing in a World Cup. As argued by Milanovic some time ago, the rules of soccer between national teams, where basically each player can only participate in one national team in his entire career, without transfers of players between national teams, combined with the mobility of players between clubs (which make it easier for the best players from whatever country they are, to play in the best clubs in Europe, that is, in the world), have led to much equalization among national teams, and to raise their level. As Kuper and Szymanski say, in the World Cup edition of their famous book "Soccernomics", far from being in a bubble, the world of soccer continues in a process of solid expansion, reaching more people who are fond of and passionate about this sport, perhaps in the absence of other challenges. 

In 2015, as shown in Netflix’  documentary "FIFA Uncovered," several FIFA executives were arrested by the Swiss police on the orders of the FBI, accused of corruption and of being part of organized crime. Among those affected there were officials from various continents. The very decision to assign the World Cup to Qatar was surrounded by accusations of bribery. 

Holding the World Cup in Qatar has at least had the virtue of triggering a debate about what fans and athletes can do to protest something so complementary to corruption, such as the involvement in sport of autocratic countries (like Qatar -certainly not the only one, and not the worst), whose leaders take advantage of soccer to launder their crimes and their reputation as human rights abusers. The debate on the sportswashing phenomenon has reached the pages of prestigious media. 

Several voices have suggested that a requirement to have the opportunity to organize a major sporting event, and the publicity that this allows, should be an impeccable record of respect for human rights. Amnesty International has demanded that FIFA should at least create a fund to compensate the families of immigrants who died in Qatar's World Cup construction sites, although it would be difficult to agree on the figures, among the three officially recognized by the Qatari government, and the thousands denounced by The Guardian newspaper. The players of the Australian team released a video joining the pro-human rights demands, and ten teams (eight of them at the time of writing this text, playing in Qatar) have joined a campaign in which their captains will wear an armband in defense of the rights of people from the LGTBQ+ community. Some coaches known for their few diplomatic qualms, such as the Dutchman Louis Van Gaal, have raised eyebrows about holding the event in Qatar. 

Many of us will not have the willpower to join a fan strike. It is not possible -at least to me- to disguise this weakness behind ethical arguments.

Useful Microeconomics

 Microeconomics does not need to be a distant topic. My design of the Applied Microecnomics course  (taught jointly with Javier Asensio) at the Master in Applied Research in Economics and Business of my university combines theory and discussion of empirical papers in top journals.

I paste the syllabus here. As we finish the current edition and we prepare the next one, I would most welcome suggestions of topics, references and discussion papers. 

Objectives

-Learn the basic skills to understand and be able to use the basic models and theories (old and new) in microeconomics, to better analyze businesses and the economy.

-Use theory to ask relevant questions to be answered with data and empirical work.

-Associate microeconomics to some of the most pressing problems of our time: digital revolution, climate change, inequality.

Contents

1.Optimization models of consumer and firm behavior

Utility Maximization. From preferences to demand. Demand functions. Elasticities and consumer surplus. Income effect and substitution effect. An exchange economy. Efficiency. The problem of endogenous, social and changing preferences. Profit maximization and cost minimization: supply functions and cost functions. Technology and costs. Productive efficiency. Existence and objectives of the firm, and agency theory. Transaction costs and incomplete contracts theories of the firm.

 Discussion Paper: Alcott, Braghieri, Eichmeyer, Gentzkow (2020), The welfare effects of social media, American Economic Review, 110(3): 629-76.

 Recommended Reading:

-Varian (2014), chapters 1-10, 14, 15, 18-23.

-Church and Ware (2000), chapter 3.

-Farber, H. (2015), Why Can’t you Find a Taxi in the Rain and Other Labour Supply Lessons from Cab Drivers, Quarterly Journal of Economics, 130(4): 1975-2016.

-Fort, R. (2004), Inelastic Sports Pricing, Managerial and Decision Economics, 25(2): 87-94.

-Nerlove, M. (1961), Returns to Scale in the Electricity Industry, in “Measurement in Economics”, Stanford University.

-Hausman, J.A. (1997), Valuing the Effect of Regulation on New Services in Telecommunications, Brookings Papers on Economic Activity. Microeconomics, vol. 1997: 1-54.

-Bloom, N.; Van Reenen, J. (2007), Measuring And Explaining Management Practices Across Firms And Countries, Quarterly Journal of Economics, Vol. CXXII, Issue 4.

-Garicano, L. (2016), Why Organizations Fail: Models and Cases, Journal of Economic Literature, 54(1): 137-192.

 

2.Welfare economics: efficiency, fairness and mechanisms of resource allocation

 Property Rights, markets (including financial markets), governments, communities, hyerarchies. Welfare theorems, market failures, Coase theorem, second best, inequalities and merit wants. The “tragedy of the commons.” Social Welfare Functions. Non-welfarist approaches. Instruments of public intervention: public institutions, taxes, public expenditures, regulation. Corporate Social Responsibility. The economics of disruptive change: climate change, digital revolution.

 Discussion Paper: Fremstad, A.; Paul, M. (2019), The Impact of a Carbon Tax on Inequality, Ecological Economics, 163, 88-97.

Recommended Reading (and watching):

-Varian (2014), chapters 9, 16, 33-37.

-Bowles (2004), chapters 2 & 6.

-Hindriks and Myles (2013), chapter 2.

-N. Stern (2010), Imperfections in the Economics of Public Policy, Imperfections in Markets and Climate Change,  Journal of the European Economic Association, 8(2-3): 253-288.

-E. Ostrom (2009), Nobel Prize lecture.

-Robert Shiller’s Financial Markets course on video at Yale University: https://oyc.yale.edu/economics/econ-252.

-Vives, X. (2016), Competition and Stability in Banking: the role of Competition Policy and Regulation, Princeton University Press.

-Kietzmueller & Shimshak (2012), Economic Perspectives on Corporate Social Responsibility, Journal of Economic Literature, 50(1): 51-84.

 

3.Basic Game theory

Definition of a Game, Dominant Strategies (examples: prisoners’ dilemma, public goods games), Nash Equilibrium (examples: Hotelling, Cournot, Bertrand), Mixed Strategies, Cooperation and Coordination Games, Risk Dominance, Repeated Games, Sequential Games. Evolutionary Game Theory with 2 players and two types.

 Discussion Paper: Ignacio Palacios-Huerta (2003), Professionals Play Minimax, Review of Economic Studies, Wiley Blackwell, vol. 70(2), pages 395-415, 04.

 Recommended reading:

-Varian (2014), chapters 28 & 29.

-Bowles (2004), chapter 1.

-Dixit, Skeath and Reiley (20 15), Games of Strategy, 4^th edition, Norton & Company.

-Levitt, List & Reiley (2010), What Happens in the Field Stays in the Field: Exploring Whether Professionals Play Minimax in Laboratory Experiments, American Economic Review, 78(4): 1413-1434.

-Andreoni, J. (1995), Warm-Glow versus Cold-Prickle: The Effects of Positive and Negative Framing on Cooperation in Experiments, Quarterly Journal of Economics, 110(1): 1-21.

 

4. The challenges of deciding together: social choice, institutions and political economy in microeconomics

The Public Choice critique. Wicksell and Lindahl: the promise and limits of unanimity. Median voter theorem. Voting rules and Arrow’s impossibility theorem. Inequality and democracy: why the poor do not expropriate the rich in democracies. Lobbying and corruption. Incentives in the public sector. Transaction costs in politics and the political Coase theorem? Institutions and economics.

 Discussion Paper: Ferguson, Voth (2008), Betting on Hitler, Quarterly Journal of Economics.

 Recommended Reading:

-Hindriks and Myles (2013), chapter 11.

-Sen (2017), Collective Choice and Social Welfare, revised edition.

-Achen and Bartels (2016), Democracy for Realists: Why Elections do not produce responsive government, Princeton University Press.

-Acemoglu & Robinson (2012), Why Nations Fail: The Origins of Power, Prosperity and Authority, Crown Business.

-MacLeod, W.B. (2013),   Book Review of “Why Nations Fail” and “Pillars of Prosperity,” Journal of Economic Literature, 51(1): 116-143.

-Rodrik, D. (2020), Why does globalization fuel populism? Economics, Culture, and The Rise of Righ-wing Populism, NBER Working Paper, 27526.

-Bagues & Esteve-Bolart (2016), Politicians’ Luck of the Draw: Evidence from the Spanish Christmas Lottery, Journal of Political Economy, 124(5): 1269-1294.

-Bonica, McCarty, Poole, Rosenthal (2013), Why Hasn’t Democracy Slowed Rising Inequality? Journal of Economic Perspectives, 27(3): 103-124.

-Yermack, D. (2010), Shareholder Voting and Corporate Governance, Annual Review of Financial Economics, 2: 103-125.

 

5.Regulation of natural monopoly

From perfect competition to monopoly in partial equilibrium. Non-convexities and the welfare theorems. Definition of natural monopoly. Optimal prices for a natural monopoly. Asymmetric information and the Laffont and Tirole model. Sunk investments and the commitment problem. Regulatory capture. Liberalization and universal service. Liberalization and access prices. Vertical integration and separation. Competition for the market and yardstick competition. Natural monopoly and modern digital markets.

 Discussion Paper: Lim, Yurukoglu (2018), Dynamic Natural Monopoly Regulation: Time Inconsistency, Moral Hazard and Political Environments, Journal of Political Economy.

 Recommended Reading:

-Laffont and Tirole (1993), A Theory of Incentives in Procurement and Regulation, MIT Press.

-Laffont (2000), The Political Economy of Regulation, Oxford University Press.

-Church and Ware (2000), chapters 2, 4, 22, 24-26.

-Armstrong and Sappington (2006), Regulation, Competition and Liberalization, Journal of Economic Literature, 44(2): 325-366.

-Estache and Wren-Lewis (2009), Toward a Theory of Regulation for Developing Countries: Following J.J. Laffont’s lead, Journal of Economic Literature, 47(3): 729-70.

-Trillas, F.; Montoya, M.A. (2011), Commitment and Regulatory Independence in Practice in Latin American and Caribbean Countries, Competition and Regulation in Network Industries, 12(1): 27-56.

-Tirole, J. (2020), Competition and the Industrial Challenge for the Digital Age, unpublished paper.

 

 6. Behavioral Economics

Departures from the standard rationality assumptions. Prospect theory. Behavioral public economics and behavioral industrial organization.

 Discussion Paper: Chetty, R. (2015), Behavioral Economics and Public Policy: A Pragmatic Perspective, American Economic Review, 105(5): 1-33.

 Recommended Reading:

-Varian, H. (2014), chapter 30.

-Hindriks and Myles (2013), chapter 3.

-Dhami, S. (2016), The Foundations of Behavioral Economic Analysis, Oxford University Press.

-Bhargawa & Loewenstein, (2015), Behavioral Economics and Public Policy 102: Beyond Nudging, American Economic Review, 105(5): 396-401.

-Kagel & Roth (2016), Handbook of Experimental Economics, Volume 2, Princeton University Press.

-Salganik, M.J. (2018), Bit by Bit. Social Research in the Digital Age, Princeton University Press.

-Tirole, J. (2017), Economics for the Common Good, Princeton University Press.

-Putterman, L. (2012), The Good, the Bad and the Economy, Langdon Street Press.

-Spiegler, R. (2011), Bounded Rationality and Industrial Organization, Oxford University Press.

-Della Vigna and Malmendier (2006), Paying not to go to the gym, American Economic Review, 96(3): 694-719.

7. Market Power Measurement and Implications

(taught by Javier Asensio)

SCP Paraidgm and NEIO. Is market power rising? Implications for the digital economy & labour markets.

 Recommended Reading:

- J. Church and R. Ware (2000), Industrial Organization: A Strategic Approach, McGraw-Hill, Chapter 12.

P. Davis and E.Garcés (2010), Quantitative Techniques for Competition and Antitrust Analysis, Princeton UP, Chapter. 6.

- Genesove, D., & Mullin, W. P. (1998). Testing static oligopoly models: conduct and cost in the sugar industry, 1890-1914. The RAND Journal of Economics, 355-377.

- De Loecker, J., & Eeckhout, J. (2017). The rise of market power and the macroeconomic implications (No. w23687). National Bureau of Economic Research.

 

8. Entry dynamics and innovation

(taught by Javier Asensio)

Modelling entry. Estimating market power from entry models. Entry, exit & innovation

Recommended Reading:

- P. Davis and E. Garcés (2010) Quantitative Techniques for Competition and Antitrust Analysis, Princeton UP. Chapter 5.

- T. Bresnahan and P. Reiss (1991) Entry and competition in concentrated markets, Journal of Political Economy, 99, 977-1009.

- Klepper, S. (1996). Entry, exit, growth, and innovation over the product life cycle. The American economic review, 562-583.

- Aghion, P., Blundell, R., Griffith, R., Howitt, P., & Prantl, S. (2009). The effects of entry on incumbent innovation and productivity. The Review of Economics and Statistics, 91(1), 20-32.

- Dubois, P., De Mouzon, O., Scott‐Morton, F., & Seabright, P. (2015). Market size and pharmaceutical innovation. The RAND Journal of Economics, 46(4), 844-871.

 

 

General Bibliography

Varian, H. (1992), Microeconomic Analysis, Norton and Company. [CS(-2) E2.10Var (not on loan)]

Varian, H. (2014), Intermediate Microeconomics, 9^th edition. [CS(-2) E2.10Var]

Bowles, S. (2004), Microeconomics. Behavior, institutions and evolution. Princeton University Press. [CS(-2). E2.10 Bow]

Bowles & Halliday (2022), Microeconomics (pdf available in Halliday’s web page)

Hindriks and Myles (2013), Intermediate Public Economics, second edition. [CS(-2 & 0). E10.0 Hin]

Church, J. and R. Ware (2000), Industrial Organization: A Strategic Approach, McGraw-Hill. [Can be freely downloaded on-line:  https://works.bepress.com/jeffrey_church/23/]

Davis, P. and E. Garcés (2009), Quantitative Techniques for Competition and Antitrust Analysis, Princeton University Press. [CS(0) E15.232 Dav].

You have two weeks to read the new edition of "Soccernomics"

Journalist Simon Kuper and economist Stefan Szymanski have just published a substantially expanded edition (a timely “world cup edition”) of their famous book Soccernomics. This book inspired me some years ago to propose a course on Soccer & Economics that I teach at the Study Abroad program (for foreign undergraduate students) of the Autonomous University of Barcelona.

Most if not all chapters have updated data and there are new chapters on a number of topics, such as the “neoliberal” European Superleague that failed to exist in 2021, or a chapter calling for financial reparations to compensate for the historic discrimination of women in soccer.

There is updated work on who are the best national teams. In relative terms, the best are small post-Yugoslav countries such as Croatia and Bosnia, that is, relative to what should be expected from their population, income levels and soccer experience (and they benefit a lot from the strong experience of the former Yugoslavia). Spain has been doing well, according to the authors, coinciding with the economic growth and increasing openness of the country in the recent decades. Both Spain, the post-Yugoslav republics and other national teams have benefited from their talent pools becoming more internationalized. That’s one of the paradoxes of soccer: national teams benefit from internationalization.

There is an interesting discussion of the data analysis revolution in soccer (more about that in Kuper’s book review in The New Statesman of Rory Smith’s book “Expected Goals”). The authors of Soccernomics argue that this revolution is still at a very early stage (like what alchemy was to the Scientific Revolution) and that the jury is still out to decide whether clubs who claim to have been very successful with data analysis, have really been so (perhaps Liverpool were not so consistently good at that after all).

Like in previous editions, but with new data to support their claim, Kuper and Szymanski argue that it is very difficult to predict who will be a good manager, but that there are very few managers that add any value to the game. They are skeptical that former famous players can in general be better managers than people who study and truly specialize on being a manager (“good horses do not make good jokeys,” as Italian manager Sacchi used to say).

In a final chapter, the authors are optimistic in that soccer will survive in the era of social media and streaming, because these will only provide more platforms to reach more people in more places. The success of the game and its combination with new technologies will attract more fans and more and more investors (that will keep losing money).

Soccernomics is still the best introduction to the economic (in a very broad sense) keys of the most globalized sport. It uses academic standards to shed light on a number of relevant issues. It cannot cover everything, and it is not fair to criticize something for what in doesn’t address in depth (when it already has 400 pages). But, still, one misses a chapter on corruption (although there are some references here and there) and some more updating of some pieces. For example, the 60% advantage of kicking first in penalty shoot-outs is still conventional wisdom (briefly mentioned in the chapter on penalty kicks), but I’m not sure it still is academic wisdom, after an article on 2012 (that included the data used to make the 60% claim but also many more observations for the period when kicking first or second was purely random) reduced the percentage to a non-significant 53% -and after all the shoot-outs in the 2018 World Cup being won by the team that kicked second.

Like many people, I don’t have the strength of will to participate in a fans’ strike in the Qatar World Cup (as I probably should). Given that many of us will be watching it, reading the updated Soccernomics ahead of it is a good investment, so much better than wasting our time incurring the mental risk of reading the sports media. Soccer has a dark side, but it also provides lots of opportunities to learn. 

Some national election results as global public goods

Bolsonaro has been defeated. This is good for Brazilian citizens, for the Amazon and for the Planet. Like Bolsonaro, Trump is also a global public bad and democratic administrations in the US today are a global public good.

Stopping climate change needs at least a democratic majority in the US, a normal government in Brazil and a European Union committed with a zero-carbon economy. Governments and legislatures committed with global collective goods not only have direct positive effects on stopping the climate emergency, fighting autocrats or stopping tax competition, but also indirect effects in that they discourage opportunists from joining their ranks.

The friends in Anne Applebaum’s party that later joined the ranks of national populism would not have done so if national populists were not winning elections. Members of center left or center right parties, no matter how experienced or educated they are, are more likely to join national populist forces when these win elections. There are few cases of politicians or activists that switch parties in favor of declining political forces.

The electoral success of national populists normalizes extreme voices, voices that divide societies and may even trigger violence.

As David Axelrod has said there are those who will dismiss the meaning of the assault on Pelosi as the act of a lone, unsettled man. But he was echoing far-right conspiracy theories, legitimated by cynical people for their own purposes. “There were many hands on that hammer.”

There is the case of a Catalan opportunistic and cynical politician who, while joining a national populist regional government, says that he is a social democrat without a party. I wonder how many friends of Anne Applebaum’s say that they are center righ without a party. One day he says he is against Catalan Independence, and two days later he says he might have no option but be pro-independence.

Governements in the hands of national populists empower those that divide societies, no matter how moderate they turn when the election approaches. Sometimes they will win, as in Italy, but we must try to minimize their victories and start a strong opposition from day one if they reach power.

In the absence of democratic global enforcing powers that use legitimate coercion to provide global public goods, we rely on the voluntary contribution of national democracies to them. 

A federal future: we must change the world to save the Planet

We live in an increasingly interconnected world, facing existential challenges that succeed one another and are interrelated. When we were leaving a painful global financial crisis, an also global pandemic reminded us about the fragility of our existence (and the potential for government action), just to witness how the aggression of Putin in Ukraine tested our mechanisms of secutirty, protection of human rights, access to energy and cooperation. Meanwhile, the increasing threat of the climate emergency is ever more present and demands urgent and massive action at all levels, making sure to put the welfare of the poor and the most vulnerable at the forefront, and not as an afterthought.

Wars, refugees, and migrations have never stopped, although we have also learned that living in democracy is possible, although fragile.

We have lived through great technological progress in the last two centuries but have also experienced great catastrophes. The European Union has proved a sophisticated and necessary mechanism to prevent wars on its soil, but is insufficient to stop disasters in its neighborhood, such as the Balkan wars or the war in Ukraine.

The new generations grow full of hope but also full of concern for their future and the future of the Planet, and are not shy to express their rage and fear whenever they can.

Addressing the challenges of our times requires unprecedented levels of cooperation. Cooperating, however, is not easy. It requires a social sophistication that nation states are far from reaching. In our hopefully post-pandemic scenario, the climate crisis, increased poverty and inequality will only get worse with additional doses of national populism. It is the time to accelerate the promotion of alternatives, and in particular the promotion of federalism as a set of principles and values, the principles of a multilevel democracy and the values of cooperation and acceptance of diversity and pluralism.

If a small group of illustrated progressive leaders could conceive of a federal Europe in the isle of Ventotene in Italy when the fascists were still in power, now the same visionary ambition should be displayed at the global level. There are people willing to fight for this more cooperative world.

 The EU must evolve towards a more integrated and democratic Union, and at the same time elements of a global federation must emerge. Governments and communities must be stronger at all levels and promote individual freedoms in a context of true equal opportunities.

Tax cooperation among jurisdictions should be promoted and tax havens should be eliminated. A multilevel democracy were no level has the monopoly of sovereignty is crucial precisely to achieve tax justice. Inequalitites must be addressed directly at their source. The Laffer curve (the notion that reducing tax rates will magically increase tax revenues) and “trickle down economics” are zombie neo-liberal ideas that have been discredited by empirical evidence.

Egalitarian ideologies that were born as alternatives to capitalism can today join forces with those that want to promote deep reforms in capitalist economies. In the fight for equality, mistakes have been made over history. One of the most important of these mistakes is the belief that equality is compatible with nationalism.

Peace and diversity are promoted through democracies with equal rights instead of ethnocracies. There is almost no piece of land in our Planet that can be closed in borders and include only members of a pure identity. That can be only the result of ethnic cleansing or a distorted view of collective freedom. All borders are artificial. We should waste no time trying to change them, but we should spend more time trying to promote cooperation and friednship over them.

Federalism is a necessary ingredient to leverage the fight of the new generations to save the Planet and change the world. We must promote the values of solidarity, fraternity and cooperation. A society guided only by the profit motive or by material interests ends up being a poor society in all respects.

Those that take advantage of the problems and exploit identity feelings are powerful and effective in the use of new communication technologies.  Those who want to oppose them cannot remain in their ivory towers, limiting themselves to explore new theories and regretting that the world has changed. No more lives must be wasted fighting for “us against them”, when the fight for the Planet and for solidarity is both the most important and the most urgent of our times.

We must use the green and digital transition to promote a better world, where the standards of living can improve for everybody without destroying the natural resources and without compromising the existence of future generations. More than ever, we must multiply the initiatives (and make them multiplicative) –in the form of virtual exhibitions, videos, web resources, apps…, in a process of trial and error, to promote federalism as a social cause in our complex world.

To promote human dignity for all, we need institutions that bring out the best of human beings, and not the worst. These institutions may evolve from the existing ones, or be the result of social innovation. If continents drifted away from Pangea, they must come together again, at least symbolically, in the fight to save the Planet.

Pandemic lessons for (and from) behavioral economics

Behavioral economics had a bad pandemic if we restrict behavioral economics to "nudges." It seems that Johnson’s UK government at the beginning of the pandemic thought that with nudges-like cheap interventions would be enough to flatten the curve, but it wasn’t.

In some cases, nudges may be a useful part of the tool box of public interventions, to help people decide, for example in cases where health or savings may be improved. Harvard economist Raj Chetty has an article I teach in my graduate courses on how nudges in some cases may help.

But it is more than nudges that is needed to address some of the most complex issues of our time, like pandemics, inflation or climate change. In many of these cases, citizen cooperation is needed for the success of traditional instruments, like taxation or quotas (quantity decisions, prohibitions, lockdowns, masks…). The worst that can happen is that in front of these challenges that require tough public intervention, significant parts of the public adopt a cynic approach disguised into anti-establishment politics.

George Loewenstein has written that the most important nudges are those that help people support or complement traditional public interventions, instead of crowding them out.

One way of “nudging” people to support or complement traditional interventions is thorugh the impact of policies itself on the preferences and beliefs of citizens. For example, Schmelz and Bowles found that mandatory vaccines are worse for cooperative behavior than voluntary vaccines. And Mónica Martínez Bravo and Carlos Sanz found that well-managed public policies increase trust in the political system, in times where this is necessary to avoid free-riding attitudes in tax compliance, vaccination or mask-wearing.

The article by Martinez Bravo and Sanz is based on an online survey that was administered in the fall of 2020, before vaccines were available. They find that bad contact-traing policies negatively affected trust in collective institutions. After that, I wouldn’t say that phenomena such as Euro-scepticism or anti-vaxer behavior has been a more serious problem in Spain than in other countries (in fact, we are OK on these), but we have our own “trust” issues in terms of tax compliance and tax culture in general, or our own versions of populist politics. Better policy execution creates a positive feddback loop.

The climate emergency is not part of the cultural war

Some comentators argue that the left makes a mistake to focus on cultural wars about gender and identity, instead of focusing on social class and income or wealth inequality. I am very much in favor of focusing on social inequalities, although I am also convinced that these should include categorical inequalities such as those related to gender and ethnicity.

It is also common to add environmental issues to the list of “cultural issues,” as if the climate emergency was some aesthethical concern related to birds and landscapes. That would be a very serious mistake. The environmental catastrophes that we are facing are a human social concern, because they will affect dramatically more the poor, and because unless we transition to a carbon-neutral world in an equitable way, we will never have carbon neutrality. Also, because it is a matter of social solidarity with future generations. Thanks to economists like Nicholas Stern, now we know more about how to address these issues.

Since the publication of the Stern Review in the first decade of the 21st century, two important trends stand out in terms of knowledge about climate change and the tools to deal with it: first, the problem is worse than first thought (containing the average rise in temperatures to 2 degrees Celsius is not enough) and it is happening faster; but second, there is new evidence that technological change to base the economic system on non-polluting activities is more affordable and faster than expected. The cost of renewable energy has fallen considerably, the expansion of electric vehicles has been faster than expected, and the adoption of healthy dietary patterns has become widespread.

For humanity as a whole to cope with the problem of climate change, a different kind of economic growth based on rapid technological change will be necessary. This will require high levels of social coordination. This need and virtuality of coordination is associated with an acceleration in the adoption of new technologies. The existence of non-linear temporal evolutions, that is, subject to rapid accelerations, increases the risk of unambitious and slow reactions. These overly slow and unambitious reactions are often based on short-sighted economic models (or misconceptions about “culture wars”). In a table on the "failures" (failures or imperfections) of the market mechanism that occur in relation to climate change, Stern shows in a recent article that these are more than those traditionally considered when the phenomenon has been addressed by economists. Traditional economics focuses on the imperfection of the market associated with the external effect (or externality) that occurs when polluting. The solution in this case is a tax that "internalizes" the externality, or a regulation that prohibits emitting more emissions than those that result from taking into account the interests of all affected parties, or a market system of emission permits that put a socially optimal price for emissions, resulting in incentives similar to those resulting from a carbon tax. 

However, in a broader and more realistic view of the climate change phenomenon, the negative externality is just one among several failures of the market mechanism to be considered. It is in this sense that the author proposes to change the way in which economists develop their research work, to take into account this broader perspective. Specifically, Stern believes that five other market failures must be taken into account, and public policies developed to correct them. These five additional market failures or failures are i) the incentives for technological innovation (people who innovate do not take into account the positive externality they generate, thus requiring public support policies); ii) the imperfections in the risk allocation markets and in particular the financial markets (financial mechanisms must be introduced to reduce risks and reduce the weight of dirty technologies); iii) the need for coordination in a variety of networks and systems (which makes it necessary to improve urban planning policies to ensure coordination, for example, of energy and transport networks); iv) information problems (which lead to a lack of knowledge on the part of many agents about the possibilities of new technologies); v) the need to consider benefits that go beyond those that can be obtained through the market, such as the valuation of ecosystems and biodiversity. Even if we limit ourselves to strict negative externality analysis, the risks of moving too slowly are potentially huge, and there are increasing returns to scale, fixed costs and uncertainties in key industries, so setting standards and regulations is also necessary in addition to taxes. A great challenge for action is how to promote collaboration and act together, which raises important questions from the point of view of social institutions and mutual support. The analysis of the necessary changes would be incomplete in this sense if the distributional effects at the international and local levels were not taken into account, in order to move towards a rapid transition that is just and is perceived as such, while developing institutions that survive political changes. Economics, in connection with other disciplines, can contribute to accelerating the changes necessary to stop climate change, provided that it broadens its perspective.