Growthology

A perfect NCAA bracket? Ali, Tebow, and Tom Church

Loyal reader Tom Church is also a blogger, and has an interesting post on the NCAA brackets.  He uses stats to calculate the odds of selecting a perfect bracket as ...

... roughly 1 in 9 quintillion, or 1 in 9 million trillions. I don’t care how many brackets you fill out. We’re not going to see that one anytime soon.

But surely that’s not right. Every year, someone gets decently close to filling out a perfect bracket. Is there a better way to predict winners? Sure. How about using the seeding system? After all, a number one team is almost unequivocally better than a number sixteen team. How much better? I went and found out. Over a surprisingly short few hours, I was able to record every match-up between ranked teams in NCAA Tournaments since 1985. 20 years of data, 63 games per year, 1260 total games. What resulted is a table of the probabilities of each rank beating every other rank, so long as such match ups occurred.

As you might imagine, the loss by top-seed Kansas to Northern Iowa (Northern Iowa?!? Panthers?) hit brackets here in KC pretty hard.  I actually went against the grain and selected Kentucky to win it all, so maybe the Kansas loss will help. You know that Bob Litan loves immigrants (Ali's father is an immigrant from Iran), but after this Ali Farokhmanesh kid netted the ultimate 3-pointer and iced his beloved Jayhalks ... I dunno. Still, you have to love this story:

[Ali's] parents, Mashallah Farokhmanesh and Cindy Fredrick, quit their volleyball coaching jobs two years ago to follow their only child's basketball career. They traveled the Midwest in their Honda CR-V, driving 16 hours round-trip at times -- with no hotel stay -- to games as distant as Evansville, Ind., and Carbondale, Ill., and Wichita, Kan.

When Mashallah came to this country in 1978 to learn English, he didn't know that he'd end up earning a master's and a Ph.D. and staying for the rest of his life. And he didn't know much about basketball. But both parents did their best to coach Ali, taping a broom to a yardstick and holding it up to help him learn how to arch his shot over taller players.

Come to think of it, wouldn't it be neat to open up our immigration policy to anyone from Iran with a PhD?  Talk about competitive advantage! But let's pivot here (without travelling) and think about the equivalent of a Kansas loss in college football. Should NCAA bowls transition to a playoff?  Kansas losing to Northern Iowain basketball is the football equivalent of Tim Tebow's Florida Gators losing to Central Michigan. Funny, but not fun. Believe me, I'm not knocking Mount Pleasant -- I have many ancestors buried there. 

I wouldn't want to lose "March Madness" because it's a cultural treasure.  But so is the Bowl Season. I think each sport already has an optimal championship structure. A playoff will not translate well to football, especially with the much higher level of uncertainty that what Tom Church highlights in his spreadsheets. Fairness is the rationale for forcing a playoff on NCAA football, but as I explain with Mike Davis with our fairness index here, that's a value that cuts both ways. Our bottom line is not a defense of the BCS (it can be so much better), but a rejection of playoffs. 

Or think of it this way: if you like what quants have done for Wall Street, just think if we could work our magic on college football....

Crucible and The New Colossus

Health care reform is law. Now can we talk about something else?

Next up on the policy-making agenda in DC is, hopefully, immigration reform. We've long advocated here at the Kauffman Foundation for something like a Startup Visa, a program that would grant citizenship to migrants who want to (and are able to) create new firms and jobs in America (but be sure to read this counterpoint).  I go one step further, and believe America would be wise to return to its roots as a more open society in general, not just with the high-skill immigrants.

As the "nation of immigrants" embarks on another policy discussion, it might help to keep our cultural heritage in mind.  I often hear the words of Emma Lazarus echo in my mind, for example.  The words of her poem, The New Colossus, inscribed on the plaque that has been mounted since 1903 on the inner wall of the pedestal of the Statue of Liberty:

Not like the brazen giant of Greek fame,
With conquering limbs astride from land to land;
Here at our sea-washed, sunset gates shall stand
A mighty woman with a torch, whose flame
Is the imprisoned lightning, and her name
Mother of Exiles. From her beacon-hand
Glows world-wide welcome; her mild eyes command
The air-bridged harbor that twin cities frame.
"Keep, ancient lands, your storied pomp!" cries she
With silent lips. "Give me your tired, your poor,
Your huddled masses yearning to breathe free,
The wretched refuse of your teeming shore.
Send these, the homeless, tempest-tossed to me,
I lift my lamp beside the golden door!"

And then there is the play, The Melting Pot, published in 1908.  In it, the protagonist proclaims,

America is God's Crucible, the great Melting-Pot where all the races of Europe are melting and reforming... Germans and Frenchmen, Irishmen and Englishmen, Jews and Russians - into the Crucible with you all! God is making the American.

2010 Econ Bloggers Forum

This Friday, the Kaufman Foundation will be hosting the second annual Economics Bloggers Forum. The substantive agenda is (times are central daylight time):

8:30 a.m.   Welcome by Tim Kane
8:45 a.m.   Keynote Speech by David Warsh

9:30 a.m.   Panel 1 – Great Recession: Impact on America’s Future?
Paul Kedrosky, Bob McTeer, Megan McArdle, and Mark Thoma

1:00 p.m.   Persuasion and Norms by Paul Romer

 

1:30 p.m.   Panel 2 – Is Growth a Mystery? Haiti, Afghanistan, Africa...

Tim Kane, Alex Tabarrok, and Allison Schrager

 

2:45 p.m.   Panel 3—U.S. Fiscal Mess: How Does It End?

Robert Litan, Donald Marron, Ryan Avent, Ken Houghton, and Mike Shedlock

 

3:45 p.m.   Closing Remarks by Carl Schramm, President and CEO, Kauffman Foundation

David Warsh will give a new keynote address on "Economists and the Great Recession."  Also, Paul Romer will offer a new presentation titled "Persuasion and Norms." Panel presentations will be short (7 minutes) to provide ample time for other participating bloggers to dialog. All of this will be webcast, and we will welcome questions from the blogosphere (please add them here as comments, and I will pass them along).

VIEW WEBCAST at
http://sites.kauffman.org/EconBlogForum/template.cfm?page_id=1283  
Webcast begins Friday March 19, 2010 at 8:30 a.m. - 4:00 p.m. CDT
Microsoft SilverLight plugin required to view.

Generational Shift? Fiscal Crisis Plus Global Migration Equals ...

What if they had a fiscal crisis, and nobody came? What if the chump generation figures out the Ponzi scheme? Bob Samuelson thinks the fallout will be political:

... As baby boomers retire, higher federal spending on Social Security, Medicare and Medicaid may boost Millennials' taxes and squeeze other government programs. It will be harder to start and raise families.

Millennials [ages 30 and younger] could become the chump generation. They could suffer for their elders' economic sins, particularly the failure to confront the predictable costs of baby boomers' retirement.

Samuelson asks the question in a political context, and that's how most analysts interpret the looming fiscal crisis, as if young voters will punish fiscally irresponsible representatives in Washington. My alternative theory focuses on the context of immigration. Already you may have heard about the millions of illegals who departed the U.S. when the Great Recession dried up job opportunities. A lot of crass nativists might think "Good Riddance!" but I wonder what they'll say when their own children seek greener pastures abroad in 10 or 20 years?

Consider: almost everyone younger than the Baby Boomers expects to get the short end of the fiscal stick. We were laughing about the unlikeliehood of getting Social Securiyt Checks when I was in high school in the 80s. So now that the reckoning is all but unkickable, do the Boomers think their kids and grandkids will just become fiscal serfs?  Think again.

The consequences of U.S. fiscal calamity will go hand-in-hand with globalization. The world is in the early stages of globalization, but already member states in the EU are feeling the effects of combining tax competition with the right of movement. A 2006 BBC report noted that nearly 10 percent of Britons lived aborad, a million in Spain.  Two emigrant types dominate: retirees and workers!  Here's a more recent report from the OECD

... the share of immigrants in the OECD population almost doubled from just over 4.5% in 1975 to 8.3% in 2005. It is also noteworthy that 45% of immigrants living in OECD countries in 2008 came from other OECD countries.

The threat America faces is a world that competes for our greatest natural resource: it's young. If we make the tax climate hellish, the U.S. is going to suffer outmigration as places like Canada, Australia, Brazil, Mexico, Chile realize what an opportunity they have to cream our entrepreneurial talent. If we don't, and let the deficit spiral out of control, the dollar will fall and workers will go elsewhere for value reasons. There's already a migratory tension in Europe, waged primarily with favorable tax treatment for high net worth immigrants.

Go ahead and worry about the fiscal crisis of 2020, and worry about its implications across the generations. Just make sure you worry on a big enough scale. We all know that globalization will deepen, and the national borders that seem so tall and vital today will look more and more like borders among the 50 states of yesterday. Remind me again, how difficult does Texas make it on fleeing Californians to move in to their state?

Searching for Startups ... with Co-Conspirator Bob Cringely!

For thousands of entrepreneurs, Bob Cringely is more than a guide to the inside world of technology and innovation, he is a co-conspirator. I bet that half of the tech entrepreneurs of the 1990s were inspired by his documentary "Triumph of the Nerds." I can attest that at Neocor, in the summer of 1996 especially, we had that video on as background noise almost daily. We got so used to Bob's voice that we thought of him as a co-founder (he'll probably ask for some loot soon...).

So I'm very, very pleased to announce that Bob has invited the Kauffman Foundation to literally conspire with him on his next project. It's going to be huge. Here's the announcment posted on his I,Cringely blog:

Today is a great day for I, Cringely and for me. It is the day we launch the special web site for Cringely’s (NOT in Silicon Valley) Startup Tour. I wrote a column last month announcing the Tour ... but today marks the actual start of this summer’s adventure, because it opens nominations.

Visit the new web site here

... Just to recap what I announced last month, my family and I will this summer saddle-up our 1996 Winnebago motor home to visit all 24 finalists, taking with us a TV camera crew. We’ll spend two days at every company, camped in the parking lot or in the CEO’s driveway. Two days is how long it usually takes for my kids to use up all the water and demand a trip to Redbox for new videos.

In addition to two months of ongoing text, audio, and video coverage right here, the 24 finalists will appear in my 12-hour reality TV series which will be on a BIG cable channel, one you have actually heard of that does not include the word “shopping” in its name.

Why Denigrate Chile? A Tale of Two Charts

Paul Krugman just can't stand the praise being given to Chile's liberal economic reforms of the last 30-40 years, so he is denigrating them. Why would he do that?  He claims the economic liberalization in Chile is nearly mythical, and uses the following chart as his key piece of evidence.  It's scandalously misleading.

 
That chart does not jibe with my own experience following Chile's development, especially in contrast to other Latin American economies. And note the source: Total Economy Database. Why not use the Penn World Tables, or World Bank data? Paul's data says Chileans are just 15 percent wealthier than they were in 1970. The PWT Mark 6.3 indicates they are 161 percent wealthier. So who do you trust: the global standard for cross-country economic comparisons or the Nobel prize-winning NYTimes blogger?

Even my kids know the answer. Just look at the wikipedia entry on Chile's economy, and you'll find this chart:

 
For the record, anyone who travels in Latin America can attest that little Chile's role as a model is not what you might expect. Neighboring nations still like to think of Chile as their poor sibling, and pretend that its economic success does not exist. It's time to take off the rose-colored glasses.

UPDATE: The chart Krugman uses cuts off in 1991, so it's not the data source that's misleading. It's chart trickery with the X axis, a Tufte favorite.

Book talk at Cato on C-SPAN

Last month, I commented on Kling and Schulz new book From Poverty to Prosperity at a Cato event.  I didn't realize it was being taped by C-SPAN, but you can watch it here.

Economic Freedom goes Mainstream, Winter 2010

The earthquakes that struck Haiti and now Chile this winter are creating an unavoidable contrast. It also to my mind marks the moment when the idea of economic freedom is going mainstream. Here's an essay in TIME magazine:

... The 8.8-magnitude earthquake that hit Chile early on Feb. 27 was 500 times stronger than the 7.0 quake that killed an estimated 200,000 Haitians last month. And yet the number of casualties in Chile appears to be exponentially smaller, with the official death toll still in the hundreds.

... Wrong. It's the other way around: Chile is more developed because it's doing things right. The same goes for Brazil, Uruguay, Costa Rica and a handful of other Latin American and Caribbean nations that have decided in the 21st century to stop running their societies like medieval fiefdoms. They've conceded that niceties like rule of law, accountability, education, entrepreneurial opportunity and administrative efficiency actually have merit.

Keep in mind that this theory promoted by TIME is derided as "magical thinking" in Jeff Sach's The End of Poverty.

Still, the recovery in Chile will be long and difficult. They deserve our help. Thank goodness the U.S. and Chile already have an open trade agreement in place, since 2004.