Sunday, June 10, 2012

Why Not...a World Series of Economics?

By Doug Goepfert, guest writer

***This blog introduces a novel idea conceived by our most enthusiastic reader/ commenterand B-W alum!  If you love baseball, you're gonna' love Doug's cross-over for assessing the economic health of "Team USA". 


I love Major League Baseball: the games, the players, the trades, the playoffs, the winners and the losers.  But most of all, I love the statistics.  In baseball there’s a statistic for everything.  All the information any manager could want to manage his team more effectively.  Just look at today’s American League Central Division.

Team
Won
Lost
Percent
Games Behind
Last 10
Streak
Home
Away
Chicago
29
22
.569
-
9-1
W-8
12-13
17-9
Cleveland
27
23
.540
1 ½
4-6
L-2
15-14
12-9
Detroit
24
27
.471
5
4-6
W-1
11-12
13-15
Kansas City
21
28
.429
7
5-5
W-2
5-17
16-11
Minnesota
18
32
.360
10 ½
4-6
W-3
9-17
9-15

Now add to these figures a myriad of other comparative statistics: earned run averages, batting percent’s, slugging percent’s, runs, hits, errors.  Now you can get a real feel for the health of a baseball team.  Now you can see what the team needs to do to compete well, maybe even make the playoffs and win the World Series.

So why don’t we have a World Series of Economics?  That way we can see the true health of “Team USA” and whip together a strategy to compete successfully in the world.  Let’s see, what would be the key stats in a World Series of Economics?  Well, you would need some indicator of the financial well being of the average citizen of the country.  Gross Domestic Product per person should do that.  This statistic would approximate average income and cover employment levels.  That’s not enough though; you’d need an indicator of how fast income was growing or declining.   And the economy might be growing at the expense of natural resources, so I think you’d need an indicator to show if the nation is consuming more than it’s fair share of its bio-capacity. Our “Economic Footprint” work be a good measure.

Also, you’d need an indicator of the physical well being of each citizen (life expectancy, educational expectations); the “Human Development Index” is the statistic there.  You might also add data on the spread of income between the richest and the poorest.  Does the economy distribute wealth in an equitable manner?  Finally, there’s government borrowing.  How much debt is too much debt for the country?  How much is not enough?

You would need to organize leagues and divisions.  Let’s create a “West League” with four divisions and an “East League” with five.  Let's say the US competes in the West League, “North/Central American Division”.  Now, let’s set this up in a Major League Baseball type of grid. You can check the footnotes at the end of this blog to get the full definitions for the stats I’ve used.

NORTH/CENTRAL AMERICA DIVISION
Country
GDP per Capita
($mm’s)
 (1)
Ave. Annual % Growth GDP /C (2)
Ecological Footprint (3)
Human Develop-ment Index (4)
Top 10% Ave. Income/Bottom 10% Ave. Income (5)
% Debt/ GDP (6)
US
47.3
 0.7
 10.0
.910
15.9x
94
Mexico
  9.6
 0.5
    3.8
.770
21.6x
43
Canada
46.2
 1.1
-25.0
.908
  9.4x
84
Guat.
  2.9
 1.1
    1.5
.574
33.9x
24
Cuba
 n/a
 2.4
    3.0
.776
n/a
n/a
Haiti
  0.7
-1.8
    1.0
.454
54.4x
17
Dom Rep
  5.2
 3.6
    2.5
.689
25.3x
28
Honduras
  2.0
 1.0
    0.0
.625
59.4x
26
El Sal
  3.7
 1.6
    3.5
.674
38.6x
50
Nicaragua
  1.1
 0.9
  -5.0
.589
31.0x
80
Costa Rica
  7.8
 2.7
    2.0
.774
23.4x
30

Do you think we can win our own division?  Not so much.  Rank the countries by how many times each nation scored in the top three in each of the six categories.  If so, Canada is in the lead.  But that’s just our own division.  Take a look at how we compare to other potential division winners.  Each division leader was picked by the same method, i.e., the country with the highest number of top three results in each category.  All countries with populations of at least 5 million were entered.

WESTERN LEAGUE
Division
Country
GDP/c
GRW%
EFP
HDI
10%
DBT%
North/Central America
US
47.3
 0.7
 10
.910
16x
94
South America
Chile
11.8
 2.8
  -1
.805
26x
  9
Western Europe
Sweden
48.9
 1.6
  -8
.904
  6x
40
Eastern Europe
Belarus
  5.8
 7.1
    1
.756
  7x
27
EASTERN LEAGUE
N Africa/African Horn
Algeria
  4.4
 2.5
    3
.698
10x
10
Sub-Saharan Africa
Angola
  4.5
 8.3
   -6
.486
29x
35
Middle East
Turkey
10.4
 2.3
    3
.699
  7x
42
Central/South Asia
Kazakhstan
  8.9
 7.7
    1
.745
  9x
11
Far East/Oceana
Australia
56.0
 1.7
-23
.929
13x
21
 
Australia is in great shape for a run at the World Series of Economics.  But that spread of income could be much better.  And what’s with the lack of growth?  Sweden’s game is quite good in most categories but again, where is the growth coming from?  How about Kazakhstan?  Good growth in GDP per capita and a very respectable Ecological Footprint, Human Development Index and spread of income.  Got to get that average income up there.  Chile is financially the most conservative; they have the lowest debt ratio.  But without debt, can they stimulate enough investment to facilitate the measures that will boost the level of income? 

Team US needs help in income growth, income spread, and debt levels.  Growth means 1) facilitating business, (2) investment in a strong infrastructure (roads and rails) and 3) improving the education of our workforce.  We can’t let our economic footprint suffer while we do this.  It’s already pretty high.  At the same time we must bring down that debt level so we don’t choke future investment or the welfare of generations to come.   Restructuring and enforcing tax rules is a must, as is, development of innovative funding forms.

You see, now we can begin to form a coherent strategy for managing our country, for staying competitive with the world.   We can start generating specific goals and action plans.   Maybe, we can win the World Series of Economics!

Now let’s turn to the teams that make up the “also-rans” of the divisions; the ones in the cellar of each division.  What can we learn from the management of such countries?  What can we say about our own foreign aid strategy? 

WESTERN LEAGUE
Division
 Country
GDP/c
GRW%
EFP
HDI
10%
DBT%
North/Central America
Haiti
     .7
 -1.8
   1
.454
54x
  17
South America
Bolivia
   1.9
   1.7
-45
.663
94x
  37
Western Europe
Portugal
 21.6
   0.1
    8
.809
15x
  93
Eastern Europe
Greece
 27.3
   2.4
    9
.861
10x
143
EASTERN LEAGUE
N Africa/African Horn
Niger
    .4
   0.4
   .3
.295
46x
  16
Sub-Saharan Africa
Congo
    .2
   2.0
   -7
.286
18x
  34
Middle East
Israel
28.6
   1.0
  11
.888
13x
  77
Central/South Asia
Nepal
     .6
   1.7    
    6
.408
16x
  36
Far East/Oceana
Papua-NG
  1.5
  0.9
   -4
.466
24x
  26
 
The 68 million people of the Democratic Republic of the Congo make an average of $200 per year.  Income is growing only about 2% per year.  The Human Development Index reflects a life expectancy of 48 years and a schooling level of 3.5 years.  There’s a large spread between income of rich and poor and debt levels are not low.   The country must focus on building a strong infrastructure (roads to facilitate commerce) and education of the workforce.  Yet, where are they going to get the funds to do this? 

The favorable Economic Footprint of the Congo would suggest development of its natural resources (cobalt, tantalum, diamonds) in a manner that benefits its citizens.  The country’s rivers can provide hydroelectric power to other African countries and wise harvesting of forest products is also a possibility.  Foremost, the country has suffered from two major wars since declaring independence in 1960.  This strife has settled and perhaps a strong government can get back to doing what’s best for the country.

Again, by studying the stats and comparing results to other competitor states, we can develop a strategy for success!

So I say let's have an annual competition for the World Series of Economics!  As citizens of the US, we have a great advantage over Major League Baseball.  That is, we get to pick the manager for Team US!  This is an election year.  Who will it be?  Democrat, Republican?  Who has the best plan to for the US to compete with the rest of the world for the benefit of its citizens?  How does it stack up against plans of other nations?  Maybe we can use the World Series of Economics to actually keep score.  Wouldn’t that be a home run!


We'd love to hear what you think of Doug's World Series of Economics!
__________________________________
Notes:
(1) Gross Domestic Product (GDP) per capita; a measure of the average income for each individual in the nation.  (In thousands of US dollars) (Source: Wikipedia - International Monetary Fund List of Countries by Nominal GDP per Capita (2010)
(2) Average annual percentage growth in GDP per capita over the last decade; a measure of the growth and vitality of the nation. Source: ERS International Macroeconomic Data Set.
(3) The Ecological Footprint of the nation; a measure of how many natural resources are consumed per person in excess of the natural resources per person available. Source: Global Footprint Network, 2011.
(4) The Human Development Index (HDI); a measure of individual longevity, years of education, and level of income. Source: Human Development Report 2011.
(5) The ratio of the income of the richest 10% of a country to the income of the poorest 10% of the country; a measure of the distribution of wealth.  Source: Wikipedia - UN statistics.
(6) The percentage of total national debt to the total GDP of the country; a measure of the fiscal responsibility of the country, it’s ability to pay bills and its ability to attract investment. Source: Wikipedia IMF Statistics.

Dr. Lewis C. Sage (AB Kenyon, PhD U. Maryland) likes intersections. Since 1991, he has taught Law and Economics, Mathematical Economics, and the Economics of Healthcare. A former Fulbright Fellow (Bulgaria 1995-6), he teaches an interdisciplinary Honors seminar, Enduring Questions, and is studying strategy in the NFL draft with faculty and students in Sport Management and Psychology. E-mail: lsage@bw.edu

Kay Strong, Ph.D., Southern Illinois University, M.T., University of Houston, M.A., Ohio University; Associate Professor at Baldwin-Wallace College; Areas of expertise: international economics, contemporary social-economic issues, complexity and futures-based perspectives in economics. E-mail: kstrong@bw.edu

2 comments:

  1. An ingenious, exceptionally realistic idea. I might behoove some of the politicians this year to take this blog to heart and come up with a new campaign strategy. Perhaps, if Economics was taught more like a game people would see the incentive of playing; or at least becoming more knowledgeable. The statistics on here, especially, when they can be viewed and other countries easily cross referenced do make me ponder what other countries are doing right. And why America still thinks it is the number one super power in the world.

    ReplyDelete
  2. If their was a world series of economics the united states and the euro zone would be in last place.

    ReplyDelete

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This blog lives under the auspices of the Department of Economics whose mission has been to hold high the lantern beaming an "economic way of thinking" onto the world. Selfishness, rationality and equilibrium have been central to the teaching of an economic way of thinking rooted in the Renaissance. And, in this regard, the department has faithfully stayed the course. The intent of this blog, thinking out loud..., however, is to entertain exchanges which may challenge the centrality of economics as we teach it.