Sunday, April 28, 2013

The World Series of Economics 2013

By Doug Goepfert



The World Series of Economics 2013

I just can’t believe it.  It’s only the 4th week in April and our Cleveland Indians have dropped to fourth place in the America League Central.  Just look at these statistics!

Team
Won
Lost
Percent
Games Behind
Last 10
Streak
Home
Away
Kansas City
10
7
.588
-
6-4
W-2
4-2
6-5
Minnesota
9
7
.563
 ½
5-5
W-5
5-3
4-4
Detroit
9
9
.500
1 ½
5-5
L-4
4-2
5-7
Cleveland
8
10
.444
2 ½
5-5
W-3
2-6
6-4
Chicago
7
12
.368
4
3-7
L-4
4-5
3-7

This, of course, is our signal that it’s time to turn our attention to the World Series of Economics.  Instead of teams, we rank countries, and instead of wins and losses, games behind, and batting percents, we use six key economic statistics.   For example, take a look at Spain, and the explanation of the stats that follows:


GDP/c
Ann % Growth
NEFP
HDI
IE
DBT%
              Spain
28.5
-1.63
-8.1
.919
32.0
90.1

     GDP/c (Gross Domestic Product per capita) – an indicator of the average individual income in the country for the most recent year studied, in thousands of US dollars.
    
     Ann % Growth (Average Annual Percentage Growth in GDP/c) - the average annual percentage growth in individual income, excluding inflation, over the past five years; that is, are the people getting richer or poorer?

     NEFP (Net Ecological Footprint per person) - an indicator showing how efficiently the country’s people are making use of natural resources.  A positive number means the average person uses fewer acres of natural resources than are available in the country.  A negative number means he/she uses more than are available.

     HDI (Human Development Index) - a quality of life index encompassing the life expectancy of each individual plus the average and the expected levels of education.  An index of .919 for Spain reflects a life expectancy of 81.6 years, average years of schooling of 10.4 and expected years of schooling of 16.4.

     IE (Income Equality) - an indicator of income equality. 0 would mean every person makes the same amount, 100 would mean one person makes all the money.  The greater the value, the greater is the difference between the richest and poorest segments of the population.

     DBT% (%Debt to GDP) – the percentage of public debt to GDP; an indicator of financial stability.  Too much debt stifles investment and therefore growth. It places extreme debt carrying charges (i.e., interest) on future generations.
The World Series competition includes 118 countries with populations of 5 million or more.  They are grouped into nine divisions; four in the Western League, five in the Eastern League.  Winners are determined by the number of top 3 finishes in each of the 6 categories.  You can find complete definitions and sources in the notes section at the end of this article.  If you just can’t get enough of this and want to see the entire database and scoring, just e-mail me at dgoep1@gmail.com.

This year the division winners are:

Western League: 
       North/Central America-Canada, South America-Chile, Western Europe-Sweden, Eastern Europe-Belarus. 

Eastern League:
       N Africa/African Horn-Algeria, Sub-Saharan Africa-Ghana, Middle East-Saudi Arabia, Central/South Asia-Kazakhstan, Far East/Oceana-Australia.

How did these countries achieve winning status in their division? As you read about each you’ll see some common themes:

                    Educating a healthy work force
                    Building effective infrastructure
                    Stable Democratic government
                    Focus on International free trade
                    Financial Conservatism
                    Intelligent use of natural resources
                   Ability to attract foreign investment
                   Belief in free market economies, private enterprise

Here’s a recap of the winners by division:

WESTERN LEAGUE

North America
GDP/c
Ann % Growth
NEFP
HDI
IE
DBT%
Canada
51.0
.27
21.0
.934
32.1
87.5
Division Average
13.5
1.12
0.0
.752
46.7
49.1
World Average
14.1
1.88
1.9
.725
39.8
48.1

Canada is again first in this division.  Canada’s strong points are high GDP/capita with steady growth, an excellent net economic footprint, a high human development index, and a good spread of income.  Canada takes pride in its modern physical plant and skilled labor force, with an eye toward maintaining natural resources.  The nation focuses on infrastructure building, healthcare.

Notable Country:
GDP/c
Ann % Growth
NEFP
HDI
IE
DBT%
United States
49.9
-0.26
-8.2
.958
45.0
107.2

It’s not hard to see here where the US needs to focus.  Grow incomes by making more of the stuff the world needs.   Facilitate increased domestic and international commerce with improved infrastructure.  Get our debt down.  Use resources efficiently.

South America
GDP/c
Ann % Growth
NEFP
HDI
IE
DBT%
Chile
15.7
2.45
1.2
.863
52.1
11.4
Division Average
8.6
2.84
10.7
.779
49.9
32.3
World Average
14.1
1.88
1.9
.725
39.8
48.1

Chile is still the winner – with firsts in GDP/c, HDI, and debt to GDP.  Chile has a commitment to democratic government, sound economics, and an emphasis on foreign trade.  Argentina was a strong second with high GDP/c growth, human development, and a respectable spread of income.

Western Europe
GDP/c
Ann % Growth
NEFP
HDI
IE
DBT%
Sweden
57.2
.71
9.4
.940
23.0
37.0
Division Average
48.8
-0.36
-4.8
.919
29.6
76.6
World Average
14.1
1.88
1.9
.725
39.8
48.1

Sweden repeats as hands down winner – showing a top 3 standing in all categories and number one in income distribution and low debt ratio.  Sweden’s secrets:  a focus on international/free trade, an educated/skilled workforce, fiscal conservatism, many natural resources and effective use of them, and an armed neutrality concerning foreign affairs. 

Eastern Europe
GDP/c
Ann % Growth
NEFP
HDI
IE
DBT%
Belarus
6.0
5.47
-1.5
.830
27.2
38.3
Division Average
11.2
1.31
-2.8
.844
32.2
50.1
World Average
14.1
1.88
1.9
.725
39.8
48.1

Belarus is the repeat winner - followed by Slovakia and Russia. Belarus has an outstanding growth in GDP per capita, a good use of resources, respectable spread of income, and a healthy debt to GDP percent.  The country has a strong manufacturing base.  It’s focused on free international trade, privatizing more of the previous state run industry, and increasing foreign investment.

Notable Country:
GDP/c
Ann % Growth
NEFP
HDI
IE
DBT%
Greece
23.7
-4.17
-8.2
.899
33.0
170.7

It’s easy to why there’s always a hubbub about Greece in the European Union.

EASTERN LEAGUE

North Africa/African Horn
GDP/c
Ann % Growth
NEFP
HDI
IE
DBT%
Algeria
5.5
0.81
-2.7
.755
35.3
8.6
Division Average
2.1
1.15
-0.7
.532
38.5
47.9
World Average
14.1
1.88
1.9
.725
39.8
48.1

Algeria is the repeat winner here with strong showings in total GDP, Human Development Index and a conservative debt ratio.  Gas and oil reserves are this country’s largest asset.  It has strived to maintain a consistent multiparty government despite unrest and civil war caused by extremist efforts.  Its infrastructure is a problem – unreliable water supplies and electricity.  New improvement programs have been started and the government is trying to attract foreign investment.

Sub-Saharan Africa
GDP/c
Ann % Growth
NEFP
HDI
IE
DBT%
Ghana
1.6
5.99
-1.1
.646
39.4
44.9
Division Average
1.3
2.11
.6
.484
46.1
39.9
World Average
14.1
1.88
1.9
.725
39.8
48.1

Ghana beat out South Africa, Nigeria, and last year’s winner Angola to win this tough division.  Even though rich in natural resources, the countries of Sub-Saharan Africa have many barriers to economic growth.  Bad roads and lack of electricity, lack of communications, health issues, diverse languages and religions are all impediments to economic wellbeing.   Ghana scored high in GDP/c, growth in GDP per capita, and Human Development.  Its strengths are a strong stable government and a competitive business environment.  Extensive oil reserves are expected to add growth.

Middle East
GDP/c
Ann % Growth
NEFP
HDI
IE
DBT%
Saudi Arabia
24.8
2.24
-8.3
.774
32.0
5.5
Division Average
17.2
1.53
-6.2
.727
38.7
42.8
World Average
14.1
1.88
1.9
.725
39.8
48.1

Saudi Arabia is the solid winner here with top three finishes in 5 of the 6 categories.  While oil contributes greatly to the economy, the government is supporting diversified private enterprise and is concentrating on educating its younger population in order to employ more Saudi nationals in its efforts.  Social Development, foreign investment and infrastructure are priorities.

Central/South Asia
GDP/c
Ann % Growth
NEFP
HDI
IE
DBT%
Kazakhstan
11.4
3.42
-1.6
.791
26.7
12.4
Division Average
2.7
4.62
-1.0
.647
34.7
39.6
World Average
14.1
1.88
1.9
.725
39.8
48.1

Kazakhstan is the winner again, followed closely by Turkmenistan and Uzbekistan.  These countries here have benefitted by moving to market based economies and improving infrastructures.  Kazakhstan’s growth and GDP levels are very good and its debt level is conservative.  It is rich in fossil fuels and minerals.  While the government is a republic with three branches, it remains under authoritarian rule.  It’s making a concerted effort to diversify its economy into pharmaceuticals, transport, telecommunications, and food processing.  Electricity and telecommunications are structural problems.  Landlocked, it must efficiently get its products to neighboring country seaport.

Notable Country:
GDP/c
Ann % Growth
NEFP
HDI
IE
DBT%
India
1.5
5.73
-1.0
.575
36.8
67.6

India’s 1.2 billion people have an average income of just $1500 dollars per year.  Its HDI represents a life expectancy of just 66 years and average years of schooling of 4.4.

Far East/Oceana
GDP/c
Ann % Growth
NEFP
HDI
IE
DBT%
Australia
70.0
1.35
19.5
.978
30.5
27.1
Division Average
16.7
3.29
22.4
.744
41.5
50.8
World Average
14.1
1.88
1.9
.725
39.8
48.1

Australia continues to be the juggernaut of the Pacific, having a very high GDP/c, a remarkable net ecological footprint, a stellar human development index, a fine spread of income and a very low debt to GDP %.  Australia’s democratic government supports open international trade and a free market economy.  It exports food and its natural resources are abundant: coal, iron ore, copper, gold, natural gas, and uranium.

Notable Country:
GDP/c
Ann % Growth
NEFP
HDI
IE
DBT%
China
6.2
8.28
-3.1
.728
48.0
22.2

While China has a long way to go, its rate of income growth is pretty spectacular.

World Series Champion!

Who’s the World Series champ?  Eastern League champ Australia outscored Western League heavyweight Sweden, trumping Sweden in 5 of 6 categories.

Championship
GDP/c
Ann % Growth
NEFP
HDI
IE
DBT%
Sweden
57.2
.71
9.4
.940
23.0
37.0
Australia
70.0
1.35
19.5
.978
30.5
27.1
World Average
14.1
1.88
1.9
.725
39.8
48.1

Congratulations!

NOTES:

Definitions of the 7 Categories of Statistics

Population: Source: http://en.wikipedia.org/wiki/List_of_countries_by_population. Based on the most recent estimate or projections by the country'sl census authority where available. Where updated national data are not available, figures are based on the 2012 estimates by the Population Division of the United Nations Department of Economic and Social Affairs.

GDP per Capita -  This number represents an estimate of the total output of goods and services by the nation (Gross Dometic Product) (https://www.cia.gov/library/publicatios/the-world-factbook/fields/2195.html) divided by the population of the country at mid year(http://www.census.gov/ipe/www/idb/tables.html).  It equates to the income earned by the average person in the country regardless of whether or not that person is in the workforce. Source is the CIA World Factbook acessed on March 2 2013.

GDP per Capita - Average annual real growth 2005 to 2012.  This is the compounded average annual growth between the two numbers.  Source of the numbers are the ERS International Macroeconomic Data Set updated 11/03/2012.  Stated in 2005 dollars.

Net Ecological Footprint per person. The Global Footprint Network (www.footprintnetwork.org) publishes for each country for 2012: 1) The ecologiocal footprint per person (how many hectares of natural resources are used by the average person in the country) and 2) the biocapacity for each person within in that country (how many domestic hectares of natural resources are available for each person in 2012).  The Net Ecologicsl Footprint per Person is 1-2, in other words the surplus(-excess) of resources used by each person in the country over that available in the domestic country.  Hectares are converted to acres here (one hectare = 2.47 acres).  For Example, in 2012, the average Austrialian consumed 6.68 hectares of resources, but 14.57 hectares were available for that person.  The net surplus ecological footprint was therefore 7.89 hectares or 19.5 acres.

Human Development Index.  Source:  The Human Development Report 2013 (http://hdr.undp.org/en/reports/global/hdr2013/).  The Human Development Index Non Income HDI is an index of the development of people in that country.  For example Norway has a life expectancy of 81.3 years, a mean years of schooling of 12.6, and an expected years of schooling of 17.5.  This converts to an HDI of .977.  Afghanistan has a life expectancy of 49.1 years, a mean years of schooling of 3.1 years and an expected years of schooling of 8.1.  This translates to an index of .393.

Income Distribution:  This index measures the degree of inequality in the distribution of family income in a country.  The source is the CIA GINI coefficient. (https://www.cia.gov/library/publications/the-world-factbook/rankorder/2172rank.html). The more nearly equal a country's income distribution, the lower its Gini index, e.g., Sweden with an index of 23. The more unequal a country's income distribution, the higher its Gini index, e.g., Zambia with an index of 51. If income were distributed with perfect equality,  the index would be zero; if income were distributed with perfect inequality, the index would be 100.

%Debt to GDP - This is a measure of the amount of debt the nation has compared to its output of goods and services.  The source is Government gross debt, International Monetary Fund, October 2012 World Economic Outlook Databse.(http://en.wikipedia.org/wiki/List_of_countries_by_public_debt#cite_note-2).  Gross goverment debt is the cumulative total of all government borrowings less repayments that are denominated in a country's home currency.


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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.