Is Your City in the Right Place?

An article on VOX by Guy Michaels and Ferdinand Rauch looks at whether towns in France and Britain are "poorly located." The authors explain that being in the wrong place -- with poor access to world markets and resources, or vulnerability to natural disasters -- has dire economic and social consequences. Examining historical evidence from the Roman Empire and the Middle Ages, they found that towns in France stayed put, while those in Britain moved:

Medieval towns in France were much more likely to be located near Roman towns than their British counterparts (Figure 1). These differences in persistence are still visible today: only three of the 20 largest cities in Britain are located near the site of Roman towns, compared to 16 in France. This finding suggests that the British urban network shifted towards newly advantageous locations, while French towns remained in locations, which may have become obsolete.

They also found coastal access to be important:

The Gini Coefficient

A recent issue of the Handelsblatt (the German Wall Street Journal equivalent) had a neat graphic comparison of the U.S. to 5 other major countries: France, Germany, Italy, Spain and the U.K., along the criteria of the Gini coefficients on pre-tax/transfer incomes, post-tax/transfer incomes, and household wealth. Our pre-Gini on incomes is slightly below that in Italy, a bit higher than in the other four countries.  The big difference is that our post-Gini is much higher than in all the other countries—0.38 compared to a range of 0.29 to 0.34.  We do much less redistribution through transfers and have flatter taxes.

It is thus not surprising that we win the Champions League of Gini wealth inequality:  Ours is 0.85, with a range of 0.65 to 0.78 in the other five countries. The tiny tax increase on the top 1 percent of households that took so much political energy last year will do almost nothing to strip us of our championship status.

Who Suffers in Bad Weather?

The weather -- its effects on the environment, behavior, sports, and society -- has long been of interest to Freakonomics.  Now a new working paper from Warren Anderson, Noel D. Johnson, and Mark Koyama explores the effects of cold growing seasons on discrimination against Jewish communities between 1100 and 1800:

What factors caused the persecution of minorities in medieval and early modern Europe? We build a model that predicts that minority communities were more likely to be expropriated in the wake of negative income shocks. We then use panel data consisting of 785 city-level expulsions of Jews from 933 European cities between 1100 and 1800 to test the implications of the model. We use the variation in city-level temperature to test whether expulsions were associated with colder growing seasons. We find that a one standard deviation decrease in average growing season temperature in the fifteenth and sixteenth centuries was associated with a one to two percentage point increase in the likelihood that a Jewish community would be expelled. Drawing on our model and on additional historical evidence we argue that the rise of state capacity was one reason why this relationship between negative income shocks and expulsions weakened after 1600.

If Greece and Germany Were a Couple….

hilarious depiction of Greece and Germany as a bickering couple:

Solving Problems in the Real World

I owe my favorite local bookstore, the Harvard Bookstore, for making another day for me. Wandering the tall, packed shelves on a warm and breezy evening, I ran across Schaum's Outline of Principles of Economics. One subtitle on the cover: "964 fully solved problems." The problems include, for example (from page 50): "True of false: As used in economics, the word demand is synonymous with need," or "True or false: A surplus exists when the market price is above the equilibrium price."

I didn't long much for either answer.

Instead, as the U.S. mortgage market has, as James Kunstler predicted on October 10, 2005, imploded "like a death star" and dragged "every tradable instrument known to man into the quantum vacuum of finance that it create[d]," as euros flee from Greece, and as bank loans dry up in Spain, I wished that the 964 fully solved problems included one or two of the real problems.

Why Do American Women Work More Than Europeans?

Economists Indraneel Chakraborty and Hans Holter have an explanation for all those extra hours Americans work as compared to Europeans: divorce rates (and tax rates)  Here's their theory:

We believe this is because marriage provides an implicit social insurance since the spouses are able to share their income. However, if divorce rates are higher in a society, women have a higher incentive to obtain work experience in case they find themselves alone in the future. The reason the incentive is higher is because in our data, women happen to be the second earner in the household more often than men. European women anticipate not getting divorced as often and hence find less reason to insure themselves by working as much as American women.

Chakraborty and Holter use U.S data to run a model testing their theory; their findings are interesting:

Portugal's Budget Cut: Public Holidays

The BBC reports that Portugal will be cutting 4 of its 14 public holidays as an "austerity measure":

Two religious festivals and two other public holidays will be suspended for five years from 2013.

The decision over which Catholic festivals to cut was negotiated with the Vatican.

It is hoped the suspension of the public holidays will improve competitiveness and boost economic activity.

Tourist Drug Ban in the Netherlands

As of May 1, it is illegal for foreigners to buy soft drugs in three border provinces of the Netherlands. This new constraint is especially restrictive in Maastricht, which lies only 20 miles from the larger German city of Aachen and only 60 miles from Brussels, Belgium. Before May 1, foreign “drug tourists” flocked to the 14 “coffee houses” in the city, paying €3 or so for a joint and lighting up (since this activity is illegal in neighboring countries). In protest against the law, all 14 houses have closed.

A Free Market Solution (from Europe) to the Labor Problems in North American Sports

The following is a guest post by David Berri, a Professor of Economics at Southern Utah University. He is also the lead author of Stumbling on Wins, the general manager of the sports-economics blog Wages of Wins, and is a frequent contributor to the Freakonomics blog.

Soon after presents are opened on Christmas morning, the NBA – after a lengthy lockout – will finally open its 2011-12 season with a slate of five games. Although NBA fans are pleased the lockout has ended, they'd probably prefer that it had never happened. Unfortunately for fans of pro sports in North America, such disputes frequently cause games to be missed. But maybe there is a free market solution to this problem to be found in, of all places, Europe.

Although we tend to think such disputes are a contest between labor and management, frequently the real conflict – as noted in my recent posts here -- is between small and large market teams. In North American sports, team revenue seems to depend on the size of the market where the team plays.

The Butter Chronicles: Norway Comes Up Short

Norway is in the midst of a butter shortage. Yes, butter.

There are a few explanations: low-carb diets have been popular, and the summer of 2011 wasn't ideal for dairy. Olav Mellingsater for CNN writes:

A rainy summer reduced the quality of animal feed, decreasing milk production in Norway this year by 20 million liters (5.3 million gallons) compared with the same period last year, the cooperative said.

Stores are currently rationing butter sales, and some entrepreneurial spirits are selling butter online at 30 times the normal cost. There are also some gray market characters emerging from the crisis. CNN reports:

Authorities detained a Russian citizen Monday who they said was trying to smuggle 90 kilograms (200 pounds) of butter from Germany into Norway. Food safety authorities then warned people not to buy butter from strangers, Norway's TV2 reported.