• Nominees for World Bank President Show Emerging Influence for Emerging Economies

    Something a little unusual happened on the way to finding a new president of the World Bank.  Two of the three candidates for the post come from emerging economies.  It seems the World Bank is becoming more, well, worldly.  And Brookings fellow Colin Bradford, former chief economist at the U.S. Agency for International Development, says that is a good thing.  

  • BEA: Economy Grew 3.0% During Fourth Quarter 2011

    The US economy rose at a faster rate in the fourth quarter of 2011 than previously reported, according to a revised estimate released by the Bureau of Economic Analysis this morning.  The BEA is now reporting that Real GDP increased 3.0 percent in the fourth quarter of 2011.  

    Here is an updated look at the ups and downs of real GDP over the last 4 years:

    The BEA report also includes some useful data for GDP over the year:

    Real GDP increased 1.7 percent in 2011 (that is, from the 2010 annual level to the 2011 annual level), compared with an increase of 3.0 percent in 2010.

    The increase in real GDP in 2011 primarily reflected positive contributions from personal consumption expenditures, exports, and nonresidential fixed investment that were partly offset by negative contributions from state and local government spending, private inventory investment, and federal government spending. Imports, which are a subtraction in the calculation of GDP, increased.

    The deceleration in real GDP in 2011 primarily reflected downturns in private inventory investment and in federal government spending and a deceleration in exports that were partly offset by a deceleration in imports and an acceleration in nonresidential fixed investment.

    Read the full release from the BEA here.

  • Impact of Monetary Policy on Housing Prices

    At VoxEU, economists Christian Hott and Terhi Jokipii have a rather concise analysis of how low interest rates spur housing bubbles.  The conclusion is not surprising, but it is useful to have the case laid out so neatly.  Hott and Jokipii compare actual housing prices with "fundamental housing prices" across 14 countries.  And it is striking just how much the price levels deviate. Take a look at what they found for six countries:

    Read about the authors' conclusions and methodology here

  • Vijay Govindarajan on Reverse Innovation

    It is easy for us to understand why people in developing countries would dream of having the goods that are prevalent in richer countries.  So why develop products in poorer countries and not just bring in products from richer economies?  Because that is not the best way to develop good products for mass markets where people have less money to spend.  The advantage of developing products in places like India rather than the US is that the demand structure will foster more innovative products.  Thats the argument that Vijay Govindarajan, Professor of International Business at Dartmouth's Tuck School of Business, makes.  He calls this "reverse innovation," and he explains why it works in this short video from BigThink:

  • The Role of Startups in an Emerging Economy: Kenya

    In the latest issue of Technology Review, David Talbot takes a look at an emerging market in Kenya.  A group of homegrown entrepreneurs are matching the utility of cellphones with the need for better delivery of health care.  It is a reminder that technology used effectively can be an important bridge to better services--but it is the people with the ideas and ability to understand the marketplace that matter.  And the technology need not be the latest and greatest.  It isn't smartphones and iPads providing the network tools for Nairobi's tech startups, but more basic cell phones.  

    Talbot profiles many members of Kenya's innovative startups, including those who are part of an incubator called iHub, which has pulled in support from the community and from major multinationals Nokia and Google:

    The incubator opened in 2010 and now counts more than 6,000 members, with an average of 1,000 new applications a year. Most members are merely part of iHub's online community, but more than 250 of them use the space. Some 40 companies have launched from iHub, and 10 have received seed funding from venture capitalists. The most successful so far is Kopo Kopo, which helps merchants manage payments from M-Pesa and similar services. One key to iHub's growth is that Kenya's IT infrastructure has improved significantly. The first Internet fiber connection landed at the Kenyan coast in 2009 (previous service had come through satellite dishes in the Rift Valley), and the country's first truly mass-market Android smart phone went on sale in 2010, for $80. Safaricom now counts 600,000 smart phones of all kinds on its network and expects them to make up 80 percent of the market by 2014.

    Inevitably, this petri dish produced a mobile health startup. Shimba Technologies, led by a couple of University of Nairobi graduates named Steve Mutinda Kyalo and Keziah Mumo, created a platform called MedAfrica with the simple goal of providing basic health information to Kenyans in the face of the national doctor shortage. So far, MedAfrica offers lists of doctors and dentists taken from government registries, plus menus for finding basic first-aid and diagnostic information. "What we want is for the common man to have the right information in his hand," says Kyalo, the company's CEO. "We can't replace the doctors, can't replace the hospitals, but we can improve access to relevant information.

    MedAfrica illustrates the power of local entrepreneurship. Though it has few connections with the medical community or the health ministry, its health-care app has been downloaded on  43,000 phones, and the company is still only halfway through $100,000 in seed funding. The service can be delivered through an app or through a mobile Web interface (nearly all Kenyans who access the Internet do so through mobile devices). Soon it will be available through SMS—an essential feature, because 85 percent of Kenyan mobile-phone owners don't yet have Web access. Kyalo hopes to aggregate other medical apps on the platform and ultimately sell sponsored messages from pharmaceutical companies, health-care providers, and others. 

    Read Kenya's Startup Boom here.

    (hat tip: Melissa Acuna)

  • Case-Shiller Index: '2012 Home Prices Off to a Rocky Start'

    Home prices went up between December and January in Washington, DC, Miami, and Phoenix.  They dropped in all other metro areas, according to the latest S&P/Case-Shiller Home Price Indices release.  The 10-city and 20-city indices dropped 0.8% from December to January.  The 10-city composite showed a 3.9% decline while the 20-city composite showed a 3.8% decline.  Denver, Detroit, and Phoenix all posted positive annual growth, but they were the only cities to do so.  Atlanta, with an annual decline of 14.8%, remains the city with the fastest dropping home prices.  Here's a look at the long term trend:

    From the release:

    “Despite some positive economic signs, home prices continued to drop. The 10- and 20- City Composites and eight cities – Atlanta, Chicago, Cleveland, Las Vegas, New York, Portland, Seattle and Tampa – made new lows,” says David M. Blitzer, Chairman of the Index Committee at S&P Indices. “Detroit and Phoenix, two cities that have suffered massive price declines, plus Denver, saw increasing prices versus January 2011. The 10-City Composite was down 3.9% and the 20-City was down 3.8% compared to January 2011.

    “Due to delays in reporting for Mecklenburg County, we did not publish a January index level for Charlotte, North Carolina. There was not enough January data to publish an accurate index level this month. We are not sure of the reasons for the delays, but do expect to see the data with next month’s release. We did include data we received from Gaston County, NC, and York County, SC, in the calculation of the 20-City Composite.

    “Atlanta continues to stand out in terms of recent relative weakness. It was down 2.1% over the month, and has fallen by a cumulative 19.7% over the last six months. It also posted the worst annual return, down 14.8%. Seven of the cities were down by 1.0% or more over the month. With the new lows, both Composites are now 34.4% off their relative 2006 peaks.”

    Read the full release here.

  • Central Bankers Issue Warnings Over 'Easy Money' Policies

    It appears that easy money policies are making some of the world's top bankers uneasy.   The Federal Reserve held a conference this past weekend with members of central banks from around the world.  Several of the attendees, including the head of the Bank of Japan, argued that central bankers need to watch carefully for the risks associated with policies like quantitative easing.  The Wall Street Journal's Jon Hilsenrath was at the meetings, and he described the scene on the Journal's Markets Hub:

  • The Economist: The Curious Case of Apple's High Climbing Stock

    If your neck is feeling stiff lately, we suggest you stop following the path of Apple stock.  The price of one share hit a new record high of $605.96 last week, and according to The Economist, Apple stock is now strong enough to have a lifting effect on the markets overall.  Take a look at the impact on the S&P 500:

    The question now seems to be how high it can climb before buyers get truly nervous.  As The Economist points out, the announcement last week that Apple will use some of its cash holdings to pay a dividend and buy back some stock, only keeps investors interested:

    Most analysts remain committed fans of the shares. Some claim that a $1 trillion valuation could soon be possible. The bullish case runs as follows. Apple has low penetration in the personal-computer and smartphone markets, and can hook millions more customers in emerging markets like China and Brazil. Although questions remain over how much of Apple’s innovation was due to its magician-in-chief, Steve Jobs, who died last October, the launch of the new iPad has calmed nerves somewhat. Apple is poised to enter new arenas like television and mobile payments.

    The firm still has a ton of cash to invest in new products and ward off emerging threats. Horace Dediu of Asymco, a data-analysis firm, has estimated that even after the dividend payout and any buy-back activity this year, Apple could still end 2012 with over $35 billion more in the bank than it had at the end of the previous year. With an historic price-earnings (p/e) ratio of 22, shares are not as dear as you might expect, and look even more attractive when the p/e is calculated based on forward earnings. Apple’s revenues are forecast to grow by at least 51% in fiscal-year 2012 and by 23% in 2013, according to Morgan Stanley.

    Others reckon that the outlook for its business is not the only thing that has been driving the steep ascent of Apple’s shares. The stock has seen such heavy gains in recent weeks that many investors can’t afford not to have Apple in their portfolio. Fund managers that are judged against a benchmark where Apple is heavily weighted, like the NASDAQ 100 or the S&P 500 technology index, have to scramble to keep a heavy exposure to Apple. “The speed of the move and the size of the company scare people who haven’t got it,” says Andy Ash of Monument Securities. “The danger is that you end up with everyone buying it because they have to rather than because they want to.”

    So what should we be looking for in the unique case study that is Apple? What signs that Apple stock's climb will level off, or even dip down?

    Read the full article here

  • March McKinsey Global Survey Shows Increased Optimism Globally

    Executives of global companies are feeling a lot better about the state of the economy now than they did three months ago.  The latest McKinsey Global Institute Global Survey paints a relatively optimistic picture, with economic expectations moving upwards in all regions.  And while expectations in the Eurozone lag behind those elsewhere, even there executives are much more optimistic than they were in December.  Take a look at the survey trends:

    From the report:

    Executives’ optimism also extends to the global economy. Indeed, 42 percent say conditions are better now compared with six months ago, and 48 percent expect better conditions six months from now—up from 26 percent in December. Respondents in India report the most positive outlook on the world’s prospects, and the share in the eurozone expecting improvement climbed 17 percentage points since the previous survey.

    The eurozone remains, unsurprisingly, a locus of uncertainty: 60 percent expect either a minimal contraction or recession there in six months, while only 23 percent expect at least minimal growth. When asked about potential eurozone outcomes, fewer expect either short-term or long-term integration than in December, though nearly half expect rescue packages to maintain the status quo. A larger share in Europe expect integration than do their peers in other regions.

    Executives expect uncertainty in other areas, which hints that the recent optimism may still be tenuous. One area of concern is around resources: 58 percent say oil prices will be higher in six months, and a growing share (19 percent, up from 11 percent in December) cite high commodity prices as a barrier to growth. More executives also cite geopolitical instability as a barrier to growth than did three months ago; at 31 percent, it’s the barrier cited most often in North America.

    Read the report here.  

  • Marketplace Whiteboard: Explaining the Role of the Fiduciary

    When you are on the bus, the bus driver is there to drive you from place to place.  She or he isn't driving the bus to get themselves from place to place.  That's how Paddy Hirsch says fiduciaries are supposed to behave.  Take a look as he explains the role of a fiduciary at the Marketplace Whiteboard:

  • New Matchmaking Service for Multinationals and Domestic Small Businesses

    Business Week's John Tozzi reports on an interesting new program designed to get help multinational corporations like IBM connect with potential suppliers among domestic small businesses.  The program is called Supplier Connection, and it creates an online interface that introduces small business to big business.  Think online dating, but with a lot more money involved.  Tozzi writes:  

    The challenge for large companies is, “How do I find you, and how do I accredit you?” Citigroup (C) Chairman Richard Parsons said Thursday at an event promoting the website at IBM’s New York office. Citi and other major banks are among the companies participating. Others include AT&T (T), Facebook, Caterpillar (CAT), and Pfizer (PFE).

    Why would such big corporations want to deal with small businesses? “The goal is to grow the U.S. economy in an effective way,” says Stanley Litow, president of the IBM International Foundation. (The foundation is funding the project with a $10 million grant.)

    Beyond such altruism, larger companies may find more nimble or competitive suppliers who may work harder to please a big client, says Kevin Lyons, a professor of supply chain management at Rutgers Business School. “With a small business, the hunger to do more business, to actually interact with such a large firm allows them to adapt and change,” Lyons said.

    Read Corporate America to Small Biz: Sell to Us here

  • Charlie Rose Roundtable on Doing Business in China

    Kudos to Charlie Rose's bookers for putting together an interesting collection of business people to discuss how to best find success in China today.  Zhang Xin,CEO of Soho China, brought some particularly interesting insight to the conversation.  We were also struck by the sheer volume of business that David Novak, CEO of Yum Brands, says his company's restaurants are doing in some of the lesser known Chinese cities ("smaller cities" of only 15-20 million people).  Here is an except of the conversation:

    Watch the full discussion here

  • Key Factors in Gas Prices from State to State

    When we look at how much the cost of a gallon of gas varies from state to state, the first cause that comes to mind is the different tax rate for gas from state to state.  But while that explains part of the cost variance, it does not account for all of it.  At Econbrowser, James Hamilton breaks down the key factors in state gas prices in a series of helpful maps.  First, there is this map from GasBuddy.com that shows how different gas prices can be from state to state, or even county to county:

    So while taxes are a major factor, Hamilton cites a number of other key factors, like state requirements for the quality of fuel, and the cost of crude oil at regional refineries:

    For example, sweet crude in Louisiana is currently fetching $125 a barrel, or $27 more than its counterpart in Wyoming. If the refined product market in Wyoming were completely separate from that in the rest of the country, we might then expect gasoline in Wyoming to be 68 cents/gallon cheaper than on the coasts as a result of differences in the cost of crude alone.

    But the refined markets are not completely separated, and no producer would want to sell gasoline in Wyoming if you had an easy way to get it to somebody willing to pay 68 more cents per gallon for it. Although America's pipeline system for transporting crude oil is not up to the task of moving all the crude available in Wyoming to refineries in Louisiana, the infrastructure for transporting refined products is somewhat better. The result is that Americans in the middle of the country pay more and those on the coasts pay less than they would if the product markets were completely isolated geographically. The equilibrium price differential is the one that equalizes the return from selling in different markets after taking into account transportation costs.

    Read Why do gasoline prices differ across U.S. states? here.

  • Acemoglu and Johnson Calls Out EU Leaders for Mismanagement of Debt Crisis

    Daron Acemoglu and Simon Johnson blame Europe's leaders--or "policy elite"--for worsening the economic crisis and "betraying all of the lofty promises of unity and prosperity issued when the euro was created."  What should Euro Zone leaders have done?  For one, Acemoglu and Johnson argue, they should have worked earlier to restructure the debt of countries like Greece.  From Project Syndicate:

    The Greek, Portuguese, Irish, and Italian economies are reeling under fiscal austerity – with budget cuts and higher taxes as far as the eye can see. This policy mix will slow their growth, and that of the rest of Europe.

    But that is only part of the problem. The bigger issue is the “debt overhang” that has forced European governments to pursue this course. There are strong parallels to what happened in the United States in the past few years: many families felt crushed by their debts, so household consumption fell and has yet to recover. The adjustment will be even more painful in Europe, because a sovereign-debt crisis has a depressing effect on everyone – consumers, investors, and the public sector alike.

    There is a simple way to deal with a debt overhang: reduce payments by restructuring the debt. Many firms are able to renegotiate financing terms with their creditors – typically extending the maturity of their liabilities, which enables them to borrow more to finance new, better projects. If such negotiation cannot be achieved voluntarily, US firms can use Chapter 11 of the bankruptcy code, under which a court supervises and approves the reorganization of liabilities. So you would think the same would be true for US households and embattled European governments. But the restructuring of debt has been too little and has come too late. Why?

    In both cases, the main argument for not removing the debt overhang came from bankers, who claimed that it would create havoc in financial markets for two reasons. First, banks were the primary creditors, and the large losses that they would face in any restructuring was bound to trigger a domino effect, with waves of pessimism driving up interest rates and ruining other borrowers’ prospects. Second, banks would also suffer because they had sold insurance against default – in the form of credit-default swaps. When these swaps were activated, the banks would incur potentially further crippling losses.

    Read Captured Europe here.

  • Business Leaders on Bolstering US Competitiveness

    "Think more locally." 

    "Redoub[le] our commitment to our nation's entrepreneurs." 

    "Recognize and develop an urgency around the fact that our k-12 education system and the cognitive skills it produces in our students is one of the most important factors in long term competitiveness." 

    "Build trust with the American people." 

    "Invest in job training."

    These are some of the answers that thought leaders on business gave when asked, by Harvard Business Review, "what business can do to bolster competitiveness?" Watch Vanguard's William McNabb, Citigroup's Vikram Pandit, Small Business Administrator Karen Mills, and others weigh in, and then give us your answer:

  • Geithner Stresses Importance of Economic Improvement in Europe to US Economy

    Treasury Secretary Timothy Geithner testified on the state of the international financial system before the House Financial Services Committee today, and we imagine some part of him was pleased to not have to focus on the slow recovery in the US.  He did not, however, treat the state of the global economy as a strictly foreign problem, making sure to point out the impact of Europe's economic struggles on all economies.  And he pointed to the importance of US involvement in efforts to improve the bleak economic picture in Europe:

    The Euro Area accounts for about 18 percent of global GDP.  It is a major source of financing for many emerging economies.  It accounts for about 15 percent of U.S. exports of goods and services, but a larger portion of exports of many or our trading partners.  When growth slows in Europe, it affects growth around the world.  And when the fears of a broader European crisis have been most acute, as they were in the summer and fall of 2011 and during the spring and summer of 2010, financial markets fell around the world, damaging confidence and slowing the momentum of the global recovery.
    Our financial system has relatively little exposure to the five European economies at the heart of the crisis, but we have significant financial and economic ties to Germany and France and the continent as a whole.
    We have worked very closely with Europe’s leaders over the past two years, and with the members of the IMF, to help support a stronger European response to the crisis.
    The Federal Reserve’s dollar swap lines with the ECB, the Bank of Canada, the Bank of England, the Bank of Japan, and the Swiss National Bank have played a critical role alongside the ECB’s direct efforts.  European banks borrowed heavily in dollars before the crisis, and many lost the ability to borrow in dollars as the crisis intensified.  The Fed’s swaps made it possible for Europe’s banks to borrow dollars from their central banks, which has helped avoid a more rapid deleveraging, reducing the impact on financial conditions in many countries where European banks had lent heavily.
    The IMF has also played an important role in Europe. The IMF has provided advice on the design of reforms, a framework for public monitoring of progress, and support for programs in Greece, Ireland, and Portugal in partnership with Europe, which has assumed the majority of the burden.  These actions have helped limit the damage from the crisis to the United States and to economies around the world.
    It is in the interest of the United States that the IMF is able to continue to play a constructive role in Europe.  IMF resources cannot substitute for a strong and credible European firewall and response, but they can help supplement the resources Europe mobilized on its own. 

    Watch Secretary Geithner's testimony here, and read the full address here.

  • Visual Economics Unemployment Infographic

    All you ever wanted to know about unemployment (or maybe didn't want to know) in one big infographic from Visual Economics.  VE calls this The Truth Behind America’s Unemployment.  There are not necessarily any surprising figures here for those of us who have been paying close attention to unemployment stats, but this sure is a convenient way to disseminate a lot of clear, relevant details in unemployment and show a much more complete picture of this jobless recovery beyond the basic ups and downs of the official unemployment rate. Click here for the full size infographic.

  • Gallup: Economic Optimism 'Volatile'

    After reaching a 4 year high the previous week, Americans' optimism in the state of the economy dropped again last week, according to Gallup.  The Gallup Economic outlook rating and Current conditions rating both dropped last week:

    From the report:

    The exact reason for the slight deterioration in confidence last week is difficult to determine. One proximate cause could be -- at least to some degree -- continually increasing gas prices at the pump. Gas prices are not only approaching the psychologically important price of $4.00 a gallon, but are expected to exceed $5.00 a gallon in some areas in the months ahead. Gallup finds that Americans on average say they would not significantly change their lifestyles until gas prices reach the tipping point of $5.30, suggesting that the true impact of current gas prices on economic confidence is difficult to assess with certainty. Further, despite the latest decline in confidence and the surging gas prices, economic confidence remains better now than it was during the same week one year ago (-31).

    Read the full report here.

  • Impact of Rising Oil Prices Big on Political Rhetoric, Small on US Economy (so far)

    Wall Street Journal Economics Reporter Ben Casselman says to try and put the idea that there is a key "threshold" for gas prices--a price at which the economy "comes to a halt."  Meanwhile gasoline prices keep climbing--though not to levels of a year ago.  Yet.  And the key questions to consider now are how fast are prices rising, and what is the impact on consumer behavior rather than what consumers are saying about prices.  Here is Casselman speaking on what economists are focusing on as they watch oil prices climb:

  • Skepticism About Monthly State Jobs Reports

    We all watch the Labor Department's monthly jobs reports very closely these days.  Too closely?  Boston Globe business correspondent Jay Fitzgerald spoke to some Boston-based economists and found that there is some serious skepticism about the narrative we journalists build off of the reports, or at least the state statistics.  Fitzgerald found that the revisions of 2011 jobs numbers in Massachusetts made the original reports look like they were made up.  In Massachusetts, for example, the Labor Department's revised numbers showed an increase of 9,000 jobs for the years, compared to an original figure of 41,000.  Fitzgerald writes:

    To build the estimates, the Labor Department’s statistical agency, the Bureau of Labor Statistics, surveys about 4,400 establishments in Massachusetts. The survey program is voluntary, and employers often don’t respond every month. Even if a monthly payroll response is good, the bureau still has to base its estimates on a relatively small sampling of the state’s nearly 230,000 establishments.

    Further complicating the process, the Labor Department must estimate the number of new companies that are launched each month and the jobs they create, as well as the number of firms that fail and eliminate jobs. The agency has developed a model to project monthly births and deaths of firms, but it’s not science.

    “It’s a snapshot of the economy at a given point,’’ Chris Manning, deputy division chief of the Bureau of Labor Statistics current-employment statistics program, said of the monthly reports. “It’s based on just a sample of businesses.’’

    Read Local economists question usefulness of jobs reports here.

  • CPI Rises 0.4 Percent

    The Consumer Price Index for All Urban Consumers had its biggest one-month jump in nearly a year, rising 0.4 percent in February according to today's Bureau of Labor Statistics report.  Food prices remained flat, but energy prices rose significantly with gasoline prices pushing the energy index up.  Here's a look at the CPI for All Urban Consumers over the last year:

    Here are some key details from the BLS release:

    The energy index rose 3.2 percent in February after a 0.2 percent increase in January. The gasoline index rose 6.0 percent, its largest increase since December 2010. (Before seasonal adjustment, gasoline prices increased 4.9 percent in February.) The gasoline increase more than offset a decline in the index for household energy, which fell 0.6 percent. The index for natural gas continued its string of declines, falling 3.4 percent. The electricity index was unchanged and the index for fuel oil increased 2.8 percent. Over the last 12 months, the gasoline index has risen 12.6 percent, the fuel oil index has increased 8.9 percent and the electricity index has advanced 1.9 percent. In contrast, the index for natural gas has declined 9.8 percent.

    The index for all items less food and energy increased 0.1 percent in February. The shelter index increased 0.2 percent for the fifth month in a row. The rent index increased 0.2 percent and the index for owners’ equivalent rent rose 0.1 percent, while the index for lodging away from home advanced 1.9 percent. The index for new vehicles rose for the first time since June, increasing 0.6 percent. The medical care index increased 0.2 percent with the prescription drugs index rising 0.6 percent. The index for household furnishings and operations rose 0.3 percent in February, its largest increase since August. In contrast to these indexes, the apparel index declined in February, falling 0.9 percent after a 0.9 percent increase in January. The index for used cars and trucks declined for the sixth month in a row, falling 0.2 percent, and the tobacco index declined 0.4 percent. The indexes for recreation, personal care, and airline fares all posted slight declines in February.

    The index for all items less food and energy has risen 2.2 percent over the last 12 months. Indexes rising faster include apparel (4.2 percent), medical care (3.4 percent), new vehicles (3.0 percent) and used cars and trucks (2.9 percent). Among those indexes rising more slowly were shelter (2.0 percent), household furnishings and operations (1.3 percent), and recreation (1.0 percent).

    Read the full release here.

  • Career Advice: Pursue Passion, No Excuses

    Larry Smith teaches economics at the University of Waterloo.  Apparently, in teaching his students how to make important personal decisions--like choosing a career--he urges them to think about the big picture, and he doesn't care for excuses.  And if his classroom lectures are anything like this talk from TEDxUW, Smith might just be effective in getting them to understand the link between economic success and passion.

  • GDP Growth in the G20 Slows

    GDP across the G20 was 0.7% in the fourth quarter of 2011, according to a new report from the OECD.  That was down slightly from the third quarter.  Overall, GDP in the G20 grew 2.8% in 2011, down from 5.0% growth in 2010.  Here's a look at the trend:

    From the OECD report:

    The G20 GDP aggregate masks diverging patterns among the world’s largest economies. In the United States, GDP growth increased to +0.7% in the fourth quarter of 2011, compared with +0.5% in the third quarter. In India and Indonesia growth increased strongly, but slowed in China to +2.0%, compared with +2.3% in the third quarter. In Japan, economic growth decreased to -0.2%, following the strong rebound (+1.7%) in the third quarter. GDP fell by -0.3% in both the European Union and the euro area in the fourth quarter of 2011, the first fall since the second quarter of 2009.

    Read the full release here.

  • In Search of the Economic Benefits of Professional Sports

    After a strong push by the city's former-NBA-star Mayor, the Sacramento city council has approved signing a big check to keep the Sacramento Kings from fleeing to play basketball in another city.  The usual arguments were in play for this decision--that losing the team would hurt the city's economy, and building a new arena--a largely public funded one--would increase jobs.  Those arguments appear to be specious ones.  At Freakonomics, Dave Berri sets out to answer the larger question:"Do sports generate jobs and economic growth?"

    This is a question that has been addressed numerous times by economists.  And these studies – summarized by economists Rob Baade and Victor Matheson — tend to reveal two answers.  When the study is completed by paid consultants prior to the public money being spent, the benefits from sports are numerous are large. However, when independent researchers – who are not paid by professional sports teams or leagues – look for these benefits after the fact, evidence of more jobs and economic growth are hard to find.

    Baade and Matheson offer three reasons the impact suggested by proponents of sports fail to appear:

    The Substitution Effect: Sports are just one form of entertainment.  If the Kings didn’t play in Sacramento, the people in Sacramento would simply spend the portion of their entertainment budget currently dedicated to the Kings on something else (i.e. dining out, movies, etc…).

    The Crowding-Out Effect: Sporting events attract crowds. When people know those crowds are going to appears, those who are not attending the sporting event tend to avoid the general area.  For example, Baade and

    Matheson note that the 2008 Olympics in Beijing failed to increase the number of tourists in Beijing in August of 2008 relative to what the same city saw in August of 2007.
    Leakages: The Kings do employ very high-priced labor.  But many of those players probably don’t live in Sacramento.  This means that the income earned by these players doesn’t stay in the Sacramento economy.

    Given these three effects, the empirical evidence suggests quite strongly that sports do not create many jobs or generate much economic growth.  And such evidence has proven to be quite persuasive.  In fact, a survey of economists by Gregory Mankiw noted that 85% of economists agree that local and state governments should not subsidize professional sports. Mankiw also notes that only five issues have more agreement among economists.

    Read How the NBA Takes Money From People Who Don’t Like Basketball here.

  • Increase Employee Engagement, Increase Productivity

    In the short interview with Harvard Business Review's Sarah Green (below), Doug Conant--until recently president and CEO of the Campbell Soup Company--tells of one of his biggest challenges when he took over the company.  In short, Campbell Soup had what Conant calls "an engagement problem."  Roughly a third of the company's employees were looking to leave.  So Conant set out to change the culture, and he found something as simple as writing notes to employees, "celebrating contributions to the company," to be highly effective at setting the right tone and increasing productivity.