Thursday, June 28, 2018

Memories of my World Cups

My first World Cup was the one in Chile in 1962. In those days, there were no satellites to beam the picture directly from South America to Europe so the live games were listened on small transistor radios that you would grab in your hands, ever more tightly as the attack seemed more dangerous. My one big memory:  the Yugoslavia-Chile game for the third place. I went with my family to dinner and we carried the radio. It turned out that everybody else did the same. And then a huge silence that enveloped the restaurant when Chile scored the winning goal.

The World Cup then was not a very big affair. Few people travelled to Chile and some games were played in front of empty stadiums, with only a couple thousand of spectators. These were still football’s heroic days.

The first World Cup I watched live was 1966 England. My memories of that Cup are incredibly vivid. In June that year I got a viral pneumonia and spent a week in a hospital. I was so keen to get out of the hospital on time for the World Cup. Luckily, I did and watched many of the games (in those days, not all the games were shown). Single memory. The brilliant Hungarian dismantlement of Brazil sans Pelé (3-1), and Varga’s incredible goal. These were the days when Hungary still displayed some of the Puskas era scintillance before it dropped into the footballing black hole, seemingly forever.

The 1970 World Cup was, I believe, the best ever. It was also the first World Cup I watched on a color TV. Technology was making big strides (just compare Chile 1962 and Mexico 1970). One special memory: rather conventionally, the semi-final slugfest between Italy and W. Germany that I watched alone (my parents having decided it was too  late and gone to bed).

The 1974 Cup was held in West Germany. The quality of the games was still outstanding, mostly thanks to the great Dutch team. A memory: a quasi waterpolo match played by West Germany and Poland on an inundated field.  

For the 1978 World Cup, I was in the United States where soccer was an exotic sport. No games were shown on national TV: no games, period. So I would read the results of the previous day's games in the newspapers. But since I watched all finals since 1966, I could not miss this one: I travelled three hours by car to Gainesville, Florida where in a movie theater with an audience about equally divided between the Argentinian and Dutch fans, I watched  the final. People climbed the chairs and jumped across the aisles

The 1982 World Cup found me traveling. I was in Cameroon when Cameroon tied  Italy 1-1. The World Bank arranged a high level meeting exactly at the time of the match. It was clear to all, except to the leader of the World Bank team, that the Cameroonian counterparts were not interested in structural adjustment but in dribbles and shots. Suddenly, half-way through the meeting, the minister jumped and started yelling “le poteau, le poteau”. Cameroon failed to score.

By 1986, US television was showing all the games (notice again the tremendous progress over eight years). I remember being late for an important meeting because France-Brazil went into extra-time and then penalty kicks. But I just could not leave without knowing if Platini or Zico will play in the semis.

1990 was, I think, the worst World Cup ever. I remember rather badly attended games, and the Italian stadiums that, contrary to what happens now at the World Cups, were left in their fairly dilapidated state. Yugoslavia, which had an excellent team, was imploding. Slovenian Football Federation recalled its players before the World Cup began. A couple of team staggered after a tournament full of 0-0s, to the pathetic final, complete with fist fights, doubtful penalty, dubious ejection.

The 1994 World Cup was perhaps just slightly better in quality. The 1990s were not very good years for soccer in general. In a somewhat blasé way I did not care to watch the games played in Washington DC, but then as the tournament progressed I got excited. My former girlfriend very kindly helped me get three tickets for the final in Pasadena. (In those days, you still had to buy tickets on the spot and she bought them just a week before the final—when instead of Italy-Brazil, there was a possibility that we might watch Sweden-Bulgaria).

The French 1998 Cup was yet another, very modest, improvement in the level of the game. I spent that month travelling with my family across France and was surprised how little interest the World Cup elicited. It was hard to find restaurants that would show the games—except when France played. I watched the final after paying a sizeable amount of money to a FIFA official who got his ticket for free. He asked for even more money than what I had in my pocket but his wife convinced him not to press the price further.

The 2002 Cup was in Japan and South Korea.  Now the whole world was watching. One big memory: when Cafu climbed to the top of the makeshift podium and in a flurry of confetti and with music blaring lifted the Cup. I thought a new pagan religion had overwhelmed the world and Cafu, Ronaldo o fenomeno and Rivaldo were its chief priests.

In 2006, we travelled through Germany. Unlike eight years ago in France, football was everywhere: in all bars, hotels, fan zones. I watched Germany-Sweden QF match in a beautiful hotel in Berchtesgaden. Perhaps because the hotel was expensive and the guests quiet or perhaps because of the place where it was built, German tourists who watched the game just politely applauded each German goal. It was almost like attending a chamber concert. But for other games and in other surroundings, the atmosphere was different.

I remember rather badly the 2010 World Cup. I watched the Uruguay-Ghana match with my son in an outdoor café in Belgrade. Suddenly the storm descended and the connection was lost. I insisted that the owner try several times to restore it. Eventually, he succeeded: we witnessed Suarez’s incredible save and Ghana’s unlucky penalty miss. It was the closest that an African team came to the semis.

The 2014 Cup in Brazil transformed the whole country. You had the feeling that had the nuclear war broken out, the news would be relegated to page 4 of the newspapers. Despite all the fears, the Cup was excellently organized—surpassing in some areas even German organization.  I remember a beautiful starry night at Ipanema, dining in a terrace restaurant, with Henry and FIFA officials just a few tables away.

The 2018 so far looks great. The quality of the games has steadily risen: it is one of the better World Cup, I think, and we yet have to see the best.

I am very optimistic about the Qatar Cup. I am glad it will be played in an Arab country: Arabs love football and their teams are getting steadily better (and they were singularly unlucky this year). The Cup  will be played in Winter when top players are less tired.

It has been a great ride of more than half century for me, and when we compare machines and organization used today as well as the global reach of the sport with how  things looked in 1962, we can more easily grasp the role of both technology and globalization. Immense progress in both. But we also have to be modest in judging what was accomplished. We are proud that the Olympics and the World Cup have an almost unbroken record of respectively more and slightly less than a century. But Greek Olympics were held continuously for four centuries. Who will win the 2318 World Cup? Will countries compete? Or perhaps only Oceania, Eastasia and Eurasia? Will there still be football? Will the Cup be held at all?  Qui sait.

Friday, June 15, 2018

Bob Allen's new "poverty machine" and its implications

Several days ago Bob Allen gave at the Center for Liberal and Democratic Studies in Belgrade an excellent lecture on the evolution of his own thinking about the basic needs poverty line (BNPL) and on how he moved from the subsistence and respectability baskets to the more ambitious baskets that reflect consumption patterns and relative prices across time and space (his beautifully titled "When necessity displaces desire" recent paper in the American Economic Review).

It was a riveting lecture perhaps mostly because of its autobiographic or chronological character: we could follow Bob’s own thinking as it evolved over the last two decades. The most recent (and yet unfinished) project is to calculate the minimum cost basket, under the constraints on calories, proteins, fat, for each country in the world (and potentially across time) and thus to produce the BNPLs  that are time and space specific—while at the same time being the same in terms of the “objective” needs they satisfy.

Allen is thus solving the perennial problem that consisted in the trade-off the researchers had to face between equivalency (sameness) of the baskets and their local representativeness, The more you insisted in that the baskets be the same the less were they representative for some areas of the world. For example, if you insist that every basket have rice because it is a staple in East Asia, the basket will be unrepresentative for, say Africa. Idem for wine etc.

But if the “background” sameness is accomplished through calorific/protein constraints and linear programming (cost minimization under the constraints) picks the cheapest combination, then you do not face the trade-off any more. (Note that the trade-off may thus be solved for subsistence needs because they can be defined using the calorific and other minimal requirements. The trade-off is still very much alive when it comes to PPPs because they deal with average consumption patterns which depend on tastes and preferences, and cannot be “codified” as the basic needs can.)

What Allen did was to create a unified approach for  solving the food component of the BNPL and partly the non-food. The food part is solved in the way I just described. The non-food component of housing and clothing is solved by using differences in climate: the needs are obviously greater in cold than in temperate or warm climates.

Now, note that none of these approaches was unknown. Allen mentions George Stigler’s 1945 paper as precursor. But the view that the needs in tropics and cold climates are different has (I would say) a millennial history probably going back to Herodotus. To go to the more recent times note that Colin Clark in his “Conditions of Economic Progress” argued that we should have two “international dollars”, one for the temperate areas and one (“oriental”) for warmer climates. Even the use of linear programming to solve for the minimum cost combination is not new. I remember seeing it used in the World Bank Poverty Assessments in the 1990s (in particular I remember a Poverty Assessment for Russia where it was used), and I doubt that the World Bank discovered it then. The idea was around for a while.

But Bob created a powerful “machine”, using these insights, a machine that, as I mentioned, delivers poverty lines “subscripted” for time and place. What did this “machine” produce?

First, it falsified the World Bank standard approach where $PPP 1.90 poverty line was supposed to really reflect the same consumption opportunities (bundles) across the world.  Mostly because of the differences in housing and clothing costs, but also in relative food prices, Allen shows that this line is broadly correct for African countries but that in Asia and in middle-income countries to achieve the same  level of calorific intake, clothing, shelter you need between $PPP 2.50 and $PPP 3.50, and that in rich countries, you need about $PPP 4.50. This means that the monetary amount of the global poverty line ought to vary between the countries.

Second, Allen’s results represent (in some ways) a revindication of the Pogge-Reddy critique of the World Bank approach. More than a decade ago, Thomas Pogge and SanjayReddy criticized the unique poverty line for the whole world by arguing that it underestimates the cost of food in poorer countries. Relative price of food in poor countries is higher than what is obtained from general PPPs. Although the Pogge-Reddy critique comes from a different direction, Allen’s results vindicate it in the sense that they show that a single global poverty line cannot do the job that the World Bank, since the first poverty report in 1990, claimed it could.

But, intriguingly, Allen’s work in this area has also implications for his work in another area: the origins of the Industrial Revolution. As is well-known, Bob is the originator of the hypothesis of High Wage Economy (HWE), an argument that the Industrial Revolution was driven by high cost of labor in England (and low cost of energy) which made the substitution of labor by capital profitable. This was most famously seen in the evolution of the welfare ratios (nominal wages divided by the cost of the subsistence basket) for North-West Europe vs. Italy vs. China/India. While all three welfare ratios were about equal in the 15th century, they diverged afterwards with North European being much higher and China/India’s welfare rations plummeting. Allen saw in that divergence the origin (and not the effect) of the Industrial Revolution.

Now, with the poverty lines that are subscripted for place and time,  what we see to be a welfare ratio from the worker’s perspective is no longer the same thing as the cost of that worker to a capitalist.  The new methodology introduces a wedge between what is the worker's welfare and what is the cost of labor for the capitalist. This is most obviously seen in Allen’s former and new results for Russia. With the same basket across all countries (the earlier approach) Russian welfare ratio during most of the 19th century was 2; with a climate/country specific baskets, the welfare ratio is around 1 (that is, is much lower because of high requirements imposed by a cold climate).

But note that the cost of that worker to a Russian capitalist is still twice as high as the cost of an equivalent worker (at the same subsistence) in India. When we now draw the welfare ratios using Allen’s new methodology, we have to explicitly state that they reflect welfare ratios from the worker’s perspective, not the cost of labor. The implication of this wedge is that, following Allen’s own HWE hypothesis, introduction of machines is --everything else being the same—more profitable in the North than in the South.

If that’s the case, then a geographically-determined explanation for the Industrial Revolution suddenly looks more plausible than before. So, I thought, perhaps one (unintended) effect of Bob’s new and much improved methodology is to help the geographical explanations for the rise of the West.