• Reflected by the Tour de France female exclusion, the gender gap for female athletes relates to less media, consumer and commercial appeal.

    The Tour de France Gender Gap

    Aug 1 • Businesses, Demand, Supply, and Markets, Economic History, Gender Issues, Labor, Media, Sports • 176 Views

    In 1908, 36 men and one woman completed the Tour de France. Like today, women were prohibited from participating in that 4,497 kilometer (2794 miles) bicycling race. But Marie Marvingt (1875-1963)–a bobsledding champion, mountain climber, nurse, swimmer, fencer, the first female hot air balloonist to cross the English Channel, a pilot during WW I who flew bombing missions over Germany–covered the same route. She just had to do it right after the race ended.

    Marie Marvingt in 1920:

    Gender gap female and male athetes

    From: Bettmann/CORBIS


    Where are we going? The Tour de France gender gap is typical for most sports.

    In Tour de France competitions, women have primarily been Tour hostesses. Positioned on the awards podium, they had to look attractive, act charming, serve some champagne and help the riders put on their leader’s jerseys.

    Last Sunday, though, a group of women took a baby step toward participation. Before the men arrived at the final 57-mile ride around Paris, 120 female bicyclists covered the same course. The good news is that its timing coincided with a hugely publicized segment of the race so the women got the media coverage. The bad news is its length was a miniscule proportion of the entire Tour.

    And that takes us to economics.

    Between 1984 and 2004, there was a 21-day women’s Tour that was composed of 15 stages and less daunting than the men’s route. Cancelled in 2004, the women’s race returned with 5 stages and then 4 until it was eliminated in 2009. The reason? Lack of financial support. Why? We have some clues from a University of Minnesota women’s sports think tank report on media coverage for female athletes:

    • less than 5% of all media coverage (I have also seen a 7% stat.)
    • 1.62% of major network airtime
    • 3.6% of the ESPN The Magazine covers

    Yes, some women have narrowed the gender gap. Take NASCAR driver Danica Patrick ( a lap at 196 MPH!), Wimbledon’s equal prize money, and the growing attention at the Olympics to women’s competition.

    But still, inequities abound. Male coaches get more than their female counterparts, total prize money for men on the PGA tour far exceeds what the women get, and male Indian cricketeers get $10,500 per test match while females, $1500 for the whole series. Meanwhile, at the top, in Fortune’s 2014 “Fortunate 50″ list of the highest paid US athletes, there was one woman. Boxer Floyd Mayweather Jr. was #1 with $105,000,000 in salary/winnings, Lebron James was #2 with $19,067,572 in salary/winnings and $38,000,000 in endorsements, and at #39, Serena Williams totaled $12,385,000 for salary/winnings and $10,000,000 in endorsements.

    Our bottom line: In labor markets for female athletes, equilibrium pay is far below the men. To shift the demand curve, we need the synergy that more media, consumer and commercial appeal will create.

    Narrowing the salary gender gap for female athletes






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  • Violating the sanctity of contracts, Argentina has again defaulted on her sovereign debt and diminished her ability to borrow.

    Argentina’s (Long) Default History

    Jul 31 • Demand, Supply, and Markets, Developing Economies, Economic Growth, Economic History, Economic Thinkers, Financial Markets, Government, International Trade and Finance, Macroeconomic Measurement • 214 Views

    Reading that Argentina’s debt problems just got worse, I thought of Alexander Hamilton.

    In his 1790 Report on Public Credit, Alexander Hamilton explained why it was crucial for the United States to honor its Revolutionary War debt. Governments, he said, needed to be able to borrow money for emergencies and everyday needs. Consequently, just like you and me, they have to pay back loans fully and promptly in order to borrow again at reasonable rates.

    Argentina has ignored Hamilton’s wisdom:

    (The yellow shading represents the number of years their debt was in default or restructured.)

    Violating the sanctity of contract and Argentina's debt default history

    From: “This Time is Different Chartbook”


    Argentina’s most recent debt saga began with what scholars Rogoff and Reinhart called the lending boom of the 1990s. Enjoying an influx of dollars, Argentina borrowed and grew and prospered…for a while.  But when recession hit at the end of the decade, the good times quickly unraveled.

    In 2001, after Argentina defaulted on $95 billion of sovereign debt, she offered bondholders a swap. Anyone willing to take a 70% “haircut” could receive new securities that paid them 30 cents on the dollar. 93% of those who held the defaulted debt said yes while 7% were the “holdouts.” Meanwhile, some investors bought the original bonds for bargain prices.

    This is where the story gets interesting. When Argentina refused to honor the holdouts’ (a group of hedge funds) bond payments, they went after Argentina’s assets. In Ghana, they were able to have an Argentine naval ship impounded for them (really!) and Argentina’s President Kirchner flew commercial to see the Pope so her private jet would not be threatened by the group.

    The holdouts also went to court and won.

    In its decision, a NY court said Argentina had violated the following contractual obligations that it had promised its bondholders:

    • Even in default, she would pay interest and principal in full.
    • NY courts would have jurisdiction over any dispute.
    • The bonds would be transferable “and payable to the transferee.”
    • Bonds would have the same status as other external debt.

    Then last June, the Supreme Court upheld the lower court’s decision by refusing to hear the case.

    And now, refusing to observe her contractual obligations to bondholders by missing a July 30th interest payment deadline, Argentina has again defaulted.

    Our bottom line: As Hamilton explained more than two centuries ago, for dependable relationships between lenders and borrowers, governments need to guarantee and observe the sanctity of contracts.

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  • The everyday economics of a North Dakota oil boom.

    How North Dakota Fuels Economic Growth

    Jul 30 • Businesses, Demand, Supply, and Markets, Economic Growth, Economic History, Innovation, Labor, Macroeconomic Measurement, Tech • 283 Views

    Harold Hamm is an oil man. The youngest of 13 children, he grew up in a shack without running water or electricity. While Oklahoma is where he entered and built an oil business, the best part of his story is in North Dakota.

    Hamm was convinced, and over and over again proven wrong, that there was an oil bonanza beneath the surface of North Dakota’s northwest corner. His initial attempts to unleash the oil from the Bakken formation were minimally successful. He tried horizontal drilling but that did not work well enough. The fracking technique he initially used disintegrated the rock. After more than a decade he figured it out and the oil started to flow–not a gusher–but a respectable amount. Then oil prices plunged and he had to stop. Still, he continued acquiring land, convinced he just had to outsmart and outlast a tough situation.

    He did and now, North Dakota has become the second largest oil producing state in the country, behind only Texas. Firms like Hamm’s, Continental Resources, have made North Dakota a growth anomaly.

    You can see that, at 9.7%, North Dakota’s GDP growth rate in 2013 far exceeded the US norm:

    North Dakota's economic growth was the country's highest in 2013.

    After reading The Frackers by journalist Gregory Zuckerman and listening to NPR’s Planet Money’s podcast about Williston, North Dakota, I realized they were telling 2 sides of the same story. Zuckerman’s was an entrepreneurs’ tale. He focused on the oil men whose personalities were, as he said, part salesman, part geologist and part gambler.

    Meanwhile, Planet Money told the story of what it means to be an oil boom town. Leaving their families behind, men move there temporarily to make their fortunes. Walmart had to pay as much as $22 an hour and still could not find enough employees. One trucker made $90,000 a year hauling water to fracking sites. Scarce housing costs as much as in NYC, there are few parks or cultural amenities, and milk is $5.60 a gallon. It is not surprising that the unemployment rate is below 1% in Williston and less than 3% in North Dakota.

    Our bottom line: As an economic growth story, North Dakota’s wealth is about entrepreneurs and temporary residents. It is the perfect example of how money and people gravitate to opportunity.


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  • With factions in Greece resisting further austerity, a sovereign debt problem could resurface.

    Greece Again?

    Jul 29 • Economic Growth, Economic History, Financial Markets, Government, International Trade and Finance, Labor, Macroeconomic Measurement • 344 Views

    Three years ago, we were talking about Greek hairdressers. Classified as an “arduous and hazardous” profession, Greek women who styled hair qualified for a full government retirement pension at 50. Radio and TV announcers also qualified because of their bacteria laden microphones. Combine too many retirees on government pensions with a lengthy government payroll, a long list of government businesses and widespread tax evasion and you have a recipe for fiscal disaster. The result was a call for austerity. In order to get bailout billions from the international community, Greece had to cut back. In his Greek Bailout Song, Merle Hazard explains the problems:

    Now, 3 years later, with a bailout and some austerity, the Greek economy has improved:

    Greek economy improving

    From: The Economist

    Perhaps because GDP is up, unemployment down and Greece was able to sell debt with reasonable interest rates in international markets, resistance to austerity is resurfacing. Consequently, one of the world’s largest investment managers, Black Rock, gave Greece its lowest rank for sovereign debt risk. In other words they believe that Greek bond buyers might not get their money back. Among 50 countries, Greece is #50 on Black Rock’s risk monitor.

    Our bottom line: Governments create sovereign debt by borrowing money from you and me and banks and other governments and businesses. While sovereign debt is a valid way for governments to cover deficits when expenditures exceed revenue, too much borrowing is reckless. With Greece back in international financial markets and resisting further government cutbacks, she could be reverting to her old bad habits.

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  • Calculating the GDP involves many decisions and using it can be controversial as in Greece.

    Why the GDP is Much More Than a Number

    Jul 28 • Economic Growth, Economic History, Economic Thinkers, Environment, Government, Labor, Lifestyle, Macroeconomic Measurement • 248 Views

    The GDP measures a country’s production. Just add together the value of the goods and services that were produced during one year and you have the GDP? Not really. Like the Malaysian proverb that says we should not think there are no crocodiles just because the water is calm, the GDP is not as it appears on the surface.

    War was the original reason that countries wanted to know the value of their output. During the Anglo-Dutch War in 1665, if England knew more about its wealth then it could figure out how much to tax people. Fast forward to World War II and the United States. The same situation. With a war to wage, FDR needed to know how much land, labor and capital could be allocated to military production. From that task emerged the modern concept of the GDP…and all of its dilemmas.

    Calculating what a nation produces involves answering a host of questions.

    • Do you count illegal activity? 60 years ago the answer was no but now, not necessarily.
    • Should you include non-market home production? But that means if you marry your accountant then the GDP will decrease.
    • Would it be wise to adjust the GDP when prices fall but quality rises? After all, laptop prices are way down while computing power is up.
    • Are free online services a concern? Maybe Google searches are a service that should boost the GDP.
    • How to account for environmental harm that results from production? Should we subtract the value of the damage from GDP?

    You see where we are going. Depending on what you count, the GDP could go anywhere. And we have not even touched globalization and how much to include when an item is made in 5 different countries.

    Still though, we are in relatively calm GDP territory until we relate all of this to people. And that takes us to Greece.

    Brought in to overhaul the Greek statistics office, economist Andreas Georgiou concluded that the Greek deficit was higher than had been reported and its GDP was lower. The impact on the country was calamitous. Georgiou’s revised deficit and GDP figures necessitated an unheard of discipline in order to secure the bailout loans it needed from the international community. Gargantuan government spending had to be cut, government employees fired, government pensions slashed.

    The old numbers had been a useful fiction that let Greece adhere to eurozone guidelines. Because Georgiou injected some reality, he has been accused of doing the falsifying. The crime is called breach of faith and the sentence could be 5 years in prison.

    All because of the GDP.

    Our bottom line: I wonder whether the GDP returns us to fractal mathematician Benoit Mandelbrot. Yes, we can look at the coast of Great Britain from afar and see a lovely uninterrupted curving line. But move in to a closer view of the coast (or the GDP) and the hazardous jagged zigs and zags start to appear.

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